Ofwat has announced its decision to modify water companies' licences to introduce customer-focused principles, describing the new licence condition as “an important addition to our regulatory toolkit.”
The water sector regulator launched a statutory consultation in October 2023, on its proposal to modify each water company's Instrument of Appointment licence by deleting the existing Condition G and replacing it with a new principles based customer focused licence condition, and deleting existing Condition J.
Ofwat has now reviewed the responses to the consultation and have decided to modify all water companies' licences in order to:
- introduce a new customer-focused licence condition for each water company in a new Condition G, replacing the existing Condition G;
- delete the current Licence Condition J
Announcing the decision, Ofwat explained that “overwhelmingly, responses to the introduction of a new customer focused licence condition were positive.”
However, Ofwat said there are many instances where customers feel let down, for example:
- Overall satisfaction has fallen in recent years: Trust in water companies has fallen, with customers feeling that companies do not have their interests at heart.
- Negative experiences during events: Companies often fail to support and/or communicate clearly with customers or manage complaints and compensation fairly when things go wrong.
- Repeat failures: Companies do not learn from mistakes leading to repeated failures which result in customer detriment.
- Vulnerable customers left unsupported: Companies sometimes fail to plan for or act quickly enough to support customers who need extra help.
The modifications 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. According to the regulator, the new licence condition addresses a significant gap in its regulatory toolkit and will place enforceable obligations on each water company.
Ofwat comments in its decision document:
“The introduction of this new licence condition is an important addition to our regulatory toolkit and will strengthen our ability to drive improvements in customer service across the water sector.
“The aim of the new licence condition is to drive a positive change in the levels of customer service in the water sector, and to hold companies to account where customers, including the most vulnerable, are harmed and / or repeatedly failed. It will also offer protection for non-household customers who are not served by a retailer.”
The modification decision is made under:
- section 12A of the Water Industry Act 1991 (WIA91) for the English water companies whose areas are wholly or mainly in England;
- section 13 of the WIA91 for the Welsh water companies whose areas are wholly or mainly in Wales
The modification to each water company's licence will take effect from 12 February 2024.
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