CEO Quarterly Market ReviewQ2 2017/18
5committees established
3working groups
established
1market code
dispute
2.7m supply points
planned settlement runs
corrective settlement runs
over
61,000 services switched
cost of
£1.1m to operate the market per month
Financial settlement of around
3.5m transactions1
code changes considered by the Panel15
15
21
1 Transactions relate to all interactions by trading parties with the central system (CMOS), e.g. switches, meter readings, etc.
£210ma month
Market to Date
1 self-supply retailer
22 national retailers
12 regional retailers
35retailers
in the market
25wholesalers
Contents
Foreword 1
Review of the second quarter 3
– The market landscape 3
– Switching 3
– Settlement and data quality 9
– Market change 10
Looking forward 11
1 Transactions relate to all interactions by trading parties with the central system (CMOS), e.g. switches, meter readings, etc.
Welcome to our second Quarterly Market Review, reflecting on non-household retail water market activity from July to September 2017.
The new open water market continues to offer 1.2 million business customers the opportunity
to shop around for the best deal. Six months since full market opening on 1 April 2017 there are seven more parties progressing through market entry assurance and an additional self -supply retailer has achieved its market entry certification. We have seen more than 61,000 switches and a significant increase in the number of transactions processed by the central marketing operating system (CMOS) compared to the previous quarter.
CMOS
We have improved the functionality of CMOS at an operational level following the release of version 3.0 on 30 September. This improved functionality covers:
A new volume transfer process
Changes to trade effluent
Tariffing updates
Cross border meters.
CMOS 3.0 is the first release focused on new functionality rather than defect resolutions and is part of our cycle of two major releases a year. We are sensitive to the demands that our releases place upon member IT services and are planning to reduce the frequency of releases in 2018/19.
MOSL changes
There has also been significant change within MOSL. On 1 September Jim Keohane officially took up his responsibilities as MOSL Chair and on 27 September we welcomed Mel Karam, Chief Executive of Bristol Water, as our new Wholesaler Director on the MOSL Board for a two-year term. I would like to express my sincere thanks to Peter Simpson, our outgoing Wholesaler Director, for his dedication and hard work on the MOSL Board and during the Open Water programme. Peter has played a leading role throughout the creation of the market and the establishment of MOSL.
Member engagement
Jim will join me at an event on Wednesday 25 October to meet with the CEOs and senior leaders of our members. The event will be an opportunity to review member feedback from the CEO survey, provide an update on the progress of the Strategic Review and discuss the upcoming Business Plan 2018/19.
We launched our monthly User Forum in September to provide opportunities for trading parties to meet, discuss key market issues and get involved with improvement activities. Live video streaming was available for members to join the discussions online, which received positive feedback, particularly from those members unable to travel.
Foreword
MOSL CEO Quarterly Market Review Q2 2017/181
We are committed to ensuring all companies have access to key market forums and groups regardless of their type, size or geographical location.
We have also been exploring how we can introduce innovation to improve the efficiency of the market, especially through digital; and would like to explore some early ideas and some potential initiatives with our members. We are consulting with members on our plans to create a new Digital Strategy Committee, in place of the former CIO Forum. This new committee will be available to advise the Panel on technology matters and as the market matures, it will support MOSL in the development of its digital strategy and technology implementation.
Next steps
In line with our commitment to provide transparent and insightful information about the market, we are also working to develop our market reporting capabilities. You will see the early fruits of this work in the next Quarterly Review.
In summary it’s been a busy few months, with lots more to come. I look forward to continuing discussions with all of our members and stakeholders on how we can work together to improve and evolve the market.
Chris Scoggins
Chief Executive Officer, Market Operator Services Limited (MOSL)
We have improved the functionality of CMOS at an operational level following the release of version 3.0 on 30 September.
MOSL CEO Quarterly Market Review Q2 2017/18 2
The market landscape
In this quarter several retailers have announced their intent to enter into joint ventures or mergers to consolidate their market shares. Currently the largest five national retailers, which include two new entrant retailers, serve around 75 per cent of all supply points in the market.
One new national retailer has entered the market during the quarter, bringing the current number of retailers to 35. One national retailer with no supply points in the English market has exited during the quarter and one large regional retailer has announced its intention to exit the market. This will again change the market dynamics.
Switching
Switching has continued at a steady rate during the quarter with an additional 25,010 switches bringing the total so far since market opening to 61,311. This represents 2.3 per cent of the 2.7 million supply points in the market.
Review of the second quarter
Transaction Date, Week Commencing (2017)
Num
ber o
f Sup
ply
Poi
nts
Cumulative Switching of ServiceAs at 1st October
Total Switching
Water Services
Sewerage Services
0
10k
20k
30k
40k
50k
60k
70k
03 A
pril
10 A
pril
17 A
pril
24 A
pril
01 M
ay
08 M
ay
15 M
ay
22 M
ay
29 M
ay
05 Ju
ne
12 Ju
ne
19 Ju
ne
26 Ju
ne
03 Ju
ly
10 Ju
ly
17 Ju
ly
24 Ju
ly
31 Ju
ly
07 A
ugus
t
14 A
ugus
t
21 A
ugus
t
28 A
ugus
t
04 S
eptem
ber
11 S
eptem
ber
18 S
eptem
ber
25 S
eptem
ber
Cumulative Switching of Service As at 1 October 2017
MOSL CEO Quarterly Market Review Q2 2017/183
As in Quarter 1, the number of switches has continued to fluctuate around 1,000 to 2,000 a week.
