IN A PANDEMIC
THE WATER REPORT and Indepen have unveiled their ONLINE 2020 Social Contract Summit that will focus on the next steps for the water sector In demonstrating public purpose in the wake of Covid 19.
November 3, 10 & 24 2020
The CMA ruling shores up company finances and suggests boundaries for future regulation.
A line is drawn
The Competition and Markets Authority’s (CMA) provisional findings, published on 29 September, will have gone quite a way to addressing the concerns raised Yorkshire Water, Anglian Water, Northumbrian Water and Bristol Water about their PR19 final determinations – but perhaps not in a predictable way. The CMA’s expert panel has opted to provide redress for the companies over their challenges on resilience, investability and risk/return through an uplift to the Weighted Average Cost of Capital (WACC) primarily, rather than through costs and outcomes.
For the four companies, the provisional settlement offers a marked improvement on Ofwat’s December decisions, validating the case for appeal. But Ofwat can take comfort in the fact that delivering this settlement, should it be locked in this December, will remain far from a walk in the park for the firms. The CMA endorsed many of the water regulator’s positions, and left the package tough and stretching; “from impossible to difficult” was how one commentator described the shift.
The panel upheld Ofwat’s models and costs for the most part, allowing more scope in some instances, but not rewriting the rules to any significant degree.”
Give customers control
As Covid effects bite, Angela Smith says customers need to be empowered to take charge of their water usage, and water companies need to step out of the shadows.
Portsmouth Water director, Angela Smith, chaired last year’s Social Contract Summit and closed the day with a challenge to water companies to “go away and think seriously about developing a social contract approach to water services” – one that would inspire pride and amount to exemplary responsible capitalism.
She says: “I feel that even more strongly now. If there was every any doubt last year about the need to do that, then surely that doubt has completely evaporated.
“People in this country have made an enormous sacrifice in the wake of this disease – in terms of personal freedom, ill health, people losing loved ones…I think the growing view out there is that after such a sacrifice, once we start going back to normal, people will expect to see reform of the private sector, for want of a better way of putting it – reform of capitalism, more fairness, balancing profitability with people and planet.
Water companies have felt very reluctant to show leadership because they’ve been under such attack politically. Now is the time to really come out of the shadows.”
New CCW chief, Emma Clancy, wants the watchdog to be a team player in improving customers’ lot rather than just noisy on the sidelines – and plans to kick off by tackling the postcode lottery of support.
For CCW, these are times of significant change. Former chief executive Tony Smith had led the organisation since its formation in 2005, so Clancy is its first new leader ever. It’s also the start of a new regulatory period with all the new challenges that brings.
And CCW will be mindful that the lives of the customers it watches out for have been turned upside down, and therefore that some ‘givens’ may no longer be assumed.
All round, in spite of the unorthodox start, it seems a good time to be taking the reins at the customer watchdog, if a refresh is in order. The early signs are, that’s what Clancy and the board have in mind.
There will be changes of approach internally and in policy terms and tackling the "postcode lottery" of customer support will be a high priority.
Ain’t no river clean enough
Ellins: “What we’ve managed to do is get the discussion focused on human capital.”
As better data reveals the true condition of the freshwater environment, storm overflows and chalk streams take centre stage for action.
Storm overflows in general and chalk streams in particular are at the centre of a rising tide of alarm over the health of the freshwater environment. This is driven not because the actual health of our rivers is declining (though it is not improving), but because more sophisticated monitoring is increasingly revealing their true condition.
That makes grim reading, and is rightly leading to mounting pressure for change.
If the company is out of balance with the community and the environment, in the long term, that’s not good for shareholders. Peter Simpson
Thompson: "personalised service" to members.
to keep you on top of the threats and opportunities in retail and upstream competition.
It's the eye on the competition.
Watching it unwind
Market authorities are closely scrutinising the removal of Covid vacant flags – and say they will act decisively if October does not bring a return to occupancy norms.
MOSL said it would “act quickly and decisively where we see trends,
behaviours and activity levels which either give cause for concern, or merit being called out as good practice”.
MOSL, Ofwat and CCW have formed a Covid 19 Transition Review Group to assess progress on unwinding Covid vacancy measures.
The group, which will meet fortnightly, met for the first time at the end of August and immediately agreed to contact a number of retailers, “expressing concern that they were yet to make any significant progress towards changes to their portfolio of ex-Covid 19 vacant premises to ‘occupied’ or ‘assured vacants’.”
The temporary vacant flag expired at the end of July, and retailers had until the end of September to remove the flags in CMOS.
Retailers need to either return premises to occupied or evidence that previously Covid vacant premises remain vacant under the business as usual (pre-Covid) definition of vacancy. They are expected to obtain meter reads to reflect actual consumption, or where a meter read cannot be obtained, to engage with the wholesaler and the customer to obtain an accurate estimate.
To support the work, MOSL said it would implement an Additional Performance Indicator around levels of ex-Covid 19 vacant premises which have not been evidenced as vacant or confirmed as occupied.
Six months of stepping up INDUSTRY COMMENT
Business Stream chief, Jo Dow, reflects on the pandemic .
No amount of business continuity planning could have prepared any of us for the past six months. We’ve had to adapt our working practices and respond to issues that we’ve never had to deal with before. But in doing so, we’ve achieved things that we wouldn’t have previously thought were possible – and it’s these elements that we need to preserve as things begin to return to "normal".
From a customer perspective the impact was immediate and profound. They say it’s good to talk and arguably never more so than in a crisis, where there is simply no substitute for being able to speak to someone who can empathise, provide reassurance and help fix your problem. Our frontline teams are entirely office based so maintaining telephone contact was not without its challenges. We had to put in place the technology to channel
inbound calls to our employees’ homes. Following a number of tearful and heartfelt conversations with customers, we knew we had to do something, so we immediately suspended all debt recovery activity and introduced payment support arrangements including payment holidays and extended
Dow: "good to talk."
payment plans. This had an immediate impact on our cashflow too, but there was no question it was the right thing to do.
A cost efficiency gap persists for slow track firms in Ofwat’s draft determinations.