The Water Market

Your guide to the UK's groundbreaking "Open Water" Market - from privatisation, nationalisation, and deregulation - and our role in the global Circular Economy.

The UK recently introduced a series of landmark environmental policies that continuously evaluate and improve how we use and recycle water.

The Circular Economy Package (CEP) established an ambitious long-term route to efficient waste management and wastewater treatment. The government has also similarly committed to the 25-Year Environment Plan (25YEP) and Resources and Waste Strategy (RAWS) initiatives. These policies minimise waste, promote resource efficiency, improve water treatment facilities, and deal with waste crime.

What is the water market and how does it work?

Since privatisation in the 1980s, the UK’s water market began to operate much like any other open utility market – such as gas, electricity, and telecoms – to prevent regional monopolisation and encourage investment in cleaner, more sustainable potable water and wastewater services.

In 2017, the Department of Environment, Food, and Rural Affairs (DEFRA), Ofwat, and Market Operator Services Ltd (MOSL) launched the world’s largest, most competitive deregulated non-household wholesale water retail market. So far, this “open water” market has enabled more than 1.2 million businesses, charities, and other public sector customers to choose their own water retailer and wastewater services for the first time. As market operator, MOSL is responsible for stabilising price volatility, incentivising investment in sustainability, and protecting consumer interests by setting price caps on water supply tariffs.

According to the Policy Exchange, one multi-site business customer can save between £80,000 to £200,000 per annum in administrative costs if it switches to a single supplier for water and wastewater services through MOSL’s pioneering centralised operating system. Customers who switched or renegotiated in the first year have already saved roughly £8 million and approximately 270 to 540 million litres of water.

The water market is already worth well over £2.5bn annually, and it’s estimated that this new open market structure will contribute an additional £200m to the economy over the course of the next three decades through improved services and greater value for money.

How has deregulation changed the water market?

MOSL’s Central Market Operating System (CMOS) allows business customers to seamlessly switch between water suppliers, wholesalers, and wastewater services. To participate in the water market, retailers and wholesalers must apply for a license to operate through the Market Entry Assurance (MEA) process. In order to sell water on to customers, retailers sign contracts with wholesalers. It is the wholesaler’s responsibility, however, to ensure these are uploaded into the CMOS.

In accordance with the Market Agreements Code (MAC), MOSL is also responsible for enforcing Service-Level Agreements (SLA) and collecting Water Wholesale Market Operator Charges and Retailer Market Operator (MO) charges.

How is the water market regulated?

The water market is regulated by different bodies in England, Wales, and Scotland. In England, the Department for Environment, Food, and Rural Affairs (DEFRA) sets general water and sewerage policy framework, whereas the Water Services Regulation Authority (Ofwat) protects the economic interests of consumers and suppliers by promoting competition and investment in sustainable development.

The Environment Agency (EA) in England acts as the primary adviser to the government on environmental issues and works in tandem with other organisations to prevent flood risk, improve water treatment infrastructures, and manage sewage and wastewater (e.g. blackwater and industrial greywater).

The UK’s primary water and sewerage regulatory bodies:

  • Department for Environment, Food & Rural Affairs (DEFRA) – Main governmental department responsible for water and waste management, biodiversity protection, sustainable consumption, animal welfare, and food production.
  • The Office of Water Services (Ofwat) – Sponsored by DEFRA to implement major economic and water and sewage policies, stabilise wholesale water price volatility, protect customer interests, set price caps, and monitor compliance.
  • The Environment Agency (EA) – Sponsored by DEFRA to protect water supplies, prevent flooding, and reduce water pollution.
  • The Drinking Water Inspectorate (DWI) – Sponsored by DEFRA to improve the quality and accessibility of drinking water.
  • Consumer Council for Water (CCW) – Primary ombudsman sponsored by DEFRA to handle water and sewerage complaints.
  • The Water Industry Commission for Scotland (WICS)
  • The Utility Regulator for Northern Ireland (UREGNI)

 

The Water Market: A Brief History

At the beginning of the 19th century, water and sewage systems were built, owned, operated by private companies. Ever since, the water market has undergone periods of both nationalisation and privatisation due to controversy regarding whether clean water should simply be considered a tradable commodity or a human right.

