PR19 will dominate everything in the water sector in 2018. It was fitting, therefore, that the first speaker at the Utility Week Water Customer Conference, sponsored by Oracle, was Ofwat senior director John Russell, who provided an update on the regulator’s vision for the next price review.
Ofwat has been vocal on its high aspirations for PR19, and Russell’s speech reiterated previous warnings that it will be tougher and performance commitments more stretching – “building on the good work” done in PR14. The regulator expects companies to develop their plans through “active customer participation”, and set stretching performance commitments which reflect customer priorities. For companies which really impress, the rewards will be plentiful. But for companies which don’t measure up, severe penalties await.
The issue is trying to get customers on-side
Tony Smith, chief executive, Consumer Council for Water
Not everyone agrees with rewarding companies for doing the basics. Speaking as part of a panel discussion, Consumer Council for Water chief executive Tony Smith said that the group has concerns about the incentives for the operational measures, as research has unveiled “a great deal of negative feeling” from customers about companies receiving rewards for “doing the day job”. “We absolutely understand what Ofwat is trying to do,” he said. “But the issue is trying to get customers on-side.”
Welsh Water chief executive Chris Jones agreed that customers struggle with the idea that they pay more so that companies deliver “a less bad service”. “As a concept, that is difficult for customers,” he said.
Ultimately, everyone agreed, all of the actions of a water company should be to the benefit, not to the detriment, of customers. Sarah Bentley, chief customer officer at Severn Trent emphasised the importance of keeping things simple for the customer, and spoke enthusiastically about the need for a joined-up approach. “ change the businesses that I know we all care massively about to make life easier for the customer.”
I’d encourage you to rip the rulebook up, and stop being obsessed with regulation
Louise Beardmore, customer service director, United Utilities
The focus of the conference may have been largely on the imminent price review, but not everyone agreed that regulation should be front of mind. United Utilities customer service director Louise Beardmore delivered an impassioned speech in which she attested the water industry is “too preoccupied with regulation”.
“Regulation is there to protect customers if we’re not doing what we should do,” she said. “But I’d encourage you to rip the rule-book up, and stop being obsessed with regulation.”
Current regulation states that a written complaint must be responded to within 10 days. Beardmore questioned why an angry customer should have to wait “just because the regulator says you’ve got two weeks”. “That’s lazy, and that’s not customer-service-focussed,” she insisted.
This is not a retailers’ market, it’s not a wholesalers’ market, it’s a customers’ market
Steve Arthur, director of market performance, MOSL
Another faction of the conference which was less concerned with PR19 machinations was the new non-household water retail market. MOSL director of market performance Steve Arthur questioned how long we will be able to refer to the market as “new”, before going on to reflect on how the first 10 months have gone. He suggested that “more work could have been done” to raise awareness of the market before it opened. Although the market is “growing in confidence”, but that “more needs to be done” to raise its profile among customers. “This is not a retailers’ market, it’s not a wholesalers’ market, it’s a customers’ market,” he added.
Wave head of customer experience Lissa Balmer agreed, saying the market should genuinely benefit customers, and insisting water retailers still have “a lot to learn” about customer loyalty. “We’ve got so many great advocates across other industries and we shouldn’t be afraid to look outside the water industry. This is a new market, why shouldn’t we take best practice from other industries?”
Ofwat’s Russell said the regulator cannot predict how the market will develop. “It may develop in a number of different ways, depending on the preferences and behaviour of a wide range of market participants,” he said. However, the early signs are “positive”.
Key takeaways
- PR19 will build on the groundwork laid in PR14. However, companies will be expected to go much further in terms of engaging with customers and ensuring they are at the heart of business plans.
- Companies must set stretching performance commitments – which will be met with strong incentives.
- Not everyone agrees that companies should be rewarded for operational measures, which customers consider the “day job”.
- Regulation shouldn’t cloud good customer service. If regulation is going to be to the detriment of the customer, companies should “rip up the rulebook” and use their common sense to genuinely help on the customer.
- The early signs are promising in the business retail market, but the hard work starts now to ensure it is up to scratch and really working for customers.
Views from the speakers
John Russell, senior director of strategy and planning, Ofwat
“We don’t intend to predict how the business retail market will develop… it’s still early days, but the signs are positive”
Chris Jones, chief executive, Welsh Water
“Customer engagement is a win-win. It’s crucial in understanding how you’re going to deliver favourability, but also comes with a second win in that getting customers involved raises their familiarity with the company”
Martin Dunlea, senior director of utility industry strategy EMEA, Oracle
“Improving your distribution evaluations planning not only makes financial sense, not only is it good in terms of the overall efficiency and the long-term viability of your business, it’s a key determinant in improving your overall customer service”
Louise Beardmore, customer service director, United Utilities
“Digital should be digital by choice, not by default. We need to be available on all channels for our customers”
Sarah Bentley, chief customer officer, Severn Trent
“Obviously none of us want incidents to occur, but when they do occur, how can we properly engage with communities?”
Steve Arthur, director of market opening, Market Operator Services Limited
“I think a lot more work could have been done to raise the awareness of the market prior to its opening”