In 2022 we are launching our work with the sector to develop a customer-focused licence condition for water companies in serving residential customers.
We held a workshop for customer representatives and water companies on 9 June 2022.
Below is a summary note of the workshop.
- Speech: why a customer-focused licence condition?
- Panel session: What are the problems facing water customers today?
- Panel session: How have other sector regulators sought to drive customer focus in their industries?
- Breakout sessions and Plenary session: feeding back from breakouts
- Closing remarks
James Hawthorne, Principal at Ofwat, welcomed delegates from customer representatives, water companies and other sectors and introduced the agenda for the day.
Emma Kelso, Ofwat’s Senior Director – Markets, Enforcement and Customer Policy, opened the event with a speech on the need for a customer focused licence condition.
- You can watch Emma’s speech on YouTube: https://youtu.be/A–DnaPaUvY
- You can also read her speech on our website: https://www.ofwat.gov.uk/wp-content/uploads/2022/06/Licence-condition-workshop-9-June-2022-Emma-Kelso-speech.pdf
Facilitated by Gwenllian Roberts, Ofwat’s Director of Wales. Each of the panellists gave their view on the problems facing water customers today.
Each of the panel members were invited to speak for a few minutes on the key problems facing water customers today.
- Jess Cook, Project Development Manager – Water Poverty, National Energy Action: Jess spoke about the cost of living crisis and the role the licence condition could play in making companies focus on the needs of all customers, drawing parallels with the steps taken in the energy sector.
- Sue Lindsay, Director of Customer Policy and Engagement, Wessex Water: Sue spoke about the cost of living crisis, meeting customers’ service needs including where things go wrong – and engaging customers to change behaviours.
- Mike Keil, Senior Director of Policy, Research and Campaigning, CCW: Mike also highlighted the cost of living crisis, including CCW’s recent campaigns (Ending water poverty; Credit where its due; Don’t let people suffer in silence; End sewer flooding misery). He also spoke about the need to focus on customer’s actual experiences and the need to engage customers on the future of services.
Questions and discussion points included:
- the key building blocks for the licence condition;
- whether more work could be done across sectors to offer customers support during the cost of living crisis;
- the scope of the licence condition;
- whether companies need more freedom on social tariffs;
- being clear how the new condition fits with other regulatory tools;
- whether the new condition sets a minimum service standard and how to free up companies to innovate and do more than the minimum;
- adopting an outcomes-based or principles-based approaches for the condition; and
- the importance of companies and others being able to navigate, understand and report on the new condition.
4. Panel session: How have other sector regulators sought to drive customer focus in their industries?
Facilitated by Stephen Humphreys, Ofwat’s head of regulatory communications and planning.
Each of the panel members were invited to speak for a few minutes on how they have sought to drive customer focus in their industries.
Nisha Arora, Director, Consumer and Retail Policy, Financial Conduct Authority
Nisha spoke about the FCA’s work to build on existing customer-facing ‘fairness’ and customer communications licence conditions and replace them with an outcomes-focused consumer duty on the businesses they regulate.
Martin Campbell, Head of Consumer Vulnerability and Debt, Ofgem
Martin spoke about Ofgem’s licence conditions for gas and electricity suppliers with the objective of ensuring that customers are treated fairly, including specific reference and requirements for those in vulnerable situations
Questions and discussion points included:
- how to balance prescription and freedom;
- how to measure adherence to outcomes or principles and demonstrate compliance;
- where licence conditions have been enforced;
- whether water companies can share best practice more easily than those in other sectors; and
- whether there has been a detectable shift in cultures with energy and financial services.
Attendees joined one of three breakout sessions. A summary of each of the sessions is below.
Breakout 1 – Vision: What does a fairly-treated water customer look like?
Breakout group 1 identified some areas that the licence condition might cover: communication, accessibility, resolution, transparency, people’s awareness and understanding, data sharing.
The group also talked about what fairness means – and how customers may interpret it.
A point was raised that some aspects of regulation discourage companies from working together as they compete directly on customer service.
