Our use of cookies How the water self-supply licence works for businesses
Deregulation of the English and Scottish water market introduced the option of self-supply. Large organisations can apply for a licence to purchase water directly from regional water companies and take on the supplier’s role themselves.
The self-supply regime means that a company with a licence has similar rights to business water suppliers, except that it is restricted to supplying water to properties it owns or rents.
This guide explains the opportunities offered by water self-supply licences. Here’s what we cover:
- What is a water self-supply licence?
- How water self-supply works for businesses
- Who can apply for a water self-supply licence?
- Which businesses in the UK currently self-supply water
- What are the benefits of a water self-supply licence?
What is a water self-supply licence?
A water self-supply licence is a type of Water Supply and Sewerage Licence (WSSL) that lets a business act as its own water retailer, rather than buying retail services from a licensed water supplier in the open market.
Formally, this licence is called a WSSL with a retail authorisation restricted to self-supply, and it permits the holder to provide retail services to its own premises.
Holding a self-supply licence requires the holder to take on responsibility for meter readings and for the relationship with local water companies. In exchange, the holder benefits from the cheaper regulated wholesale rates charged by regional water companies.
How water self-supply works for businesses
When a business takes on a self-supply licence, it’s important to understand what does and doesn’t change.
The responsibility for the physical water infrastructure remains with the local water company. They continue to supply water to each property and remove wastewater exactly as before.
What changes is the retail layer, which involves administration that is usually the responsibility of a business water supplier. Here is a summary of the three key water management processes that change when a business starts self-supplying.
Meter readings
Self-supply businesses become responsible for submitting water meter readings for each water supply point (SPID) they operate.
Water meter readings are submitted by the self-supplier to the CMOS (Central Market Operating System), the database that underpins the deregulated non-domestic water market.
Wholesale charges
Businesses with a self-supply licence are responsible for paying the underlying wholesale water rates to the local water companies that supply each registered supply point.
This includes:
- Standing and volumetric water rates
- Standing and volumetric wastewater rates
- Highways and surface drainage charges
- Trade effluent charges
These wholesale charges are calculated based on the submitted water meter readings and the wholesale water rates published by each water company.
Water relationship management
Instead of contacting the customer services department of their supplier, self-supply licensees must deal directly with local water companies when managing any of the following operational issues:
- Water meter replacements
- Commercial water leak investigations
- Business water interruptions
- Trade effluent consents
Who can apply for a water self-supply licence?
In principle, any registered company that operates a non-domestic property in England or Scotland can apply for a self-supply water licence.
There is no minimum water consumption, no minimum number of sites, and no specifically excluded sectors.
The application for a self-supply licence with Ofwat typically takes 45 working days and requires payment of a one-off £3,000 fee.
This section explains the criteria used to assess a water self-supply licence application:
Assessment criteria for a self-supply water licence
Ofwat requires applicants for a self-supply water licence to demonstrate sufficient competency, which it assesses through the following three criteria:
- Managerial competency: The skills, qualifications and experience of the applicant’s staff.
- Financial stability: An assessment of the financial resources available to meet the applicant’s obligations under a self-supply licence.
- Technical competency: A demonstration of knowledge of the requirements of the Drinking Water Inspectorate and the Environment Agency.
Typically, a contract with a managing agent is used to fulfil some of the water industry specific requirements above.
Market Entry Assurance Certification
Alongside the Ofwat application, an applicant must also submit a trading application to MOSL, the retail water market operator.
Market Entry Assurance Certification ensures that a company seeking to become a trading party has the required systems, processes and capabilities to use the CMOS system that underpins the retail water market.
Most self-supply water licence holders outsource the work of dealing with the CMOS system to a managing agent.
Where water self-supply is available in the UK
The following summarises where in the UK a water self-supply licence is available.
- England: Available through registration with Ofwat.
- Scotland: Available through registration with WICS, the economic regulator for the water industry in Scotland.
- Wales: Most business properties already purchase water directly from local water companies. However, non-domestic properties consuming over 50 million litres annually are eligible for management using an Ofwat self-supply licence.
- Northern Ireland: Not available, as the non-domestic water market is not deregulated, and businesses already purchase water directly from local water companies.
What happens after a self-supply licence is granted
Once a water self-supply licence has been granted, the following steps are taken by the licence holder to begin self-supplying their portfolio of properties.
Signing the necessary industry agreements
Newly licensed businesses must obtain the following agreements before commencing self-supply of water:
- MOSL membership: Completion of MOSL’s application form to become a trading party.
- Accession agreement: Signing an accession agreement with MOSL confirming adherence to retail market codes.
- Wholesale contracts: Signing a wholesale agreement with each regional water company relevant to the applicant’s portfolio of sites.
Individual wholesalers may require credit cover or prepayment of wholesale business water bills, as a contract condition.
