The water companies have flagged up a number of potential risks which could either impede the start of shadow operations in October 2016 or the opening of the competitive market for non-household customers in April 2017.

At a workshop which took place in August, representatives from eighteen water wholesalers, MOSL and Water UK met to consider whether there were any significant issues - the workshop was unanimous in confirming that there were no fundamental barriers to either the live or shadow markets opening on time.

However, attendees identified.a number of risks that need to be considered to improve quality and confidence of the market opening.  

Two key risks in particular were highlighted that were considered as having a high likelihood of occurrence and a high impact on the quality of the market opening – the potential impact of a water quality incident and the high volume of switching activity anticipated on ‘Day 1’.

DWI report on UU water quality incident could trigger system changes

Although the report by the Drinking Water Inspectorate (DWI) into the water quality incident in United Utilities’ region last year is not yet available, attendees considered it likely that its findings will require changes to the systems currently being developed for the non-household market.

The workshop note says that if system changes are deemed necessary prior to market opening it could cause a delay to the launch date. In addition, if during the shadow market period there was a further water quality incident, there is a risk that the DWI may lose confidence in the ability of the industry as a whole to manage an incident under the future arrangements as they currently stand.

“Although the processes set out in the codes have been thoroughly reviewed, it was felt that a significant incident could result in escalation to DEFRA for review, resulting in a delay to market launch. If an incident was to occur in the coming weeks, it could also affect the start of the shadow market phase.”

High degree of switching on Day 1 could see systems unable to cope

Attendees also felt it was likely that there would be a high degree of switching on Day 1 and expressed concern that systems and processes may not be able to cope. There were particular concerns about this given that there is currently no plan to test large scale switching prior to live operations, with similar concerns in relation to bulk switching between retailers to facilitate exit from the market where there was some uncertainty in the process.

The workshop also identified a number of other risks as having a medium to high likelihood of occurring and a medium to high impact for the start of shadow market operations and market ‘go live’ respectively. On Shadow Operations, market participants felt that to ensure the likelihood of a successful ‘go live’ there would need to be sufficient companies participating in the shadow market to demonstrate that the systems and processes are working as intended.  However, no such criteria currently exists.

The issues raised by the workshop will be considered by the Retail Market Opening Management Group (RMOMG) with a view to determining what actions, if any, may be required to mitigate the risks.