Ofwat In Drive To Bring About Change In The Water Sector

Industry watchdog Ofwat has announced that it will continue to push water suppliers around the UK to act more in their customers’ interests, taking on some of the practices that have long been a cause for concern.


Chair of the organisation Jonson Cox – who has written to the secretary of state for environment, food and rural affairs to set out the regulator’s agenda with regards to improving corporate behaviours – said that some suppliers do even now seem to be too focused on “financial engineering” at the expense of servicing the public.


He went on to state: “We’ve seen significant service failures, most recently following last month’s cold snap and quick thaw, which led to tens of thousands of customers being left without water. All of these things have damaged trust in water. Ofwat has been pushing water companies to up their game for some time; but we need to go further, faster.


“We expect the water sector to own the challenge by taking the lead in engaging with customers and the wider public about how it can redefine its role and rebuild trust. Companies who wish to be leaders in the sector will step up, voluntarily accept the need for change and put customers’ interests at the heart of everything they do, as an essential step in rebuilding trust.”


In his letter to government, Mr Cox noted that tighter standards should be set to ensure companies remain financially resilient over the long term, as well as reforming licenses so its even clearer that suppliers must put customers at the heart of all their activities and increasing demands on transparency around profits and dividends.


Concerns around executive pay should also be addressed, including expectations that water company boards explain their bonuses by referring to exceptional delivery for their customers.


Over the next six months, Ofwat will be holding a series of formal consultations so it’s possible to get to the position where these initiatives and others can be implemented. Water suppliers will have to introduce these changes in line with planning so as to drive further efficiency and improve performances between 2020 and 2025 as part of the PR19 price control.


Wholesale price controls for water and sewage companies are set by Ofwat every five years and it is currently working on the price review for next year (PR19). When setting these controls, the organisation has a duty to protect consumer interests while ensuring that each company has enough money to finance its operations.


In 2014, the government introduced legislation to allow those eligible business customers to switch water and wastewater retailers. Ofwat’s business retail price review 2016 was published in December of that year, setting out business retail price controls for the three years from April 2017.


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