Ofwat has mooted a change to the performance incentives offered for customer service, after revealing that all water companies have so far failed to achieve higher outperformance payments during the current price review period.
The proposed changes have been put forward as part of Ofwat’s consultation on plans for the next price review PR24.
The regulator said: “So far, no company has performed beyond the cross-sector threshold based on the UK Customer Satisfaction Index (UKCSI) upper quartile, although some companies have got close.”
Proposed changes include adapting the way customer feedback is collected as well as changes to the way targets are set.
C-Mex and D-Mex were introduced at PR19 as the measure of customer experience to incentivise companies to improve billpayer service.
Annual C-Mex scores are graded out of 100 based on two satisfaction surveys, one of which is based on feedback from randomly-selected members of the public and the other based on the satisfaction scores of consumers who have directly contacted their water company.
At present, a company’s C-Mex payments are calculated by multiplying its incentive rate by its annual retail revenue. A company can earn up to 6% or be penalised up to 12% of its retail revenue. The higher performance payments are open to the three highest scoring companies who have below average complaints and upper quartile UKCSI performance.
From 2025, Ofwat has proposed setting universal domestic customer targets for all companies rather than allocating performance payments between companies measuring performance relative to other companies.
The approach to gathering customer feedback may also evolve to become more balanced by recognising that customer groups which experience high impact events will have a greater impact on each company’s score.
Last year, C-Mex was criticised for overlooking complaints to, or about, companies, as well as the level of rewards being made available.
D-Mex was introduced to incentivise improved performance of developer services to property developers, self-lay providers and new appointees. The score is calculated based on qualitative monthly customer satisfaction surveys together with a quantitative component measured against Water UK metrics.
At present, all customers are weighted in the same way but Ofwat is mulling changing this to reflect changes to developer services markets becoming more competitive.
As with C-Mex, Ofwat is contemplating universal incentive targets rather than relative. It is also exploring if the quantitative metrics are sufficiently stretching.
Over the coming months Ofwat will engage with stakeholders on re-designs to measuring experience.