10:00 refreshments and welcome ahead of public meeting

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1 Consumer Council for Water Board Agenda Meeting in Public Tuesday 6 February :20 14:40 Newmarket Town Hall Memorial Hall High Street Newmarket, CB8 8JP 10:00 refreshments and welcome ahead of public meeting 209/17P 10:20 Welcome and apologies for absence 210/17P Declarations of interest Policy/Strategy 211/17P 10:25 Non-Household Retailer Complaints to CCWater (1 April C Pegg 31 December 2017) (attached) Paper to note 212/17P 10:40 Water Company Financial Performance M Keil Paper to note (attached) Stakeholder Session 213/17P 10:55 Introduction/overview of the public session Bernard Crump Regional Chair (Central and Eastern), CCWater 214/17P 11:00 Public/stakeholder session To receive presentations from the stakeholder representatives indicated below on innovation: innovations they have deployed and those they have planned. (i) 11:00 Innovation through Dialogue Phil Newland, Managing Director South Staffordshire Water Page 1

2 Consumer Council for Water Board Agenda Meeting in Public Tuesday 6 February :20 14:40 (ii) 11:30 An Open Innovation Culture Heidi Mottram, Chief Executive Essex & Suffolk Water 12:00 12:10 comfort break (iii) 12:10 Putting a bike on a boat Liv Garfield, Chief Executive Severn Trent Water (iv) 12:40 Open Innovation: building an industry fit for our future Peter Simpson, Chief Executive Anglian Water (v) 13:10 Further/final questions, roundup and final thoughts Bernard Crump, Regional Chair (Central & Eastern) 215/17P 13:20 Listening session An opportunity for guests to raise any relevant issues with the Board. 13:30 14:00 networking lunch Governance and Reporting 216/17P 14:00 Minutes of the public meeting held on 5 December 2017 (attached) and any matters arising 217/17P 14:05 - Wales/regional committee minutes:- (i) Northern Committee: meeting in public, 26 October 2017 (attached) (ii) Central & Eastern: meeting in public, 9 November 2017 (attached) 218/17P 14:10 Chief Executive s Report T Smith Paper to note (attached) 219/17P 14:20 Finance Report (to December 2017) M Perry Paper to note (attached) - 2 -

3 Consumer Council for Water Board Agenda Meeting in Public Tuesday 6 February :20 14:40 General 220/17P 14:25 Regional/Wales Roundup Regional/Wales Chairs Paper for discussion/note (to follow) 221/17P 14:35 Other business 222/17P Future Meetings The next meeting in public will be on 10 April 2018 at the Town Hall, Boscawen Street, Truro, Cornwall, TR1 2NE Public meeting close 14:40 Attending:- Board: CCWater: C&E LCAs: Bernard Crump, David Heath, Julie Hill, Philip Johnson, Robert Light, Alan Lovell (Chair), Tony Redmond, Tony Smith, Tom Taylor. Christina Blackwell, Gemma Domican, Steve Grebby, Mike Keil, Phil Marshall, Carl Pegg, Marie Perry, Alison Townsend. Graham Dale (apologies), Yvonne Davies, Gill Holmes, Paul Quinn

4 Consumer Council for Water Board 6 February 2017 Paper 211/17P Title: Non household Retailer complaints to CCWater - 1 April December 2017 Report by: Colin Lench, Performance Analyst/Project Manager Responsible lead: Carl Pegg, Head of Consumer Relations & Communications Paper for: Information/discussion Appendix: No Purpose 1. This paper updates the Board on retailer performance in England based on the level of non-household (NHH) complaints received by CCWater from 1 April to 31 December Recommendations 2. Board is asked to: note the report; discuss retailer complaint performance; and agree the proposed trigger points and CCWater actions when individual retailers or the whole retail industry performs poorly on complaints to ensure we adopt a consistent approach. Background 3. In January 2017, Consumer Relations and Policy presented to Board their preparations to ensure CCWater would be ready ahead of the introduction of retail competition in April Three scenarios on complaint numbers were included with mitigation: the same or slightly fewer complaints no change to CCWater staff resource; small increase in complaints and enquiries (up to 500 of each) additional fixed term contract; higher increase (greater than 500 additional contacts) consider call off contract or front line support. Page 1

5 Complaints against retailers and non-household complaints received by CCWater 4. Our estimates on NHH complaint numbers to CCWater prior to the market opening was around a 50% increase (under 500 complaints per year). We based this on the proportion of switching complaints received by energy companies and the number of complaints the Scottish and Parliamentary Ombudsman received against Business Stream. 5. The Board agreed our proposed mitigations against any increase in complaints and enquiries. Since the retail market opened, we have recruited an additional fixed term contract and put in place an external call off contract (Call Care 247) to deal with increased contacts. 6. Consumer Relations and Policy committed to monitor and regularly report to CCWater s Executive team and to Board on retailer performance. Reports identify complaint trends and quickly inform our local Chairs and Policy Managers of any underperforming retailer(s). NHH complaints 7. For the first three months after the market opened, complaints to CCWater were close to the 50% increase we predicted. However, in the second and third quarter complaints to us increased. For most retailers, we have received more NHH complaints in compared to wholesalers in In the first quarter of , the increase in NHH complaints was around 63% compared to the previous year (377 compared to 231), slightly higher than we expected. This rose to almost 190% (560 compared to 194) in the second quarter when we received a higher number of complaints against Anglian Water Business and nearer the end of the quarter Castle Water. In the third quarter complaints increased by 368% (814 compared to 174). One of the main causes for this upsurge was a higher number of complaints we received against Castle Water about billing and administration issues. 9. Chart 1 shows the household and NHH trend in complaints to us for each quarter from April 2016 to the end of December Page 2

6 Complaints against retailers and non-household complaints received by CCWater Chart 1: Complaints to CCWater by property type 1 April 2016 to 31 December 2017 Domestic / other complaints NHH complaints (inc mixed use) Q Q Q Q Q Q Q While the number of total complaints has remained consistent to the previous year, complaints in the third quarter of 2017 were almost 30% higher (2,423 compared to 1,874) in The ratio of household and NHH complaints has shifted considerably. The second and third quarter numbers are far higher than we anticipated ahead of the introduction of retail competition. 11. However, closer scrutiny shows this is not an industry wide problem. Some of the retailers have performed generally well. Compared to the NHH complaints we received against wholesalers last year, Affinity for Business, Yorkshire Water Business and South East Water Choice compare well with fewer or a similar number of complaints. 12. Our reports and updates to CCWater s Executive team and Board have previously cited Anglian Water Business and Castle Water (whose problems manifested at the end of the second quarter) as needing to improve. Chart 2 shows the monthly complaints we received against these retailers and what it would have looked like if Castle Water and Anglian Water Business had received complaints in line with the industry average. Page 3

7 Complaints against retailers and non-household complaints received by CCWater Chart 2: Retailer complaints to CCWater by month April to December Retailer complaints With Anglian Water Business and Castle at the industry average Chart 3 shows that complaints to Water Plus are also trending in the wrong direction. Complaints to CCWater against Water Plus have climbed from 30 in April to 89 in December CCWater s local Chair and Policy team are addressing this increase with the company to avoid this problem getting worse. Chart 3: Complaints to CCWater against Water Plus - April to December Apr May Jun Jul Aug Sep Oct Nov Dec 14. Looking at our entire caseload, the increase in NHH complaints has been partly offset by a reduction in household complaints. However with a busier household billing period expected in February and March, the use of Call Care 247 will mitigate the impact on our Consumer Relations team and on our Operational Business Plan performance. Page 4

8 Complaints against retailers and non-household complaints received by CCWater Retail company complaints to CCWater per 10,000 Supply point identifications (SPIDs) 15. Retail companies report their complaint data monthly to CCWater. The trends we have seen between their data and ours show a good amount of correlation. Looking at retailer submitted complaints data for example, complaints to Castle Water peaked in September, but despite seeing a reduction since, the retailer still has three times more complaints in December than it did in April Complaints against Anglian Water Business to CCWater reduced from their peak in September but also remain above the industry average. 16. Chart 4 shows the complaints received by CCWater per 10,000 SPIDs for each quarter of These also include around 180 complaints from household customers. Although Clear Business Water is the second poorest performer relatively, this figure represents just three complaints due to its small size compared to other retailers. Chart 4 Retail company* complaints to CCWater per 10,000 SPIDs - 1 April December 2017 Castle Water Clear Business Water Anglian Water Business Pennon Business Stream Water Plus Everflow SES Business Water Affinity for Business Water2business NWG Business South East Water Choice Yorkshire Water Business Services Industry average Apr - Jun 2017 Jul - Sep 2017 Oct-Dec 2017 *Does not include: NHH complaints to Wales companies as we are collecting complaint information from them based on connected properties. Also does not include one complaint received against Cambrian Utilities. In the reporting period, CCWater received no complaints against: The Water Retail company, Pod53, Regent Water, Water Choice South East, ADSM, Three Sixty Water, First Business Water, Waterscan, Veolia Water Retail, Thames Water Commercial Services. Page 5

9 Complaints against retailers and non-household complaints received by CCWater 17. Castle Water s better performance in the first quarter kept it just below twice the industry average for the year to date. Castle has to improve its service at least to a level where we receive less than half the complaints we are currently receiving to bring it back in line with the rest of the industry. CCWater actions following reported poor company performance 18. CCWater actions taken as a result of our monitoring of complaints to us against retailers include: Our London and South East Chair, local team and Consumer Relations Manager pressing Castle Water on what actions it was taking to address the increase in customer complaints we were receiving against it. CCWater s Chief Executive also spoke to Castle Water s CEO on its poor complaints performance and the company committed to reduce complaints through better staff resourcing, making its bills clearer and better timing of its billing collections. A follow up progress meeting between our London and South East team and Castle is scheduled for 8 th February. We expect to receive assurances over Castle s plans to continue to improve on its current level of complaint handling performance. Our local Central and Eastern Chair and team meeting with Anglian Water Business to discuss its performance. The company committed to better staff resource, staff coaching, the creation of a dedicated operational team to liaise with wholesalers and a process improvement for billing. Complaints against Anglian Water Business to us have since reduced, putting it closer to the industry average per 10,000 SPIDS but with more to do. 19. Castle Water, Anglian Water Business and Water Plus represent over 60% of the market based on SPID numbers. We are currently receiving over 80% of retailer complaints against these three retailers. Castle Water in particular is skewing the figures as although it represents just under 20% of SPIDs, in the last six months we have received 40% of all retailer complaints against it. As we are now more familiar with the market we have been regularly identifying the poor performers. In the event a company performs poorly it is important we have a consistent approach before we raise it with the media. 20. Since the retail market opened, around 3.5% of the 2.6 million SPIDs have switched retail provider. Because many NHH customers have multiple SPIDs we are unable to translate this to customer numbers. Eventually, customer fragmentation will reach a point where comparisons are no longer viable. 21. There are many variables when considering company performance: whether it is a short or long-term problem, the size of the company and the number of complaints. In order to identify trigger points for particular actions, we ask the Board to consider and agree the following when looking at company performance and the impact on customers: The size of the company by number of SPIDs The period of time, a short term problem or longer term trend; Page 6