Transaction Date, Week Commencing (2017)
Num
ber o
f Sup
ply
Poi
nts
Sw
itche
d
0
1k
2k
3k
4k
6k
5k
Total
03 A
pril
10 A
pril
17 A
pril
24 A
pril
01 M
ay
08 M
ay
15 M
ay
22 M
ay
29 M
ay
05 Ju
ne
12 Ju
ne
19 Ju
ne
26 Ju
ne
03 Ju
ly
10 Ju
ly
17 Ju
ly
24 Ju
ly
31 Ju
ly
07 A
ugus
t
14 A
ugus
t
21 A
ugus
t
28 A
ugus
t
04 S
eptem
ber
11 S
eptem
ber
18 S
eptem
ber
25 S
eptem
ber
Weekly Switching Rate As at 1 October 2017
MOSL CEO Quarterly Market Review Q2 2017/18 4
There is a continued customer preference to have one retailer providing both their water and sewerage retail services.
Switching Behaviours As at 1 October 2017
Services switched with no associated service
4%Water and sewerage both switched to a new retailer from two different retailers
14%
Water retailer acquired sewerage service
17%
Water and sewerage both switched to a new retailer from a single retailer
58%Sewerage retailer
acquired water service
5%
Water and/or sewerage switched as individual services
2%
MOSL CEO Quarterly Market Review Q2 2017/185
New entrants gained around 35 per cent of the supply points switched during the quarter. Switches away from the largest five retailers accounted for around 70 per cent of all switches.
Number of Supply Points
As at 01 October
Water Gain Sewerage Gain Water Loss Sewerage Loss
20000 10000 0 1000017500 15000 12500 7500 5000 2500 2500 5000 7500 12500 15000
Icosa Water
Severn Trent Water
Albion Eco
Dee Valley Water
Leep Water Networks
Albion Water
Dwr Cymru Welsh Water
Veolia Water Projects
SSE Water
Independent Water Networks
Greene King
South East Water Choice
Yorkshire Water
Cambrian
Cobalt Water
Thames Water Commercial Services
Veolia Water Retail
Waterscan
ADSM
Three Sixty Water
Water Choice South East
Regent Water
Pod53
The Water Retail Company
Clear Business Water
Everflow
SES Business Water
SSWB Ltd
Affinity for Business
Pennon Water Services
Water2business
Business Stream
NWG Business
Anglian Water Business
Castle Water
Water Plus
Retailer Gains and Losses As at 1 October 2017
*Note: Gains and losses logged against Severn Trent Water have been shown against Water Plus. Severn Trent Water intends to exit the market.
MOSL CEO Quarterly Market Review Q2 2017/18 6
Consumption Profiles
MOSL monitors switching activity according to water consumption per supply point.
There are nine consumption profiles:
Consumption Profile
Threshold - Water Consumption Per Supply Point, Litres Per Day (l/d)
Trade Effluent Customer Example
% of Total Switching Activity
M1 less than 100 l/d No Church, local shop 19%
M2 100 l/d to 1,000 l/d No Pub, hairdresser 43%
M3 100 l/d to 1,000 l/d YesResidential building site, local garage
0.5%
M4 1,000 l/d to 3,500 l/d No Hotel, warehouse 18%
M5 1,000 l/d to 3,500 l/d Yes Farm, mine 1%
M6 3,500 l/d to 13,700 l/d NoSupermarket, university
14%
M7 3,500 l/d to 13,700 l/d YesChemical factory, brewery
1%
M8 greater than 13,700 l/d No Airport, power plant 3.5%
M9 greater than 13,700 l/d Yes Oil refinery, port 1%
MOSL CEO Quarterly Market Review Q2 2017/187
Switching has continued in all customer segments. There has been sustained growth in the level of switching of supply points with associated trade effluent.
0.4%
0.8%0.9%
1.2%
1.1%
1.9%
2.2%
3.4%
3.9%
3.7%
6.8%
6.4%
1.4%
2.0%
2.2%
3.5%
3.1%
3.0%
5.6%
5.3%
3.4%
3.8%
3.6%
4.8%
6.2%
5.8%
4.2%
3.8%
4.1%
4.2%
3.3%
4.1%
3.9%
3.6%
6.8%
6.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
1.0%
3.0%
5.0%
7.0%
9.0%
12.0%
14.0%
11.0%
13.0%
15.0%
Q1 Q2 Q1 Q2 Q1 Q2 Q1 Q2 Q1 Q2 Q1 Q2 Q1 Q2 Q1 Q2 Q1 Q2
M1 M2 M3 M4 M5 M6 M7 M8 M9
Sewerage %Water %
Per
cent
age
of S
uppl
y P
oint
s S
witc
hed
with
in S
egm
ent
Consumption Profile
Proportion of Supply Points Switched within Segment Total Supply Points as at 1 October 2017: 2,669,733
MOSL CEO Quarterly Market Review Q2 2017/18 8
Settlement and data quality
Settlement is most significantly affected by missing or incomplete data (user exceptions) and the accuracy of meter reads.
