Ofwat to reduce perception score and expand service in C-Mex

Ofwat is consulting until 26 September on diluting the customer experience element of its C-MeX metric from 50% of the score currently to 33.3% at PR24, and expanding the customer service element from 50% to to 66.6%, split equally between billing and operational contacts. It reasoned this will provide “stronger incentives on companies to focus on customers that are most likely to experience the worst service, while maintaining balanced protections for all customers”.

The change was one of a number Ofwat favoured to the high level design of customer experience measures for the next price period.

Other significant proposals for C-MEx included changes in the allocation of incentives and in incentive payments

The way incentives are allocated will change from being relative between water companies, to being based on cross-sector benchmarks. Water companies would earn outperformance payments if they perform above a threshold based on a cross-sector average, with maximum outperformance payments for performing as well as the best service provider in the wider economy and maximum underperformance payments for performing at the level of the worst service provider. Ofwat explained: “Like in competitive markets, a company's revenue is at risk if it provides relatively poor levels of service compared to other providers. And by making greater use of cross-sector benchmarks, companies should face even stronger incentives to improve their customer satisfaction relative to other firms in the wider economy, helping to promote a step change in customer service."

Incentive payments will move from being calculated as a proportion of residential retail revenue to being calculated as a proportion of return on regulatory equity.

Elsewhere, the consultation proposed changes to D-MeX (for developers) and to the business customer experience in Wales performance commitment. Ofwat said it would set out its proposed incentive design for the new BR-MeX mechanism (for business customers and retailers) in the draft determinations, before finalising decisions in the final determinations.