Simon Colvin, partner and head of utilities, Weightmans LLP Policy, Skills, Strategy & management, Water, Opinion

Water utilities must get their conflict resolution strategies in order ahead of PR19, says Simon Colvin.

The water industry’s next price review is almost here. In January, Ofwat will deliver its first assessment of water company business plans for 2020-25 and kick-off 12 months of increased scrutiny for the sector. At the end of the year the regulator will set the price, service and incentive package against which the performance of water utilities will be measured against over the next five years. Improving the sector’s customer engagement is one of the core aims of PR19, and water companies need to review the measures they have in place to handle aggressive, vexatious customers to ensure they’re fit for purpose.

Aggressive customer interaction can result in significant commercial damage if it isn’t handled properly. From a legal perspective, the pressure points are twofold. First, water utilities can find themselves liable for costly claims from frontline employees if there isn’t a conflict resolution mechanism in place to protect them from physical or mental harm. And second, if a poorly-handled customer complaint is escalated to a public forum, be it in the media or in the form of a legal challenge, it can irreparably damage a water provider’s reputation. Customer satisfaction is a metric Ofwat is keen to make a more prominent measure of success from 2020, especially given the regulator’s support for “social contracts”, which recognise customers want to understand how water companies perform in areas such as corporate social responsibility and the environment and executive remuneration, in addition to service delivery.

As a part of PR19, Ofwat is piloting a new financial incentive programme, WaterworCX. Though what it will look like in practice is unclear, the intention is to bring the customer service credentials of monopoly water companies in line with competitive markets. Under the proposed framework, social media complaints would be measured for the first time, and customers who have never dealt with their water company directly would be surveyed on the second-hand perception they have of their provider’s service. If WaterworCX passes its pilot phase, a poor reputation created by the fallout of a badly-handled customer complaint could make the difference between financial penalty and reward.

Even so, when it comes to difficult customer interactions, the primary focus should always be the health and wellbeing of staff. Conflicts usually occur when a customer’s life has been seriously affected, such as by a burst water main causing flooding. The onus is on water providers to make it clear they do not tolerate customers acting inappropriately in these situations and to implement resolution strategies that equip employees to act if they do, ensuring the necessary support can be drafted in if required. A good strategy will deliver against this and the challenges presented by PR19 simultaneously, protecting staff, addressing customer grievances effectively and safeguarding the business from legal challenges and reputational damage.

The most important element of a conflict resolution strategy is a clear process that identifies and expedites challenging customer grievances. Water companies must separate the innocuous, day-to-day complaints that their frontline staff are tasked with handling from the grievances that pose a legitimate personal, legal or reputational threat.

Ultimately, the sooner a case that carries risk is escalated to those equipped to handle it, the sooner its fallout can be managed, and its ­potential damage mitigated.

 

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