In delivering our strategic cases and our casework generally, we focus on six priorities.
1. Being clear on our policies
The best outcome for customers is if complaints, disputes or company failures are resolved without us even having to open a case. So we are clear:
- where we have specific expectations of how water companies should behave to encourage them to do the right thing for their customers; and
- how we will approach particular types of casework or specific issues. This may allow water companies and other parties to negotiate and resolve any problems without referring the matter to us.
We make sure our policies are efficient, effective and remain appropriate in the light of developments in the sector.
2. Effectively identifying risks and opportunities
To deliver the most beneficial outcomes to customers we must make sure we focus on strategic cases. This means we need to use intelligence to identify those areas that present the greatest risks and opportunities (‘horizon scanning ’).
One of our key sources of intelligence for horizon scanning is customer complaints. But these are not always sufficient to identify all possible areas of concern within the sector.
So we also use a range of other information to provide us with insights into the sector. This includes, among other things:
- a company’s track record in a given area
- using information that companies provide to us about their performance
- using our formal powers to collect information
- conducting market studies under the Enterprise Act 2002
- news stories or research carried out by other organisations
- information provided by whistleblowers
Where we have had to open a case involving a company, this information will feed into Ofwat’s overall assurance framework, as a company’s track record in a given area may be an indicator of risk in the future.
3. Deciding whether settling cases or investigating them will deliver the best results
Where information suggests that there is a significant risk that companies will fail to deliver the outcomes they must deliver, or are not conducting themselves in line with expectations, we consider:
- whether we are best placed to act, or whether action might be better – more effectively or efficiently – taken by another party;
- what regulatory tool, including opening a case, could be used to address the issue
- an assessment of the costs and benefits of our intervention.
We call this our risk-based approach to regulation.
In individual cases, we may be able to achieve a more positive outcome – within a shorter timeframe and using fewer resources ‒ by making an official agreement with parties to resolve a dispute or conflict (‘settlement’). This is instead of us continuing to investigate and making a formal decision. Settling cases also allows us to focus our resources on other cases more quickly, which will reduce potential harm and detriment to other customers.
However, by not reaching a formal decision in an individual case we could also deliver less beneficial outcomes to customers overall. This is because settling a case may reduce its value to set a precedent – or act as a deterrent – to deliver positive change for all customers in the sector.
We recognise that the choice of settlement or pursuing a formal enforcement action will result in different outcomes for customers and Ofwat. So we use an approach to weigh up the risks, opportunities, benefits and costs of:
- making formal decisions in establishing precedent within the sector; or
- settling a case to give better and more speedy outcomes for customers.
This risk-based approach allows us determine when it would be most appropriate to consider settlement.
- Example of using settlement: formal investigation under the Competition Act 1998 concerning Bristol Water’s charges to self-lay operators.
4. Improving our processes and procedures
In order to deliver the maximum value to customers we must:
- focus on the cases that can deliver the biggest overall benefits to customers, the environment and wider society;
- reach timely and effective decisions; and
- minimise the overall resources we use on individual cases.
So we constantly review our processes and procedures to ensure that we are able to sort, choose, deal with and conclude cases as efficiently and effectively as possible .
This means that:
- customers and companies will receive a decision from us – whether that is a decision to open a case or the final decision at the end of an open case – in a timely and robust manner
- we maintain trust and confidence in Ofwat as a decision-making body
- decisions we make are relevant
- the risk of legal challenges to our decisions is reduced
- we can consider settlement at the beginning of a case
5. Communicating clearly and effectively
Opening a case and then either investigating or settling it can deliver benefits to customers. But communicating clearly and effectively about what we are doing – and making sure it is understood – can also deliver wider benefits to customers.
We seek to maintain a dialogue with water companies about our expectations and how those companies should be working with and for their customers. Our dialogue with companies over the interpretation and implications of a particular case may well deliver more benefits to customers than our completion of the case itself. This is because we engage with the entire sector and not just the company concerned on an individual case.
Communicating clearly and effectively can also help encourage stakeholders to inform us of conduct by the companies that they believe to be worthy of further investigation. This helps ensure that we are able to pursue those cases that effectively target the most serious consumer harm and detriment.
6. Resolving issues before they become cases
In addition to opening and investigating cases, we will also carry out work to try and resolve issues before they become cases. This includes challenging the sector to choose to act in the best interests of customers, rather than requiring them to do so through regulatory action.
Similar to our priority to communicate clearly and effectively, this approach helps us achieve much wider benefits for customers than we could hope to achieve through a single or series of cases. This also helps improve our capability as a regulator by broadening the experience of our staff.