10 Complaints against retailers and non-household complaints received by CCWater The level of complaints compared to other retailers per 10,000 SPIDS; Whether the company is improving or we are receiving more complaints. 22. It is important CCWater are clear about when we will publicly criticise retailers on their complaint performance as they will likely be sensitive due to the potential impact on market share. Table 1 proposes how we could assess company performance by complaints per 10,000 SPIDs, the measures we could use and the actions we could take to focus retailer attention on delivering better service for their customers. Table 1 Complaints to CCWater per 10,000 SPIDs and CCWater Actions Measure CCWater action Complaints per 10k SPIDS % above the industry average 1-2 months Raise with Exec in monthly report Share with local Chair for future meeting Root cause analysis Local Chair to contact company immediately CCWater criticise in annual complaint report Publicly criticise company* Greater than 3 months Possibly 12 months 100% + above the industry average 1-2 months No Greater than 3 months Possibly 12 months Possibly * For the 12 month period we would include it in the general press release for the complaint report 23. When retailers perform badly, contacts to CCWater increase because of service failures to customers and subsequent customer frustration because they cannot contact their retailer. If we use the option of criticising a retailer publicly, we must make sure we take into account the size of the problem, impact on their customers and all of the available data. This approach will negate any retailer counter argument about it showing signs of improving or it is only down to a handful of complaints. Conclusion 24. Customers continue to switch providers so the retail market is working. However, while some retailers are performing well with lower complaint numbers, others are skewing the figures. This report highlights there is more work for us to do in ensuring the poorer performing retailers improve. Page 7

11 Complaints against retailers and non-household complaints received by CCWater 25. Despite Castle Water showing a small improvement since complaints to us peaked in October, its performance remains a concern. CCWater s local team is holding a follow up meeting with Castle on 8 February. We will discuss its progress and its planned future actions to quickly address its service problems and bring itself in to line with the rest of the industry. 26. Our pressure has led to improvements from Anglian Water Business. Our local Chair and team will continue to monitor its performance and press the retailer to reduce its complaints further to bring it closer in to line with the industry average. 27. The increasing trend in complaints we are receiving against Water Plus is a cause for concern. Our local Chair has raised this with the company. Based on complaints per 10,000 SPIDs it has not yet reached a level where we would take immediate action but we are looking to the company to reverse the increasing trend recently seen. Next steps 28. We will continue to monitor the complaints we receive against retailers and make sure the improvements from poor performing companies continue. Our recommended trigger points outlined in Table 1 will enable our local Chairs to address any retailer issues through regular reporting, root cause analysis of the complaints we receive, press retailers to report on action plans in place and report on retailers performance to their customers at the end of each reporting year. Ultimately, if any retailer performs poorly we have an option to issue a press notice informing potential new customers of a retailer(s) shortcoming. Page 8

12 Consumer Council for Water Board 6 February 2017 Agenda Item 212/17P Title: Water Company Financial Performance Report by: Steve Hobbs, Senior Policy Manager (Regulation) Responsible Lead: Mike Keil, Head of Policy & Research Paper for information/discussion Annex: Yes (Annex A) Purpose 1. To provide the Board with key findings and recommendations based on analysis of the companies financial performance in the second year of the current price control period ( ) carried out by Economic Consulting Associates (ECA). Recommendations 2. Use this evidence to strengthen our case to companies and Ofwat for tougher efficiency challenges in wholesale totex allowances for Whilst companies actual wholesale and retail expenditure, compared to Ofwat s PR14 allowance, varies by company, a majority (ten out of seventeen) have outperformed their wholesale expenditure allowances so far in There is a mechanism for Ofwat share some of the efficiencies achieved with customers, when cost assumptions are set at the 2019 price review, though companies do retain part of this. To help ensure companies are challenged to continue being more efficient, we should press for out-performance to be reflected in the expenditure forecasts in the business plans companies are currently developing for PR19 and are due to submit to Ofwat in September. This should also inform the setting of allowances by Ofwat at PR Continue to track companies outperformance of Ofwat s assumed real cost of debt financing , because if the trend continues (driven by increasing Page 1

13 Water Company Financial Performance inflation) there may be a stronger case to press for a share of outperformance with customers when performance is assessed. Most companies performance in raising debt finance compared to Ofwat s allowed cost of debt improved in compared to , with fewer underperforming. This improvement was largely the result of an increase in inflation. With higher inflation in , it seems likely that there will be further improvement in companies performance against debt cost allowances in Use evidence of companies net Outcome Delivery Incentive (ODI) rewards so far in to : (a) Press companies to set more stretching performance targets for ODI rewards in ; and (b) Given the scope for rewards to increase customers bills, challenge Ofwat and companies to ensure that the ODI model has credible customer support in Across the two years , five companies had net penalties, whilst twelve had net rewards; total net rewards almost doubled from ( 35m) to ( 68m). In both and , Severn Trent s net rewards accounted for over half the total net rewards of the sector. Background 5. CCWater commissioned Economic Consulting Associates (ECA) to analyse and report on the financial performance of the England and Wales water companies. 6. The purpose of this report is to provide CCWater with an overview of the companies financial performance in (and ), highlighting any implications for Ofwat s 2019 price review (PR19), emerging risks for consumers, and opportunities for the sharing of any outperformance with customers. 7. The report is due to be completed by close of January 2018 and will be published on our website. Company performance compared to Ofwat s PR14 ( ) allowances 8. In PR14, Ofwat used the Return on Regulated Equity (RORE) as a key metric. RORE is a measure of the returns available to shareholders over the duration of a price control In the Final Determinations at PR14, Ofwat presented a base case RORE for each company, reflecting the expected return. Figure 1 reports companies PR14 base 1 All ODI rewards and penalties will be applied in period in RORE was developed by Ofgem and is intended to broaden the scope of returns available to shareholders away from a singular focus on the allowed cost of capital. RORE includes returns available to shareholders from a range of sources (e.g. cost out-performance, incentive payments and penalties). Page 2

14 Water Company Financial Performance case ROREs and their outturn ROREs (these outturn values are cumulative, reflecting performance in both and ). Figure 1: Base case and cumulative RORE (as at 2016/17) Source: Monitoring financial resilience, Ofwat, November Key findings: Across the sector, there is a relatively even split between the number of companies out-performing their base case ROREs (nine out of seventeen) and those under-performing (eight). Across the first two years, outturn ROREs range from 11% (South West) down to just below 4% (Thames and Yorkshire). This sector wide view masks slight differences between the Water and Sewerage Companies (WASCs) and Water Only Companies (WOCs) with three out of the seven WOCs having outturn ROREs greater than the base case, compared to six of the ten WASCs. South West has the largest RORE (at 11%). Through its Watershare scheme, established at PR14, it has already shared some of its cost and financing outperformance with customers. For this amounted to 3.1m (which was reinvested in service improvement) and in to 4.5m. Also, as a not-for shareholder business, Dŵr Cymru gives its shareholders a say in how surplus funds (estimated at around 30m/year in PR14) are re-invested. 11. Figure 2 presents a breakdown of companies ROREs in the following three categories: Expenditure, comprising: The company s share of totex 3 out- or under-performance (excluding any differences arising from the re-profiling of totex within the period). The company s share of out- or under-performance against retail costs. The impact on RCV run-off (i.e. slow money) of any totex out- or underperformance. 3 In PR14 Ofwat adopted a total expenditure (totex) based approach to assessing efficient expenditure for the wholesale price controls. This approach was intended to remove the perceived bias towards capital intensive solutions that might arise from the separate assessment of operating and capital expenditure. Page 3

15 Water Company Financial Performance ODI, comprising the impact of ODI or Service Incentive Mechanism (SIM) rewards or penalties. Financing, comprising the difference between the actual average interest rate paid on debt and the allowed interest rate (both in real terms). Figure 2: Breakdown of cumulative RORE (as at 2016/17) Source: Monitoring financial resilience, Ofwat, November Key findings: There is a mechanism to return totex efficiencies to customers during the price review process, so our focus is on the impacts of outperforming on cost of debt, inflation impacts and ODIs. As customers do not automatically get a share of this outperformance, our objective is to assess whether there is sufficient evidence to press for companies to share their success with customers. A majority of companies (ten out of seventeen) are out-performing expenditure allowances (covering both wholesale totex and retail costs) across the first two years of the price control. This can be seen in more detail in Figures 1 and 2 in Annex A which show the differences between companies PR14 wholesale totex and retail cost allowances and actual expenditure up to the end of In actual wholesale totex was just over 8.6bn compared to allowances of just under 9.1bn. Across the sector, companies underspent against their allowances by 441m (just under 5%). In , whilst allowances and actual totex were lower, underspend was slightly larger (at 576m, or 6.8%). Although not shown in Figure 2 above, there is a difference in the average performance across wholesale and across retail (with companies, on average, out-performing on totex but under-performing (by a lesser amount), on average, on retail costs). A majority of companies (twelve out of seventeen) received net rewards for delivery against their ODIs. On average, these increased outturn RORE by 0.14%. Further detail on ODI performance from paragraph 15. Page 4

16 Water Company Financial Performance Conclusion: As a majority of companies have out-performed their wholesale expenditure allowances so far in (a trend that may continue through the rest of ), strengthen our case to companies and Ofwat for tougher efficiency challenges in wholesale totex allowances for Debt financing costs 13. Figure 3 gives a comparison of companies actual real cost of debt for and compared to Ofwat s PR14 allowance. Figure 3: Real cost of debt (actual and allowed) Source: APRs. Note Thames Water includes TTT Note: Actual real debt costs have been converted into real terms using the November to November RPI inflation rate. 14. Key findings: Real debt costs have fallen for most companies as the higher inflation rate in reduced the real cost of companies fixed rate debt. This matters because Ofwat s allowance for the cost of debt at PR14 was set in real (not nominal) terms, at 2.6% for most companies (this is shown by the orange lines in Figure 3). Whereas in just four companies out-performed their real cost of debt allowance, in , seven companies out-performed their allowed real cost of debt, with another four performing just slightly above their allowance. Page 5

