In the New South Wales electricity and gas sectors, enticing customers to move to new third-party competitors has been partly dependent on making customers feel confident about entering into negotiated contracts in the first place.^[66] It would seem that establishing the requisite levels of trust and comfort in those sectors may have posed some difficulties because the ‘churn’ rates in relation to residential electricity supplies have remained relatively low. (‘Churn’ is the rate of switch between competing suppliers and is the basic measure of retail competition.) The rate of churn for residential electricity customers in New South Wales was, according to the Public Interest Advocacy Centre, approximately 15 per cent and that was after four years of retail competition.^[67] Hence 85 per cent of retail customers remained with the incumbent supplier and purchased electricity at the regulated price. In the gas industry the position was similar.^[68] After approximately five-and-a-half years the churn rate has increased but the competitor’s market share remains relatively small. About 70 per cent of electricity customers have opted to remain with the incumbent supplier according to IPART’s 2007 figures (IPART, Overview of Final Report, Retail Prices in Electricity in NSW June 2007: 1). It is possible that this position would not be entirely dissimilar in the water sector.

It is acknowledged that in some other jurisdictions, such as South Australia and Victoria, the churn rates in the electricity sector have been higher than in New South Wales (PIAC Submission to Introducing a Dynamic and Competitive Water Industry 2006: 5). However, IPART also acknowledged that New South Wales would be unlikely to approach these high churn rates because the rate of switch in Victoria and South Australia was associated with a peculiar set of circumstances.^[69] IPART also noted that the average switching rate for (electricity) customers in the European Union was around 10 per cent and that in New Zealand, which had the longest history of contestability, the churn rate was also around 10 per cent (IPART, Promoting Retail Competition Final Report: 104). This suggests that churn rates are not generally high. Further, although IPART has proceeded on the basis that its determination is likely to lead to increased competition, it admits to still being uncertain about whether that will translate into increased churn rates. IPART has expressed the view that increased rivalry between firms may have positive spin-offs for existing customers, in the form of discounts or innovative services, for example, but not impact greatly on churn rates (IPART, Promoting Retail Competition Final Report: 105). Whether this is ultimately the case is not yet known but recent debates surrounding the potential privatisation of the electricity sector in New South Wales suggests that IPART’s confidence in the benefits of competition is, at least, contestable.^[70] It may be helpful to bear in mind the experience of the electricity sector when assessing competition in the (waste)water sector, albeit that there are some notable differences between the two.

Perhaps one reason for the relatively low churn rate in the New South Wales electricity sector is customer resistance to being contacted (particularly by telephone) by competitive operators offering ‘better deals’. The implementation of the national ‘Do Not Call Register’^[71] is just one measure of how far customers will go to avoid being contacted by retailers seeking to sell ‘their product’. Hence, it may be more problematic than first thought for new third-party competitors in the wastewater sector to attract customers. (Dovers discussed the significance of human behaviour and conduct in Chapter 5 when he observed that although ‘we talk of “water management” … it is really about managing people’.) Ease of access to the customer base, plain-English information, positive financial and service benefits, as well as confidence and trust in the retailer itself, will be important factors to address if the introduction of alternative wastewater-service provision via third-party access to infrastructure is to succeed. The introduction of ‘retail headroom’ in pricing may achieve a greater take-up rate of alternative service provision but the quid pro quo could be financial hardship for many customers.^[72]