Water companies' efforts to ease cost of living pressures and areas for further action

This page sets out water companies’ efforts to ease cost of living pressures and areas for further action

In October 2022, Ofwat and CCW – the consumer representative body for water customers in England and Wales – jointly wrote to all water companies to ask them to set out their plans for supporting customers through cost of living pressures. Research by Ofwat shows that more customers are struggling with household bills and that two-thirds expect their situation to worsen in the coming year.

Below is a summary of water companies’ responses and provides links to the responses. It highlights examples of how companies are supporting customers in financial difficulty, as well as some areas where we would like to see further action.

Click below to see:

• Ofwat and CCW’s view on water companies’ cost of living plans and next steps
• Supporting more customers in financial difficulty – company examples
• Other initiatives to support customers struggling to pay bills – company examples
• Areas for further action by companies
• Companies’ responses to Ofwat and CCW’s October 2022 letter

If you are worried about your bill or know someone that is, visit our cost of living page for four tips to follow. CCW’s help with my bills page is packed with advice and tools including a water meter calculator, Benefits Calculator and guide to water company social tariffs.

Ofwat and CCW’s view on water companies’ cost of living plans and next steps

Ofwat and CCW welcome the efforts that companies are making to help customers who need it most. Responses to our joint letter show companies are increasing financial support for their customers and pursuing different initiatives to deal with growing demand. But we’d like to see water companies do even more to help. Read our joint press release

Ofwat and CCW have identified areas where water companies can learn from best practice to increase support for customers struggling to pay, through:

• improving access to and awareness of support– for example, making it easy for customers to apply for help in ways that suit their needs
• increasing funding of social tariffs – for example through shareholder contributions; and
• updating the understanding of what level of support customers are willing to fund – helping identify opportunities to expand support where customer views have not been recently sought.

Supporting more customers in financial difficulty – company examples

• All companies have social tariffs for customers who struggle to pay their bill. Some companies are making changes to eligibility criteria, raising income thresholds to enable more customers to apply and be eligible (including South Staffs Water and Cambridge Water, SES Water, Severn Trent Water, and Thames Water). Other companies are increasing the discounts available to customers (for example, Southern Water report increasing its discount from 20 to 45 per cent, with customers most in need receiving 90 per cent off their bills).
• Most social tariffs are funded by the cross-subsidy companies charge on customer bills. Some companies mention re-consulting their customers to gain support to increase the cross-subsidy level applied to fund their social tariffs (including Anglian Water, Portsmouth Water and Hafren Dyfrdwy).
• Additional financial contributions to social tariffs are being made by a small number of companies. Five companies contribute their own funding (Dŵr Cymru Welsh Water, Hafren Dyfrdwy, SES Water, United Utilities and Yorkshire Water). Severn Trent Water also extended its Big Difference Scheme, creating capacity for an extra 100,000 people through making efficiencies in its business operations.
• Initiatives to simplify social tariff qualifying criteria and application processes are mentioned by Severn Trent Water, Southern Water and Wessex Water. Efforts to encourage auto-enrolment of customers without the need for customers to apply are referenced by companies that include Northumbrian Water, Portsmouth Water, South West Water and Bristol Water, South East Water and Southern Water (with examples including data share arrangements with local councils and the Deartment of Work and PensionsDWP).
• Working with local and national partners has helped increase social tariff take up. Northumbrian Water’s ‘One Call’ initiative is an example of a collaborative ‘one-stop’ service to housing association tenants experiencing financial difficulty. Northumbrian Water volunteers have worked alongside housing association teams to better understand each other’s tariffs and other support available. Text messages have been sent from the housing association to its tenants, offering them an assessment to see if they are eligible for reduced water bills.

Other initiatives to support customers struggling to pay bills – company examples

Alongside social tariffs, companies report undertaking (or planning to undertake) other initiatives to support their customers. A selection of examples follow.

