Ofwat is seeking new powers to take action against water and wastewater companies across England and Wales when customer service falls short.

The water sector regulator has opened a consultation on a new licence condition to ensure companies better reflect customer expectations, drive higher standards of customer service and support the full diversity of customer needs.

Ofwat is proposing to establish a new regulatory basis for how companies treat their customers, including customers in vulnerable circumstances, in the form of a dedicated condition in the licence of each water company in England and Wales.

The new licence condition relates to household customers in England and Wales and will apply to the licences of all water companies, including new appointees, also known as NAVs. NAVs are small water companies that typically supply some new housing developments.

In addition, in a more restricted form, Ofwat is proposing that it encompasses companies' treatment of business customers (i.e. non-household customers) where they are not supplied by a retailer. In practice this means all but the largest business customers of Welsh companies, and business customers of new appointees in both England and Wales.

Some non-household customers in England are served by new appointees who have not exited the non-household retail market. Ofwat’s proposed approach includes excluding non-households from the condition relating to customers struggling to pay or in debt, consistent with corresponding non-households served by a retailer.

According to Ofwat, the licence condition will provide additional protections for business customers in Wales where there is no choice of retailer. Business customers in Wales will be covered by almost all the same principles as household customers.

Ofwat said this will be particularly beneficial for small businesses who may struggle with their limited resources to engage with their water company.

The new requirement will set out the principles that companies must follow in delivering their services to customers and dealing with problems when they arise.

The changes will mean that each company must ensure:

• customers are well-informed at all stages of the customer journey;
• when something does go wrong, customers can rely on their company to put it right; and
• all customers’ needs are identified, understood and met by companies in the services and extra help they provide.

Ofwat has a range of regulatory tools within its framework for providing customer protection and better outcomes which it is continuing to develop. According to the regulator, it currently has a gap in its toolkit which means it cannot take action against companies where they fail to deliver good service to their customers. “We expect the new licence condition to complement our existing tools and play a key role in improving outcomes for customers in relation to customer service” the consultation paper says.

David Black, Ofwat CEO said:

“In England and Wales, households are not able to choose their water company, so it is crucial that good customer service is not a postcode lottery. We want the powers to enforce that fundamental expectation. People expect their water company to get the basics right and rectify things quickly when they go wrong and to take responsibility and offer compensation when appropriate.

“Companies need to identify and meet the needs of all customers, they need to be clear in their communications and we expect them to work together to share learning that helps to achieve high standards across the sector. Where we see companies letting their customers down, these powers give us the scope to step in and take action.”

CCW - “All customers have the right to expect a good level of service from their water company”

Emma Clancy, Chief Executive of the Consumer Council for Water (CCW), said:

“We welcome Ofwat’s plans to introduce a customer-focused licence condition. All customers have the right to expect a good level of service from their water company. We believe the principles set out in the licence condition will provide greater clarity for companies on how they can provide excellent services, and ensure there is greater accountability for those that fall short.

“As the voice for water consumers, we have had an important part to play in helping to shape the principles set out in this licence condition, ensuring they reflect peoples’ views. Going forward, we will continue to play a vital role in monitoring company performance, identifying and highlighting issues that may be negatively impacting customers, and ensuring companies treat them fairly.”

Consultation paper explores Ofwat’s current thinking on related policy areas and approaches

In addition to consulting on draft wording for the licence condition, the consultation paper document also explores Ofwat’s current thinking on related policy areas and approaches. Following the consultation, the regulator intends to finalise the wording for the proposed licence condition and carry out a statutory consultation under sections 12A and 13 of the Water Industry Act 1991 (WIA 91). Ofwat intends to do this later in 2023.

Deadline to submit comments to the consultation is Friday 7 July 2023 - Ofwat will publish the licence change in the autumn.

Click here to download the consultation document