CMA: is the customer voice being heard?

Mike Keil, Head of Policy and Research at CCW
Mike Keil, Head of Policy and Research at CCWater

More customer engagement was carried out at PR19 than in any previous price review. But how has this translated into tangible outcomes for consumers, and is the CMA listening? CCW’s Mike Keil explores whether the customer voice is being heard as the appeal process continues.

A step change in both the quality and quantity of customer research and engagement was apparent at PR19 compared to previous price reviews. Water companies used a wide range of techniques and combined varied sources of customer opinions to gain a clearer picture of the diversity of priorities and expectations from different customer groups.

What’s less clear, though, is how that research and engagement was carried through into companies’ business plans, and the extent to which the customer voice is now being heard by the Competition and Markets Authority (CMA) as it makes its decisions on four company appeals.

It is hard at times in the CMA’s provisional finding to understand how the consumer voice has been acted on and in places it’s difficult to identify the “golden thread” linking customers’ views with the decisions made. While our own analysis of PR19 revealed several areas for improvement in terms of customer research, we have to guard against dismissing or minimising the consumer perspective merely because of these limitations.

Ensuring the consumer voice is heard is about more than just research. CCW has been a strong advocate for companies – and the CMA – using triangulation to take a wide view on consumer evidence, and the lack of clarity over how consumer evidence has been used leads us to question how the customers’ voice has been taken into account in the round – and consequently, how closely the CMA’s decisions are reflecting the voice of consumers.

A case in point: the cost of capital (WACC). It’s clear from CCW’s annual tracker survey, Water Matters, that fairness and value for money of water bills are areas where consumer sentiment is lower than it should be. The CMA’s decisions on the WACC and the removal of the gearing outperformance sharing mechanism – both of which appear to tip the balance in favour of shareholders over customers – do not appear to have considered either the potentially damaging effect this will have on customers’ perceptions of the water industry.

A lack of transparency over the impact these changes will have on customers’ bills also leads us to question how far consumers are really being considered. Bill profiles are important because they allow customers to understand how the decisions made by the CMA will affect them in practical terms – what’s my bill going to look like next year compared to what I pay now? Basic, yet important, information for consumers.

This lack of transparency over the real impact on customers’ bills will add to their financial worries at an extremely uncertain time. We are very concerned about the affordability of these increases given the impact of Covid-19. These bill increases, coupled with annual inflation, could be a tipping point for some struggling households.

These are just a couple of several areas where it’s hard to see how the CMA has fully considered the consumer perspective. The CMA’s decisions are extremely important as they impact millions of water consumers and will also have implications beyond the water sector. The need for the CMA to listen to consumers and amplify their voice has never been more important, and that’s what CCW will continue to campaign for as the CMA reaches its final decisions.

Categories: Blog, News, Price Review