One of the best things about coming back into a sector is the opportunity it provides to be able to spot changes that have occurred. Arriving back at Ofwat as the new chief executive after just over two years at the Office of the Rail Regulator has given me just such a perspective.
In recent weeks, I’ve been making the most of this opportunity by meeting stakeholders, including water company chief executives, through a series of round table events. One of the first things that has struck me about those encounters is how much things have changed and, most importantly, how much progress has been made.
Two years ago, in similar conversations, I recall outlining how Ofwat was considering changing its regulatory approach. Responses were varied and uncertain. For some, the case for change was unconvincing. The water sector wasn’t broken, the argument went, so why did it need to change?
My response was the same then as it is now. Water companies have been privatised for nearly 25 years. Now is the time for them to start taking ownership of their relationships with customers.
Our current Price Review sets out our expectations here. We have been clear that we expect boards to sign off their company’s business plan. The days of water companies being given a tick-box set of requirements with the hope that the regulator would look after customers’ requirements are gone and they will not be returning. Instead, Ofwat is pushing water companies to change the relationship they have with their customers. We want to see companies listen to their customers’ priorities and respond, rather than draw up their plans and then seek to justify them to their customers.
This week, we received companies’ business plans for 2015-20. We will be testing and challenging them to ensure that the focus of the plan is not performing for the regulator, but responding to whatever customers have said is most important.
Two years ago, some water firms needed convincing. Today, the dialogue is very different. What I’ve heard from my conversations so far is that a significant change in the relationship between water companies and their customers is emerging. Companies understand what we’re trying to do, recognise the benefits, and see how it makes sense that they own and focus on the customer relationship.
Someone said to me the other day: “It’s not as if water companies provide chocolate bars.” This seeming truism highlights a fundamental point about the water industry. Unlike some consumer products, the services the water companies provide are truly essential. And most customers don’t have a choice about where they buy them. For Ofwat, this means that, in fulfilling our statutory duties, we need to act in ways that are demonstrably in the interests of customers and, where appropriate, society more broadly. It is important for our legitimacy that – while keeping a steady hand on the tiller of a tried and tested regulatory regime – we are listening to public needs, wants and concerns.
I want to build on the recent success Ofwat has had in listening to those concerns, protecting customers and driving a changing relationship between companies and their customers. Our current Price Review is just one example of this. But there are other areas where we have a role to play in protecting customers and ensuring fair competition. We will continue to push companies to be more transparent and open about their decision making. We want to see companies explaining to their customers why they make the decisions that they do.
We also want to see customers getting a better deal, through faster resolution of their complaints. I believe this can be achieved through our work with the sector on creating an Alternative Dispute Resolution system and we’re working with the Consumer Council for Water, Water UK and water companies to deliver this.
I’ve arrived back in the sector at a time when it is under intense political and media scrutiny. The ongoing debate about energy pricing, which has long been near the top of the political agenda, has intensified in recent weeks and has extended to include household water bills. In this context, Ofwat’s role as a strong and effective independent regulator for the sector is all the more important. Added to the mix is the Water Bill currently going through Parliament, which will enable all businesses in England to switch their water and sewerage supplier.
This week, I gave evidence to two Parliamentary committees: the Water Bill Committee and the Environmental Food and Rural Affairs (Efra) Committee. I was clear to both that we welcome the Bill and the reforms that it will deliver. It has the potential to deliver real benefits for both customers and the environment and to open up a new stream of investment for the sector.
With such a demanding agenda ahead, Ofwat needs to be at the very top of its game, using all the regulatory tools available to protect customers and ensure fair competition. I am working closely with our chair, Jonson Cox, and senior team to plan how we will deliver this. This year, new board members have been appointed and we have started to reinforce our senior leadership team. This includes the recent appointment of three new executives to enhance our capacity in casework and communications and to lead our corporate services. And, coming back to Ofwat, I am pleased to see that our people are still completely committed to what we do and are working hard to deliver.
One of my priorities is to review our corporate strategy to ensure that it is grounded in what both customers and wider society want from the water sector. There will be more to say on this in the weeks ahead and I look forward to a wide range of new conversations as we engage others in our thinking. Above all, we will continue to challenge ourselves, as well as the industry, to ensure that customers are protected and that efficient companies can finance their functions.