The Central Market Agency: harnessing data for customer benefit

The move to improve data quality and ensure water customers are billed accurately has been led in Scotland by the Central Market Agency (CMA).

Ten years ago, the water industry north of the border underwent a ground-breaking structural change that resulted in a unique model for the delivery of water services to businesses.  The 2005 Water Services etc. (Scotland) Act made provision for the separation of Scottish Water into wholesale and retail businesses.

It also required that the retail activities, whether provided by Scottish Water’s retail business or any other company wishing to provide these services, should be subject to a licence, granted by the water industry regulator, the Water Industry Commission for Scotland (WICS).

Although at the time this legislation went largely un-noticed, it facilitated the creation of the first water retail market in the world and meant that business customers in Scotland could choose their supplier of water and wastewater services.

While Scottish Water retained responsibility for the physical supply of water and removal of wastewater, different suppliers could compete to carry out retail activities such as billing and meter reading.

“The opening of the water market in Scotland threw a spotlight on the information that was being used to bill customers,” said CMA chief executive Jeremy Atkinson. “Inevitably we found the errors and omissions that are seen in all utility industries. In response, we led the efforts to improve data quality and thereby ensure that customers are billed accurately.”

Responsibility for data completeness and accuracy resides with participating companies. Customer-centred data tends to be the responsibility of the so-called Licensed Providers (see panel), while asset-centre data tends to be the responsibility of Scottish Water. The CMA’s role is to provide the systems that handle and process market data.

However, early on the CMA’s Board took the view that if data quality issues were left unresolved it would reflect poorly on the market and everyone involved, not just the responsible party. The Board decided that as an independent central body, the CMA was perfectly positioned to take the initiative on improving matters.

Not only did it successfully run data improvement projects in its own right, the CMA also proved to be the catalyst for individual participants stepping up their own efforts. The CMA also developed a purpose-built computer system and associated business processes, known as Central Systems, to help participants by providing some validation of data as they enter it into the data base.

I have been impressed by the reliability and quality of the calculations we undertake – David Sigsworth, CMA chairman.

In April last year, a water market opened in England. All the key players in Scotland were closely involved in its establishment; the arrangements in Scotland were taken as a starting point, and then adapted for the regional structure of the industry in England. “It was a testament to our success that the market arrangements, the governance, and the market administrator were all closely modelled on the arrangements in Scotland,” said Atkinson.

Also last year, the CMA appointed former Scottish Environment Protection Agency chair David Sigsworth as its new chairman. “Coming from a utilities background I am fully aware of the challenges posed in these industries,” said Sigsworth, “and I have been impressed by the reliability and quality of the calculations we undertake.”

Compared with the water market in Scotland and England, systems used to administer the electricity and gas markets look out of date. For a business customer to change their electricity or gas supplier it can take a couple weeks. In water it is a couple of days, and the limiting factor is the business process which allows the existing supplier time to object, as opposed to the system itself.

“I have been struck by the fact that the CMA has accumulated a wealth of experience and expertise,” added Sigsworth. “One of my objectives is to find ways of creating value from all this both for the business and for Scotland.”

The CMA is not a public-sector body, because of its mixed private and public membership, and is therefore not directly part of the Hydro Nation project, the Scottish Government’s commitment that the nation’s water resources be developed to bring the maximum benefit to the Scottish economy. But Sigsworth views the CMA as a resource that is complementary.

About the CMA

Just as in the gas and electricity industries, the market is governed by a series of codes and agreements.  The Operational Code sets out how Scottish Water and the suppliers, known formally as Licensed Providers, coordinate to ensure that physical activities such as new connections and meter installations are carried out.

The Market Code establishes the rules for participation in the market, covering what information must be provided by who and when. Although the Central Market Agency (CMA) was established by the WICS, its duties, obligations and governance are all documented in the Market Code (available on the CMAs website).

The CMA is an independent not-for-profit business, set up to administer the market. It was established as a company limited by guarantee (CLG), and its members are the participants in the market, both Licensed Providers and Scottish Water.

The CMA operates a purpose-built computer system and associated business processes, known collectively as the ‘Central Systems’, to ensure that the market operates on a day-to-day basis.  This involves keeping a record of which Licensed Provider is responsible for the services delivered to each business customer, and then calculating the amount that the Licensed Provider owes Scottish Water in wholesale charges.

With 225 thousand commercial properties in Scotland, that involves processing a lot of data in the form of meter reads, rateable values, connection sizes, and various allowances and serial numbers.  The data and information held in the Central Systems is continually updated and maintained through electronic transactions received from market participants.

The market is run by the industry with regulatory oversight. Every two months the market participants meet as body known as the Technical Panel to discuss how the rules of the market might change and develop to improve its functioning.  WICS is present at these meetings to ensure that customer interests are safeguarded, while the CMA acts as a secretariat and authority on the technical consequences of proposed changes.

The CMA safeguards and protects the market by ensuring that all participants have the required technical capability to join in.  We deliver training and advice to market participants before they enter the market, provide an expert opinion to the sector regulator, and give ongoing technical support.

The CMA is run by a Board of Directors, which includes the chairman and chief executive, two non-industry non-executives, one nominee from Scottish Water, and two Licensed Provider nominees.  Between them the Board members bring a diversity of experience and perspective to the business; they include a former energy minister, a former partner from Andersen and the last chairman of SEPA.

The market has been in operation now for ten years. There are currently 25 Licensed Providers delivering water and wastewater services to business customers in Scotland.  Many offer value-added services such as consolidated billing for multi-site customers, water efficiency audits and conservation measures.  Details of these business are available on the Scotland on Tap website run by WICS.