Water companies must think big and be ambitious for PR19

Writing exclusively for Utility Week, Ofwat chief executive Cathryn Ross explains the regulator's demands of water companies to 'go the extra mile' in PR19.

When we launched our 2019 price review methodology consultation last week, we threw down the gauntlet for water companies. The water sector provides a truly vital public service which we simply could not do without.

However, there’s no denying the challenges we all face, from a growing population, to shifts in customer behaviour, to environmental pressures and the continuing need for affordability. That’s why in this review, we are asking water companies to think big and be ambitious in both what and how they deliver for customers, the environment and wider society, now and in the future.

At the heart of our price review are four themes: customer service, resilience, affordability and innovation. We view each as fundamental to maintaining trust and confidence in water and waste water services among customers and wider society.

In each one of these areas, we expect companies to stretch themselves through high-quality, ambitious and innovative business plans that deliver more of what matters to their customers. For companies that go the extra mile, there will be rewards – financial, procedural and reputational. Conversely, companies that fall short will find this a very tough review.

“…water has lagged behind other sectors. We see no reason why this should continue to be the case…”

Where it comes to customer service, there have been considerable improvements since privatisation. But water has lagged behind other sectors. We see no reason why this should continue to be the case. Water companies can learn from other sectors that have successfully harnessed a wide array of digital tools to become closer to the customer, to engage them in decisions about the product or service they receive and to better deliver against their diverse needs and expectations.

Affordability remains an issue for many customers, not only those who have fallen into debt. That’s why we’ll be expecting to see bills that offer overall value for money for customers. More broadly, we want to see companies going further than ever before to better understand and support those customers who find themselves, for whatever reason, in vulnerable circumstances.

Long-term resilience in the round is something we’ve been talking about for quite some time. As we head into the next review period, we are asking water companies to consider carefully whether they have in place the right people, infrastructure and processes, as well as robust finances and corporate structures to see them through the next control period and beyond.

To deliver all of this, when financial returns are looking like they will be lower for longer, companies will need to be innovative. They will need to find new ways of doing things and embed those new ideas and processes firmly into their businesses so that customers will get more of what matters to them.

This will be a challenging price review. In order to ensure that the water sector is well placed to meet the demographic, societal and environmental challenges that lie before us, we’ve set the bar high. We’ve made clear the kind of outcomes we are looking for and the direction we expect to see companies moving in, particularly with regard to theircustomers. We are confident however that the sector can and will rise to meet these challenges. We’ve seen real progress in recent years, but the years ahead will require the sector to shift the frontier further still.