Utility Week

Comment Chief executive's view Cathryn Ross, Ofwat Dialogue is key to price review As customers across the UK try to deal with the devastation water has caused over the past few weeks, Ofwat is working to make their relationship with water and wastewater companies more effective. A s floodwaters rose, so did the number of column inches. Over this Christmas and New Year period, water has rarely been off the front pages. Too many people across the UK have experienced the devastation water can cause. Reading the newspaper stories and seeing the broadcast footage of families and whole communities struggling with the floods over the holiday season hammers home how destructive water can be when it runs out of control. In recent weeks, whole villages have been submerged, homes have been ruined, transport services have been halted and bridges have collapsed. Most tragically of all, several people have lost their lives. Although water has dominated the headlines, few people will know of the range of different agencies working to manage drainage and maintain services in a crisis. Such significant weather patterns have created operational challenges for many different agencies over the Christmas period. The Environment Agency, local authorities and others have worked hard to manage flood and coastal waters. Water companies have played their role tackling surface water flooding, sewer flooding and minimising pollution events. Water is an essential public service and it is when traumatic events such as flooding occur that the public service nature of water companies' work comes to the fore. This year marks 25 years since water companies were privatised. Over this period, there have been significant developments in services, with companies investing in the region of £116 billion, leading to major improvements. Twenty years ago, customers were more than five times as likely to be at risk of an unplanned supply interruption as they are today and eight times more likely to be at risk of having their house flooded by sewage. Leakage today is about a third lower than it was two decades ago. Yet despite its vital contribution to society, how the water sector works – and the intricacies of economic regulation in particular – will understandably be a mystery to most. While most water customers may have little knowledge of Ofwat, the regulator needs to 6 | 31st January - 6th February 2014 | utILIty WeeK be alert to and aware of the expectations and emphasises, what matters is engagement demands customers have of the water service with customers about bills, water quality they receive. This awareness does not just and resilience, and also customers feelextend to the individual customer or busi- ing valued and fairly treated by responsible ness of today, but also to the wider societal corporate leadership. expectations of water services and their relaAt the core of our thinking is the recognitionship to the environment in which we live. tion that our role as the economic regulator This focus on what customers want and is to make the relationship between water need is central to our current price review. and wastewater companies, investors and The review process has pushed companies customers work effectively. to put customers at the heart of their busiWe can do this by creating an environment ness plans, by talking to their customers, where continuous, responsive dialogue takes listening to what they want and responding. place and by supporting conditions under Such engagement is important in which efficient companies can a sector where customers cannot finance their water and wastewater choose to walk away from a probusinesses. This dialogue needs vider that doesn't deliver the service to include the needs and wants of they require, or just stop consumfuture customers as well as current ing the service. Customer trust and ones. It also needs to deliver benlegitimacy comes from engagement, efits to companies, and fair returns information and knowledge about to investors. Others also need to what customers want and are willbe part of the debate and part of ing to pay for. our role in future may be to help The water sector has always had "The recent to create the space where dialogue to grapple with the unpredictabil- flooding has can happen between companies, ity of the weather, and the recent customers, investors and those illustrated flooding has provided a graphic reflecting broader societal and illustration of the effect this unpre- the effect environmental interests. dictability can have on people's unpredictOf course, there are also cerlives. Other factors may be less ability can tain standards to be set and mainvolatile, but still create a climate of for example public have on peo- tained – environmental in protecchange or uncertainty: be it politihealth, cal, economic or environmental. As ple's lives" tion and service levels – and our a regulator, our response to such strategy needs to address Ofwat's uncertainty should not be to hunker down future role in the delivery of those standards. and stay still. Neither should it be a knee- But our price review process has moved away jerk reaction that automatically results in a from the approach of "tick box" regulation bigger, tighter safety net, with more direct and we want to continue in that direction by regulatory intervention. Instead, we need utilising a wider set of regulatory tools. to work to create a new dynamic, in which The launch of our consultation document the water sector is engaged in continuous, on our forward programme begins a process responsive dialogue with its customers. that will extend over the next year. To sucOn 15 January, Ofwat published a con- ceed, we need to encourage the climate of sultation on its forward programme of dialogue and debate that we are looking to activities for 2014/15. At the very start of that make a permanent part of our role. Our forprogramme, we've set out our intention to ward programme consultation, open until develop a new long-term strategy for Ofwat, 11 February, is available on our website and which will reflect the needs of everyone who there will be more detail on our strategy, and benefits from water and wastewater services. opportunities to get involved, emerging in the As our approach to the current price control coming weeks. We hope you will take part.

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