OWML Board Paper no 16-03c - 15th April 15
CONFIDENTIAL
Programme Lead update
Programme governance and leadership
There remains substantial uncertainty about the future management of the Open Water
programme. While, it is possible for OWML to be ready to meet the transition target date
of 31 May 2015, it is not clear that others could be ready by this date. The main obstacle
to OWML being ready would be the requirement for a Members’ meeting to be held and
for a 75% majority of those participating to vote in favour of the winding up of OWML.
Cathryn Ross’s letter to licensed companies (of 13 February 2015) did not actually
specify a transition date. It preferred a looser formulation that OWML had been asked to
continue to the end of May and to complete several tasks. That letter also announced the
appointment of Adam Cooper, who has experience in Ofgem and considerable
experience in public affairs and energy commodities, to lead the Open Water programme
from an Ofwat perspective.
In February, OWML agreed to continue until the end of May subject to:
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appropriate resources being made available from Ofwat for the remainder of the
current financial year and for the first two months of the 2015-16 financial year;
the current team being ready, able and willing to continue to work on this basis; and
there being clarity about to whom the OWML activities would be transferred and the
existence of a clearly defined and implementable transition plan.
The first two of these conditions have now been met. There remains, however, some
uncertainty on the third of these. Peter Bucks has initiated a transition working group that
should meet in the next week or so.
The principal obstacles to a successful transition at the end of May relate to:


Ofwat being resources to take on its responsibilities; and
MOSL having an elected Board with appropriate independent non-Executive
members.
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OWML Board Paper no 16-03c - 15th April 15
CONFIDENTIAL
Ofwat has recently issued a tender for support services relating to the opening of the
non-household retail market. The potential scope of this tender is quite wide but there still
appears to be an intention to pursue a ‘Thick MOSL’ option. There is a draft of Ofwat’s
RACI analysis of the activities required for market opening and this appears to confirm a
‘Thick MOSL’.
Time has, however, been lost in the setup of MOSL. The original timeline had a fully
constituted Board in place by the middle of May. This was timetabled in order to allow the
new Board to take a key procurement decision relating to the central systems. MOSL has
currently had confirmation from around a quarter of incumbent companies that they
intend to join MOSL.
MOSL is currently planning to appoint the non-Executive team in advance of the
membership applications being closed and the election of an incumbent and a new
entrant director. The intention is to form a nominations committee from the existing Board
and two invited new entrants. This option has the advantage of speed, but could be seen
to lack legitimacy. The nominations committee under this option is not representative.
The approach is also not consistent with the articles and could, unless the articles were
to be changed, leave the company open to challenge. Even under this revised approach,
it is highly unlikely that MOSL could be properly constituted before the middle/ end of
June 2015.
Defra continues to emphasise the need for a robust, independent and high quality Board
to be appointed. It is important that the independent non- executive roles are properly
described. OWML has edited an initial role description, which focused on the longer term
potential MO role. As noted previously, we all need to be quite careful about taking the
views of HM Treasury for granted when it comes to the organization and classification of
the MO.
There is currently insufficiently close working between the procurement work of MOSL,
the design activities and the codes and processes work stream. My view remains that the
procurement activities should be managed within OWML and that all activities should be
transitioned in a single step to MOSL, should this be the result of Ofwat’s RACI analysis.
The original plan for a transition to MOSL was envisioned on this basis and Board has
previously been alerted to the risks in both cost and time of an insufficiently coordinated
approach.
There remains uncertainty as to what happens to the team currently working on MAP 3.
This is far from optimal. It is a substantially demotivating factor at a time when we require
maximum commitment from the relatively small team that we have at our disposal. Claire
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OWML Board Paper no 16-03c - 15th April 15
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Nichols has resigned from the programme. Harriet Towler will return to Severn Trent after
MAP 3 and will not extend (as I had always hoped) her secondment. On a much brighter
note, James Rickleton, formerly a senior official at the NAO, has commenced work as the
COO of OWML. He is already proving to be a most valuable addition to the core team.
Notwithstanding this uncertainty, the programme team is progressing ‘full steam ahead’
on MAP 3. As Board members will see there is still a substantial number of areas where
we will need clarity from Ofwat on policy matters.
There have also been further conversations between the Scottish Government and Defra
(particularly around commencement in both Scots and English law of the joint licensing
provisions included in the 2014 Act.
High-level Programme Plan
Despite the distractions of when any transition may take place, the work of OWML is on
track. There are separate papers on the MAP front end, its structure and the outstanding
policy issues.
We continue to visit companies. In line with earlier reported impressions, there is a wide
range in the understanding of the issues and preparedness. In many cases WOCs are
well advanced in their thinking and planning.
There is now a good understanding about the MAP activities over the next six months or
so. The aim is to finalise the market design and freeze the codes and procedures (at
least insofar as they impact the information processing capability that is being procured
for the MO). The target date for the MAP (Final Recommendations post vendor
appointment) is 30 September 2015. We have also planned a MAP (pre vendor
appointment recommendations) for July 14 2015. The Codes Panel would review any
changes following the 30 September (see below).
We continue to have regular meetings with Ofwat and Defra to review each
organisation’s plans and to understand the interfaces between their workstreams. We
have made some progress on the assessment of risks and the descriptions of mitigations
available but this work is hampered by the lack of a clear transition plan and allocation of
responsibilities between those that will be charged with delivery.
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OWML Board Paper no 16-03c - 15th April 15
CONFIDENTIAL
Work Areas
In the last programme leader report, I outlined the proposed transition to six work
streams. The scope of these work streams was not discussed owing to time constraints.
