Customers unlikely to switch water supplier to achieve yearly saving of £6, says regulator

GOVERNMENT plans to introduce competition into the domestic water market would offer households savings of just £6 a year – not enough for most people to bother switching supplier, water regulator Ofwat has found.

Currently, households and businesses in England get their water supplies from a monopoly regional supplier.

However, from 2017 competition will be introduced in the business sector, allowing companies to switch between different water suppliers, as they can with energy providers.

Ministers last year asked Ofwat to produce a report looking at “the costs and benefits of extending retail competition to household water customers” and said it would “work with water companies to begin the transition to retail competition before the end of this Parliament”. A preliminary study published by Ofwat has now concluded that the plan “could deliver average savings per customer of £6 a year”, or less than 2pc of a typical annual water bill of £386.

It also conducted customer research which found that while just over half of customers believed they should have a choice of supplier, on average people said they would only bother switching if they could cut their water bills by 25pc. That would entail reductions of almost £100 a year, a level of saving Ofwat noted was “unlikely to be available”.

Cathryn Ross, Ofwat chief executive, described the likely saving as “modest”, but said: “I’m sure customers would rather have that money in their pocket, than not.”

The findings follow warnings from the Consumer Council for Water earlier this year that consumers might find it was “not worth the hassle” to switch because of the low savings likely.

In its report, Ofwat insisted other benefits from competition would include better customer service, more innovative product offers, and environmental benefits. In particular it could allow suppliers to offer “multi-service bundles”, where customers could buy their water from the same firm as, for example, their energy and telecoms.

Ms Ross said: “The benefits are not only about lower bills. We think there is real potential for competition to improve customer service, generate new offers and innovations and make customers’ lives a bit easier.”

A Government spokesman said: “We want to have good evidence on the potential for household competition and the costs and benefits it could bring for customers. We look forward to Ofwat’s final report later in the year.”