Deal marks sea change for UK water industry_2
19 July 2012
The water supply industry is expected to enter an era of intensified competition after a new company won the go-ahead to begin supplying a major water user.
The water supply industry is expected to enter an era of intensified competition after a new company won the go-ahead to begin supplying a major water user.
Albion Water, a subsidiary of Enviro-Logic, scooped the contract to supply 1.5 billion gallons of water to newsprint manufacturer Shotton Paper, based in north Wales, after a four-year wrangle. The contract is worth £18 million over 10 years. Regulator Ofwat granted a licence to Albion after Shotton confirmed it would prefer to end its contract with Welsh Water, the existing regional water company. The deal marks the first time a new player has entered the water supply market since privatisation and sends a signal to the regional water companies that their monopoly will not last. Jerry Bryan, managing director of Enviro-Logic, told SM that the number of new contracts will increase significantly in the next few months. “It has taken a long time to achieve, but it does demonstrate for the first time that competition in the water industry can be a reality. “I am confident that we will see a large number of announcements in the next few months approving new contracts.” Albion has a further 30 applications for “inset appointments” - allowing large customers to decide who provides water and sewerage services at a particular site. Ofwat director-general Ian Byatt has already said that he intends to give the contracts the green light once formal confirmation comes from those businesses that want Albion to provide their water. The company hopes to achieve savings for Shotton by maximising efficiencies, looking at further uses for the water and by identifying cheaper sources. However, Shotton is unlikely to see any immediate reductions in its water bills. The company will continue to be supplied by Welsh Water until Albion has found cheaper water sources. The regulator has previously faced criticism for the failure so far to introduce true competition into the water supply industry. Since privatisation in 1989, there have been just four inset appointments, all of them involving the existing regional water monopolies. Ofwat’s Byatt said: “This is the first time that we have seen a new entrant to the industry since privatisation. I certainly hope that Albion Water will not be the last.”
Albion Water, a subsidiary of Enviro-Logic, scooped the contract to supply 1.5 billion gallons of water to newsprint manufacturer Shotton Paper, based in north Wales, after a four-year wrangle. The contract is worth £18 million over 10 years. Regulator Ofwat granted a licence to Albion after Shotton confirmed it would prefer to end its contract with Welsh Water, the existing regional water company. The deal marks the first time a new player has entered the water supply market since privatisation and sends a signal to the regional water companies that their monopoly will not last. Jerry Bryan, managing director of Enviro-Logic, told SM that the number of new contracts will increase significantly in the next few months. “It has taken a long time to achieve, but it does demonstrate for the first time that competition in the water industry can be a reality. “I am confident that we will see a large number of announcements in the next few months approving new contracts.” Albion has a further 30 applications for “inset appointments” - allowing large customers to decide who provides water and sewerage services at a particular site. Ofwat director-general Ian Byatt has already said that he intends to give the contracts the green light once formal confirmation comes from those businesses that want Albion to provide their water. The company hopes to achieve savings for Shotton by maximising efficiencies, looking at further uses for the water and by identifying cheaper sources. However, Shotton is unlikely to see any immediate reductions in its water bills. The company will continue to be supplied by Welsh Water until Albion has found cheaper water sources. The regulator has previously faced criticism for the failure so far to introduce true competition into the water supply industry. Since privatisation in 1989, there have been just four inset appointments, all of them involving the existing regional water monopolies. Ofwat’s Byatt said: “This is the first time that we have seen a new entrant to the industry since privatisation. I certainly hope that Albion Water will not be the last.”