17 Water Company Financial Performance RPI inflation is higher again in which suggests that further improvements in performance against debt cost allowances in are likely. South West report a real cost of debt that is significantly lower than other companies. South West has a relatively high proportion of fixed rate debt amongst the WASCs and it has the lowest (indicative) interest rate on that fixed rate debt across the sector (at 2.2%). Through their Watershare scheme, customers should be able to benefit from this out-performance within the price control period. Yorkshire and South Staffs have actual costs of debt that are notably higher than the allowed cost of debt in both and In the case of South Staffs, it has a high proportion of index-linked debt which is at the highest indicative rate across the sector. In the case of Yorkshire, it has a mix of debt types, but the interest cost on its fixed and index linked debt are relatively high. Across the sector, the impact of financing costs on RORE are largest for Yorkshire Water (around -2.3%). Conclusion: As most companies performance in raising debt finance compared to Ofwat s allowed cost of debt improved in compared to , continue to track companies outperformance of Ofwat s assumed cost of debt financing If the trend continues (driven by increasing inflation) there may be a stronger case to press for a share of outperformance with customers when performance is assessed. Outcome Delivery Incentives (ODIs) 15. Financial ODIs provide for penalties or rewards depending on company performance. For most companies, their penalties or rewards are calculated over the current price control period to be applied at the next price control period. The exceptions are Anglian, Severn Trent and South West, who have in-period adjustments for some of their ODI rewards or penalties. Partly because the outcomes framework was new, Ofwat limited the impact of financial ODIs to no more than two percentage points of the RORE per year (i.e. a cap and collar). 16. Table 1 shows the ODI rewards net of penalties accrued in and in accrued net rewards are highlighted in yellow. Net penalties are highlighted in light blue. 4 The annual RPI inflation rate (November to November) was 1.05% in , 2.19% in and 3.88% for (Source: ONS) Page 6

18 Water Company Financial Performance Table 1 Net ODI rewards ( m nominal terms) Net ODI rewards 2015/16 Net ODI rewards 2016/17 Anglian Dŵr Cymru Northumbrian Severn Trent South West Southern Thames United Utilities Wessex Yorkshire WASC sub-total Affinity Bournemouth - n.a. Bristol Dee Valley Portsmouth South East South Staffs Sutton & East Surrey WOC sub-total Key findings: Industry totals Source: APRs, ECA calculations In , at an industry level, net ODI rewards were around 68m, up from 35m in and all but two WASCs and three WOCs received net rewards. The net rewards across the industry are attributable to the WASCs, as across all WOCs there was net ODI penalty of 0.4m. The majority of the net rewards across the sector, as well as the increase in , are attributable to Severn Trent. In Severn Trent had net rewards of just under 20m (out of 35m in total) and in over 43m 5 5 These include close to a 1m reward for leakage performance that the company has decided not to collect. Page 7

19 Water Company Financial Performance Conclusion: (out of 68m). Of their rewards in , just over 39m were from their ODIs on internal and external sewer flooding (around 4m and 35m respectively) these two ODIs for Severn Trent accounted for over half of the sectors net rewards in Use evidence of companies net Outcome Delivery Incentive (ODI) rewards so far in to: (a) Press companies to set more stretching performance targets for ODI rewards in ; and (b) Given the scope for rewards to increase customers bills, challenge Ofwat and companies to ensure that the ODI model has credible customer support in Further analysis 18. Annex A includes further analysis of Companies actual revenues compared to the Ofwat PR14 allowance. Actual revenue is lower by 1% than Ofwat s PR14 assumption not a significant difference, but we will continue to monitor this. Current gearing ratios. Average gearing slightly lower (at 70.5%) then in (71.5%), but higher than Ofwat s nominal gearing assumption of 62.5%. The higher gearing continues to reflect the low interest rate environment. Companies credit ratings. Evidence that several companies have a negative credit outlook in light of the 2.4% Weighted Average Cost of Capital assumption in the final PR19 Ofwat methodology. This may see companies financially restructure to protect their investment grate ratings. We will continue to monitor this. Operating profits and dividends. Post tax operating profits are slightly lower in than the previous year, with three WASCs incurring losses due to financial restructuring. Dividend yields are at 7% on average, broadly consistent with 2014 and 2015 (2016 saw a dip to 6.3%). Page 8

20 Wholesale expenditure Water Company Financial Performance Annex A 1. Figure 1 shows how companies have fared in terms of their actual wholesale totex, compared to Ofwat s PR14 allowance, for and It shows the differences in percentage terms. Annex A Figure 1: Variance (%) between actual and allowed totex (2015/16 and 2016/17) Source: APRs. Note Thames Water includes TTT 2. Key findings: Underspend against allowances can reflect totex efficiencies, but may also arise from a re-profiling of expenditure within the price control period (i.e. expenditure may have been deferred to later in the price control, or brought forward). As at least some of the totex underspend against allowances is due to efficiency, this should be reflected as the starting point fur future totex assumptions in companies business plans for PR19. As the current price control period progresses, the extent of genuine out- or under-performance on totex will become more apparent.

21 Retail expenditure 3. Figure 2 shows how companies have fared in terms of their actual retail expenditure compared to Ofwat s PR14 allowance, for and It shows the differences in percentage terms. Annex A Figure 2 : Variance (%) between actual and allowed retail costs (2015/16 and 2016/17) Source: APRs. Note Thames Water includes TTT 4. Key findings: At 931m in , retail costs across the industry are substantially smaller than wholesale totex, at 8,639m, and have a correspondingly smaller impact on customers bills. In contrast to totex, across the industry, actual retail costs were greater than allowed costs, but only by some 22m (or 2.4%) in This represents an improvement compared to when, across the industry the extent of under-performance was 61m (or 6.8%). Five of the ten WASCs (compared to three in ) and four of the seven WOCs (three in ) out-performed the allowed retail cost. Severn Trent achieved the largest out-performance in (as in ) of 33m, compared to an allowed cost of 122m. In they attributed their outperformance to a range of factors, with a reduction in doubtful debts being the largest. In doubtful debts were also a key element of out-performance for Severn Trent (at just over 10m), along with other operating expenditures on household retail activities (at just under 11m). Whilst at an industry level the extent of under-performance against retail costs reduced in , there was not a universal reduction. For example, both Southern and Thames under-performed against their allowances in and the extent of their under-performance increased in In relative terms, Southern (at around 49%) had the largest under-performance in As in , Southern attributed its under-performance to a range of factors,

22 including increases in bad debt provisions and costs related to the transformation and outsourcing of the customer service centre. Revenue 5. Across the industry, actual revenue was 11,812m in , up slightly from 11,712m the previous year. WASCs share of revenue is over 92%. 6. Across the industry, in , actual revenues have been slightly lower than allowed revenues (adjusted for actual numbers of household numbers) by 0.1%. This compares to when actual revenues were greater than allowed revenues by around 0.8%. 7. It should be noted that revenue variances are not retained as financial gains or losses but corrected within the price control period or in the next price control period. In PR14, Ofwat also introduced the Wholesale Revenue Forecast Incentive Mechanism (WRFIM). As well as adjusting companies allowed revenues for over- or under-recovery of wholesale revenue, this mechanism incentivises accurate forecasting by penalising companies for any under- or over-recovery of wholesale revenues outside of a threshold. Gearing 8. Figure 3 shows companies gearing in and (measured as the ratio of net debt to the RCV) and notional gearing assumed by Ofwat for PR14 (of 62.5%). Annex A Figure 3: Gearing Source: APRs. Note: Thames Water includes TTT. 9. Key findings: Gearing ranges from 56.4% (Dŵr Cymru) to 84.1% (Thames). Compared to , average gearing is slightly lower across the sector in (70.5% versus 71.5%). However, companies have continued to maintain gearing levels well above Ofwat s notional level of 62.5% in the low-interest environment.

23 The slight reduction in gearing across the sector is driven by a slightly lower gearing among WASCs (70.3% versus 71.3%). Gearing among the WOCs is slightly higher in (75.1% versus 74.8%), although this is largely a result of Bournemouth Water being removed from the calculation in In , gearing is also somewhat higher across the WOCs than the WASCs. Credit ratings Profits 10. Most companies are required by their licences to have an investment grade credit rating at a minimum of Baa3. As was noted in Ofwat s financial resilience report published in 2 November 2017, 1 all companies currently pass this threshold. 11. At the time, two companies had been placed on negative outlook : Southern and Northumbrian. Ofwat had noted that Southern s negative outlook was particularly concerning given it currently holds a Baa2 rating with Moody s, which is only one notch above a minimum investment grade rating of Baa3. On the positive side, Yorkshire had, around that time, had its outlook upgraded from negative to stable after restructuring its finances. 12. However, following the publication of Ofwat s PR19 methodology, the list of companies placed on negative outlook has grown from two to six, with Anglian, Portsmouth, Severn Trent, and Yorkshire joining Southern and Northumbrian. Moody s stated the changes in outlook reflect the companies it considered most exposed to a likely fall in allowed returns from 2020 due to the PR19 methodology. 13. Under Ofwat s notional gearing approach, risks with capital structure are borne by the shareholders, not consumers. Following publication of the PR19 methodology (and, in particular, the indication of a notably lower cost of capital), more action by companies to manage this expected change may become evident (e.g. refinancing and gearing reductions). 14. Figure 4 shows companies post tax project as a percentage of Ofwat s assumed revenue. 1

24 Annex A Figure 4: Post-tax profit, 2015/16 and 2016/17 Source: APRs. Note: Thames Water includes TTT. 15. Key findings: Although operating profit margins across the WOCs are lower than the WASCs, WOCs post-tax profits in were higher on average (at 11.1% versus 7.9%). This is a reversal from , when WASC post-tax profits were 22.3% and WOCs were 18.8%. This is largely due to multiple WASCs incurring large losses on financial instruments in Notably, Anglian recorded a 116m loss (equivalent to 9.6% of appointed revenues), Southern a loss of 417m (52.5%), Thames a loss of 206m (10.0%), and Yorkshire a loss of 467m (47.4%). In contrast, South East was the only WOC to record a financial instrument fair value loss of 14m (6.2%).

25 Dividends 16. Figure 5 displays dividend yields across the water companies from 2014 to Annex A Figure 5: Dividend yields, 2014 to 2017 Source: APRs, Ofwat. Note: Thames Water includes TTT. 17. Key findings: Industry-wide, dividend yields have been lower since Dividend yields were 7.4% in 2014 and 7.7% in This fell to 6.3% in 2016, recovering somewhat to 7.0% for The fall in dividend yields has been more dramatic among WOCs, which had average dividend yields of 13.1% in 2014 and 11.1% in 2015, falling to 5.4% in 2016, and then rising to 8.2% for This is largely driven by the significant decline in dividends from Affinity, Bristol, and South East, recovering somewhat since. WASCs dividend yields have been more stable: 7.1% in 2014, 7.5% in 2015, 6.4% in 2016, and 6.9% in This WASCs-wide number masks some significant upand-down swings in dividend yields by Northumbrian and South West, and Southern s return to issuing dividends. For , Thames, which issued dividends of 82.4m (2.7% dividend yield) in and 109.2m (5.3%) in 2016/17, announced it would not be issuing a dividend in 2017/18 in order to focus on improvements in operational performance.

