Sixty-one per cent of the panel, which is polled on a topical issue every other month by Utility Week’s research partner Accent, said the company social tariffs advocated by December’s Water White Paper were the wrong choice for helping those who struggle to pay. One executive stated: “Social support and income redistribution should be carried out through taxation and benefits. Manipulating product prices is not transparent and risks distorting incentives.” Sir Ian Byatt, former chair of Wics and ex-director general of Ofwat, added: “Water poverty (whatever it may mean) is a matter for social policy – to be decided by elected government.”
Only 17 per cent of respondents thought company social tariffs were the right policy choice. One executive believed they “should be effective if properly regulated”. The remaining 22 per cent were unsure.
There was discernible uncertainty on the panel as to whether a “postcode lottery” would result from letting each water company decide how much help was available and to whom. Twenty-two per cent thought it would, 33 per cent said it wouldn’t and the rest didn’t know. According to one executive: “There is certainly the potential for significant variation on support levels. Previously, money advice and help bodies have been confused by the wide variation in assistance available within the water sector.” Another envisaged an important role for CCWater here: “As long as there is a consumer body like CCWater assessing company plans against a set of common principles, a postcode lottery can be avoided. Without close attention from CCWater, a postcode lottery is very likely.”
Over 60 per cent of the panel agreed that one thing that would help companies target their social tariffs appropriately would be access to data on individuals in receipt of benefits. The government says in the White Paper it will make information available “wherever this is legal and feasible”. However, not a single panellist believed this access would be granted, perhaps drawing on another comment in the White Paper that “the circumstances in which any personal data may be shared are very limited and tightly controlled by law”.
So, given that social tariffs are going ahead, and that it will be at the industry’s discretion who gets how much help, what issues will water companies face? Among the points made by respondents were that “data management to keep an up-to-date picture of those who qualify will be an issue” and that administering water poverty relief will “… force water companies to take responsibility, as a part of the moral obligations that go with monopolies”. However, customer resentment emerged as a recurrent theme. One executive
said: “To the extent that cross-subsidies are transparent to all customers, there may be an increase in non-payment among those customers who resent the approach.”
Rob Sheldon, managing director of Accent, which co-sponsors the research programme, says: “These results indicate a mixed feeling among the executives questioned in terms of their attitudes towards water affordability. However, opinions surrounding customers subsidising others seems to be an area where the majority of executives agree.”
Indeed, most panellists felt there would be hostility from customers at large who would begrudge paying higher bills to fund cross-subsidies: 50 per cent said customers would be unreceptive and 17 per cent that they would be very unreceptive. According to Sir Ian: “As soon as they realise that they are paying for somebody else, most of them will not like it or think that it is fair.” Another panellist explained: “I feel they will consider it unfair in the same way many feel welfare is unfairly managed.”
Only 28 per cent thought customers would be receptive to the idea (with the rest unsure) of cross-subsidising cheaper deals for others. Brian Saunders, former chief executive of Elexon and now a freelance consultant, commented: “Taxpayers already cross-subsidise those on benefits. This is just an extension of that principle.” Another executive added: “I’m being positive. Sure, they will prefer to see their cross-subsidy going to those that are generally struggling to pay their bills rather than those who just decide they can get away with not paying (even though they can afford to pay). The key, though, is identifying the ‘can’t pays’.”
On that note, the government plans to consult on different approaches to help water companies access occupier details to tackle bad debt. Occupiers are not presently legally required to pass on their details to water firms, and there
is no way of pursuing unnamed debtors. Executives were asked what they thought would be the best approach.
Andrew Dunn of Andrew Dunn Consulting advocated implementing the landlord liability provision in the Flood and Water Management Act. He wanted to see “an increased duty on landlords to inform companies of tenants, and a fall back of landlord duty to pay”. Saunders, however, said: “The best approach will take into account that competition for non-domestic premises is coming. Access to, and quality of, occupier data in this sector will be a major issue for competition
and action now will help that as well as the bad debt issue.”
Finally, executives were asked if the government was right to restrict help from the public purse to the South West. The White Paper confirms that South West Water will receive government funding to enable it to cut bills by £50 a year per household from April 2013, in recognition of the poor state of the area’s assets at the time of privatisation and the high bills that have resulted from bringing these up to scratch. Seventeen per cent of executives said yes, 28 per cent said no and the remaining respondents didn’t know.
An executive who agreed with the decision said: “The subsidy addresses a specific infrastructure issue faced by the South West. It would, however, not be justified to focus only on the South West if the objective were to support low income customers.” Another executive didn’t agree, commenting: “Other regions have a similar problem though on a smaller scale.”