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What’s the difference between price and value? That can be a hard question for utilities to answer, because they are unable to differentiate on product. Water is water; power is power. Not for the big six or the water companies the luxury of offering luxury, in the style of John Lewis or Waitrose, to justify a higher price point. Instead, the extra cash customers pay for water and energy compared with ten or 20 years ago covers benefits they rarely see: higher quality standards for drinking water, new sources of renewable energy. Try putting that in box and tying it up with a ribbon.
But customers are willing to pay more if they perceive more value, according to Ofwat’s chief regulation officer, Sonia Brown, who writes for us this week (see p15). Brown hits back at criticism of the outperformance rewards included in PR14, arguing that evidence from South West Water shows “once you set rewards in the context of a whole package of risk and rewards, customers were willing to pay for enhanced performance in certain areas”.
Yet CCWater’s annual survey shows this week that customer satisfaction with value for money of water supply is at its lowest level for four years, despite broad positivity when it comes to customer service (p25). The planned price cuts in the next AMP cycle should go some way to addressing this: it’s rare that a bill goes down, and the public hopefully will be appreciative. Much of this will be down to communication, however. When it comes to value for money, perception is half the battle, and right now it’s a battle water companies are losing. The moment when bills are cut provides water companies with a prime opportunity not only to advertise their willingness to reduce prices where possible, but also to communicate how the remainder of the bill is being spent.
DNOs have a similar opportunity with ED1, when most are cutting their charges. Creating greater transparency on the bill and making customers aware of what networks do for their small cut has long been a talking point. Following the fallout from this winter’s storms, it’s time for that talk to turn into action. Like the water companies, the networks have a prime opportunity to shout about what they do, and a compelling case to make on value for money.
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