26 Consumer Council for Water Minutes of the Board meeting in Public 11:00 on Tuesday 5 December 2017 Penrhyn Suite Reichel Hall Bangor University Bangor, LL57 2TR Present:- CCWater Board: CCWater: Stakeholders Presenting: Stakeholders/ Public: Bernard Crump David Heath Julie Hill Philip Johnson Robert Light Alan Lovell (Chair) Tony Redmond Tony Smith Tom Taylor Mike Keil, Head of Policy and Research Phil Marshall, Deputy Chief Executive Lia Moutselou, Policy Manager (for items 165 to 174/17 below only) Carl Pegg, Head of Consumer Relations and Communications Marie Perry, Head of Finance and Procurement Alison Townsend, Board Secretary Andy White, Senior Policy Manager (for items 170 to 176/17 below only) Paul Dennison, Severn Trent Water Andrew Norton, Research Officer, Bangor University Phillippa Pearson, Catchment Manager, Dwr Cymru Welsh Water In addition to the stakeholders presenting outlined above, approximately 15 stakeholders/members of the public joined the meeting to hear and discuss the presentations summarised in the minutes that follow. Page 1

27 165/17P Welcome and apologies for absence 165.1P The Chair welcomed stakeholders and members of the public to the meeting. No apologies for absence had been received from any CCWater Board member. 166/17P Declarations of interest 166.1P Mike Keil, CCWater Head of Policy and Research declared an interest in the matter the subject of minutes 169.7/17P to /17P below headed Elan Valley Aqueduct. When he was employed by Severn Trent Water Mike Keil had been the author of the business case for the Elan Valley Aqueduct work. The interest was not considered significant and he remained in the meeting for this item. 167/17P Listening session 167.1P The Chair asked members of the audience if they wanted to raise any issue or ask a question of the Board; no issues were raised. The Chair assured all present that there would be opportunities to raise issues during the meeting. 168/17P Introduction/overview of the public session 168.1P The Wales Chair thanked all those who had joined the meeting and went on to give a brief overview of the issues to be discussed that would explore the link between investment and the environment. 169/17P Links between Investment and the Environment (i) Dŵr Uisce Project: Efficiency of water supply and demand 169.1P Andrew Norton, Research Officer, Bangor University, gave a short presentation that outlined the Dŵr Uisce Project. The project was led by Trinity College Dublin in partnership with Bangor University and aimed to improve the efficiency of water distribution by developing new low carbon energy-saving technology, including micro-hydropower turbines to recover energy from water networks. The Board also heard about work to carry out an Environmental Assessment of Dŵr Cymru by mapping the carbon footprint of its spend profile. The Board noted that the project was also developing networks to stimulate collaboration and promote knowledge exchange to lead to innovation and economic growth P The Board discussed aspects of the presentation including:- how the spend mapping work could be used to reduce an organisation s carbon footprint. The Board heard that the footprint of new technologies and innovations could be mapped to understand the impact their introduction might have; If consideration had been given to the mapping of capital spend to understand the impact of the embedded carbon in the facilities built Page 2

28 by water companies. Bangor University recognised the point but explained that work was currently focussed on the water side of the business. (ii) Catchment Science 169.3P Phillippa Pearson, Catchment Manager, Dwr Cymru Welsh Water gave a short presentation that outlined the Dŵr Cymru Welsh Water (DCWW) approach to catchment management. The Board heard that the project aimed to improve raw water quality before it reached the treatment works. The presentation included four case studies that looked at work that had taken place to address issues caused by the environment that water was obtained from including taste and odour, natural organic material, sediment loss and cryptosporidium P The Board discussed issues associated with the presentation including:- how successful DCWW was in achieving the polluter pays principle. The Board heard about DCWW s PestSmart campaign that had been launched with the agricultural community to highlight issues associated with the use of pesticides; if DCWW had any metrics on catchment management schemes, the Board heard that water companies in other areas struggled with this as schemes were often long term in nature while regulators were looking for early impact measures. DCWW recognised this situation and explained that it was looking at modelling associated with land use. The Board noted that DCWW was taking a risk based approach to land management and initially engaging with people in high risk areas. DCWW confirmed that modelling work would take into account environmental and land use changes; if DCWW planned to extend the Cryptosporidium monitoring it was carrying out at Cowlyd to all reservoirs. DCWW explained that at the moment the work was resource intensive and it was not currently planned to roll it out widely but, as technology moved on and remote access to data became easier, this work was likely to become more widespread. (iii) Brecon Beacons Mega Catchment 169.5P Phillippa Pearson, Catchment Manager, Dwr Cymru Welsh Water gave the Board a brief overview of the development of a Mega Catchment Area (MCA) in the Brecon Beacons. The Board head how the MCA would be used to guide and develop stakeholder engagement and viewed a short animation that outlined how the MCA could benefit everyone P The Board briefly discussed issues associated with the presentation including:- engagement and relationship management with the Brecon Beacons National Park Authority. The Board noted that the Authority had been fundamental in developing the concept and were very happy with the proposal; Page 3

29 how the MCA fitted with the Welsh Government s strategy for the valleys. The Board heard that representatives from across the area would be present at a meeting later that week; the social benefits of expanding the MCA into the valleys had been recognised; what DCWW hoped would change as a result of the MCA project. The Board heard that it was hoped that the work would encourage more joined up long term thinking for example on the use of pesticides. (iv) Elan Valley Aqueduct work 169.7P Paul Dennison, Severn Trent (SVT) gave a brief presentation that outlined work by Severn Trent to replace three sections of the Elan Valley Aqueduct that supplied water to businesses and homes in Birmingham and the surrounding areas. The Board noted that because of its strategic importance the aqueduct could only be turned off for a maximum of 5 days twice a year. The limited opportunity for shut down meant that repairs to the existing tunnel were not possible and so instead three bypass sections were being created to be connected to the existing aqueduct during the shut down period P The Board heard about SVT s work with local communities near to the sites including work with local schools when the Tunnel Boring Machines were launched. The Board noted that SVT was investing in the aqueduct as it was important for the maintenance of supplies to the people of Birmingham but was also supporting local communities many of whom were fond of the structure P The Board discussed issues associated with the presentation including:- how likely it was that other sections of the aqueduct would need to be replaced in the future. SVT briefly outlined the arrangements to inspect the aqueduct and the Board noted that alternative supplies coming on stream soon should increase the amount of time the aqueduct could be turned off for and so increase the opportunities for maintenance. The Board was advised that it was unlikely that the entire length of the tunnel would need to be replaced; how SVT used risk management to mitigate the impact on local communities in the event of a catastrophic failure of the aqueduct. The Board heard that work to reduce the potential impact on communities took a number of forms including maintenance; if SVT had encountered any concerns from local communities about its water being transferred to Birmingham. SVT indicated that these views were heard infrequently and most recently it was due to a misunderstanding about who was funding the works; SVT had explained that it was paying for the work rather than central government and the resident was satisfied. The Board noted that local communities were often passionate about the aqueduct, particularly the bridged sections P The Board briefly discussed issues around the transfer of water from Wales to Birmingham and enquired about the payments made by SVT for Page 4

30 the rights. The Board heard that SVT paid high costs for the abstraction licence but these costs were largely offset as the aqueduct did not require pumps to transfer the water. (v) How the previous discussions fit with the Future Generations Act P The Wales Chair gave a short overview of the Future Generations Act 2015 and explained how the presentations that the Board had received touched on areas covered by the Act. (vi) Roundup and final thoughts P The Wales Chair thanked those that had given presentations and briefly summed up the themes running through the presentations that the Board had received. The Board recognised the need to bring people and organisations together to improve the outcome for customers. 170/17P Minutes 170.1P The Board approved the minutes of its meeting held in public on 10 October 2017 as a true record. There were no matters arising to be dealt with in this session. 171/17P Board Forward Look 2018/ The Board considered a paper that presented the Board Forward Look to March The Board noted that the plan would be adjusted over time to respond to the changing priorities and new issues that may arise and that key decisions for PR19 were included in the plan The Board highlighted that a paper on Water Resources Management Plans was scheduled for the meeting in January 2018 and asked for this to include information on the framework within which water trading takes place. Action: M Keil The Board approved the Board Forward Look to end March /17P Wales/Regional Committee Minutes Wales Committee: meeting in public, 22 September The Board considered and noted the minutes of the Wales Committee meeting in public held on 22 September The key issues discussed at the meeting were briefly outlined to the Board. Western Committee: meeting in public, 28 September The Board considered and noted the minutes of the Western Committee meeting in public held on 28 September Page 5

31 173/17P Chief Executive s Report 173.1P The Board considered and noted a paper that outlined CCWater s key activities and achievements since the Board last met in public in October The Chief Executive briefly highlighted aspects of the report including:- work taking place to monitor the non-household retail market including levels of switching and complaint levels. The Board noted the switching numbers were around the level expected and that, with the exception of Castle Water, complaint levels were also at the level expected; Ofwat was due to confirm its final PR19 methodology on the 13 December 2017; and work that had taken place with water companies in Wales to understand customers views on the transfer of the ownership and responsibility for private supply pipes to water companies. The Board heard that customers favoured the option to transfer ownership up to the internal stop tap, but that the expectations about the levels of service for any pipe repairs were high P The Board discussed issues raised in the paper and enquired about the reasons why targets for customer satisfaction for overall service, courtesy and speed were below target in Quarter 2. The Board was briefly updated on the reasons for this and the actions that the Consumer Relations team was taking to address this. 174/17P Finance report 174.1P The Board considered and noted a paper that presented a summary of the financial performance of CCWater to end October The Board heard that CCWater was confident that the year end outturn would be a 50k underspend subject to some risks and opportunities associated with this that were set out in the paper. 175/17P Affordability Strategy 175.1P The Board considered a paper that updated it on CCWater s work in relation to affordability and outlined future work in this area P The Board heard that both water companies in Wales had schemes in place to support vulnerable customers and was updated on CCWater s work with both organisations. The Board discussed aspects of the report including:- how CCWater promoted good practice between water companies. The Board noted that no one company did everything well but that CCWater was identifying good practice and sharing this; how water companies could help people in difficulty but who were not paying water bills directly, for example people in social housing; Page 6

