Ofwat has proposed that water companies should as a minimum test their proposed AMP8 business plan and a least cost version for the upcoming 2024 Price Review to give customers a meaningful choice between different service and bill levels.

The proposal is outlined in a presentation of PR24 collaborative customer research between the water sector regulator and consumer watchdog CCW at a steering group meeting which took place on 14 November.

The proposal, which is identified as one of the key areas for discussion by the group, suggests that the least cost plan should ideally be equivalent to meeting statutory requirements, while the proposed plan may include extra work over and above statutory requirements.

Concerns raised that “isolating least cost business plan and bill impacts may not be possible, or is at least very complex”

According to the presentation document, concerns have been raised that “isolating the least cost business plan and bill impacts may not be possible, or is at least very complex.”

Where this is the case, companies should be transparent about “any pragmatic decisions made to determine a least cost option.”

The proposal is that the starting point the companies should aim for is least cost equivalent to statutory minimum requirements.

It also references the fact that the companies should have tested least cost options for both their Water Resources Management Plans and draft Drainage and Wastewater Management Plan and asks whether this can be built on.

The proposal also expands on the level of detail for the information to be provided to customers – the water companies will need to develop a visual, high level one page summary of the proposed and least cost business plan to support acceptability and affordability testing

In terms of content, this should cover up to six common Performance Commitments which reflect customer priorities for services:

• Supply interruptions >3 hours
• Leakage
• Water quality contacts per 10,000 customers
• Internal sewage flooding
• External sewage flooding
• Pollution incidents per 10,000km sewers

In addition, the companies should also provide information on up to six enhancements which have a bill impact and delivery timescale which can phased, in order for customers to be given choices about phasing options in the qualitative research or to answer a question about the principles of phasing in the survey.

In terms of assurance, the water companies will be expected to meet Ofwat’s minimum expectations as follows:

• Demonstrate that research meets standards for high quality research, customer challenge and assurance of customer engagement
• Research materials to be submitted to Ofwat as supporting evidence
• CCW/Ofwat may request copies of research materials at any stage and reserve the right to receive copies of any reporting outputs
• Before conducting research, the companies should consult with their Independent Challenge Group (or equivalent) on proposed research design (including any testing/piloting of research materials)

After the research has been carried out, Ofwat also expects that there should be Board assurance that customer research meets standards for high quality research.

The companies will also be required to publish a report of findings and research materials, including a succinct summary to allow customers and other stakeholders visibility and accessibility to the research findings.