Next week, some familiar figures from across the water industry will take part in a panel debate to mark the 25th anniversary of the privatisation of the sector. The debate promises to be a lively one, with participants looking back at the successes – and the challenges – of the past two-and-a-half decades, and looking forward to the future.
Twenty-five years ago, the need for change was clear. It was a time when increased environmental demands were being made on the water industry – from a public pushing for higher standards and from European legislation. A lack of investment was taking its toll on service levels, pollution incidents and river quality. In response, the government first published its proposals in a discussion paper on water privatisation in 1986 and three years later the Water Act of 1989 provided the mechanism for the privatisation of the industry.
The benefits of investment in the water sector over the past 25 years have been well documented, but the forthcoming debate is unlikely to be a complacent one. While that debate will take place on a public platform, in recent weeks Ofwat has been having similar discussions with water and wastewater companies, with investors and the different environmental and customer groups who have an interest in the water industry today and in the years ahead. Those conversations, which are helping to shape our new corporate strategy, have thrown up a clear consensus: we are not looking to turn a corner from the past, but to build on it.
Some clear themes stand out and will be at the centre of our future strategy. Most important is maintaining public confidence in the provision of an essential public service. Society cannot function without water and water companies recognise the enormous responsibility they have to safeguard services for now and the future. From engineers to chief executives to the staff answering the phones to customers, companies have spoken of an ethos of providing a public service and serving local communities. This sense of common purpose is at the core of our thinking about the future of the water sector.
The service is an essential one, but customer expectations about the service they receive are also setting the future agenda. Customers want a safe, secure, reliable service and, if things go wrong, they should be put right quickly, with the customer kept informed. For customers, familiar high street brands are a benchmark for how their water company performs. Companies are utilising the potential for technology to respond to these expectations, from avatars on websites to automated text messages warning people of outages in their local areas. On a recent visit to a water company, I stood in the control room, watching the flickering screens which detailed the incoming calls from customers. Despite an incident affecting several thousand households, the number of calls coming in was a single digit. As the call centre manager explained, the company’s proactive contact with its customers – by phone, text message and social media – had kept customers informed and reassured.
The company business plans submitted to Ofwat as part of our ongoing price review highlight this change of approach. Here, we have seen evidence of a real change of focus, with companies going to great lengths to engage with their customers and to develop plans that reflect their priorities. I have no doubt that the plans are significantly more customer-focused than in previous price controls. The success of customer engagement through the price review sets a new standard for the sector going forward and a platform on which our future strategy will build.
Customers expect companies that provide an essential public service to operate to high standards of governance and leadership. This is important for us as a regulator too, because those high standards help to give us assurance about company decision-making that is important if we are to allow companies greater flexibility. It has been great to see companies signing up to new board, leadership and transparency principles which allow the water sector in England and Wales to show that it recognises and fully meets the responsibilities that come from providing an essential public service. I’m pleased that we can use a self-regulatory approach, where companies’ boards take the lead in setting out how they meet or exceed our principles. Principles of transparency, having an effective board with independent representation and structures that are explained in a way that is clear and simple to understand will all help to ensure that the priorities described here are embedded in the way companies operate over the next decade and beyond.
Our role is to regulate in a way that can allow companies to focus on more innovative and sustainable ways of delivering for customers, while ensuring financeability. We are looking closely at our potential for incentivising and facilitating dialogue, not just with customers, but across and between companies and their supply chain. We are looking at ourselves too, to ensure that we are as efficient and effective as we can be, to build on the current price review and respond to a climate in which we all need to do more with less.
These ambitions are shared by others. Last week, the chief executives of the UK’s nine economic regulators launched the UK Regulators’ Network, tasked with improving co-ordination across regulated sectors to enhance investment and efficiency for the benefit of consumers. It will allow regulators to work more closely together and to learn lessons across industries which help to improve regulation and ensure that markets work well for consumers.
A 25-year anniversary is a good opportunity to look both back, and forward. We’re keen to carry on the debate and conversations in the months ahead and I’m delighted that so many people from across the sector are joining us to set the agenda for the future.
See www.sustainabilitylive.com for details of the debate and to book your place