Learning lessons from the 2024 Price Review

Water companies must act on CCW and Ofwat’s 2025 insights into meaningful customer engagement. Business plans should clearly show how customer feedback shaped decisions. Engagement must be accessible, relevant and demonstrate that people were informed, heard and respected.

Why: Some research undertaken by companies was too technical and complex for many customers to comprehend – for example, presenting Performance Commitment and Outcome Delivery Incentive (ODI) targets and asking customers to give opinions on them.

The volume and diversity of consumer engagement that water companies, CCW and Ofwat carried out for PR24 far outstrips what was done for previous price reviews. While CCW appreciates this increased appetite to understand people’s views and priorities, the industry must carefully consider what customers can be confident to meaningfully comment on. If customers are able to engage more effectively with the research, this will increase the validity of their views.

In early 2025, CCW and Ofwat commissioned research to explore with consumers how they think water companies should make sure that the research and engagement they do is most effective (for both everyday services and business planning).

This revealed that:

• Consumers want to feel informed to take part in engagement effectively. They feel this will help them give meaningful views which are more likely to be implemented. However, they do not want to be overwhelmed by information – they favour methods of engagement that are low-effort (e.g. short online surveys).
• Consumers are motivated to participate in research to influence change, especially where they believe their input can drive better outcomes for the public. While water companies remain distant organisations for most, awareness of industry issues has increased, but trust has been eroded by perceptions of poor performance, mismanagement, failures in regulation and rising bills. In this context, consumers see a need for companies to demonstrate honesty and transparency in their research and engagement, and they expect to see visible action as a result.
• Consumers do not distinguish between ‘everyday’ and ‘business planning’ activities when considering their involvement in research. They want to influence decisions they see as having a direct impact on their bills, investment and decisions that affect what they see as the core service – reliably treating and delivering clean water.
• Consumers found water companies’ long-term and future plans less immediately relevant or accessible. Similarly, while caring about environmental topics, consumers often feel they are not the experts. They see a role for experts to influence decisions and navigate complex information on these topics on their behalf. However, linking these with current concerns about bills and performance could increase the relevance of such topics and make them feel less overwhelming.

Our research demonstrates the importance of using mixed-method approaches to research and engagement, and makes a case for involving people with greater interest and appetite for detail using more qualitative research.

Our research also revealed that more effective company communications would help reassure consumers that their views have been heard and acted on. Consumers understand they are not experts and do not expect all their views will be adopted. However, they do expect companies to integrate expert and consumer views and communicate how these are being acted on.

CCW will publish updated principles in 2025⁴ to guide customer engagement and research for PR29. These principles will:

• Promote meaningful, balanced qualitative and quantitative research.
• Require clear links to be made between public priorities and service improvements.
• Encourage early, ongoing and locally relevant engagement.
• Emphasise honesty, transparency and clarity in communications.

Water companies should demonstrate how these principles shape their engagement and share good practices across the sector.

Why: Revised principles will help deliver good quality, representative and meaningful results and can be a framework for CCW to engage with water companies to help identify and share good practice on how these standards can be realised. We will encourage innovative new ways of engaging with consumers that helps achieve the principles.

Based on our research, CCW will deliver a set of principles relating to the different types of research and engagement that companies should undertake – both during delivery of activities in relation to their everyday services, and when preparing plans and strategies.

We will do this in 2025 so that we set the scene as early as possible.

CCW will set these principles reflecting what consumers have told us that water companies’ engagement and research should demonstrate:

• Honesty and transparency when communicating and engaging proactively when things go wrong. This engagement should show integrity and trustworthiness in action.
• Help people have an informed say, with clear and concise information presented in a suitably tailored way, without overwhelming people.
• Multiple opportunities to participate and simple ways to give views, using localised or regional specific information where appropriate.
• Research techniques that are engaging, considerate of people’s busy lives, and engage consumers on topics that feel most relevant to bills and public concerns. Companies should also clearly communicate the benefits and impacts of taking part.
• How consumer feedback is acted upon.