They are outlined again below.
Area of work
Scope of activity
1. Programme Management
 Currently an OWML activity
and Assurance
 Responsible for establishing and maintaining the
work plan for the delivery of all MOSL activities.
 Responsible for managing change control of the
plan and developing and maintaining a risk register
and an issues log.
 Communicating to work stream leads performance
against the plan.
 Responsible for managing MOSL assurance to
OFWAT/DEFRA
 Responsible for collecting assurance statements
from the individual companies.
 Responsible for commissioning individual elements
of assurance needed to build confidence in the
overall market arrangement
2 MOSL
Governance and Responsible for MOSL set up (a MOSL activity):
the establishment of the
• member registrations and explanation
Market Operator
• initial members' meeting
• appointments to Board
• selection of non-executives
• ensure that MOSL has appropriate financial,
governance and HR policies
• manage recruitment of specialists to contribute to
overall programme delivery
Market Operator set up (currently, an OWML activity
although not currently a major focus of resources):
• appointment of Chief Executive
• development of new articles
• agreement of new articles with HM Treasury,
securing private status
• explain new articles to MOSL members and
members yet to join MOSL (e.g. separate retail
arms)
• manage resignation and joining process for new
MO MOSL
• Board elections
• Staff training
3 Engagement /
Company This is currently an OWML activity except for the
external (promotional) communications element
support
[1] This activity will be outlined below, for which Ofwat is assuming
supported by one of the responsibility.
technical specialists.
The work stream is responsible for:
Senior engagement with companies
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Communicating key strategic and policy aspects of market
opening and describing how these impact company
choices
listening to senior executive feedback and ensuring
delivery of information needed for company strategic
decision making
Support to companies[1]
communicating a business planning process to companies
supporting companies as they develop and implement
their business plans
Business customer engagement and awareness building
through general business fora such as CBI, MEUC, FSB
events:
individual meetings with key national and regional
business organizations; and
Advertising and promotion.
Regulatory stakeholder engagement
DEFRA; SEMD; DWI; EA; OFWAT; WRAS; Scottish
Government; WICS; Local Government
External communications management (to be the
responsibility of Ofwat)
Appointment of relevant contractors; Web site use,
management and development; and
Social media
Internal communications management
Team meetings; Intranet; and Board secretariat
• This is currently an OWML activity.
4 Codes and design authority
• Responsible for ensuring that all the necessary
codes, processes and procedures are agreed and
in place to support successful market opening.
• This work stream would also encompass
establishing and operating a design authority to act
as custodian of the market design, capable of
operating on an enduring basis (including code
escrow arrangements to allow for a change in MO
if required)
• The design authority links the procurement
activities, the transition and data work streams,
through participation in the review and approval of
central system requirements, design and testing
specifications, and data upload, market testing, and
quality criteria specifications, to ensure that they
meet the requirements as set out in the codes.
• It would also maintain a log of all suggested
changes, decisions taken and timetables changes
that are to be made to the codes and to the
systems.
5 MO Procurement and
 This is currently a MOSL activity
Operations
 Responsible for managing the design, development
and delivery of the central systems to allow for
timely, accurate and effective registration and
settlement.
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6 Transition and data



This is currently an OWML activity
Deals with the range of transition issues that are
required to be completed by companies in order
that the market can open in April 2017.
This includes:
o defining the specification of data
o setting out guidance for plans for both the
MO and the companies in order to:
o prioritise, cleanse, upload and test data,
o develop central and company IT systems;
o build operational capability,
o enable training and culture change
o Allow for end to end system and operational
testing.
Programme Management and Assurance
Deloitte has now been appointed as the contractor for the assurance framework. They
will hold a couple of work shops with the industry before providing their recommendations
at the end of April.
Engagement and Company Support
Progress in this area has been limited by the resignation of Claire Nichols. She is a big
loss to the programme. Resource constraints now mean that focus of this team is wholy
on the preparations for MAP 3.
Going forward, the Engagement and Company Support team will need to be expanded to
seven: a leader, three company liaisons, one central policy and two juniors. The
company liaisons would work with a technical and a governance/ codes specialist in
conducting regular company visits to assist in explaining what needs to be done. This
work will be consistent with the Transition Plan. Each small team would be responsible
for working with six companies.
Codes and Design Authority
There was a further series of successful workshops with the industry.
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OWML Board Paper no 16-03c - 15th April 15
CONFIDENTIAL
Similarly, there have been successful ‘Task and Finish’ Groups, facilitated by Water UK,
with DWI and EA. We are on track to include fully the views of EA and DWI in the MAP 3
codes, processes and procedures.
We have provided advice to Ofwat on the establishment of a Codes Panel. The
composition of this panel is likely to be in line with the decision of the Ofwat Board.
Unlike in some other industries, wholesalers will be represented on the Panel.
The market operator (MO) and procurement
The size limit on the bidders for the central systems has resulted in some of the smaller
and more experienced players in the development of central systems to have to work
with a partner. While this may allow a financially stronger counterparty to be appointed, it
will have increased the costs of the system. It is not clear that the financial recourse
available for any shortfall in the delivery of the central systems could ever compensate
for the reputational damage of not being able to open the market on time.
Transition and Data
We will include an appendix in MAP 3 outlining the issues that companies should
consider in preparing themselves for market opening. Oxera, SMC and Gemserv are
responsible for the preparation of the ‘Transition Overview’.
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