WATER may be crucial for life, but it can cause headaches for economists. It is scarce in some areas and abundant in others but, with no national grid, it is costly to transport from one place to another. Prices do not fully reflect those costs; consumers living in hard-to-reach areas are subsidised by those in cities and near reservoirs. And water bills are politically sensitive. Since the water industry was privatised in 1989 it has done well on several fronts. Investment has doubled and supply interruptions have fallen. Prices have risen, but by less than before privatisation.

The next step is to transform customer service, reckons Ofwat, the water regulator. To this end, in May the government legislated to introduce competition at the retail level for non-household customers such as businesses, charities, and local authorities. Currently, these customers are usually served by their local regulated monopoly. But from April 2017, new entrants in England will be able to tap into the incumbents’ networks for a price agreed with Ofwat, and sell the service downstream—much as in the market for broadband or mobile phones.

The potential benefits for customers are large. Those with many sites will only need to deal with one supplier. A recent study found that one customer with 1,400 sites received 4,000 paper bills per year. That will fall to a handful.

Similar reforms have been tried before. In 2005, choice was introduced for the biggest consumers of water, but hardly any switched. The problem, says Ofwat, was that retailers were unable to make a decent margin, as the price to access the incumbents’ networks was too high. But the new reform allows retailers to make sufficient profits. The market is also larger, as even the smallest businesses will be able to choose supplier.

In Scotland, competition has already been introduced. In 2008 the non-household arm of Scottish Water, the incumbent, was spun out into a new company, Business Stream, which now competes with entrants. Initially, the change had a limited impact, but Business Stream has been losing significant market share since 2013.

Customer service has also improved. Business Stream works with companies to help them reduce water consumption. In one case, they helped a large store save £7,000 ($11,000) a year by changing the flushing patterns on their urinals.

In the long run, a sprinkling of competition might be introduced to the upstream market. The hope is to encourage more localised water trading between suppliers. In 2010, a hosepipe ban was introduced in the north-west due to drought. United Utilities, the incumbent supplier, sought permission to extract more water from environmentally sensitive sites. Yet water in Manchester’s ship canal sat untapped. Reformers hope that the owners of such resources might be incentivised to supply them to the market.

But water prices currently reflect the average cost of all water extracted, not the marginal cost of getting at more, and this does not create the incentives necessary to find efficiencies where they are most needed. Marginal cost pricing would mean higher bills for many customers, and more profits for water companies. That would cause a tsunami of opposition.