It only seems like a short time ago we were working on our lessons learned report for the 2019 price review. That was well over a year ago and now the 2024 juggernaut is getting into gear and building up speed. Mike Keil, Director of Policy, Research and Campaigns at CCW, explores an important new addition for PR24.
One of the key conclusions from our lessons learned was that there is still scope to bolster customers’ influence over the price review process and the outcomes it delivers. Our lessons learned recommendations supported this conclusion, and these included a call for more centralised research to take place in certain areas, this allowing greater comparability, clarity and influence.
We are pleased that lots of progress has been made in this area over the last year. We’ve been working constructively and very positively with the team at Ofwat to get a programme of collaborative research up and running – with some great input from water companies too. While the question of who should do research is always going to be a subject of debate in the sector, the areas identified for collaborative research feel like the right ones. Common Performance Commitments, Outcome Delivery Incentive rates and acceptability testing of plans are all areas where comparability between companies is important and consistency in the way people’s views are explored really matters.
At the last price review, Ofwat had important decisions to make about Performance Commitment targets, the financial incentives applied to them and the overall customer bill impacts. While many companies delivered high-quality customer research in these areas, the diversity of the research methods they used meant that the results were incomparable across the industry. There is an opportunity at PR24 to use consistently-applied research on these issues to provide greater comparability. This should lead to greater confidence that key decisions reflect sound evidence of what customers want and support.
We’ve been getting out and about alongside Ofwat (at least in a virtual sense!) talking to companies about collaborative research at PR24. As you would expect, there is a mix of views on what this should look like. That diversity is helpful as it can help drive innovation and creativity. A few key themes emerge around which questions are starting to come together:
Who owns the relationship with customers?
Collaborative research does not weaken the relationship that companies have with the people they serve – or diminish companies’ responsibilities for understanding them. As we pointed out in last year’s Views on Customer Engagement report, engagement with customers should be ongoing and not just for business planning purposes.
All companies undertake ongoing engagement, typically including direct customer contacts, complaints, service satisfaction feedback and social media. These points of engagement are supplemented by satisfaction tracking surveys and for some water companies, views from online research communities. This body of evidence can shape companies’ understanding of the people they serve and how the services and support they offer can improve. Companies’ relationships with their customers and the evidence that provides is central in producing a solid foundation for business plans.
Should company-specific research be done?
There will still be a need for company-specific research at the 2024 price review. The collaborative research programme was never intended to replace the need for companies to do any bespoke research on the unique circumstances they face that could drive investment. This is particularly true where there are gaps in what companies’ ongoing engagement reveals about people’s needs and priorities. The local view matters and it’s important that companies develop business plans that strongly reflect the needs of their customers.
Ofwat has made it clear in their recent collaborative research position paper that there is limited value in producing competing pieces of ODI valuations research. This makes a lot of sense, as we’ve seen in previous price reviews that getting into unnecessary competition on specific topics can end up draining lots of time and money for little benefit. We clearly prefer research effort to be focused on areas that aren’t covered by collaborative research or ongoing engagement.
This can include research that gives companies an understanding of the needs and expectations of different customer groups and communities within their regions, and the improvements they want to see. There may also be specific large projects affecting certain geographical areas where research would play a key role in strengthening the overall case for intervention. These are only two examples of where bespoke research would add meaningful value and there will be lots more, determined by the local circumstances, communities, and challenges.
Although the Methodology for PR24 won’t hit the streets in draft form until the summer, this shouldn‘t act as a blocker for high-quality research to be done. Irrespective of specific points of process within the PR24 methodology, there is clearly a fundamental need for companies to demonstrate that their plan reflects the views of the people they serve. This runs far deeper than a business planning process, because people can’t walk away and choose a different water provider, and now more than ever the sector faces a range of challenges. As such, companies have an obligation to show how they are listening to the people they serve and responding to their needs.