Many water companies did these things well at PR24, with oversight from CCW and their Independent Challenge Groups. However, while our research shows that consumers expect their opinions to strongly influence decisions on service improvements, at PR24 it was not clear how far this had happened.

Once we have published our principles, CCW will engage with water companies to help identify and share good practice on how these standards can be realised. We will encourage innovative ways of engaging with consumers that helps achieve this.

Behind the water companies’ business plans are overarching strategies and statutory programmes that set the direction and mandate a huge proportion of what goes into business plans and Ofwat’s price determinations.

Defra/Welsh Government, the Environment Agency/Natural Resources Wales and the Drinking Water Inspectorate should also engage meaningfully with customers about what goes into these strategies and statutory programmes. After all, it’s billpayers that must fund them, so they should be engaged about the outcomes, costs and timescales of environmental programmes, as well as the balance of grey/green solutions.

Engagement on the strategies and statutory requirements that so greatly affect the price review – and customers’ bills – would make the subsequent water company engagement with their customers more informed and therefore meaningful, instead of being presented as a “done deal”. This would increase public understanding and confidence in the whole process and the water sector.

^{4 This will update our framework for water company research published in 2020}

Water companies must increase engagement with business customers across England and Wales and retailers in England. Business plans should reflect distinct views from non-household customers on pricing, smart meters and water efficiency and service standards. Understanding should go beyond household segmentation to include business customer needs.

Why: CCW saw a lack of adequate customer engagement with businesses throughout the PR24 process.

Although wholesale companies in England do not bill business customers directly, those customers still receive a service from them and should have a proportionate say on decisions about future service provision. They are still paying for this investment.

CCW sees that water companies have a good understanding of the different segments of their household customers. They now need to increase that understanding to include their business customers.

CCW and Ofwat should retain centralised and standardised research for PR29, particularly:

• Testing of business plans and draft determinations (household and non-household)
• Tracking customer priorities nationally to inform Performance Commitments and Outcome Delivery Incentives (ODI). This consistency enables comparison across companies and over time. However, complex ODI valuation methods that proved ineffective at PR24 should not be repeated.

Why: PR24 was the first time CCW has been able to compare results between companies, and between business plan and draft determination stages, because all of this research used the same methodology under the standardised/centralised approach. This consistency enables comparison across companies and over time. However, complex ODI valuation methods that proved ineffective at PR24 should not be repeated.

CCW and Ofwat gave water companies detailed guidance for research that measured the acceptability and affordability of business plans at PR24. CCW also delivered research to measure the acceptability and affordability of Ofwat’s draft determinations.

This led to excellent consistency and comparability, and was the first time CCW has been able to compare results between companies, and between business plan and draft determination stages, because they all used the same methodology. Therefore CCW will continue with this.

In 2023, Ofwat and CCW carried out joint centralised research to inform the level of financial penalties and outperformance payments in Ofwat’s Outcome Delivery Incentives. CCW believes that the intention to have customer evidence set ODI rates was sound, and the research into getting customer valuations on different types of service delivery and failure was helpful, but it could not be modelled into ODI rates successfully. It was too complex and ultimately not meaningful. CCW will not repeat this.

CCW will deliver centralised tracking of customer priorities in England and Wales – to complement what companies do at local level – to inform the setting of Ofwat’s ODIs and the performance commitment targets these incentives are applied to. This will inform incentive rates in a way that reflects what customers believe is important.

These public sessions brought valuable transparency and accountability in PR24. For PR29, they should:

• Be held earlier to give companies more time to respond.
• Use a consistent feedback survey across companies.
• Enable real challenge from customers, not just information delivery.

Why: Your Water Your Say sessions delivered greater transparency and accountability as they enabled any consumer or interest group with an opportunity to listen to and challenge water companies’ senior management.

During the PR24 process, every water company in England and Wales held at least two Your Water Your Say online sessions – one in spring 2023, before companies had published their business plans and one in autumn 2023, after the business plans were submitted to Ofwat. CCW facilitated these sessions. They were independently chaired. Customers heard about the companies’ business plans and could ask questions.

