Four firms on report on freeze failings and compensation scheme under review

Ofwat has given Thames Water, Severn Trent, Southern Water and South East Water three months to set out how they are addressing failings identified by its freeze/thaw review published last week. It warned these four poorest performers that it would take action should their responses, which are due by 28 September and must be externally audited, be unsatisfactory.

It also announced it would be consulting on changing the compensation allowances for customers following the"Beast from the East’" experience.

In the report, Out in the cold, the regulator emphasised the differences between how companies handled the extreme weather of February and March – acknowledging the well prepared and criticising the poor performers – as well as drawing out lessons for the whole industry. Ofwat identified the following common failings across multiple companies:

  • Poor preparation and planning, with several companies lacking adequate emergency response plans and mainly reacting to events as they happened.

  • A lack of coordination between companies to share resources such as bottled water suppliers or best practice in handing the incident.

  • Limited or inaccurate data on where problems were occurring and whether they had been resolved, with several companies having limited capacity to remotely manage their networks and move resources which also hampered their response.

  • An inconsistent approach to identifying and supporting customers in vulnerable circumstances, with some companies lacking accurate or up-to-date data on customers who needed priority help.

  • Poor communication with customers and stakeholders, with only 60% of affected customers surveyed by the Consumer Council for Water receiving direct communication from their company and many priority stakeholders (councils, local resilience forums, emergency services, schools) receiving little or no proactive communication before, during or after the event.

Ofwat reported that companies have paid out £7m to customers in compensation, but that the Guaranteed Standards Scheme (GSS) which governs compensation arrangements is “not reflective of the impact on customers unable to access to water. As a result, the regulator will work with the UK and Welsh Governments to consider changes to the rules on compensation and will open a consultation by the end of next month.”

Meanwhile, the same day (19 June) the Consumer Council for Water published separate research on experiences of consumers who lost their water supply, while the Drinking Water Inspectorate published its review of the incident.

Companies that fared well have been understandably keen to point out their preparations and slick response kept customers on supply while others were cut off. Wessex Water, for instance, attributed its success to its foresight in investing in a £228m, 74km supply grid which allows water to be moved around its region to areas of need, as well as to the hard work of its staff.

Wessex cited Ofwat’s report, which said: “Wessex Water used technology effectively during this incident to identify the sources of leaks and complete repairs quickly.” It also pointed to the DWI report, which pointed out: “Wessex Water managed its operations without any loss of supplies to consumers despite the company’s area being covered by the red weather warning issued for the south-west.”