32 how customers receiving support could be helped if they moved to an area served by a different water company, for example if assessments could be transferred. The Board heard that different companies had different criteria for support and so it was not portable but this suggestion would be borne in mind; how some water companies included more areas of deprivation than others and while numbers of customers supported were available, this was not matched to a deprivation index; and that water companies were differentiating between those customers that wouldn t pay and those that couldn t pay P The Board discussed the need for water companies to re-consult customers each time they wanted to adjust scheme, for example to increase funding in line with the Retail Price Index, and the burden that this created. The Board heard that both Defra and Welsh Government had attended an affordability event hosted by CCWater the previous week and attendees has suggested that their guidance on consultation for customer support needed to be reviewed. The Board emphasised that research had shown that customers were more likely to support social tariffs if the company also contributed. The Board endorsed the strategy for CCWater s future work on affordability. 176/17P Regional/Wales round up 176.1P The Board considered and noted a paper that updated it on strategic matters in each of the English Regions/Wales. Each Chair gave a brief supplementary verbal update and key points raised included:- the Board received an update on three seminars held by United Utilities on the Franklaw cryptosporidium incident of August The Board went on to discuss the approach taken to incident management by water companies including exercises to test preparedness; the Board noted that NI Water had acquired the interests of Kelda Water Services (KWS) holdings, the owner of Yorkshire Water, in relation to four treatment plants in Northern Ireland. The Board also noted that that Corsair Capital and Deutsche Bank had announced they would be selling their interests in KWS; Bristol Water had dropped proposals for the Cheddar Two reservoir; Bournemouth Water had demonstrated a marked improvement in complaints performance since CCWater had imposed special measures in 2016; the Board was updated on the position with a number of compulsory metering initiatives in the South Eastern region; the Board heard that the Drinking Water Inspectorate had introduced a new water quality compliance measure, the Compliance Risk Index. The Board noted that some companies had been supportive of the Page 7

33 new measure but had commented that it was difficult for consumers to understand; Severn Trent (SVT) had announced its interim 2017/18 results. The Board noted that in the past SVT had under projected the return. SVT had also recently announced that it would be making some of its excess land available for housing; details of how the proceeds would be shared with customers were awaited The Wales Chair indicated that there was not a competitive market for non-household (NHH) customers in Wales and challenged the representatives from the water companies in Wales to explain what actions they would take to make sure that these customers received the best service despite the absence of competition. The water company representatives briefly outlined the work underway. The water companies recognised the need to be able to treat the different type of NHH customers appropriately; a corner shop may not wish to be treated the same way as a large or multi-site business. 177/17P Other business 177.1P There were no items of other business. 178/17P Date of next meeting 178.1P The next meeting in public would be on 6 February 2018 at the Memorial Hall, High Street, Newmarket, Suffolk, CB8 8JP. The meeting closed at 15:15 Page 8

34 Minutes of the Northern Committee Regional Meeting in Public Thursday, 26 th October 2017 Newcastle University Present: Attending: Robert Light Northern Committee Chair Bhupendra Mistry Local Consumer Advocate (United Utilities) Colin Wilkinson Local Consumer Advocate (Northumbrian/Hartlepool Water) Angela Collins Local Consumer Advocate (Yorkshire Water) Andrew White Senior Policy Manager Steve Grebby Policy Manager Jane Dayus-Hinch Policy Support Officer Philip Marshall CCWater Deputy Chief Executive Julie Hill CCWater Independent Board Member Kevin Ensell Operations Manager - Hartlepool Water Steve Forster Customer Care Manager Northumbrian Water Claire Sharp Customer Director - Northumbrian Water Louise Beardmore Customer Service Director United Utilities Sally Ainsworth Head of Service Recovery United Utilities Phillip Campbell scientific services United Utilities Dean Stewart Head of Household Retail Yorskshire Water Chris Spencer Head of Quality, Improvement and Complaints Water Plus Ralph Lock Yorkshire Water Business Services Lissa Balmer SME Customer Director NWG Business Jacqueline Atkinson Inspector Drinking Water Inspectorate Mark Allen Dwr Cymru Welsh Water Fiona Calder - PhD Water Management - University of Sheffield 1.0 Chair s Opening Remarks and Apologies for Absence 1.1 The Chair) welcomed all attendees to the Northern Committee s twenty sixth meeting in public, with special welcome to Julie Hill, Fiona Calder, Mark Allen and Jacqueline Atkinson from DWI 1.2 Apologies were noted from Catherine Carnell, Janine Shackleton (CCWater Policy Manager), Pamela Doherty (Yorkshire Water), Lisa Richardson (CCWater Consumer Relations Manager). Page 1

35 Minutes of the Northern Committee Meeting in Public 26 October Questions and Comments from Members of the Public There were no questions or comments from those in attendance no declarations of interest were received in advance. Minutes of the Last Meeting The Committee and attendees at the previous meeting in public on 20 th April 2017 deemed the minutes as an accurate record. Matters Arising Northumbrian Water had provided the promised information noted under matters arising. Industry learning points from Lancashire Boil Water Incident The cryptosporidium incident started on the 6 th August thousand UU consumers were advised to boil their water before drinking for up to almost five weeks in some cases. UU has now been sentenced and the DWI has published the findings of its investigation. The DWI provided an overview of its findings. It highlighted that the good practice identified in a 1990 report (reviewed in 1995) which followed an incident in Swindon in 1989 still stands today. This report highlighted the importance of contingency plans in relation to sites which are the sole source of water supply to a large number of consumers. UU accepted that there were failures, which led to the incident. However, it believes it responded in a prompt and effective way in terms of keeping customers informed and supporting vulnerable customers. The judge had described the company response as text book. UU intend to share the lessons learned. Invitations have been sent to DWI, Ofwat, DEFRA and all Water Company CEO s to a series of Learning Sessions/Seminars which will take place during November. There will also be sessions for employees to educate them on the wider message. UU had written to all affected customers to advise them of the outcome of the case and received a generally positive response. The letters were also used to highlight the availability of priority services. 40% of calls arising from the letter were to register for Page 2

36 Minutes of the Northern Committee Meeting in Public 26 October 2017 these DWI was asked what it will be doing to ensure that all companies follow the good practice recommendations. The DWI and companies agreed that this responsibility sits with the companies. DWI will use their powers to remind companies of their obligation in this respect. All the information will be used to regulate companies and their risks. Northumbrian Water added that there is work constantly going on. There was a question raised about company headroom to deal with failure. UU stated that the Blue Book will now require a review. The Chair thanked the DWI and UU for their contributions and invited everyone to read the report. CCWater needs to reflect and see if they need to work in the future on the recommendations and expectations. Company Operational Reports (Wholesale and Domestic Retail) Hartlepool Water Kevin Ensell informed the Committee that the company had improved its response to written complaints and that complaints themselves had reduced. However, August was very busy with 5 bursts in one day. Social tariff: The introduction of is taking longer than the company had hoped, due to the difficulty of obtaining responses from customers in the trial. The company wants to get its process right before progressing, so it was essential to finish the trial as preparation for this. DWI s new water quality data: Kevin Ensell commented that it was the company s ambition to translate this data into something that would be meaningful for consumers in the area, as they will not have access to DWI reporting once Hartlepool reports as part of Anglian Water Services Ltd. Northumbrian Water In response to Colin Wilkinson s question about the company s Project Excellence initiative, Claire Sharpe responded that the initiative had improved a range of metrics, all of which made the company more efficient in the way it served customers. Charging issues: Colin asked if NWL had learnt anything from Page 3

37 Minutes of the Northern Committee Meeting in Public 26 October 2017 their experience with the housing Association Tristar cancelling their agreement to collect charges in with rent payments. Claire Sharpe responded by saying that a number of learning points had been carried forward, particularly around an increase in meter option requests. Coast and Country tenants will be directly billed from April 2018 but NWL do not expect similar issues to arise e.g. inability to fit water meters as this Association has fewer tower blocks. Contingency plans are however in place New billing and IT system: The company stated that this project is on track to go live in December, but is being reviewed on a daily basis. The company will not go live if there are any potential issues that will impact customers and have plans in place should the go live be delayed. What not to Flush: Colin asked in the opening of the retail market to non household customers made the companies efforts to communicate with businesses such as restaurants, schools and colleges more difficult? Claire Sharpe did not believe this was the case as the company can still communicate direct with these customers in hot spots areas where Fats Oils and Grease cause blockages Julie Hill congratulated the company on winning an award for their Dwaine Pipe blockage reduction campaign and asked if the company had evaluated the campaign in terms of how successful it was in raising consumer awareness. Claire Sharp agreed to report back to the committee with any research. Julie Hill asked the companies which techniques work best with consumers preventing blockages due to inappropriate items being flushed down the sink and toilets. Louise Beardmore commented that identifying and targeting blockage hot spot areas had worked well for UU. Claire Sharp believed that the use of consistent messages, such as the 3 P s (paper, pee and poo), had helped the industry improve the visibility of the issues. Colin Wilkinson asked why the number of complaints had risen in August September. Claire Sharp will ensure that this is covered at our next meeting with the company. The Chair then asked when the next Innovation Festival is. Claire Sharp advised the committee that will be from the 9 th to 13 th July Action: NWL Action: NWL Page 4

38 Minutes of the Northern Committee Meeting in Public 26 October 2017 United Utilities Bhupendra Mistry congratulated the company on their latest set of Service Incentive Mechanism results, recent awards and growth in the take-up of affordability support. Sally Ainsworth presented and spoke about publicity leaflet drops, affordable bills and their arrears allowance (now renamed payments matching ). The company is undertaking 42,000 customer visits to support customers who might be struggling to pay. She commented that 49% of customers were still on payment plans after 12 months. The company asked if they could discuss their approach to dealing with properties that are vulnerable to sewer flooding at a future meeting. Sewer blockages: Louise Beardmore informed the committee that UU had carried out customer research around the disposal of wet wipes which were a main cause of blockages. One of the findings was that teenager were increasingly using wet wipes as make up removers which are then flushed. The company are looking at how it can influence this behaviour with messages such as if you put it down the loo, watch the poo come back to you. Louise will report back to the committee at a future date on this area of work. Ralph Lock (YWBS) asked if the industry was lobbying manufactures for clearer labelling on packaging to make it clear that wet wipes were not flushable. Steve Grebby replied that the industry has done extensive work in this area over the past two years. A research report is due out in November, which looks at product labelling across the products that used on the bathroom and maybe flushed and cause blockages. Yorkshire Water Angela Collins noted that calls to the company had increased by 350 when comparing with the same period last year and asked what had caused this. Dean Stewart replied that heavy rainfall caused localised flooding in East Yorkshire, which had accounted for most of these calls. Affordability and debt recovery: Angela asked what the main motivator was for the affordability partnership work was. Dean responded that Yorkshire Water recognised that there was a gap in the company s knowledge which they needed to fill by engaging more with support organisations in order to develop better solutions for temporary financial vulnerability. The company were looking at different solutions for different Action: UU & CCWater Action: UU Page 5

39 Minutes of the Northern Committee Meeting in Public 26 October 2017 customers Angela enquired if the company had measured the impact of new debt recovery letters. Dean replied that the company are working hard to understand these customers better and promote the message that help was there for those who needed it. The new letters have generated increased contact with regard to assistance, so the new design seemed to be working. External Sewer flooding: Angela Collins noted from the company s report that This year we are hoping to ease some of the pressure by making proactive payments to customers impacted by external flooding. The company explained that strictly speaking payments needed to be claimed by the customer but that the company believed that these should be made automatically in cases where they the customer had contacted the company. Non Household Retail Company Reports 6.23 The Chair asked the new retailers what issues were emerging in the market that could potentially cause problems for non household customers. Water Plus 6.24 Chris Spencer believed that a lot of time has been taken talking to wholesalers prior to the market opening but that this was still a work in progress and that there are opportunities to develop. The biggest things to work on include service levels and managing customer expectations. Northumbrian Water Business (NWB) 6.25 Lissa Balmer said that NWB have a good working relationship with the local wholesaler and that the company are working hard to meet customer s expectations. Yorkshire Water Business Services (YWB) Ralph Lock commented that the change over of IT systems had been a major challenge and that recovery has been the main focus. Due to the new system, the company can now get management reports and the basics are in place. There had however, been some impact on customers and complaints had increased significantly. But they are now coming down. The Chair thanked all the companies for their reports and helpful Page 6

