Making sure that bills are affordable for low-income and financially vulnerable customers is still a key challenge for the water industry. Our Senior Policy Manager Andy White asks whether it’s time for the regulator Ofwat and the water sector as a whole to be more ambitious in tackling the issue.
CCWater’s latest research on customer vulnerability (pdf) shows that around 3 million households in England and Wales consider that their water bill is not affordable. We’ve worked with the sector to address the issue and this has resulted in all 21 water companies in England and Wales now having a social tariff in place.
We’ve also focused on raising awareness of these assistance schemes to ensure those customers who need help get it. As a result, take-up of these social tariffs in 2016-17 increased by around 93% on the previous year, ensuring that more than 250,000 households are now benefiting from lower bills.
While this is welcome news, there are warning signs ahead. Social tariff schemes are largely funded by customers and the amounts contributed reflect how much research shows they are willing to have added to their bills – typically around £2 each year. For some companies this means the funding is now at risk of running dry, despite many more customers still needing help. Overall the schemes currently in place have the capacity to help only around one-fifth of customers in need of support.
Parliament recently agreed to give water companies access to data which would make it easier for them to identify which customers need help, and potentially, in some cases, to apply bill reductions automatically. However, the challenge of limited funding must be overcome for customers to see the full benefit of these new powers. Here’s how we believe this could be achieved:
Company funding contributions
We want to see water companies contribute more funding to the social tariff pot. This would be a great way for them to share profits with customers and in doing so would demonstrate that they are good corporate citizens. We also know from research that customers are more willing to contribute to helping others where they can see companies are also playing their part. We would like to see Ofwat recognise this and encourage such contributions by reporting on them, possibly using the ratio of company to customer contributions as an indicator of performance in this area.
Common performance commitments
Ofwat has proposed that in developing their business plans as part of the 2019 price-setting process, companies should set out bespoke performance commitments in relation to affordability and wider vulnerability. We see benefit in this approach but we suggest that it is coupled with common performance commitments in relation to these areas. A common performance commitment on customer affordability might be based on customer perceptions of the affordability of their bills. Wider vulnerability could be assessed based on customers’ awareness of the assistance available and satisfaction with the inclusivity of services provided – essentially how well they meet the needs of customers, whatever their circumstances.
The 2019 Price Review and the introduction of new data sharing powers provide a real opportunity for water companies to deliver a further step change in the support they provide to customers who are struggling to pay. But the Industry as a whole must rise to this challenge if it is to successfully deliver that aim and demonstrate real commitment to providing a comprehensive financial safety net for all those who need it.