Criteria for self-supply properties
A licence holder may start self-supplying any non-domestic properties that are either:
- Occupied by the licensee – Properties occupied by the legal entity that holds the licence.
- Premises of an “associated person” – Properties occupied by a legal entity that is in the same corporate group as the licence holder.
Site migration
Once all the above agreements have been obtained, the licence holder can begin arranging switching business water suppliers, replacing the current supplier with self-supply.
For each water supply point, this process requires:
- Registration of the transfer in CMOS
- A water meter reading on the date of transfer
The outgoing water supplier issues a final bill, and the self-supplier becomes responsible for wholesale charges from the transfer date.
What responsibilities come with water self-supply
The following table summarises the legal responsibilities that come with a self-supply licence arrangement.
Self-supply licensees frequently outsource the management of these responsibilities to a managing agent.
| Responsibility | What it involves in practice |
|---|---|
| Maintain the WSSL in good standing | Comply with all standard conditions issued under the Water Industry Act 1991, and respond to Ofwat information requests. |
| Pay Ofwat fees | Annual licence administration fee to cover regulatory oversight costs. |
| MOSL membership | Pay MOSL membership and market operation charges, and nominate representatives to participate in market governance and votes. |
| Compliance with market codes | Adhere to the Wholesale-Retail Code (WRC) and the Market Arrangements Code (MAC). |
| Market Performance Standards | Meet MOSL's performance standards on data accuracy, meter reads, settlement and transactions. |
| Sign and maintain wholesale contracts | Hold a contract with each regional wholesaler whose area the business operates in (Thames, Severn Trent, Anglian, etc.). |
| Pay wholesale charges | Settle monthly wholesale invoices for water supply, wastewater and trade effluent. |
| Credit and security | Provide credit cover or financial security to wholesalers as required under the Wholesale-Retail Code. |
| Maintain accurate CMOS records | Keep Supply Point ID (SPID) data correct, including service type, tariff, meter details, occupancy status and address. |
| Submit meter reads | Submit meter reads into CMOS within the frequency and accuracy windows set by the market codes. |
| Process market transactions | Register switches, changes of occupier, new connections, disconnections and tariff changes in CMOS. |
| Reporting to Ofwat | Submit any periodic returns, performance data and compliance statements Ofwat requires. |
| Water interruption plans | Create emergency plans for water outages affecting self-supplied premises. |
Which businesses in the UK currently self-supply water
The following table lists the businesses in the UK that hold a self-supply water licence.
| Licence holder | Number of supply points managed | Ofwat self-supply licence? | WICS self-supply licence? |
|---|---|---|---|
| Arla Food UK PLC | 24 | Yes | No |
| Blackpool Borough Council | 325 | Yes | No |
| Boots UK Limited | 2 | Yes | No |
| British Telecommunications PLC | 6749 | Yes | No |
| Coca-Cola European Partners | 9 | Yes | No |
| David Lloyd Leisure Ltd | 198 | Yes | No |
| Earls Gate Water Ltd | 1 | No | Yes |
| Elis UK Ltd | 72 | Yes | No |
| Futamura Chemical UK Limited | 327 | Yes | No |
| Greene King Brewing and Retailing Limited | 3,095 | Yes | No |
| Heineken UK Limited | 430 | Yes | No |
| J Sainsbury PLC | 3513 | Yes | No |
| John Lewis PLC | 818 | Yes | No |
| Kellogg Company of Great Britain | 9 | Yes | No |
| Marston’s PLC | 1916 | Yes | No |
| Nottingham City Council | 489 | Yes | No |
| Sefton Council | 449 | Yes | No |
| Stonegate Pub Company Limited | 2073 | Yes | No |
| Whitbread Group PLC | 1743 | Yes | No |
Compiled from: Ofwat Licencees, WICS Licencees, MOSL market dashboard, CMA market dashboard
What are the benefits of a water self-supply licence?
Although there is no minimum site number requirement, self supply only makes financial sense for large multi site businesses.
The two main benefits are set out below:
Savings on business water rates
The business water rates paid by most companies include a retail margin charged by the water supplier for carrying out its retailer responsibilities.
Self-supply businesses avoid this fee and pay only the regulated wholesale business water rates. This saving is usually offset in part by the admin costs and the managing agent fees most self supply businesses pay.
At AquaSwitch, we’ve helped thousands of SMEs reduce their water rates. Find out how much you can save today with our business water comparison service.
Improved visibility and data
Bringing a property portfolio under self-supply gives businesses greater visibility and control over water use and costs.
Gaining control over the water meter reading process allows organisations to obtain a consistent data stream on water consumption, enabling them to identify opportunities to reduce water consumption.
It also allows organisations to implement their own systems of water loggers or smart water meters, eliminating the need for estimated water bills and improving cost management.
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