40 Minutes of the Northern Committee Meeting in Public 26 October 2017 contributions to the committee s discussions Complaints to CCWater CCWater reported a positive trend with overall a lower level of complaints received and fewer complaints about all companies in the Northern region. UU requested that CCWater also report on non-household retailer complaints. CCWater confirmed that this is the intention and data will also be included in the annual complaints report in Any other business The Chair thanked all attendees for their contribution and invited them to the next Northern Committee meeting in public scheduled for the 24 th May 2018 at Huddersfield Town Hall. Action: CCWater Page 7

41 Minutes of the Central and Eastern Committee Regional Meeting in Public 12.00pm Thursday, 9 November 2017 Victoria Square House, Birmingham, B2 4AJ Consumer Council for Water Wednesday 9 November 2017 Present: Attending: Bernard Crump Central and Eastern Committee Chair Mike Keil Head of Policy and Research Christina Blackwell Policy Manager Central Gemma Domican - Policy Manager Central Steve Grebby Policy Manager Eastern Alice Laycock Policy Support Officer Gill Holmes Local Consumer Advocate (Anglian Water) Paul Quinn Local Consumer Advocate (Severn Trent Water) Graham Dale Local Consumer Advocate (Essex and Suffolk Water) Yvonne Davies - Local Consumer Advocate (South Staffs and Cambridge Water) Jane Taylor, Customer Relations Manager - Anglian Water Robin Price, Head of Water Quality - Anglian Water Alan Brown, Scientific Support Manager - Essex and Suffolk Water Steve Forster, Customer Care Manager - Essex and Suffolk Water Ali Hebditch, Customer Service Manager - Essex and Suffolk Water Phil Newland, Managing Director - South Staffs Water and Cambridge Water Andrew Lobley, Operations Director - South Staffs Water and Cambridge Water Rachael Merrell, Head of Customer Service - South Staffs Water and Cambridge Water Leah Fry, Head of Customer Strategy and Experience - Severn Trent Water Sean Dowen, Water Regulations and Public Health Business Lead - Severn Trent Water Alan Logan, Contracts Manager - Pennon Water Services Martin Reid, Complaints Manager - WaterPlus Richard Phillips, Inspector - Drinking Water Inspectorate Jeff Halliwell, Anglian Water Customer Engagement Forum Chair - Anglian Water Customer Engagement Forum Simon Sperryn, South Staffs and Cambridge Water Customer Panel Chair - South Staffs and Cambridge Water Customer Panel Page 1

42 Minutes of the Central and Eastern Committee Meeting in Public on 9 November Welcome and Apologies Welcome Professor Bernard Crump (The Chair) welcomed all attendees to the Committee meeting in public. Explanation of the day was given by the Chair, including expectations of likely discussion Declarations of Interest There were no members of the public present and no declarations of interest were received in advance DWI drinking water quality presentation Richard Phillips gave a presentation on the Drinking Water Inspectorate (DWI) annual report, Drinking Water 2016, with a focus on the application of the new Compliance Risk Index (CRI) measure, which can be viewed here. A question was asked if metaldehyde is harmful to health. There was a discussion around the fact that although it is not harmful to health, it is part of the water quality standards and so must be adhered to. A follow up question was asked about the health and non-health indices, which Richard agreed to circulate to attendees through CCWater. A question was asked if the new CRI measure, described in the presentation, would be separately recorded. It was advised that CRI scores will be recorded separately for companies and it is envisaged that this will feed into an overall relative risk score once the other risk indices are introduced. There was general discussion about how the DWI informs consumers on drinking water quality. It was advised that this is done through the annual DWI report, the annual industry event, and through the DWI website. There is also the Discover Water website. The point was made that customers may not understand the CRI and the Mean Zone Compliance (MZC) figures e.g % is easier to explain. Customers do want information about water quality so thought will need to be given as to how the new measure can be translated into something meaningful for customers. This is a challenge going forward. Clarification was provided that CRI is a total of the water quality breaches in one reporting year. Some attendees had concerns and felt it did not reflect current risk as this is backward looking. The point was made that it should be a rolling score. Some felt that a true benchmark exercise was needed to show industry comparisons, instead of relying on the industry average. Action: DWI & CCWater Page 2

43 Minutes of the Central and Eastern Committee Meeting in Public on 9 November Anglian drinking water quality presentation A presentation was given by Robin Price, from Anglian Water, which can be found here. A question was raised about the current levels of metaldehyde in Anglian Water s area of supply, and the company confirmed it is reducing. Anglian Water advised it likes the new CRI measure, but agreed that there is a lot of work to do to communicate this clearly to customers. There was confirmation from all companies that they would be attending a lessons learned event being run by United Utilities next week. The event will highlight formal learning points from the Lancashire Cryptosporidium incident in The companies confirmed they have already made some changes to processes following this incident. Severn Trent drinking water quality presentation A presentation was given by Shaun Dowen, from Severn Trent Water, which can be found here. Severn Trent Water confirmed that it too prefers the CRI measure and agreed that well managed incidents will likely result in a lower score. Severn Trent Water advised that it had shared lessons learnt from its Castle Donington incident with other water companies through Water UK. The company has committed to reduce water quality complaints by 35%, so this is a high priority for the company. To help clearly communicate with customers during incidents, an infographic has been developed. This is on the company s website and has been well received to date Essex and Suffolk drinking water quality presentation A presentation was given by Alan Brown, from Essex and Suffolk Water, which can be found here. The company agree that the new CRI measure is an improvement on MZC and think it is more transparent. However, it has not led to any change in emphasis for the company or a change to its plans. Essex and Suffolk Water is working with the Water Regulations Advisory Service to improve the awareness of nickel in cheap taps to ensure customers are fully aware of what the product contains before purchase. Page 3

44 Minutes of the Central and Eastern Committee Meeting in Public on 9 November South Staffs and Cambridge drinking water quality presentation A presentation was given by Phil Newland, from South Staffs Cambridge Water, which can be found here. and The company is supportive of CRI and think it is a more mature way to monitor water quality compliance. It does, however, have some reservations about double counting if there is an enforcement notice and then a further failure at the same site. It shares the concerns of others that customer confidence is hard to convey using this measure. The company want to be transparent but feel it will be hard to explain this measure to customers in a way they will understand. A question was asked about whether the polluter pays is practiced during catchment management. The companies discussed what happens in their areas and agreed that by working closely with the other industries they can collectively reduce pollution incidents and the impact on water quality to the benefit of all CCWater Delving into Water Vulnerability & Complaints Reports Bernard Crump introduced CCWater s two reports Complaints to Water Companies England and Wales April 2016 March 2017 and Staying afloat: Addressing customer vulnerability in the water sector ( ) CCWater research shows that customers are generally more willing to fund part of a social tariff or assistance scheme if the company also contributes. There was challenge on companies to use company profits to assist those that are struggling to pay. The companies were encouraged to increase dialog across the industry, especially where there are shared customers, to assist customers who are vulnerable. More joined up work is needed to get the maximum amount of resource and support to customers as possible. Any other Business No issues were discussed. Page 4

45 Consumer Council for Water Board 6 February 2018 Agenda Item 218/17P Title: Chief Executive s Report Report by: Tony Smith, CEO Responsible Lead: Tony Smith, CEO Paper for information Appendix: Yes (1) Purpose 1. This report provides customers and other stakeholders with an update on the Consumer Council for Water s (CCWater) activities and achievements since the Board last met in public on 5 December The report covers December 2017 and January Recommendations 2. The Board is asked to note the paper. Non-household water retail market 3. In April 2017, non-household customers in England were given the freedom to switch their water retailer for the first time. Retailers provide customer-facing services, including billing, meter reading and handling complaints and enquiries. 4. CCWater has worked with the market operator, MOSL, and retailers to provide business customer feedback to help improve the IT systems and central market processes used to run the market. We are members of the market codes panel and important sub-committees, which look at developing issues like emergency contact details for customers and trade effluent services. 5. In Q3 we gave retailers data that highlighted how they were performing in terms of customer complaints compared to other companies. Feedback from retailers was positive and even the weaker performers felt the information would drive better performance. We also gave this information to Ofwat, MOSL and Defra in

46 Chief Executive s Report on CCWater s achievements and performance, February 2018 confidence. We intend to publish the full year of complaints data in June 2018 to help customers judge how each retailer is performing. 6. With our research partner, we conducted dozens of interviews with customers as part of our qualitative research into business customers experiences of the market. We expect this to be an influential piece of work when it is released in late March. 7. Between October and December we received 806 complaints from non-household customers about their retail services around four and a half times as many as the same period last year. We had expected to see an increase in contact from businesses while the industry adjusted to the new market. However, complaints to us increased at a faster rate in the second and third quarters. We are putting pressure on poor performing retailers to reverse this trend in the coming months. 8. Since September we have experienced a substantial rise in complaints to us about Castle Water, mainly from customers who had encountered lengthy delays trying to get through to the retailer. A growing number of metered customers have also raised concerns with us over their billing arrangements. 9. Our London and South East Chair Sir Tony Redmond, CCWater s regional team and I have challenged the company s CEO over its performance and the company has committed to improve its call waiting times and customer service. Complaints to us about Castle fell in December but still remain high compared to other retailers. Around 45% of all NHH complaints we received in Q3 were from Castle customers. We will continue to monitor the complaints we receive closely to make sure these issues are addressed and the service its customers receive markedly improves. 10. We have been working with retailers behind the scenes to address some of the emerging difficulties that have caused concern for customers. This has already led to improvements, including clearer communication to make it easier to get in touch with retailers and additional training for frontline customer service staff. Overall complaint numbers wholesalers and retailers 11. In the third quarter of this year (October to December) CCWater received 2,425 complaints about water companies (wholesalers and retailers). This is an increase of 29% when compared to the 1,874 we received in the same period last year. Billing and charges continued to be the most common cause of complaint, accounting for half of all the complaints we received. 12. Since 1 April 2017 we ve received a total of 6,942 complaints, compared to the 6,483 we received during the first three quarters of the previous year. Affordability 13. We are continuing to work with water companies and third sector support organisations to help boost customer awareness of the financial support which is available from companies

