Ofwat wants to change how water companies are encouraged to give their customers a better service. But do the industry regulator’s proposals go far enough? Our policy manager Gemma Domican shares five ways to make them stronger.
What’s the best way to make sure your water company is providing you with an excellent service?
At the moment water companies in England and Wales are encouraged to provide a better service to household customers through a set of financial incentives called the ‘Service Incentive Mechanism’ – or SIM for short.
SIM gauges how good a company’s service is by looking at how many customers have had to contact it when something has gone wrong with their water or sewerage service. It also includes a survey where customers are asked how well a company has handled a recent contact.
From 2020 onwards Ofwat wants to replace SIM with a new ‘Customer measure of experience’ – or ‘C-Mex’. We broadly support this change but we think the proposal could be made stronger.
Here are five ways this could be done.
Split C-Mex into two We think the new C-Mex should be split into two different parts:
C-MeX ‘satisfaction’– The existing SIM only focuses on those customers who’ve contacted their water company. We like the idea of surveying customers who haven’t been in touch. This would provide a more rounded picture of how satisfied customers are with value for money and encourage companies to improve communication. This could be used alongside a Net Promoter Score where the customer is asked if they would recommend their water company to others.
C-MeX ‘contacts’ – The SIM customer contact survey should carry on and continue to include complaints performance data.
We also think each of these two elements should have its own Outcome Delivery Incentive (ODI) with companies agreeing publicly to a performance commitment for each one. A company would have to exceed its commitment before it gets a financial reward from the regulator.
We believe this would really push the companies to improve their customer service and communication with customers.
Give companies stronger incentives Companies get financial rewards for delivering improvements in areas that matter to customers with the costs passed on to customers through bill increases. Ofwat’s proposals essentially half the size of the incentive placed on complaints and contacts. We don’t think this is a good idea; instead having much stronger incentives across the two C-MeX ODIs would encourage companies to not only deliver improvements but also to spread the impact of any bill rises.
Move to monthly customer surveys Moving to a monthly customer survey, rather than a quarterly one, would increase the sample size. This would make the survey more reliable and enable companies to identify customer service issues more quickly.
Include non-household customers in Wales Businesses and other non-household customers in Wales are not eligible to take part in the new retail water market, which opened in England on 1 April this year. We think a form of C-MeX should be developed for non-household customers whose water company operates in Wales to help monitor how satisfied they are with their service.
Include ‘escalated’ complaints Ofwat would prefer not to include using data about customer complaints in C-Mex. We think a customer satisfaction survey alone would not be credible if a company’s complaints increased.
The existing SIM has encouraged companies to give better service to their customers by avoiding complaints or resolving them effectively first time. We don’t want to see this incentive lost.
A penalty could apply if a company’s performance falls below a set threshold for dealing with customer complaints that have been escalated to its senior management to sort out. We want to make sure companies are penalised if they fail to resolve complaints effectively.
Finally, there should be no compromise on customer service. We believe our ideas will help to ensure that.