We have seen the completeness of data improve, with a significant reduction in the number of supply points with user exceptions over the quarter.
Supply points which are not currently settling are missing data owned by the wholesalers. The majority of these supply points are either missing data on the type of service being provided, the associated wholesale tariff or meter details.
Inaccurate retailer meter reads have caused the largest variances in overall settlement. Nine unplanned settlement runs have been requested by trading parties during the quarter to correct inaccurate consumption information.
.
Apr May Jun Jul Aug Sep Oct
180M
190M
200M
210M
220M
230M
240M
P1 - Provisional monthly settlement report using forecast consumption information
R1 - First monthly settlement report including actual meter readings
GB
P
Aggregate Value of Settlement
Note: May and August R1 aggregate values include corrective adjustments
MOSL CEO Quarterly Market Review Q2 2017/189
Market change
The Panel has considered 15 change proposals in the first six months of the market, with four raised during the last quarter. These covered a broad range of topics from the composition of a committee through to negotiating alternative eligible credit support.
Of these change proposals, 11 have been recommended for approval by the Panel, two have been recommended for rejection and two still remain in the process.
Since market opening, seven code changes have been implemented and, as at 1 October, a further four are awaiting decision from Ofwat.
In addition, 15 changes approved by Ofwat prior to market opening, were implemented within CMOS as part of release 3.0.
To enable continued improvements to the market codes, the Panel has created five committees and three working groups since market opening. This includes the recently established Trade Effluent Issues Committee which will offer expertise to the Panel on matters relating to trade effluent.
MOSL CEO Quarterly Market Review Q2 2017/18 10
Business Plan for 2018/19
On 25 October, we will be hosting an event for the CEOs of our wholesaler and retailer members where we will present the principles of our draft Business Plan for the year 2018/19.
The Business Plan is focused on stabilising the market, providing a high quality service, capitalising on innovation, effective engagement and ensuring good governance.
The MOSL Board will put the final version of the Business Plan to members at a general meeting on 15 December.
Digital initiatives
We have been engaging with members on how we can use digital tools to the benefit of the overall market. This engagement included the Digital Innovation Workshop which we hosted on 29 August. Key areas of opportunities raised included:
Additional reporting
Automation of processes
Data quality improvement
Alternate transactional submission process to augment the current portal (low volume interface).
We will be implementing early pilots this year and plan to develop innovative solutions next year. These digital initiatives will reduce costs, improve transparency and reduce overall friction in the market.
To support these initiatives, we are consulting with members on establishing a Digital Strategy Committee which will be chaired by the market and sponsored by MOSL. This committee will look at and inform our digital strategy for the development of tools for trading parties.
Market performance
One key area of focus for the next quarter will be how we measure market performance.
The Market Performance Committee will conclude its review into the Market Performance Standards and Operational Performance Standards and the associated charging mechanisms. This is likely to result in material changes to the overall market performance framework.
How we report on our own performance is important to the market. We will be starting to publish information on our own compliance against around 1,150 market operator obligations under the market codes.
We will expand our focus for market reporting. The months to date have been focused on assessing whether the market is working. Moving forwards, we will be monitoring how the market is behaving and identifying areas of improvement for the market. You can expect to see much more of our market performance team over the rest of this year and moving forward.
Looking forward
MOSL CEO Quarterly Market Review Q2 2017/1811
Market change
Looking forward, there is a continuous pipeline of change for the Panel and its Committees to consider. The focus for the coming months includes:
Data protection and the General Data Protection Regulation (GDPR)
Performance standards for the market
Market entry process.
As requested by the Panel, we will be considering self-supply, SPID versioning and the current suspension of developer services (Part A of the Operational Terms).
Code governance itself will be an area of focus over the next quarter. In December the Panel will be conducting a review of its processes and operating practices. We are also reviewing the provisions for urgent change proposals to enable market critical changes to be considered and addressed in a timely manner.
Market audit
The market auditor will be publishing its half-yearly report in November which we expect to highlight opportunities for all parties in the market to improve.
The market auditor has gathered information using a market wide questionnaire and site visits. Initial feedback from the questionnaire highlights that key areas of challenge for the market include data quality, the interactions between wholesalers and retailers, and clarity in industry processes.
The market auditor will continue its engagement with the market and MOSL during the next quarter.
One key area of focus for the next quarter will be how we measure market performance.
MOSL CEO Quarterly Market Review Q2 2017/18 12
16 High Holborn, Holborn,London, WC1V 6BX
Tel: 020 8616 7444
Email: [email protected]
www.mosl.co.uk
© MOSL 2017
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