The Water Act 1973 established ten private Regional Water Authorities (RWAs) that operated on a cost recovery basis to manage water and sewage services. Capital investment was only raised by borrowing from the central government. The weak structure of RWAs and complex environmental demands limited their ability to discharge treated water and monitor pollution. In response, the Water Act 1983 began deregulating the water market and gave authorities greater access to private capital.

In the early 1990s, the UK privatised the sector. The government separated water suppliers from sewerage and waste monitoring services, but regional water wholesalers maintained substantial leverage over supplies in their respective regions. Companies with less than 5ML (mega-litres) water per site couldn’t freely switch suppliers. To combat monopolisation and promote innovation, the government officially introduced MOSL in 2017 – the largest deregulated water retail market on the planet.

Roles and responsibilities: wholesalers, retailers, & TPIs

Wholesalers:

  • Water pipe network maintenance to prevent burst pipes, leaks, and blocked sewers.
  • Water meter installation, alterations, and maintenance.
  • Management of the physical distribution of water to businesses.
  • Meter accuracy assessments.
  • Wastewater treatment services.
  • Publish Return to Sewer (RTS) allowance policies and provide details of their default RTS allowance.

Licensed Retailers and Third-Party Intermediaries (TPIs):

  • Procure water and wastewater services from wholesalers to sell to non-household consumers.
  • Create competitively priced bundled deals that often include other utilities, such as gas and electricity.
  • Feed customer water meter data into MOSL’s centralised database.
  • Liaise with wholesalers on behalf of consumers.
  • Conduct water efficiency evaluations, devise bespoke contingency plans, and provide emergency water supply.
  • Water efficiency reporting and optimisation strategies to reduce waste.
  • Provide customers online access to their water meter data.

 

Why choose Nationwide Utilities?

Our consultants have provided clients with robust and competitive water tenders since water market deregulation. Reduce your business' carbon footprint and lower emissions with affordable water contracts secured at the lowest tariffs from the most reputable retailers. Following an account audit to determine your business' rate of water consumption, we'll devise bespoke environmentally friendly strategies that facilitate more intelligent use of water to lower your utility bills.

Water bill analysis is integral to lean, green business management. Most businesses still overpay for water and wastewater services as they lack the tools to spot discrepancies. Use our emission and water consumption reporting tools to spot invoice inaccuracies and learn how to better reduce, reuse, and recycle.

There are a variety of ways to optimise water consumption, and reviewing your Return to Sewer Allowance (RSA) data is an excellent place to start. RSA is a charge for flushing water down the drain. By carrying out a non-return to sewer assessment, businesses can save up to 50% on RSA charges. Most sewerage wholesalers apply a default Return to Sewer (RTS) figure of between 90-95% to their metered sewerage volume charges. If the volume of water returned to the sewer exceeds the wholesaler’s default allowance, customers can apply for an additional allowance.

Let us help demonstrate your business’ commitment to the environment with holistic strategies to reduce your water consumption - or even participate in voluntary water sanitisation innovation initiatives, such as the £40 million Water Breakthrough Challenge.

Our business water and waste management services include:

  • Competitively priced impartial water supply contract procurement and renewal with licensed water market retailers.
  • Data-driven recommendations based on Automatic Meter Reading (AMR) information to optimise your business’ use of water and minimise OPEX.
  • Service Line Agreement (SLA) negotiation with leading suppliers through a robust tendering process.
  • Secure cost-effective commodity bundles featuring a variety of value-adds.
  • Water consumption reporting, emissions analysis, water meter installation and maintenance.
  • Bill validation and cost recovery to prevent water billing inaccuracies, overcharging, and the financial impact of avoidable penalties.
  • Market Entry Assurance (MEA) application guidance for wholesalers and suppliers looking to join the energy market.
  • Industry market intelligence to model and forecast supply, demand, and risk for more precise budgeting.
  • Disconnection services, supplier changes, and liaising with suppliers and wholesalers on your behalf.
  • Organisation of hydrometry and flow measurement.