• Support for customers just missing out on social tariffs is an initiative mentioned by a couple of companies. This includes Thames Water’s plan to create a new scheme of temporary support for customers who have a household budget deficit but are not eligible for its social tariff. Welsh Water proposes to use unused higher than expected revenue to provide short term support to struggling non-social tariffs customers. The company is piloting this initiative in January 2023 with the intention of rolling it out later in the year.
• One-off payments to customers receiving financial support are mentioned by some companies. For instance, Yorkshire Water highlight a one-off cost of living payment of £71 to customers on its support schemes. Affinity Water plans to introduce a one-off affordability payment for up to 30,000 customers in 2023-4.
• Deferral of some of next year’s revenue allowance (for 2023-24) to subsequent years is a reported by four companies (Bristol Water, Severn Trent Water, Portsmouth Water and Wessex Water). By deferring to later years (when the inflation adjustment is forecast to be lower), this will avoid large changes to customer bills, making it easier for customers to manage household budgets.
• Income and expenditure tool for helping customers is an initiative committed to by Thames Water. Its review form will be integrated with its billing systems during 2023 to enable customers to understand their eligibility for support, as well as accepting a payment plan in a single interaction. Thames Water forecasts that 50,000 customers will use this channel in 2023-24 out of which 40,000 customers will be on ‘reduced plans’ paying at a rate below their charges during 2023-24.
• Writing off customer repayments during Breathing Space (of £60–80 per customer) is an initiative being taken forward by Yorkshire Water. The initiative aims to provide customers with debt relief to help them re-engage and access further support – with the overall aim of reducing bad debt.
• A one stop application process to sign up customers for support is a key part of Hafren Dyfrdwy trained ‘Approvers Programme’. It gives external organisations such as Warm Wales, Citizens Advice and Age Cymru a one stop application process to signup customers to support schemes. Welsh Water also reports working closely with local authorities to target its support to free school meals families.
• ‘Business as usual’ communications are being used to encourage customer contact. From February 2023, Severn Trent Water will be adding text promoting its affordability schemes to its paper billing envelopes – building on learning from the Dŵr Cymru CCW pilot.

Areas for further action by companies

There is still work to be done. We expect urgent action to support customers struggling to pay their bills in the coming months. Below are some areas we think individual companies – and companies together – could take further action.

Improving access to and awareness of support 

• We would like to see companies do more to raise awareness of support, communicate consistently as a sector and remove barriers to access. Companies can draw on significant guidance from the CCW affordability review and company pilots linked to it.
• Promoting schemes widely and in simple and accessible language is vital if customers are to become aware and be able to access support. We know from Ofwat’s recent cost of living research that only one-third of bill payers know that financial support is available from water companies.
• There is variation in the visibility and prominence of company social tariff support. Some companies have ‘support with your bill’ messages prominently displayed on company homepages and accompanying videos to explain their support (good examples of prominence and web content include United Utilities, Northumbrian Water, Southern Water, Thames Water and Wessex Water, as well as Hafren Dyfrdwy’s video on support options).
  Other companies require customers to undertake multiple clicks to find out more.
• Some companies are reducing the effort needed to apply for social tariffs, but we still see examples of companies providing limited channels for customers to access support. Examples include customers having to apply for social tariffs by printing off and completing pdf forms or calling the company or messaging to access support.
• We urge companies to review the effectiveness of social tariff application processes, so customers can apply for support using a communication channel that suits them.
• Companies should have alternative methods of contact in place for offline customers. Some companies offer customers in financial difficulty a chargeable phone number to call for support: this could deter customers in financial difficulty from getting in contact, undermining company aims and efforts.  Other companies are already offering direct call phone lines for financial vulnerability with free-phone numbers to call and/or are proactively facilitating call backs to customers.

Increasing funding for social tariffs – efficiencies and company contributions

• We know many people currently face problems paying their bills and the need for support could escalate rapidly given the scale of cost of living challenges.
• During these pressing times, companies should continue to improve the support they offer and identify ways to directly fund additional help. This might include through operating efficiencies, cost neutral approaches and contributions from their own money (in line with those companies already leading the way on best practice by doing so).

Increasing funding for social tariffs – re-engaging customers

• We are encouraging companies to re-engage with customers at this time to establish the support levels they find acceptable to fund.
• Companies who have not carried out research to check customer willingness to increase the funding cross subsidy in the last 3 years should do so (or be able to demonstrate this is unnecessary as existing capacity is sufficient to deal with a surge in demand)

Companies’ responses to Ofwat and CCW’s October 2022 letter