Ofwat consults on how to enact a new consumer involvement rule

Ofwat is consulting until 1 October on enacting its new power under the Water Special Measures Act to ensure consumer involvement in water governance. This is to increase accountability, drive improved performance and help restore trust.

It has proposed that companies be required to meet a core requirement of a new rule, “which is to have appropriate arrangements in place for involving consumers in decisions of the undertaker that are likely to have a material impact on consumer matters”.

The rule then expands on three components that support the core requirement. Companies will be required to understand their consumers' views and preferences, which can help to inform companies' approaches on consumer matters. Then, when decisions that are likely to have a material impact on consumer matters are made, the company needs to have clear processes in place to ensure that consumers are involved. Finally, the company needs to understand how those decisions actually impact on consumers, including through accountability mechanisms, so that this can be taken into account for future decision-making.

The three components of the rule are further supported by five guiding considerations which companies must have regard to in designing their arrangements: accessibility, independence, timeliness, representativeness and transparency.

In terms of compliance, Ofwat said companies must comply with the rule’s core requirement, but that a flexible approach will be adopted to enable innovation and company-specific circumstances to be taken into account – albeit the consultation described the types of approaches firms must put in place to deliver the requirements.

The exception was that companies are to be required to engage with the new consumer panels CCW is setting up, and to ensure senior staff respond when summoned by these panels to answer questions.

Ofwat’s approach was informed by a 2024 consultation and customer research. ‘Consumers’ are defined as households, businesses and developers, and companies have flexibility to involve both ‘ordinary’ customers and independent consumer experts in their arrangements.

The new rule is set to come into force on 1 April 2026 for incumbent water companies and on 1 April 2027 for new appointees.