Two-way ‘bilateral’ processes that require retailers and wholesalers to work together to deliver for customers, such as replacing meters, have been a major cause of friction since the market opened.
Bilateral processes previously varied from company-to-company. The resulting lack of consistency created inefficiencies, making processes slower and less reliable, increasing trading parties’ costs and affecting the speed and quality of service customers received.
In September 2020, under an Ofwat-led change, the market embarked on an ambitious market-wide programme to re-think bilaterals by reviewing and standardising each process and creating a central ‘hub’ to manage them.
The business case identified 15 financial benefits and nine significant non-financial benefits and set out a five-year programme costing £3.1m (excluding integration costs). Annual efficiency savings were estimated to be £1.2m.
Today’s launch of a further nine processes into the bilateral hub formally marks the end of the Ofwat-mandated change programme. Sixteen bilateral processes are now live in the hub, representing 89% of processes with operational performance standards (OPS) by volume and a further 15% of non-OPS processes.
Based on the latest analysis, the new ways of working have transformed the speed, reliability and visibility of bilateral processes. Transaction numbers are up more than 50%, while customer complaints are down around 19%. The number of service requests being rejected by the Central Market Operating System (CMOS) has fallen by more than half.
Total five-year costs are now estimated to be £4.0m, principally due to providing multiple ways for companies to integrate with the hub, acceleration of the programme and additional functionality.
The additional costs are more than offset by the financial benefits, however, which are estimated to be £2.5m per annum*. This excludes non-financial benefits such as improvements to customer satisfaction and quality of data in the market.
MOSL is in discussion with trading parties regarding adding the remaining lower-priority, less frequently used processes to the hub to enable wholesalers to de-commission their existing systems, which is estimated could generate additional savings of £1.1m per year.
A final benefit analysis of the current phase of the programme is due to be published in early 2023. MOSL’s proposals will be included in its 2023/24 Business Plan for trading party approval.
Commenting on the milestone, MOSL Chief Executive Sarah McMath said: “The bilateral transactions programme has transformed one of the biggest frictions and frustrations in the non-household water market. Simplifying how retailers and wholesalers communicate to deliver these processes will save the market tens of thousands of hours over the coming years. But it’s not just about financial savings – the programme means more customers will now receive the service they expect and deserve.”
David Black, Chief Executive of Ofwat added: “Having been closely involved in the programme, we have seen first-hand the level of commitment and engagement that has gone in to making an ambitious programme such a success. The market has demonstrated what it can achieve when working together and we hope that this provides a framework that can benefit other market improvement programmes in future and deliver better outcomes for customers.”
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*at today's prices; £2.1m at 2020/21 prices (i.e. the basis on which the original Business Case was calculated)
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