 

The Circular Economy: Sustainable Water Management (SuWM)

The UN's Sustainable Development Goals (SDG) are fundamental to protecting to our planet. These targets safeguard human rights by increasing access to education and employment for greater upward mobility. At the moment, more than 785 million people – or one in ten people – do not have access to safe, potable water.

This means that at least three billion people worldwide have had to face Covid-19 without any soap or water.

Over half of our global population already lives in urban areas. By 2050, it’s estimated that more than two-thirds of the population (roughly nine billion) will live in cities, resulting in an 80% increase in demand for water and greater conflict between rural areas due to limited resources.

Replicating the earth’s hydrological cycle to harness hydropower and developing a truly Circular Economy is – and always will be – the key to a greener, more sustainable future for all.

The Future of SuWM: Advancements in Water Sanitisation Technologies

Wastewater treatment facilities

  • Advanced water treatment plants remove microbiological contamination, prevent flocculation, and reduce turbidity using more efficient filtration and safer UV technology to prevent regrowth during water storage and distribution.
  • Wastewater and desalination plants significantly reduce emissions and fully eliminate reliance on the grid when coupled with renewables, such as solar photovoltaic, hydro, and geothermal energy.
  • Underground water reclamation plants reduce land occupancy, contain foul odours, reuse greywater for industrial and municipal purposes, and treat sludge for soil enrichment.
  • Blackwater (waste containing faecal matter) collected from “blue box” container-based toilets can be transformed into a clean-burning, odourless alternative to charcoal.
  • Energy efficient wastewater recovery facilities can simultaneously generate renewable hydropower and extract valuable nutrients from sludge to create biogas, biosolids and fertiliser.

Seawater, blackwater, greywater, & wastewater desalination

  • Seawater, brackish water, brine, and wastewater desalination processes - such as reverse osmosis (RO), forward osmosis (FO), nanofiltration (NF), electrodialysis (ED), and membrane distillation (MD) - now require less power and pre-treatment than older methods and produce extremely high-yield, low-cost clean water.
  • Desalination processes can be supercharged with enzyme-enhanced nanofiltration membrane technology to remove more micropollutants, pesticides, and pharmaceutical residues from seawater and wastewater.

Anaerobic Digestion (AD), biogas, biosolids, and sludge

  • Coupling existing wastewater treatment solutions with Anaerobic Digestion (AD) generates biogas, which can be further converted into biomethane using combined heat and power (CHP) engines.
  • Self-sustaining Moving Bed Biofilm Reaction (MBBR) technology promotes the growth of heterotrophic and autotrophic bacteria to achieve extra high-rate biodegradation of water contaminants and can automatically respond to load fluctuation.
  • Anaerobic digestion (AD) can degrade biomass generated by water treatment processes to recover valuable, renewable biogas. 
  • By co-treating food waste and wastewater sludge at the same time, facilities can triple the output of biogas.
  • Drinking water lime, or calcite (CaCO3), generated during the drinking water softening process can be reused in softening operations, applied to cosmetics (e.g. face scrubs), and act as a low-carbon alternative form of poultry feed.
  • Calcite (CaCO3) particles extracted from wastewater treatment plants can balance agricultural pH levels compared with traditional resources.
  • Algae biomass harvested from freshwater can be used as an alternative to petroleum-based products, such as the foam in shoes.
  • Phosphorus extracted from wastewater treatment processes combined with magnesium chloride forms struvite, a type of fertiliser.

AI, hydropower, and more

  • AI technology rapidly detects and prevents sewage leaks and optimises water network efficiency.
  • Beach wells use natural sand filtration to pre-treat water supplies, saving significant time, energy, and money.
  • Wave Energy Converters (WECs) convert transform the kinetic and potential energy of waves into electricity.
  • Hydroelectric dams generate electricity, irrigate land, and prevent floods.
  • Rainwater butts collect water to be used at a later date.