Ofwat rethinks outcome delivery incentives for water firms

Ofwat has announced it wants to encourage water companies to “deliver more of the outcomes customers want”.

The regulator said it will “focus on results“ rather than giving companies a prescriptive list of activities. It said doing so would create the right incentives for companies to deliver excellence in customer service.

Ofwat is consulting on four areas, including how companies’ performance commitments can be made more stretching to deliver higher service levels to customers, and how outcome delivery incentives can be strengthened to encourage companies to deliver on their performance commitments to customers.

It will also consider how it can better reflect resilience in outcomes to ensure the interests of future customers are taken into account, and how performance commitments can be made more transparent to make it easier for customers to hold companies to account.

“By focusing our regulation on the results or outcomes customers receive, it means water companies set their priorities based on delivering what matters to consumers,” the regulator said in a statement. “This approach, which was introduced in 2014, has been successful but we want to improve it for the next price review in 2019.”

Ofwat senior director David Black said: “By focusing on the results customers want, rather than giving companies a prescriptive list of activities, we are putting customer interests at the top of water companies’ thinking and planning. And by getting the right incentives and penalties in place, we keep their minds focused on delivering for customers.

“This approach gives companies the space to innovate, find new solutions and ways of delivering for customers. It has worked well, but we want to hear ideas and thoughts about how we can make it even more successful for customers.”

The closing date for the consultation is 31 January 2017.