A new water supply licensing regime for England and Wales came into force yesterday.
Ofwat has granted licences to three companies, including a new Birmingham-based firm, which can now compete against existing water providers.
They may now pitch for business from large business customers based anywhere in England or Wales, the regulator said.
Unlike the previous regime, they have "roaming" licences which means they are not tied to any geographical area.
The new regime does not extend to services provided to domestic customers or smaller businesses.
It affects about 2,200 business customers who must use at least 50 megalitres of water per year from a single site. These will include large NHS trusts, big industrial plants and universities.
Together the relevant companies spend about £210 million on water which represents about three per cent of the total market.
The new regime breaks the "mini-monopolies" previously held by the existing water companies, according to director general of water services Philip Fletcher.
Aquavitae UK Ltd, Water-Call Ltd and Severn Trent Water Select - based in Birmingham and part of Severn Trent plc - were named by Ofwat as the three companies which have been granted new licences.
Another six companies have shown an interest in applying, the regulator said.
The existing water companies will charge new licensees a fee for access to their supply networks.
Mr Fletcher said the new regime would encourage more price competition.
"This is good news for large users as they will be able to choose their water supplier," he said.