Ofwat to ‘take action’ against companies failing customers

Water companies will be fined for failing to hit new customer service targets, under licence changes being consulted on by Ofwat.

The proposals for a dedicated customer licence condition will require water companies to improve communication with customers, fix problems in a timelier manner and provide services to meet diverse consumer needs.

The measures have been set out within draft plans for the modification of water company licences, first proposed by Ofwat early last year.

Within the plans, Ofwat – working with CCW – said there was a need to improve complaint handling and compensation events within the sector. The regulator also said companies were “not learning from their mistakes” around service failures, and not acting quickly enough to meet consumers’ needs.

Under the proposed licence change, Ofwat expects companies to have systems and processes in place for accessible, timely communications and to have a “continuously learning culture” across the organisation and any third-parties.

“It will require companies to make a critical assessment of their offerings to customers, recognise areas for improvement and map out appropriate steps to achieve these improvements,” the draft plan states. “Companies will need to work together on elements of this, as we expect more shared learning across the sector when it comes to achieving high standards of customer service, particularly in the management and response to incidents.”

Ofwat said the change will fill an existing “gap” in its regulatory toolkit to take action against companies failing to deliver good service to customers.

“In England and Wales, households are not able to choose their water company, so it is crucial that good customer service is not a postcode lottery. We want the powers to enforce that fundamental expectation,” David Black, Ofwat chief executive, said. “People expect their water company to get the basics right and rectify things quickly when they go wrong and to take responsibility and offer compensation when appropriate.

“Companies need to identify and meet the needs of all customers, they need to be clear in their communications and we expect them to work together to share learning that helps to achieve high standards across the sector. Where we see companies letting their customers down, these powers give us the scope to step in and take action.”

Ofwat said the draft licence condition is an important addition to its formal and informal enforcement tools when a company systemically fails to deliver for its customers. The regulator can fine companies in breach of any licence conditions up to 10% of their annual turnover.

The changes will apply to water companies, new appointment and variations (NAVs) for all domestic customers and non-household customers not supplied by a retailer, which mainly applies to business customers in Wales.

The new condition would replace the current Condition G and come with detailed guidance from the regulator.

Condition G currently defines core customer information and the provision of it as well as setting out a process for review how information is provided in a rule-based and specific way, which does not allow space for innovation or for companies to flexibly meet changing societal and customer needs.

Presently, no particular standards of how complaints are handled are set out or incentivised. Through price review determinations, companies have performance commitments to their customers to achieve via C-Mex.

Emma Clancy, chief executive of CCW, welcomed Ofwat’s plans and said: “We believe the principles set out in the licence condition will provide greater clarity for companies on how they can provide excellent services, and ensure there is greater accountability for those that fall short.

“As the voice for water consumers, we have had an important part to play in helping to shape the principles set out in this licence condition, ensuring they reflect peoples’ views. Going forward, we will continue to play a vital role in monitoring company performance, identifying and highlighting issues that may be negatively impacting customers, and ensuring companies treat them fairly.”

This is the second time that Ofwat has used its power to modify licence conditions since it was granted the ability within the Environment Act.

The consultation will run to July, after which the regulator will finalise the wording for the proposed condition.