Water industry regulator Ofwat has said that it will step in if the water companies fail to rise to the challenge of meeting customers’ needs, including self-lay groups, in proposals for new customer service standards currently in the process of development.

Both the Government’s initial guidance on better connections for utilities and the water companies’ own draft measures to set standards for levels of service provided to developers are at an early stage with further extensive consultation needed before they are finalised.

Yesterday Fair Water Connections, an independent association set-up to campaign for open self-lay competition and regulated self-lay market in the water sector, accused the Government of producing guidance on utilities connections which contains anti-competitive service measures.

The Government published its new guidance document Better Connected on 19^th December setting out what developers and utilities companies should expect from each other when providing utilities to bring forward future development. It is also intended to start to provide great transparency with regards to new connections processes so that their timescales and costs can be improved.

The issue is one where Ofwat has in fact already expressed its concerns which it set out to the water companies last summer – the regulator has challenged the sector to improve and take responsibility for solutions.

However, Ofwat takes the view that instead of the regulator setting out mandatory service standards for companies in relation to new connections, the companies themselves should take greater ownership and lead on the issue.

While Ofwat has prompted and fed into the process, the draft service measures have been developed by a working group convened by Water UK made up of all water and sewerage companies.

Ofwat said the service measures developed are draft measures and given the short time frame in which they were developed, only reflect initial engagement. This is only at a draft stage and the water companies recognise there is still more engagement to do.

Self -Lay Organisations can contribute to further development of guidance

The Better Connected document explains that further engagement and development of the proposals is still to take place in early 2015 to ensure the measures meet customers’ expectations. They will also be considering the most appropriate means of incentivising against the measures, which could include financial penalties for failures. The engagement will include engaging with self-lay organisations.

Ofwat said the water companies have also considered the importance of competition when drafting the proposed service levels - calls from their SLO customers for specific self-lay measures has resulted in the inclusion of some specific measures relating to self lay in the draft.

The regulator has drawn attention to the fact that the current measure relating to mains construction does not distinguish between mains provided by requisition or self-lay, pointing out that, again, if this is something customers would prefer to see the engagement process provides an opportunity to reflect this.

Ofwat has not formally agreed the draft service levels with companies. However the regulator has welcomed the steps the water companies have taken so far, taking the view that they are moving in the right direction to improve and reputationally incentivise service performance for new connections customers,  including self lay groups.

The Government also recognise that thinking is developing in this area and are already planning to update the Better Connected guide to reflect further developments in service standards.

Ofwat will step in if water companies fail to meet SLO customer needs

An Ofwat spokesperson said:

“There are long standing concerns with charging arrangements and customer service in the area of new connections. Last summer we challenged companies to take responsibility for improving customer service standards in this area. Companies have begun that process and they are moving in the right direction. Yet there is still work and engagement to do before their plans are finalised, so the sector can make sure all customers’ needs, including self-lay groups, are met. If companies don’t rise to that challenge, we’ll step in.”

Self-lay developers say Govt water connection guidance is anti-competitive

Fair Water Connections, an independent association set-up to campaign for open self-lay competition and regulated self-lay market in the water sector, has accused the Government of producing guidance which contains anti-competitive service measures.

In a statement, FWC said:

“FWC is dismayed that Government departments (DCLG and DEFRA), with input from Ofwat, have produced a document with anti-competitive service measures. This is because the performance targets disadvantage self-lay by not offering any guarantee when new mains will get connected unlike with water company provided mains, where service standards apply.”

FWC was set up in February 2012 to provide support to its members by assisting them to get more favourable terms from water companies and, where this has not been possible, assisting them in preparing determination requests and Competition Act challenges.

The organisation specifically covers statutory and competitive new water supply provision in England and Wales, including new (on/off-site) mains, water connections and infrastructure charging.

Commenting on its website, FWC has described Ofwat as “far too ineffective in getting fair terms for SLOs.”  FWC said the Water Services Regulation Authority (Ofwat) are responsible for regulating water companies and ensuring that they;-

charge in accordance with the Water Industry Act; and,

do not abuse any dominant position they hold in their local competitive water connections market.

FWC said:

“We however regard Ofwat as being ineffective in fulfilling these duties as they have not:

• accepted more than a single Competition Act challenge and, by not closing-out the draft determination they issued in May 2014, have not provided either the investigated company or the industry with clear direction and guidance;
• issued a single determination that specifically relates to on-site self-lay;
• processed determination cases quickly (with close-out of draft determination cases taking much longer than the 6 months indicated by David Gray, back in 2011, as being a reasonable response time);
• instigated an investigation into service connection fees (covering administration and other activities) even though they know that these are charging at rates well in excess of what Ofwat says is permissible when water companies lay services themselves;
• run the consultation they promised on standards of service: and,
• established any metrics to determine whether the 'ultimatum' they said they gave water companies in the autumn will lead to them actually improving new connections provision themselves.

FWC said it had been informed by Richard Khaldi, the Ofwat Senior Director of Resources and Casework, this month that they "have committed considerable resources to new connections issues, both in terms of published information materials to clarify their expectations of how companies work with their customers and in progressing individual determination cases."

However, the association said it had not been able to evidence “any meaningful impact this has had on the way that water companies operate, adding:

“ Hence we continue to regard Ofwat as being ineffective in fulfilling their duties regarding ensuring that the competitive water connections market is free to function.”

FWC said it had also gathered, through Freedom of Information requests, data on Ofwat casework performance and suggested that a self-lay determination request registered with the regulator in October 2010 had yet to be fully resolved with the outcome published.

FWC concluded:

“Over recent months Ofwat have been party to the Government process which resulted in the Department for Communities and Local Government publishing a set of utility provision performance standards which we regard as being anti-competitive and Ofwat only look to have seen that these favour in-house over self-lay provision after we told them of the issue!”

The water companies in England and Wales are due to review the effectiveness of the new voluntary standards regime with their developer customers in summer 2015, to ensure performance levels meet expectations and, if not, to explore what incentives might encourage better performance.

Water UK, the body which represents all the UK water companies, has been working with its members to produce a set of standards that developers and others can expect from water companies in relation to the provision of infrastructure. The standards form part of the government's initiative to publish levels of service for all utility providers.

Water UK members are currently trialling these with a view to publishing a league table of performance with effect from April 2015.

Ofwat will also be developing new charging rules for new water and sewerage connections. The Department for Environment, Food and Rural Affairs (Defra) plan to separately publish final guidance for the rules in summer 2015.

Click here to download the Government Better Connected guidance

Click here to download the Water UK draft service measures.