There was high attendance across all the sessions. Customers were eager to question water company bosses directly. This shows customers want and value this direct contact with their water company.

Ofwat also held two Your Water Your Say sessions in summer 2024 on its Draft Determinations.

The intelligence gathered through these Your Water Your Say sessions is not a source of evidence in the way wider customer research is. However, CCW values the transparency and accountability they brought, as they enabled any consumer or interest group to listen to and challenge water company’s senior management.

CCW wants to see consumer feedback about these sessions gathered through a consistent survey across companies and acted on wherever possible.

As the volume of engagement grows, water companies must improve how they synthesise varied sources of customer data. CCW will host a workshop in July 2025 to refresh guidance and help companies:

• Identify best practice.
• Ensure clear, consistent interpretation.
• Reduce risk of bias.
• Explore the potential role of AI in this process.

Why: As the volume of customer engagement by water companies increases, and sources of customer opinion from their day-to-day contacts is also gathered, it has become more challenging for companies to triangulate all these sources of evidence to gain a definitive understanding of the views, priorities and expectations of different customer groups.

Smaller companies have told CCW that they can struggle with the triangulation of lots of research and evidence.

In addition, triangulation techniques have evolved since CCW published independent guidance on this at PR19.

Companies must clearly explain how customer views influenced business plan choices, including cost/benefit trade-offs. Transparency in this area will build trust and demonstrate accountability.

Why: The way companies demonstrated how customer evidence has influenced decisions varied considerably.

In the next price review, CCW wants companies to show clearly how what their customers wanted led to their business plan decisions. In addition, they should explain to their billpayers how they reached those decisions, e.g. the trade-offs between cost effectiveness, sustainability and value for money.

If companies do this well, it should help increase public trust in the sector.

If Independent Challenge Groups (ICGs) remain in PR29, Ofwat must be clear on:

• Their role and influence in scrutinising plans.
• Governance standards, independence and required skills of members.
• How companies must respond to challenges raised.
• Public visibility of ICG input and Ofwat’s response to it.

CCW will continue supporting ICGs and sharing best practice across the groups, if Ofwat includes them in its PR29 methodology.

Why: CCW saw a lack of consistency across the Independent Challenge Groups at PR24. This meant the level of transparency, opportunities to challenge business plan evidence and overall effectiveness varied across the groups.

As well as a lack of consistency, ICGs had varying levels of influence and scrutiny and looked at differing ranges of issues. One company did not have an ICG at all.

For PR29, Ofwat should be clearer to water companies about:

• Water companies’ duties to provide relevant information and respond to challenges in a timely fashion
• Company board interactions with the group
• Keeping and using challenge logs
• How and when the groups provide reports and assurance to Ofwat and how the regulator uses this

If Ofwat decides to require ICGs for PR29, CCW will work with Ofwat on improving these issues.

The scope of the expert panel/ICG should cover:

• Customer engagement and how it’s used
• Performance targets
• High-level challenges to investment options and how they map to customer-supported outcomes

CCW will remain a member of each water company’s group/panel, where they exist. We will continue to share our comparative analysis of business plans and company performance, research and good practice recommendations.

CCW will also continue providing the support and admin for the challenge co-ordination group.

Welsh Government should retain and enhance this forum to:

• Improve collaboration
• Ensure customer evidence drives recommendations
• Bring forward more customer-focused, transparent decisions

Why: A more customer-focussed Wales Price Review Forum leading up to PR29 would help ensure that business plans and price determination decisions are influenced by evidence of customers’ views.

Water companies should create enduring long-term strategies and revisit them during each price review to reflect external changes. This reduces burden, prevents short-termism and improves consistency.

Why: Five-year price controls should be set in the context of long-term strategies. If long-term plans are robust, this could reduce the regulatory burden and reduces the risk of short termism. Ofwat’s introduction of adaptive planning at PR24 has mitigated this to a degree.

