On 19 December 2024, Ofwat published its highly anticipated Final Determinations on wholesalers’ investment plans for the 2025-30 period.
MOSL's Corporate Affairs Manager James Higgins reflects on the first price review since the market opened in 2017 that can fully consider the needs of the market and its customers.
"At the start of the PR24 process we called for it to ‘set clearer targets and performance commitments for the market, particularly in the areas of metering, water usage and customer service’.
Reflecting on those three asks, in the final determinations Ofwat has:
1) Asked wholesalers to roll out 800,000 smart meters for businesses over the five years
The wider rollout of 10.4 million meters is a marked increase in ambition from a couple of years ago when draft water resources management plans (WRMPs) were published. This prompted the Strategic Panel’s National Metering Strategy and wholesalers’ more ambitious smart metering plans for businesses off the back of it.
We will continue to encourage wholesalers to ensure larger businesses who could save larger quantities of water are included in rollouts. This is because, despite the step up in ambition, Ofwat has set a single unit rate for wholesalers to deliver small, medium and large meters despite challenges from stakeholders.
MOSL is supporting the Retailer Wholesaler Group (RWG) to produce wholesaler-retailer best practice for communications with business customers during the rollout. We are also working to produce an area-by-area rollout dashboard to support visibility for retailers.
2) Set a new performance commitment to reduce business demand by 0.5% by 2029-30
MOSL strongly welcomes the first ever price review commitment to reduce business demand as focus to date has been on reducing network leakage and household per capita consumption (PCC).
We hope the drop in ambition from draft determinations when the headline ambition was a 7.5% reduction by the same date will not represent a lost opportunity to reduce a third of water consumed in England.
We understand part of the change is due to re-baselining companies’ growth forecasts but believe more clarity is needed on how it aligns with Defra’s target to reduce business demand by 9% by 2038.
We will continue to use our data insight and improved customer segmentation to outline the important role business customers must play in meeting England's water security shortfall - which is set to grow to 4.8 billion litres of water a day by 2050 - and enabling the government’s desired economic growth.
3) Introduced a new business customer and retailer measure of experience (BR-MeX) incentive
This represents a step change in the level of incentives in the market to drive improved wholesaler focus and performance. As an example, several companies have maximum annual BR-MeX penalties/rewards above £10 million compared to hundreds of thousands under the current Market Performance Framework (MPF).
Three metrics from the new MPF will make up 25% of the BR-MeX score. We expect them to drive wholesaler engagement with retailer requests through the bilateral hub, and improvements in the quality of wholesalers’ address/premises data. As outlined in our 2025-28 Business Plan, we will continue to run the bi-annual retailer (R-MeX) survey which will make up 25% of the BR-MeX score and a new quarterly business customer (B-MeX) survey which will make up 50% of the score.
Bill increases is a fourth area I want to touch on. Wholesale charges for business customers will increase on average by around 42% 2025-30. Many businesses will see a larger jump on 1 April 2025 with lower rises in the following years. We are aware this could present some challenges for retailers and business customers. We are supporting RWG work on how these bill rises are communicated given the current economic climate.
Overall, the final determinations do not contain everything we asked for, particularly around water efficiency. That said, the price review (including BR-MeX) and the reformed MPF coming into effect from 1 April 2025 can all help deliver improved outcomes for the market, business customers and the Strategic Panel’s Roadmap to a Flourishing Market.
MOSL has published a more detailed summary and are supporting additional work by the relevant market groups. The changes will take effect from 1 April but wholesalers have until 18 February to decide whether to appeal to the Competition and Markets Authority (CMA)."
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