I am quite often asked whether, with the benefit of hindsight, we would have done much differently in opening the retail market in Scotland. My answer is “no”. I appreciate that this answer may sound a bit arrogant. It is certainly not meant to imply that:
- We did not make mistakes in opening the market (we did!).
- We have not made changes to the operation of the market in the light of the operating experience of retailers and the wholesaler, and the service experience of customers. In fact, we have made many such changes and have actually just finished a review of the operation of the various codes that underpin the market.
- We do not think that there will need to be further changes if there is not to be an Anglo-Scottish retail market.
Looking back the most obvious mistake that we made was not to ensure that names, addresses and contact details were included in the central registration and settlement systems. But it was also unfortunate that we set an expectation that new entrants should take any customer, anywhere in Scotland, before having reached a critical mass. And no doubt we could have made it easier for a retailer to provide a different guarantee that it would meet its obligations more quickly (other than pre-payment) than we did!
I am however pleased that we got the big process issues right:
- We worked closely with Scottish Water, prospective retailers and customers in developing the market framework.
- We set a clear deadline for opening the market some four plus years into the future (and only just made it with a lot of help from both Scottish Water and Business Stream).
- We recognised that all stakeholders had to see benefits or at least no downside to the new market arrangements and that this involved not touching the RCV or the allowed for return, and ensuring that the wholesaler was pre-paid. It also involved rewarding the retailer with a modestly higher return in return for assuming all the bad debt risk.
- We responded flexibly when an element of the market framework was not leading to better outcomes for customers.
- The market participants and not the regulator are responsible for the day-to-day operation of the framework.
- The creation of retailers allows for more robust dialogue between the customer and asset-facing activities within the water industry, preparing the ground for greater innovation.
No doubt I should be more nuanced in my response about changing things but my defence is that the focus should be on the big strategic issues – not the detail of the framework.
My next blog will be on all the things that have changed since we first opened the market. Even a cursory review should make it clear that we are in a far different place today from where we were three and a half years ago!