47 Chief Executive s Report on CCWater s achievements and performance, February 2018 Seminar on affordability and social tariffs 14. After the success of an event we held last year, we hosted another seminar on affordability and social tariffs at the end of November. The event brought together water companies and representatives from Ofwat, financial vulnerability charities, and UK and Welsh Government officials to share good practice, encourage innovation and consider future challenges and opportunities. 15. Many ideas were shared during the event including how to improve the way water companies and other agencies engage with customers that are in financial hardship. Successful examples of engagement were highlighted included advertising support schemes on bus routes in deprived areas and partnering with community events. 16. The ideas and challenges identified during the seminar will be used to help inform CCWater s on-going work with the industry to make sure assistance reaches more customers that are struggling to pay their bills or in debt. Social Tariff take-up 17. Our ongoing work with companies continues to be effective in helping expand the reach of their social tariff schemes. For the first half of 2017/18 companies reported a further 28% increase in the take-up. Around 333,000 households are now receiving on-going help with their bills through the schemes. Benefits entitlement calculator 18. Our online benefits calculator and grant search tool, which we launched in January 2016, continue to provide useful support to consumers. From April to December this year more than 2,000 customers used the benefits calculator and identified that they were potentially entitled to annual benefits totalling over 4 million. The grant search tool was used by over 350 customers. Water meter calculator 19. We continued to promote our online water meter calculator and encouraged customers to consider whether switching to a meter might save them money. This helps consumers make an informed decision by comparing their current unmetered bill with a likely metered bill. 20. In the third quarter of the year, from October to December, more than 43,000 consumers used our water meter calculator and recorded potential savings of more than 2.2 million. We promoted the tool through social media and had widespread coverage in regional media following our Halloween campaign to encourage customers to take the fear factor out of household bills by acting on our tips to save money, including switching to a water meter. 21. In January the calculator was promoted by money saving expert Martin Lewis during his live bill-busting special on ITV 1. Martin encouraged consumers to use the calculator to see whether they might be better off switching to a meter. The broadcast sparked a wave of visitors to the calculator with almost 18,000 views of - 3 -

48 Chief Executive s Report on CCWater s achievements and performance, February 2018 the online tool during and immediately after the show. Our calculator also featured prominently in Money Saving Expert s weekly money saving advice , which has about 7.7 million active subscribers. Getting water companies to resolve customer problems: Right first time Complaint handling 22. We exceeded our Operational Business Plan (OBP) targets for all three performance measures in the third quarter of this year. We acknowledged 99.8% of cases within five working days against a target of 99.5%, closed 83.3% of cases in 20 working days against a target of 80% and closed 93.2% of cases in 40 working days against a target of 91%. 23. We have been working with companies on the broadening of our complaint report to include all customer contact channels, including social media, so that it gives a more complete view of complaints made to the industry. A working group, consisting of CCWater, companies and Ofwat are working on revising the complaint guidance. Companies have been receptive to including all contact channels and reporting of telephone complaints. We will be piloting the reporting of complaints through the new channels in 2018/19. Financial redress 24. Between October and December we secured 192,000 in compensation and rebates for customers who had complained about their water or sewerage service. Influencing the price setting process for 2020 to Every five years the regulator Ofwat sets a limit on what water companies can charge their customers for the services they provide, in a price setting process known as the Price Review. We have a vital role to play in this process, ensuring that water companies put forward service and investment plans that reflect customers priorities, at a price they find acceptable. 26. In the first eight months of 2018, CCWater will continue to work with each water company, its Customer Challenge Group and the sector s regulators in the development of companies business plans, ahead of their submission to Ofwat in September. We are challenging companies to produce plans that focus on delivering customers expectations of the service they provide at an efficient cost in a package of performance commitments and prices that customers find acceptable. Ofwat s final methodology for the price review 27. In December Ofwat published its final methodology for the 2019 Price Review, showing how it will assess companies business plans and make price determinations in December 2019 for the period. 28. CCWater provided input and evidence to Ofwat through the development of the methodology to help ensure it is focused on the right outcomes for customers. We called for measures of customer satisfaction to be one of Ofwat's required common - 4 -

49 Chief Executive s Report on CCWater s achievements and performance, February 2018 performance commitments (with associated financial incentives) to help drive companies to focus on increasing customer satisfaction with both the service they provide and value for money. We also called for greater emphasis on how companies will propose to assist more vulnerable customers, including those with affordability issues. We welcomed these initiatives in the final methodology. 29. We also commissioned independent analysis and a view of what Ofwat's assumption of the Weighted Average Cost of Capital should be for the sector. Our consultants recommended a range of 1.8% to 2.5%. Given that companies financial returns can make up to a third of the average customer bill, Ofwat s assumption for this cost is significant. That s why during previous price reviews we have been vociferous in our criticism of Ofwat s over generosity to companies. But this time we were supportive of Ofwat s assumed cost of capital of 2.4%, which is the lowest the sector has seen since privatisation. This reflects the continuing low cost of debt financing and the lower risk of investing in the water sector compared to other sectors. 30. However, we remain concerned with Ofwat's use of Outcome Delivery Incentives (ODIs), which will see companies receive annual financial rewards or penalties for how they fare in delivering their performance commitments. Most customers have already told us they do not like the idea of paying more for their water company to deliver the day-to-day services they felt they were already funding through their bills. We are challenging companies and Ofwat to ensure that customers are asked for their views on such incentives, the service performance commitments where they will be applied, and the potential customer bill impact of rewards. If ODIs are to be applied, it is imperative that these are acceptable to customers, and that the service improvements they should drive are also valued by customers. Development of water company business plans 31. Our local teams will continue with customer challenge groups to press each company to show its business plan is built on evidence of customer priorities and expectations. With a lower cost of capital, and Ofwat's intention to increase cost efficiency in the sector, we believe companies should be able to deliver customers' requirements while keeping bills as flat as possible. We will challenge companies to continue to keep customers involved in the development of business plans, making sure their performance targets are challenging and encouraging greater innovation in how they serve customers. Our teams will also examine how companies intend to test their plans for customer acceptability. It is important that the majority of customers find price and service proposals acceptable and that companies address any concerns they raise. A resilient water supply and sewerage system Encouraging consumers to use water wisely 32. Our changing climate and growing population will increase the pressure on our water resources over the coming decades. A study carried out by Water UK last year highlighted the scale and urgency of the challenge facing the sector in its efforts to maintain reliable water supplies. These pressures are no more acute - 5 -

50 Chief Executive s Report on CCWater s achievements and performance, February 2018 than in the water-stressed south east of England where water companies are already having to urgently confront the issue. 33. During December we published a report examining the resilience of water supplies across England and Wales. Water, water everywhere? Delivering a resilient water system ) revealed that leakage levels across the industry had risen during 2016/17. We used the report s findings to challenge water companies to do more to reduce leakage. We warned the industry that a failure to tackle this issue could dampen consumers own motivation to save water and play their part in preserving our future water resources. 34. The report also highlighted that consumers consumption of water increased during the year, despite a rise in the number of metered customers. This suggests that further communication is needed with customers about the reasons why it is important to use water wisely. Speaking up for and informing consumers 35. We use a range of communication channels to inform consumers about issues that are important to them. For many journalists, we are also the trusted source of opinion and insight on water consumers views of the sector. In the media and social networking 36. From December until mid-january, CCWater featured in more than 430 individual pieces of media with the potential to reach an audience of almost 36 million people. Our coverage for the year to date now stands at around 155 million, which substantially exceeds our annual target of 100 million. 37. The publication of our annual water resilience report in December sparked considerable national and regional media interest across England and Wales. We challenged the water industry over rising levels of leakage and warned this could dampen consumers own motivation to save water. The Sun and The Times were among the national newspapers to feature the report s findings and I was also interviewed by BBC Radio 4 s You and Yours. There was also widespread coverage in regional newspapers and mentions on local radio stations including BBC Solent and BBC Suffolk. 38. We responded to the publication of Ofwat s price review methodology with a statement welcoming the regulator s tighter squeeze on water companies financing costs. But we also warned that its decision to remove the cap on companies rewards for beating their performance targets could lead to bill instability. I gave our reaction during interviews with BBC 5 Live s Wake Up to Money and the BBC News Channel. My comments also drew attention from national and regional newspapers, including The Times, Financial Times, Sun Online and City AM. 39. In the run-up to Christmas we published a press release offering consumers advice on how to reduce the risk of a blocked drain or sewer by safely disposing of their - 6 -

51 Chief Executive s Report on CCWater s achievements and performance, February 2018 festive leftovers, including fat, oil and grease. Our advice led to interviews with regional radio stations including BBC Derby and BBC Devon and coverage across some regional newspapers. 40. The broadcast sparked a wave of visitors to our water meter calculator with almost 18,000 views of the online tool during and immediately after the show. The calculator also featured prominently in Money Saving Expert s weekly money saving advice , which has about 7.7 million active subscribers. 41. We also gave our reaction to a Boil Water Notice that was issued by Bristol Water after traces of the parasite cryptosporidium were discovered in a treatment works near Clevedon. Around 7,000 households in the town were told to boil their tap water before use as a health precaution. We issued a statement to say we were closely monitoring the company s approach, while urging it to prioritise the needs of vulnerable customers. We also called on the company to honour its pledge to compensate all customers affected by the disruption. 42. With many customers set to see their water bills increase from 1 April as rising inflation takes hold, we issued press releases in England and Wales urging customers to take advantage of untapped financial support. We highlighted the growing range of assistance schemes now offered by water companies, as well as the tools and advice on our website that can help customers that are struggling to pay their bills. CCWater website 43. Over 300,000 people visited our website between April and December, with Money Saving Expert, the online money advice service, remaining the top referring site. Social media 44. We continued to keep consumers and stakeholders informed on key water industry issues through our social media channels on Facebook, Twitter and LinkedIn. Since April we have sent 1,494 tweets and had 42,605 visits to our Twitter profile. Our tweets have reached a potential audience of 1.2 million users and we have picked up 832 new followers. Our total Twitter following stands at 5,823. Engagement with Parliamentarians 45. In November we held a third drop-in session for MPs in Westminster. The session for MPs from our London and South East Region was hosted by Dr Matthew Offord, MP for Hendon. In total four MPs attended the session: Sir Peter Bottomley MP (Conservative, Worthing West), Mike Gapes, MP (Labour, Ilford South), Jim Fitzpatrick MP (Labour, Poplar and Limehouse) and Stephen Lloyd MP (Liberal Democrat, Eastbourne). Other MPs contacted us after the session to request briefings about the performance of water companies operating in their constituencies. We also wrote to every MP across the region to raise awareness of our work and how we might be able to help their constituents

52 Chief Executive s Report on CCWater s achievements and performance, February 2018 Our Forward Work Programme for 2018 to We have received responses from stakeholders on our draft Forward Work Programme (FWP) and will address their comments in the final version of our strategic plan which we will publish at the end of March. TONY SMITH Chief Executive - 8 -

