Roger Darlington is into his second month as independent chair of South East Water’s customer challenge group (CCG). This is one of 22 new groups set up by the water industry at Ofwat’s request as part of its bid to put customers at the heart of the next price review. Each water company is responsible for setting up a CCG to scrutinise its customer engagement strategy and ensure that the business plan it submits to Ofwat for 2015-20 is reflective of consumer priorities and preferences.
Darlington has enormous experience of consumer representation in regulated industries (see box, page 20) and says the idea of CCGs that sit within companies is a genuine innovation. He explains: “In the regulated sector, the two basic models are a voice within the regulator … and a voice outside the regulator.” He has experience of both, the former at Ofcom and the latter at Postwatch.
He continues: “If you have a body outside the regulator, you have the choice whether you have a sector-specific body – as Energywatch was, as the Consumer Council for Water (CCWater) is. Or whether you have a more general consumer body, which is the model we currently have with Consumer Focus and might in the future have with Citizens Advice.
” mandated – technically it’s a suggestion, in practice it’s almost mandated – that each of the water companies have a consumer voice within the company in the form of a CCG. That is very new … it’s a completely different model. It’ll be very interesting to see how it works out.”
Given the breadth of his experience in consumer representation, does Darlington think the new model will work? “The likelihood is it will work quite well because there is a big incentive to make it work,” he says. The “big prize” if it all goes right is that Ofwat will be able to simply feed the business plan into a legal process and get a predictable, transparent result. “The price determination process will be very close to what customers are looking for, so overall I think it’s going to be an interesting experiment, a worthwhile one,”
he says.
He adds the caveat: “It is new, and in water there are very complicated decisions to make involving very complicated trade-offs. So although the prize is great, achieving it isn’t going to be easy.”
He continues: “The fact that 22 of us are doing it means a degree of comparison will be possible … I’m sure how well it works will vary . What companies and Water UK and Ofwat will want to be looking at is whether in three or four years’ time there are some general lessons that can be drawn to feed into the next price determination.”
Darlington was headhunted by a firm employed by South East Water, and is paid by the water company for the approximately one day per week role. He explains that most water companies – all except South East, Southern, Portsmouth and Sutton and East Surrey – have opted for making the regional chair of CCWater the chair of their CCG.
He admits that the fact that he is paid by South East might give rise to questions about how independent he will really be and how much scope he will have to really challenge the water company. But he rejects them. In fact, he suggests, an “outsider” like him can act more independently than CCWater regional chairs because he isn’t “representing a particular organisation or a particular interest, apart from broadly the consumer interest”. He adds: “You demonstrate your independence by the way you behave, and even before that by the reputation that you bring. Some of the roles I’ve done in the past show I will be genuinely independent.”
He cites in support here that he was the first independent (but industry-funded) chair of the Internet Watch Foundation, a body established by British internet service providers to fight illegal content, especially child abuse images. “I was appointed as an independent chair and I behaved independently,” he says.
“More recently, for the past eight years I’ve been a member for England of the Communications Consumer Panel, which is part of Ofcom. Although Ofcom fund us we are statutorily independent; we are there to be a critical friend. Sometimes we are more critical than friendly, but it’s a relationship you develop on the basis of mutual respect. So when you challenge the regulator, you do it on the basis of the arguments and not because you have a particular point of view.”
In the case of the CCG, Darlington points out that it is in South East Water’s interest to let him behave independently because this should lead to light-touch regulation down the line. He summarises: “It’s my job to behave independently, so we provide an effective challenge. We’re not there to rubbish the company or to criticise it for the sake of it, but equally we’re not there just to rubber stamp everything. “
As for the CCG itself, Darlington says he and South East Water are “nearly there” in assembling it. Along with the groups earmarked for inclusion by Ofwat – namely the Environment Agency, the Drinking Water Inspectorate and Natural England – CCWater’s regional chair will sit on the group, together with representatives of domestic and business customers and local government, plus a handful of experts in various relevant fields. Three water company representatives will attend each meeting but won’t be formal members “because on occasion we will need to meet without them to take our own view”.
Other groups representing specific customer segments, such as businesses, will feed into the CCG, allowing it to indirectly interact with a more consumers.
The CCG’s remit is tightly focused on the price review – specifically South East Water’s consumer engagement strategy and resulting business plan – so it will not be treading on CCWater’s toes elsewhere or getting more widely involved in the running of the company. Darlington says the CCG’s first job will be to satisfy itself that South East Water’s consumer engagement methodology is up to the job. Once the resulting engagement is done, it will be checking that outcomes are robust and meaningful. Once that is assured, it will be scrutinising how those outcomes feed into business planning and decision making.
He is under no illusion that ascertaining customer priorities and translating them into expenditure specifics for 2015-20 will be an easy job. “There are very complicated trade-offs. If you ask customers if they want clean water, they’ll say ‘yes’, but if you ask ‘what do you want bills to be like?’ they’ll say ‘as cheap as possible’. So there’s a trade-off. Clean water costs money.”
Beyond that, he acknowledges that different customer groups have different priorities, and that there are capex/opex trade-offs to be made, that there are tough decisions on whether investment for the long term should take precedence over short-term thrift. Perhaps even more fundamental is the need to acknowledge and cater for the fact that most consumers have little knowledge of the industry or how much should be spent on what.
Darlington says: “For many consumers, I think these industries – water, gas and electricity – are a mystery. They don’t understand what’s behind that pipe or that tube or that line that comes into their home … Informing them what the choices are and what the trade-offs are, and realising that different consumers will have different interests, and putting it in the wider context of what’s required, and keeping it all as transparent and honest as possible is what’s required.”
In fact, Darlington believes education, communication and transparency will be key to getting an outcome agreeable to consumers. “If decisions can be explained and articulated, people will be more accepting of the final outcome,” he says. If his gut feeling on prices going forward proves accurate, this will be particularly necessary.
He speculates: “Customers now would like to feel prices could stabilise. I think they feel they’ve done their bit. I’m not sure we can satisfy that feeling … I think they’re going to have to accept that price increases will be with us for the foreseeable future. So they will need to be assured that this money will be very well spent, through minimising leakage, genuine efficiency and so on.”
Biography: Darlington
Roger Darlington has more than 30 years’ experience in consumer representation and regulated utilities including telecoms, post, gas and electricity. Aside from his South East Water role – his first in the water industry, which commenced on 1 April – among the positions he holds currently are:
· Member for England on the Communications Consumer Panel (formerly the Ofcom Consumer Panel), which is the statutory consumer body for broadcasting and telecoms.
· Chair of the Digital Consumer Expert Group, a body that advises government on switchover of television and radio.
· Chair of the Post Offices Advisory Group of Consumer Focus, which brings together stakeholders with an interest in the future of post offices.
Darlington obtained a first class honours degree in management sciences from the University of Manchester Institute of Science and Technology. After graduation, he spent six years working for the Labour Party as a research assistant and special adviser. He stood as a Labour candidate in the 1974 general election.
For 24 years, he held various posts, including assistant secretary and head of research at the Communication Workers Union and its forefunners, taking early retirement in March 2002.
He was the first independent chair of the Internet Watch Foundation. He has also held the positions of chair of the Greater London region of Postwatch and board member of Consumer Focus.
This article first appeared in Utility Week’s print edition of 18 May 2012.
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