Bilateral Transactions Programme
The Bilateral Transactions Programme is one of the key programmes through which MOSL aims to make it 'easier to do business' in the non-household water market and is one of the most fundamental developments since the market opened in 2017.
This section explains what a bilateral transaction is, why they are so important to the effective functioning of the market and provides a central location for all market participants to find out more about the process of the programme.
MOSL’s primary objective, as set out in our business plan, is to make the non-household market an 'easier place to do business' in.
The market has come a long way since it opened in April 2017, but many of the companies operating in the market – and the regulator – want to see “a faster, simpler, more reliable way of managing bilateral interactions between wholesalers and retailers.”
From its position at the heart of the non-household market, MOSL is ideally placed to work with its water company members to do just that. Improving bilateral transactions will not only improve the speed, accuracy and quality of service that customers receive, it will also help reduce costs for companies operating in the market.
The Bilateral Transactions Programme is considered to be “the most fundamental development since market opening."
In July 2019, Ofwat issued a mandate to MOSL to introduce a bilateral solution. On 30 September 2020 the Full Business Case was approved by the MOSL Board.
For an introduction to the programme, please click on the arrows below and the animation on the left. We also recommend viewing the Institute of Water webinar 'Delivering on the promise of the non-household market' and demonstration given to trading parties (October 2020). Both are available in the 'latest' section.
'Bilateral transaction' is a complicated-sounding term for something that is, in essence, very simple.
In the non-household water market, retailers ‘own’ the relationship with customers. The retailer is responsible for the quality of service that a customer receives and nearly all communications with them.
The water itself is supplied - and taken away - by one of 26 regional wholesalers, who own the water and water infrastructure. They also own and maintain customers’ water meters. However, in the non-household market, wholesalers only contact customers directly in certain circumstances, e.g. if their water supply is cut off unexpectedly (i.e. there is an ‘unplanned outage’).
When serving their customers, retailers often need to liaise with wholesalers to get a particular job done, such as fixing a water meter. There is therefore a two-way – or ‘bilateral’ – relationship.
Each request, instruction or process update that passes between the retailer and wholesaler is referred to as a 'bilateral transaction.’ Each process often involves multiple bilateral transactions.
These bilateral transactions normally take place behind the scenes, without the customer needing or wanting to be aware – they should just happen. The customer usually only becomes aware of the interplay between wholesalers and retailer when something doesn’t go to plan.
The importance of ensuring that all companies adopted a consistent approach to bilateral transactions was recognised prior to the opening of the non-household water market in April 2017.
However, in order to ensure the market opened on time it was agreed that the bilateral programme would be taken out of scope from the Open Water programme and revisited after launch.
As a result of this decision, each trading party (26 wholesalers, 35 retailers as at 31 March 2020) developed its own, often unique, procedures and protocols for delivering the processes defined by the market codes.
This has led to hundreds, possibly thousands of different combinations and permutations of processes in the market; each a point of potential delay and/or failure.
While on a single retailer to single wholesaler basis these processes may be relatively smooth, the more wholesalers a retailer works with, the more complicated and cumbersome the processes become.
Both the industry and MOSL consider bilateral transactions to be ‘unfinished business’. You can read more about MOSL’s perspective in the June 2020 edition of The Water Report.
The current bilateral programme, which was initiated in February 2020, builds on the lessons of previous projects and is the most concerted effort to date to deliver this important programme.
The primary goal of the bilateral transactions programme is to improve the speed and quality of service that water companies provide to their non-household customers.
These customer improvements will be created by a programme that:
- Adopts a consistent approach to raising and responding to bilateral requests between wholesalers and retailers
- Facilitates simpler, leaner and faster operational processes
- Increases automation, making better use of central data and reducing the number of bilateral transactions that are rejected
- Requires trading parties to use fewer user accounts and logins, reducing the need for manual intervention
- Enables more transparent performance levels that are easier to compare and report; helping to drive continued improvements in the industry’s performance.
Although the programme aims to make a significant improvement to issues currently relating to bilateral transactions, it is not a panacea. Market participants will need to continue to drive improvements, both individually and collectively, particularly in relation to data quality.
As well as improvements in bilateral processes, the programme will also significantly increase the visibility and measurability of individual processes at both an individual company and market level.
This information can then be used to measure performances, identify issues and drive further efficiency in the market.
MOSL is currently working with market participants to develop proposals to improve bilateral transactions.
It should be stressed that the bilateral transactions programme is much broader than an IT or ‘system solution’. It is an industry-wide endeavour that requires extensive engagement and cooperation across the industry.
While a solution is currently in development, we know the principles on which it will be based from our extensive discussions with trading parties about their processes.
The bilateral programme will involve the standardisation of key processes and creation of a central ‘hub’ by MOSL. The hub will hold up-to-date status information about each process.
MOSL will not be taking a 'one-size-fits-all' approach to interacting with the hub and will be allowing various methods, depending on companies’ needs and their size.
In doing so, MOSL aims to minimise additional costs for market participants, extend the life of systems that companies have already developed and reduce the risk of assets being ‘stranded’.
Trading parties will be able to access the ‘hub’ in a number of ways, including:
- Their own portal(s)
- The portal(s) that MOSL will provide and maintain as part of the programme
- The ‘low volume interface’ or LVI (i.e. individual entries, entered manually)
- The ‘medium volume interface’ or MVI (e.g. using spreadsheets to upload multiple entries that are formatted correctly)
- System-to-system integration (sometimes referred to as HVI or the 'high volume interface').
It will be mandatory for market participants to interface with the MOSL ‘hub’. Which route companies choose to take will be up to them.
MOSL has identified approximately 70 bilateral transactions that are within scope of the programme, of which approximately 15 represent the vast majority of transactions in terms of volume and/or customer-impacting issues. The top eight processes alone account for 80 per cent of the volume of bilateral processes in the non-household market.
Each process will be considered in turn, with the MOSL team engaging with trading parties regularly through cross-industry advisory groups to discuss proposals and get feedback and input on potential process improvements before sharing the output with all market participants.
The team will be addressing the processes in priority order, beginning with the meter validation process (‘C1’ in the Wholesale Contract Operational Terms).
MOSL will be adopting a flexible, agile-like approach to implementation. Each process analysed, defined, developed, tested and implemented in turn in order to provide maximum benefit to the market – and therefore customers – as quickly as possible.
This approach also reduces many of the risks traditionally associated with ‘big bang’ software implementations.
There are just under 70 bilateral processes in the market (67 to be exact), of which the top eight represent approximately 80 per cent of the most important transactions by volume and/or impact on customers.
The order in which MOSL will address the processes is based on a number of factors, including not only quantitative factors, i.e. the volume of transactions, but also qualitative factors, e.g. processes that are creating the most significant customer-impacting issues.
You can find out more about the order in which MOSL is addressing bilateral transactions and the progress we are making here.