Ofwat has published a position paper on PR24 customer engagement policy setting out the regulator’s expectations for standards regarding customer engagement as part of the water companies’ developing PR24 business plans.
Ofwat has published a position paper on PR24 customer engagement policy setting out the regulator’s expectations for standards regarding customer engagement as part of the water companies’ developing PR24 business plans.
Ofwat said:
“We expect all companies to be engaging with customers to make sure their business plans take account of customers’ needs, priorities and preferences.”
The paper sets out the standards that should be achieved by companies during business plan development for:
- high-quality research;
- customer challenge on the nature, quality and use of customer engagement evidence; and assurance of the quality and use of customer engagement evidence.
The regulator said its approach to customer engagement for PR24 has some differences from PR19 which are aimed at improving the overall quality, reliability and use of customer evidence for PR24.
Recent changes to Ofwat’s customer engagement policy include CCW and Ofwat working together to develop and implement a collaborative approach to some of the customer research that will inform common areas of companies’ business plans and Ofwat’s decisions. This includes involving companies and other stakeholders in the development of the collaborative research via agreed governance arrangements.
The position papers focuses on standards for customer engagement by the water companies during the PR24 price review business plan development. Ofwat’s current thinking on standards and principles for high quality research includes:
Useful and contextualised - research should:
- have practical relevance
- be designed with quality rather than quantity as a priority
- research findings should be presented alongside a wider evidence base – including research conducted by others.
Neutrally designed - research should:
- be designed and delivered in a way that is neutral and free from bias.
- consider the potential for bias and the ways to negate this at every stage of a project, and evidenced
- acknowledge and explain any inherent bias that is unavoidable/ an unintentional outcome of the research in the research findings
Fit for purpose
- research sample and methodology should be appropriate for the research objectives
- participants should be able to understand the questions they are being asked
- surveys should limit use of forced choice options
Continual - companies’ research programmes should be continual, enabling day-today insight gathering, as well as specific and relevant research for informing business plans and long-term delivery strategies.
Shared in full with others - research findings should be published and shared in full, as early as possible with as wide an audience as possible.
Independently assured - research should be reviewed by individuals or groups that are independent of water companies.
Ethical - research should be conducted in line with the ethical standards of a widely recognised research body – such as the Market Research Society or the Social Research Association
Customer challenge
- customers and their representatives must be able to challenge the companies’ ongoing performance, business plans and long-term delivery strategies.
- the people involved in customer challenge, and the process of challenge, should be truly independent of the company.
- challenge solutions should be at arm’s length from the company, with no restrictions or expectations placed on it which would compromise its independence
Representative - challenge should come from a representative range of customers and is open to all relevant local or national stakeholders.
Comprehensive - challenge is focused on the full range of areas where customers can have meaningful views, including:
- water and wastewater services (where applicable to the company);
- customer services;
- significant investment (large one-off schemes);
- performance levels; and
- bill impacts.
Ofwat said it also expects company boards to provide assurance of the quality of customer engagement and that customers’ views have been taken account of in business plans and long-term delivery strategies.
The regulator is also keen to ensure that customer research by the individual companies should be widely shared which would add value to the evidence base on customers:
- by allowing research approaches to be understood and improved on;
- by building the shared knowledge base about customers’ views, preferences and experiences;
- by allowing research findings to be considered in a comparative way – meaning water companies can better understand their own customer base, by comparison with the findings from other areas.
Commenting on protecting customers’ interests, Ofwat says that customers and their representatives must be able to challenge the companies’ ongoing performance, business plans and long-term delivery strategies.
The paper states:
” If this is not done effectively, we must be able to challenge on customers’ behalf. We will use a risk-based approach and our own understanding of customers’ preferences to challenge company plans, intervening if necessary to fulfil our duty to protect customers’ interests, in line with all our statutory duties. The final decision on price controls is entrusted to Ofwat.”
The regulator expects the customer and stakeholder engagement framework set out in the PR24 draft methodology to largely reflect the content of the position paper, together with its October 2021 ‘Collaborative customer research for PR24’ position paper. The draft methodology will be published in July 2022.
Click here to download in full PR24 and beyond: Customer engagement policy – a position paper
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