Fletcher: Public will judge water firms on coronavirus actions

The chief executive of Ofwat has highlighted some of the “important choices” water companies face in responding to coronavirus and warned that “the public is watching and judging”. But, has the regulator provided enough clarity to reassure firms?

The water sector will be judged by its response to the pandemic and should not use it as an excuse to forget public commitments or environmental promises, Ofwat chief executive Rachel Fletcher has insisted.

At a time when companies have been forced to rapidly adapt to very different working conditions and extend financial support to customers whose livelihood are affected, Fletcher praised the sector’s response and said its resilience had held up well, “so far”.

However, Fletcher also urged companies not to let the current crisis distract them from business as usual or renege on commitments such as environmental promises during these extraordinary circumstances.

She said the “important choices” companies make during this time will be judged by the public.

In a blog on the regulator’s website, she asked:“Do they put employees with less to do on part time pay or keep the salary bill constant and support the local community? Can they provide their contractors with vital cash flow as business elsewhere dries up? Are they dipping into their own revenues, not just relying on other customers to pay for social tariffs for those who are vulnerable? Do their financial decisions allow them to be a shock absorber during the economic downturn that is upon us? Are they planning to deliver their promises on the environment or looking to get out of them at this time?”

Since its first publication the blog has been edited to remove the “get out” reference.

Former Ofwat director Trevor Bishop told Utility Week the current situation could be a catalyst for change in perceptions but stressed there is more at play than just the relationship with the public.

“The unique and dreadful nature of this incident will test the maturity of the professional relationships between companies, regulators and government,” Bishop said. “At times like this trust between all parties is critical to people having the confidence to do the right thing – we cannot afford for it to be otherwise.”

While there is no certainty for any party during the rapidly evolving situation, the response of businesses has come under scrutiny.

“One thing is clear. The public is watching and judging how companies respond during this crisis,” Fletcher said of the numerous sectors that have been in the public eye for their dealings with staff, customers, suppliers since the start of the outbreak.

She said the meaning of being a “responsible business” in these circumstances – including decisions over executive pay and dividends – was “front and centre of people’s mind” during the coronavirus crisis.

Bishop agreed the priority must be on delivering vital services to customers and the duty of care for companies’ staff and supply chain, but he pointed out the sector needs to know that the regulator will support them.

Fletcher wrote to companies in March saying incentives and penalties “should not get in the way of effective prioritisation in the interests of customers”. She stressed that water companies did not need to “wait for our approval before implementing prioritised working arrangements”.

While Ofwat is making it clear that the sector must prioritise essential work, there is some concern that a lack of regulatory clarity could put businesses and regulator at odds. One insider suggested this room to manoeuvre could leave those companies facing penalties for not meeting targets during this time.

Fletcher said the regulator is looking forward to seeing more examples of how a public service ethos is driving decisions in water companies to support the local environment and communities they serve.

The past two weeks have seen several companies pledge donations to community groups, while frontline staff keep services running including dealing with sewer clogs thanks to the toilet paper shortage. Across the sector billpayers have been offered help with charges and households are encouraged to sign up for priority services.

Without outlining other efforts Ofwat wishes to see, Fletcher said: “Now is the time to show by their actions whose side they’re on.”

Fletcher will appear this week in the Utility Week #AskUsAnything webinar on 17 April with Ofgem’s Jonathan Brearley.