Our priorities for the 2024 Price Review
As the independent voice of water consumers, CCW should play a leading role in the coordination of collaborative, centralised research. This brings the following benefits:
- Carrying out research for each company using the same consistent approach will allow easier comparison of results. This will help identify where there are real differences between customer views in different company areas, rather than these differences being driven by the way companies have presented the questions.
- Centralised research allows the whole industry to benefit from research that provides consistent, high quality information for all water companies and which provides a comparable benchmark. It could provide the basis for a large scale segmentation exercise which the whole industry would benefit from.
- Centralised research that follows the recommendations of our Engaging Water Customers for Better Business and Consumer Outcomes research will ensure that engagement is meaningful. This includes greater consideration of the development of customer surveys – better testing of the survey design and piloting the research to find out what customers think and ensure it is not asking about issues they don’t fully understand.
We will enable more effective challenge to companies in the development of their business plans. We’ll do this in three ways:
- Sharing data and information
- Supporting the Chairs of local stakeholder groups
- Providing independent assurance of companies’ local challenge processes.
How this will work
- Our Evidence and Insights team has access to data from complaints, company performance, insight reports and our own consumer research. Combined, this gives us a rich source of information that can inform local stakeholders and enable them to effectively challenge company plans, while providing Ofwat with insight into current company performance and customer views.
- There’s also a role for greater benchmarking of company proposals during PR24. Customers of some companies should not have to wait five years (or longer) to benefit from the best ideas from the sector. We are pushing for Ofwat to incentivise the sharing of good practice at PR24 and believe that the benchmarking role of our COG model should be incorporated into the PR24 governance framework.
- We can play a role in assuring the challenge that takes place locally. This would provide Ofwat with information about the strength of local challenge, provide an extra layer of assurance alongside any other local arrangements and help local challenge groups understand where there may be gaps in their memberships, remits or governance.
CCW can ensure the customer voice is heard by Ofwat and others either though the PR24 Challenge Panel or our own Central Oversight Group (COG) model.
For customers’ voices to make a real difference to the price review process, it’s important that all customer evidence used to inform decisions is of the highest quality. We have already published our Framework for Engagement at PR24. It’s our view that this can be achieved by:
- Broadening engagement so we understand how views of citizens, consumers and customers may align or differ, both for this generation and the next.
- The sector needs to seek out and understand how views might change when people are being asked to consider proposals through different lenses; that of a bill-paying customer and that of a representative of the wider community.
- It’s possible that the customers of the future – whether that’s younger people, or those whose present circumstances mean they are not directly paying a water bill – may have different priorities than those who need to pay the bills. Companies, and Ofwat, need to understand these priorities so they can be reflected in plans and decision-making – particularly when thinking about planning for the medium and longer term.
- Centralising or standardising research, giving company-specific insights in areas where there are obvious benefits of comparability, and engaging companies on all research activities.
- A programme of centralised research can bring benefits. The scope of the research needs to be made clear early in the PR24 process so that companies can understand how it fits with their own, ongoing and business plan engagement. We are already speaking with Ofwat and the industry on this. Local research and engagement remains vitally important to understanding what customers want companies to invest their money in.
- Building on what we already know about consumers’ views (from analysis of complaints, contacts, service feedback and external research)
- Companies should already have a good idea of what their customers’ priorities are from the contact they have through their operational work and ongoing engagement. They need to use this information to improve the segmentation of customers, so that plans identify and reflect the priorities of different groups
- Research for PR24 needs to build on this evidence base, and use it to refine the understanding of what customers and communities really value. Companies should follow the recommendations of our Triangulation review to increase the credibility and validity of their engagement.
Water companies receiving ‘fast-track’ status can benefit from financial rewards and early certainty about their proposals. It’s important to us that consumers are considered in the decision to award a company fast-track status. In our view, plans should only be fast-tracked where companies have:
- Delivered the promises they previously made to customers. Considering past delivery alongside the quality of business plans – and evidence showing how customer views have been reflected in it – will help Ofwat to strengthen the customer voice in the price review while building trust in the sector by showing that keeping promises to customers is important. Companies should not be allowed a reward for proposing a good plan for the next five years when they have failed to deliver on their commitments from the previous five years.
- Demonstrated the sharing of good practice on customer engagement and any service delivery innovation with the rest of the sector. This must show that a company has effectively ‘raised the bar’ for others to follow, to customers’ benefit. Sharing good practice at PR19 was difficult due to the competitive environment that Ofwat created. Companies should be incentivised to share their best ideas early in the process so the standard can be raised across the sector.
We encourage Ofwat to make it clear how the views of consumers can influence decisions across PR24. We want a Price Review that clearly and unambiguously responds to the needs and priorities of customers.
- As a minimum we would expect customers to have a meaningful say on service levels and areas of discretionary spend (that is the areas where companies have choices about where to spend money rather than having this determined by statutory requirements). We also think customers should be more actively involved in the trade-off decisions that are made as business plans are finalised – our Expert Consumer Panel idea could be a way of doing this.
- The influence that customers’ views had on decisions was not always clear at the last price review. This is true of some companies who did not sufficiently show a ‘golden thread’ between the results of their engagement work and how these influenced the investment decisions in their business plans. But also we feel that Ofwat could have made clearer how it considered customers’ views when making its draft and final decisions.
- Our Engaging Water Customers research explored the areas that customers feel they need to be consulted on. Equally importantly, it considered the best ways of carrying out this engagement in order to make it meaningful for customers and produce robust results. We expect the recommendations of this research to be implemented across the sector.
- By clearly setting out the areas of business planning where it will expect to see evidence of customers’ views – and how it will take account of these views in its decision making – Ofwat can assist companies in the planning of their engagement programmes and allow local challenge groups to focus their activities on those areas where they can have the most impact on behalf of customers.