At PR24, Ofwat’s use of customer evidence was unclear. For PR29, it must clearly explain:

• How evidence was used or overridden
• The rationale behind trade-offs
• Why decisions align (or not) with public preferences

Why: Ofwat’s methodology and price determinations at PR24 were very vague about how customer evidence had influenced its decisions. Being more explicit about this should help increase trust in the sector. If other issues supersede customer evidence as the basis for a decision, Ofwat should explain that.

Ofwat must require water companies to publish:

• Non-technical summaries of business plans.
• Timelines and methods of engagement.
• Public data sources and explanations.
• Evidence of how customer and other feedback shaped the plan.
• Independent Assurance Statements outlining scrutiny and responses.

This will strengthen trust, transparency and accountability.

Why: While companies did demonstrate this to a degree at PR24, there was some inconsistency across the sector.

Clearer improved guidance from Ofwat to companies will strengthen the companies’ duties to:

• Publish clear, accessible summaries of their business plans tailored for different stakeholder groups, including non-technical audiences.
• Support all key decisions and assumptions (e.g. cost forecasts, demand projections, service improvements) with evidence that is publicly available or clearly referenced.
• Disclose all data sources used in the plans, with a plain-language explanation of how they informed decisions .
• Demonstrate how they engaged customers and stakeholders at multiple stages in plan development.
• Publish a timeline of engagement activities, including methods used (surveys, focus groups, deliberative forums), participants involved, and outcomes.
• Explicitly show how feedback led to material changes in the plan or, where it didn’t, why.
• Provide an Independent Assurance Statement, in which third-party experts evaluate whether the plan is robust and reflects customer/stakeholder input.
• Explicitly state in assurance statements the extent of challenge applied, issues raised, and how the company addressed them.

Why this will help:

• Stakeholders will understand what is being proposed and the rationale behind it, fostering trust and opportunities for scrutiny and challenge
• Customer and stakeholder views will be meaningfully integrated into planning
• It strengthens external accountability and raises confidence in the integrity of the plan

CCW will continue to actively shape and influence PR29 decisions, particularly in the areas of:

• Customer priorities and outcomes.
• Engagement quality and impact.

To support this, Ofwat should provide greater clarity on how CCW’s input will be reflected in key decision-making processes.

Why: Explicit recognition of CCW’s role will enhance our impact and drive greater responsiveness from companies.

CCW would welcome some clarity on CCW’s level and sphere of influence in the price review, particularly on customer priorities (and related performance improvements) and assessing quality of customer engagement and how it was used. This will help us focus our efforts to be as useful as possible throughout the process. Companies may respond better to CCW’s challenges if they clearly see the influence we have.

CCW should be empowered to evaluate and direct affordability support schemes. We want to see one clear strategic outcome – ending water poverty. Patchy, unchallenged schemes must be replaced by a coordinated and accountable approach.

Why: At PR24, we saw water companies produce a patchwork of affordability schemes that were not aligned to one strategic outcome. Ofwat didn’t challenge any of them either at draft or final determinations.

CCW wants the authority to guide Ofwat on the strategic outcomes we expect from a price review, specifically in assessing how well water companies’ proposals support affordability.

If CCW evaluated company schemes, it could direct Ofwat on what more needs to be done to deliver good support for customers struggling to pay.

Revised incentives should:

• Reduce complaints – Introduce a complaints metric with a financial ODI for complaints to companies. High complaint levels should not go unpunished.
• Prioritise harm reduction – Develop ODIs that measure harm from pollution and sewer flooding, not just frequency.
• Use compensation, not hidden penalties – Where customers suffer service failures, meaningful compensation should replace indirect revenue adjustments.

Why: Companies currently have no penalty for high customer complaint volumes. New performance commitment metrics to measure pollution from storm overflows do not take into account the harm caused. Sewer flooding performance metrics do not account for the consequences to property owners/occupiers of a flooding incident.

Reducing customer complaints

While Ofwat’s customer experience incentive (C-MeX) incentivises good customer service through measuring customer satisfaction, water companies face no penalty for high complaint volumes.