The group also highlighted the importance of the licence condition being developed based on customers’ needs and to make it understandable to customers.
In the questions and comments a point was raised that the Financial Conduct Authority moved away from the idea of fairness towards good outcomes for customers.
Breakout 2 – Toolkit: How will a new customer licence condition complement other parts of the regulatory framework?
Breakout group 2 considered how a new customer licence condition would sit alongside other regulatory tools. The following issues were covered during the discussion.
- The group acknowledged there are a range of regulatory tools for driving better customer outcomes and that it will be important to consider the full range of these tools in developing the licence condition.
- There is merit in taking a step back and considering what we want to achieve for customers and what cultures we are seeking to change, as well as taking a holistic look at our existing toolkit to identify gaps. Mapping this territory early on and identifying gaps will be important for informing licence design.
- It was suggested that one gap was around companies offering accessible services to all customers. There is guidance in other regulated sectors that can be drawn on and companies should be encouraged to design services so that they are inclusive and accessible to all customers.
- In some cases, there may be gaps/limits with certain tools and customers can fall through these gaps, particularly the worst served customers who experience repeated service failures.
- It is important to reflect on previous learning when designing the new condition. For example, Freeze-Thaw has lessons to offer as water companies thought systems were effective and working well but there were then challenges in practice when Freeze-Thaw happened.
- There is also a role for other stakeholders to play in driving progress and holding companies to account, including through exposing bad behaviours and incentivising collaboration and the sharing of best practice.
- In taking forward work on a licence condition, it will be important to strike the right balance between high-level principles and some prescription/further guidance. Adding a customer condition early in the licence also has potential to signal its importance.
Breakout 3 – Delivery: How can the whole sector work together to make a success of the licence condition?
Breakout group 3 discussed that:
- there is a lot of flexibility about what the licence condition could do; and
- although the industry had gone through a licence simplification process a few years ago – the new condition would be much more wide ranging and very multi-disciplinary in its nature.
In terms of delivery:
- there was interest in the co-creation approach;
- recognition that it is important to understand what the industry wants to achieve, what desired outcome was, and build up a shared understanding of that; and
- the licence condition needing to have a clear purpose understood by companies, customers and others.
Questions and comments included the following.
- That the licence condition should set a clear, high level purpose understood by companies, customers and wider stakeholders. For example, it should set out what licence holders should achieve by way of outcomes but not to undermine innovation, creativity, etc. You then leave it to individual licence holders to work out what they need to do individually in order to meet that purpose.
- The role of a principles-based licence condition to allow that flexibility for innovation rather than being very prescriptive.
- The need for the condition to be workable for different teams within companies (not just regulatory or legal – and with particular regard to company customer service teams and the customers they deliver for.
- Although most customers won’t read the condition, it needs to be understandable to them too.
Emma Kelso closed the day by thanking attendees for useful discussions and emphasised that Ofwat will be seeking to co-create the new condition with the sector and customer representatives.
Ofwat highlighted that it will be sharing Emma’s speech and a write up of the event. Ofwat invited attendees to:
- send further thoughts through its survey;
- use its new licence condition webpage for updates; and
- send any questions to [email protected].
Ofwat will be engaging with stakeholders directly, develop its thinking and next steps.
We would like to thank the speakers and the over 50 individuals who attended and contributed to the workshop. Organisations which attended the workshop included:
- Affinity Water
- Anglian Water
- Bristol Water
- BUUK Infrastructure
- Citizens Advice
- Dŵr Cymru Welsh Water
- ESP water
- Financial Conduct Authority
- Hafren Dyfrdwy
- Independent Networks Association
- Last Mile Asset Management
- Money and Mental Health
- National Energy Action
- Northumbrian Water
- Portsmouth Water
- SES Water
- Severn Trent Water
- Thames Water
- South East Water
- South Staffs Water
- Southern Water
- South West Water
- Sustainability First
- United Utilities
- Yorkshire Water
- Wessex Water