Market Performance Framework (MPF) Reform

 

The Current Market Performance Framework

The current Market Performance Framework (MPF) for the English and Welsh non-household water retail market was established when the market opened in April 2017. The MPF is a group of mechanisms that govern, monitor and incentivise trading parties to deliver a set of service standards in order to comply with market codes.

Through these standards, the MPF aims to provide confidence to customers that:

  • There is an orderly operation of the market
  • Trading Parties and MOSL as the market operator are incentivised to comply with their obligations
  • The risk of non-compliance and any associated disbenefits are mitigated and managed
  • Risks to the central systems are being managed and the performance of the market is being continually improved to ensure its orderly operation.

The current MPF measures provide a view of specific steps in market processes and offer insight on whether tasks are being completed on time. However, there is evidence that the current MPF does not always drive improved outcomes for customers, the market or the environment.

In 2019, the Market Performance Committee (MPC) commissioned Economic Insights to undertake an independent review of the MPF. Following the recommendations MOSL is embarking on a reform of the MPF.

Market Performance Framework Reform Programme

We believe that an effective future framework should put customer outcomes first, rather than be compliance driven.

Feedback from stakeholders (including the Panel, Strategic Panel and our members) indicates strong support for a ‘root and branch’ reform of the MPF. This will consider a range of options, not beholden to the current framework, for effectively incentivizing the right outcomes for customers, the market and the environment.

The Market Performance Committee and its MPF Review working group strongly believes that a future framework should provide reassurance to market stakeholders that risks to the achievement of key market outcomes are being proactively addressed by:

  • Aligning the incentives of trading parties with those of non-household customers to ensure the market delivers the outcomes that benefit current and future customers
  • Effectively incentivizing and rewarding trading party performance where it leads to a positive customer experience or outcomes
  • Ensuring there are appropriate mechanisms to deter, detect and remedy issues when they arise.

The MPF Reform is outlined as one of the core improvement programmes of our draft 2022-25 Business Plan.

Timeline

 The MPF Reform programme will be delivered in two phases:

  • Phase one – will look to identify the preferred model for the future performance framework, the principles that will underpin it; and the areas of the market it will focus by summer 2022. Work on this has already started with our call for inputs
  • Phase two – will comprise the detailed design and implementation of the preferred MPF model. This will include the development of specific measures, performance standards, and associated incentive mechanisms, as required. We anticipate the work on these elements will be completed in 2022/23 to enable implementation in 2023/24.

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We will continue to update and populate this page with more information on the MPF reform programme as it develops and as we engage with stakeholders.

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