When it comes to complaints, CCW would rather customers didn’t have to make them at all, and we think companies should therefore be financially incentivised to reduce them. High volumes of complaints are evidence of a poor experience for many customers and can be an indicator of more fundamental problems.

CCW wants to see a new separate metric (with a financial ODI) that tracks complaint volumes (per 10,000 connections). Ofwat rejected the suggestion from CCW at PR24 to include company complaints in C-Mex. Given continued high levels of complaints received by some companies⁵, there is a strong case for companies to be more strongly incentivised to address this problem. An incentive based on customer complaint volumes will also encourage companies to identify and address the causes of complaints, not just how well they are addressing them.

Harm caused by pollutions

During the next five-year period, the industry will have more data available about the harm caused by storm overflows. So Ofwat should develop a harm-based storm overflows performance commitment (PC) that measures the harm caused, as well as the number of spills.

This would demonstrate to the public that the most harmful overflows are being prioritised for solutions, rather than companies just choosing the easiest ones to fix to hit a numerical target.

Consequences of sewer flooding

Ofwat should introduce a sewer flooding Performance Commitment that measures the consequences of an incident, not just the frequency. At PR24, a small puddle in someone’s basement is weighted the same as somebody having to move out of their house for weeks. Bringing in these new PC targets would ensure that water companies prioritise the properties that suffer the worst consequences or face the most risk of getting severely flooded.

CCW recognises that some water companies do have a prioritisation measure on what to fix first, but they’re all different. CCW finds this postcode lottery unacceptable as water customers cannot move to a different supplier.

Recompense direct to affected customers not revenue adjustments

As the value of recompense given to customers experiencing service failures such as sewer flooding and water supply interruptions has now increased⁶, CCW questions whether ODIs are a suitable incentive for water companies to achieve their performance targets for customer-facing areas of their performance.

If companies carry the cost of issuing recompense to customers affected when such failures occur, this should act as an incentive to reduce the risk of such incidents.

Additionally, a greater level of recompense received by customers affected by the failure is preferable to an ODI penalty applied to a company’s revenue allowance as the effect of the revenue reduction on all customers may be negligible. Greater compensation under the Guaranteed Standards Scheme may be a more effective deterrent, and acts as a penalty that compensates the customers affected.

^{5As shown in our annual household complaints handling report 2024
6 Under revised Guaranteed Standards Scheme}

If water companies benefit from cheaper borrowing than Ofwat had assumed, customers should share in the gains through direct rebates or priority investment. Customers are co-investors through bills – fairness demands a share in any unexpected windfalls.

Why: If wider economic factors (e.g. inflation, interest rates) lead to lower cost financing for companies than Ofwat assumed at the final determinations, this can prove to be a windfall for companies.

Customers should get a share of this windfall – either by getting money back direct or the water company should reinvest the windfall into projects that customers believe are a priority. Customers are the major investors in water companies – via their bills. It is not fair if only institutional investors and water companies benefit from any unexpected rewards.

Defra, Welsh Government and regulators must better align environmental and strategic planning (e.g., WINEP, WRMP⁷) with the price review process. Last-minute scheme additions at PR24 created unfair surprises for customers. This must not be repeated.

Why: In PR24, the Environment Agency added significant cost WINEP (Water Industry National Environment Programme) schemes into the price review process in the time between draft and final determinations. Because of this, customers’ bills went up by more than had been visible at draft determinations. Doing this means that costly projects are being loaded into the process without due scrutiny and challenge.

^{7WINEP (Water Industry National Environment Programme), WRMP (Water Resource Management Plans)}

Ofwat should require water companies to prioritise nature-based solutions unless clear evidence shows they are not viable. These solutions are supported by customers and offer long-term, sustainable benefits.

Why: CCW research shows that water customers support nature-based solutions. Making them the default should encourage greater take-up of solutions that tackle pollution at source, reduce carbon and are more sustainable in the long term.

Ofwat should reject nature-based solutions only if the evidence demonstrates that they would be impractical or not the best-value solution, both financially and in sustainability terms.