Ofwat has published a paper setting out its approach to conducting customer research collaboratively with CCW and the sector for the 2024 Price Review (PR24) to inform common performance commitments, outcome delivery incentive (ODI) rates and acceptability and affordability testing.

It follows on Ofwat’s recent consultation - PR24 and Beyond: Creating tomorrow, together - which set out Ofwat’s vision for customer engagement at PR24.

The paper sets out the scope of the collaborative research, its fit with company-led research and engagement, the timing of the collaborative research, the delivery of the fieldwork, the governance arrangements and next steps. Scope of the research is as follows:

• Common performance commitments - the research will aim to test the extent to which the common performance commitments (PCs) we are considering for PR24 correctly reflect the key service attributes of interest to customers across the country and whether any gaps in coverage exist.
• Outcome delivery incentive (ODI) rates – the research will inform the ODI rates for common PCs for each company using a common methodology across company operating areas, taking account of variation in existing performance levels.
• Acceptability and affordability testing - the research will be used to test customer views on the acceptability and affordability of companies’ business plans prior to submission to Ofwat, and the acceptability and affordability of Ofwat’s draft determinations

Introducing the discussion paper, Ofwat said:

“This approach is intended to address issues encountered at PR19. At PR19, we found that companies had engaged with more customers than ever before, with many companies demonstrating high quality and innovative approaches.

“However, we also found problems with the quality of research approaches in some instances, meaning that we could not rely on the evidence.We also found the results from companies' research varied significantly on common issues, with no clear underlying reason for the differences.”

The research is a major sector-wide customer engagement exercise - Ofwat has developed a partnership with CCW for the design and delivery of the research.

However, Ofwat said it would “strongly discourage” companies from submitting research solely to inform ODI rates for common PCs on the basis that this would duplicate the collaborative research and so be “poor use of customer money.”

“As we attach significant importance to the consistency of customer evidence to inform ODI rates across companies, we will make a judgement on the weight we assign to any company-specific research in our triangulation - which may be zero, “ the regulator added.

Ofwat has already started work on the ODI rates research and expects fieldwork to be carried out between April 2022 and July 2022. The regulator intends to publish indicative ODI rates alongside the PR24 Final methodology in December 2022.

The acceptability and affordability research will take place in two distinct phases :

• Phase 1 - design of a survey which companies can use to test their business plans which will take place during 2022
• Phase 2 - will test acceptability and affordability of Ofwat’s draft determinations following publication in spring 2024

With regard to governance of the collaborative research, Ofwat will establish steering groups which will include members of Ofwat, CCW and company representatives.

The regulator is also inviting wider stakeholders to be involved, including representatives from government (Defra and Welsh Government), environmental regulators (Environment Agency and Natural Resources Wales), the water quality regulator (Drinking Water Inspectorate) and potentially other consumer groups, such as Citizens Advice.

Ofwat is aiming for governance arrangements to be agreed and in place no later than January 2022.

Click here to download PR24 and beyond position paper: Collaborative customer research for PR24

Click here to download PR24 and Beyond: Creating tomorrow, together - Ofwat’s vision for customer engagement at PR24.