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Ofwat modifies water company licences to introduce customer-focused principles

In December 2023 Ofwat published its decision to modify licence condition G to introduce the new principles.

We have previously reported on Ofwat’s May 2023 preliminary consultation seeking views on the proposed wording and the outcomes it hoped to achieve through the introduction of a new licence condition setting out customer-focused principles.

The responses to this preliminary consultation informed Ofwat’s October 2023 statutory consultation which included the new customer focused licence condition in draft form.

In December 2023 Ofwat published its decision to modify licence condition G to introduce the new principles.

In the decision document, Ofwat states that the reasons behind its changes include the following -

  • 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.

Ofwat adds, “The modifications we have made 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. This new licence condition addresses a significant gap in our regulatory toolkit and will place enforceable obligations on each water company”.

The text of the new Condition G for companies operating wholly or mainly in England and which have exited the non-household retail market is -

Interpretation and application

G1 In this condition:

G1.1 an 'incident' means an event or situation which causes or may cause damage, disruption, distress or inconvenience to the Appointee's customers in their capacity as such which is not trivial.

G1.2 References to customers in principles G3.1 to G3.6 means the Appointee's customers in their capacity as occupants of Household Premises.

Principles for customer care

G2 The Appointee must:

G.2.1 develop or have in place policies and approaches to meet the principles for customer care set out in paragraph G3, consulting with the Consumer Council for Water where appropriate;

G.2.2 implement or continue to follow those policies and approaches in a way that meets the principles for customer care set out in paragraph G3; and

G.2.3 explain in a manner that is effective, accessible and clear how it is meeting the principles set out in paragraph G3.

G3 The principles for customer care are:

G3.1 The Appointee is proactive in its communications so that its customers receive the right information at the right time, including during incidents.

G3.2 The Appointee makes it easy for its customers to contact it and provides easy to access contact information.

G3.3 The Appointee provides appropriate support for its customers when things go wrong and helps to put things right.

G3.4 The Appointee learns from its own past experiences, and shares these with relevant stakeholders. The Appointee also learns from relevant stakeholders' experiences and demonstrates continual improvement to prevent foreseeable harm to its customers.

G3.5 The Appointee understands the needs of its customers and provides appropriate support, including appropriate support for customers in vulnerable circumstances, and including during and following incidents.

G3.6 As part of meeting principle G3.5 above, the Appointee provides support for its customers who are struggling to pay, and for customers in debt.

The modifications will have effect from 12 February 2023.

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