53 Chief Executive s Report on CCWater s achievements and performance, February 2018 Consumer Council for Water: Performance Scorecard (year to the end of March 2018) Benefits for Customers During the third quarter of (October to December) we secured 192,000 in compensation and rebates for customers who had complained about their water or sewerage service. During the same period our water meter calculator generated potential customer savings of 2.2 million. Our complaint handling performance and customer satisfaction: Performance Actioned within Closed within Closed within 5 days 20 days 40 days Target* 99.5% 80% 91% Q % 83.3% 93.2% Q % 76.1% 90.8% YTD 99.9% 81.8% 93.2% Customer satisfaction Service Outcome Speed Courtesy Target* 75% 61% 80% 93% Q % 64.3% 65.1% 90.4% Q % 61.6% 73.8% 94.0% YTD 72.2% 62.6% 68.4% 92.2% *Operational Business Plan target Financial Governance and Financial Performance During April to December 2017 we spent million (72%), compared to a budget to date of million. By sharing some of our office space with Government bodies and departments, we contributed 46,470 in public sector savings for the period from 1 April to 31 December Governance CCWater complies fully with all Government spending restrictions. As part of our Board s focus on different regional issues and stakeholders in each part of England and in Wales, we have held three Board meetings in public, in Hull in May, Reading in October and Bangor in December. These meetings give us the chance to hear directly from water companies in our Northern and London and South East regions and in Wales respectively, and raise issues of importance on behalf of consumers. The final meeting in public for will be held in the Central & Eastern Region in February

54 Chief Executive s Report on CCWater s achievements and performance, February 2018 Staff Reputation and External Activities Absence due to sickness from 1 April to 31 December 240 days for the period. This was an average of 3.42 days per person for the period, compared to the public sector average of 8.5 days per annum. Five permanent employees have left CCWater since 1 April 2017, which included two retirements. We had an average of 70 employees during the period. To date we have provided 38 individual and team training events using Civil Service Learning and other providers. From April 2017 to mid-january 2018, consumers had the opportunity to hear or see our messages in media with a total reach of about 154 million people. This has exceeded our annual target of 100 million. Since April our website has had a total of 587,944 page views and 345,513 unique views. Money Saving Expert remains the top referring site. From April to December 2017 our social media posts had reached more than 1,209,000 people. We now have more than 5,823 followers on Twitter

55 Consumer Council for Water Board 6 February 2018 Agenda Item 219/17P Title: Finance Report (to December 2017) Report by: Usha Nayyar, Finance Manager Responsible Lead: Marie Perry, Head of Finance & Procurement Paper for noting Purpose 1. The purpose of this report is to provide a summary of financial performance for the year to date to 31 December 2017 and highlight risks and opportunities for the year end. Recommendations 2. The Board is asked to note the contents of this report. Summary Financial Performance 3. In month spend for the month of December was 401k compared to a budget of 405k, a variance of 4k (1%). 4. The year to date spend is 3.810m compared to a budget of 3.814m, a variance of 4k (less than 1%). 5. Our budget for was agreed at 5.24m; however, following the approval of the Board the carry forward budget from 2016/17 of 20k has been applied increasing the budget to 5.26m. 6. Based on the risks and opportunities set out in this report, the forecast spend for the full year is between 5.19m and 5.26m compared to the budget of 5.26m. The most likely outcome is an underspend of between 50-70k. In Month Performance against budget Page 1

56 Finance Report (to December 2017) Month Month Variance Var Actual Budget Dec 17 Dec 17 in Month % TOTAL STAFF COSTS % RESEARCH SERVICES (1%) TOTAL PERSONNEL OVERHEADS(EXCL TRAINING) (14%) TRAINING (10%) PUBLICITY, LIBRARY & PARLIAMENT % COMPUTER SERVICES % OFFICE SUPPORT COSTS % ACCOMMODATION (4%) SUB TOTAL % DEPRECIATION & NON CASH ITEMS % CCWATER REVENUE TOTAL % CAPITAL % CCWATER GRAND TOTAL % 7. In December, actual spend was 401k, an over spend of 4k (1%) compared to a budget of 405k, The in month variances are as follows: a. Staff costs are underspent by 6k mainly due to underspends on vacancies on PR19 Policy Manager and Customer Contact staff in Consumer Relations. Year to Date Performance against budget 8. The table below shows the original budget to the end of December of 3.877m, compared to the revised budget at the end of December of 3.814m. Explanations for the 62k of budget movements made during the period (over 5k or 10%) are below: a. Staff budget relating to underspends on vacancies of 24k for the PR19 Policy Manager post and other posts has been transferred to the unallocated budget and profiled to later in the year. This is offset by the budget adjustment of 8k to allocate the 16/17 pay award into December, which is backdated to August. b. Research Services programme has been reprioritised and projects valued at 63k have been re-profiled to later in the year to reflect changing circumstances. c. Training budget has been re-profiled to reflect courses being booked for staff. d. Computer services have been re-profiled to later in the year to reflect changing circumstances for the 5k stakeholder database budget transferred to Communications budget and 5k budget transferred to Telecoms budget. e. Office Support Costs have been re-profiled due to improvement work on the telecoms systems and the minor works (floor box moves) in the HR area taking place now likely in January f. Depreciation carried forward budget of 7k year to date was applied due to additional depreciation costs arising from prior year capital spend. g. Capital carried forward budget of 9k was applied due to capital costs in year of 9k. Year to Date Financial Summary to 31 December: Page 2

57 Finance Report (to December 2017) Original Forecast Budget Year to Date Variance Var % Budget Total Budget to Budget to movement Actual to Actual to Spend of the Remaining Budget Dec 17 Dec 17 Dec 17 Revised Budget Budget % % TOTAL STAFF COSTS 2,608 2, , % 73% 958 3,525 RESEARCH SERVICES (0%) 63% TOTAL PERSONNEL (1%) 73% OVERHEADS TRAINING (1%) 83% 8 45 PUBLICITY, LIBRARY & (7%) 80% PARLIAMENT COMPUTER SERVICES % 73% OFFICE SUPPORT COSTS (3%) 74% ACCOMMODATION (2%) 75% SUB TOTAL 3,867 3, , % 72% 1,445 5,229 DEPRECIATION & NON CASH % 75% 6 22 ITEMS CCWATER REVENUE TOTAL 3,877 3, , % 1 1,450 5,251 CAPITAL % 101% -0 9 CCWATER GRAND TOTAL 3,877 3, , % 72% 1,450 5, The actual expenditure for the year to date is 3.810m compared to the revised budget of 3.814m, an under spend of 4k (less than 1%). 10. Staff costs are under spent by 18k mainly due to vacancies for a Policy Manager post and customer caseworker and senior customer caseworker posts in the Consumer Relations team which is offset by auto enrolment of pensions for staff in the Wales Policy team. 11. The Publicity, Library and Parliament and Accommodation budget is over spent by 5k within the Communications team on the purchase of a stakeholder database and a licence for a social media monitoring platform. Additional expenses were incurred due to running MP dropin sessions and campaign meetings with water company communications teams. 12. The Accommodation budget is over spent by 7k mainly due to mainly due to invoices for the balance of service charge ( 3k) for This increase in charges is being followed up with the landlord s agent. 13. Other variances against budget were less than 5k or 10%. A detailed breakdown can be found in Annex one (by cost centre) and two (by activity). 2017/18 Forecast 14. Carried forward budget of 20k was approved at the July Board. This has been allocated as 9k to capital, 9k to depreciation and 2k to the unallocated budget. 15. As previously reported the Executive have discussed the financial plan for the year and have agreed the following actions to mitigate against the identified risks:- Page 3

58 Finance Report (to December 2017) a. To aim for a buffer of 50k initially, there is currently 52k, which is comprised of a combination of under spends on staff vacancies and use of budgets which are not forecast to spend in full. This is held in the unallocated budget and profiled in March This will result in an underspend of this value. b. Risks and opportunities are identified in the table below which could affect the outturn, resulting in a potential outturn of between 5,185k and 5,260k. The most likely outcome is an under spend of around 50-70k. It is expected that any underspend would be requested to be carried forward into 2018/19. c. The risks notified to the Board in previous months relating to the establishment fee, additional costs of salaries due to pensions auto enrolment and in-year benchmarking exercises and telecoms overspends due to legacy issues with closed regional offices have all been mitigated as stated in the table below. Page 4

59 Finance Report (to December 2017) Risks and Opportunities Range Service Area Likelihood (Low Most Likely Low High / Med / High) Outcome (Best (Worst Description case) case) Consumer Relations & Comms Team (5) 5 Medium 0 Accommodation costs for Wales Office could vary against budget; this cost is not yet known. Consumer Relations & Comms Team 5 10 High 7 General Data Protection Regulation (GDPR) consultancy work for gap analysis Consumer Relations & Comms Team 0 5 Medium 0 Costs of reconfiguration of telecomms systems Consumer Relations & Comms Team 0 15 Low 0 Recruitment agency fees for Head of Communications post. Consumer Relations & Comms Team High 21 Agency cover for the Communications Manager post Policy High 20 Additional costs of travel & susbsistence in response to PR19 workload, this will be offset by underspend on vacant posts within Policy Vacancy in Policy Manager posts which will be used Policy (18) (22) High (20) to offset additional costs of travel & susbsistence in response to PR19 workload. Potential underspend on LCA additional days and Policy (5) 0 High (5) travel Unallocated budget for research unlikely to be Policy (15) (15) High (15) utilised in 2017/18 Unused budget for PR19 and Market Reform call off Policy (5) (15) High (10) unlikely to be used in 2017/18 Slippage in Testing the Waters project into 2018/19. Policy (15) (15) High (15) This budget will be required in 2018/19 as carry forward. Potential inflationary increase to dilapidations Finance & Procurement 0 10 Medium 3 provision Finance & Procurement 5 8 High 5 Potential increase to service charges for 2017/18, will not be notified until March 18 Finance & Procurement 1 13 Mitigated 1 Notification of establishment fee from Defra for legal services during lease negotations. Fee is likely to be 13k, most of this is mitigated within the Finance & Procurement budgets. Finance & Procurement 0 0 Mitigated 0 Minor works budget unallocated will be used to offset establishment fee. Deputy CEO 0 0 Mitigated 0 Benchmarking of post 5k previously reported will be met from other DCEO budgets Deputy CEO 0 0 Mitigated 0 Employer s superannuation costs due to auto enrollment previously reported will be met from under spend on pay budget. Deputy CEO 0 0 Mitigated 0 Telecoms overspend due to charges for closed offices (being removed from Jan 18) will be funded from other DCEO budgets Deputy CEO 0 0 Mitigated 0 Under spend on ICT budgets will offset telecomms over spend Potential to reduce annual leave accrual by managing carry forward of annual leave, and timing of Easter break partly before 31st March year end date. This Corporate (10) 10 High (5) could be a risk or opportunity, although the number of days accrued at December is lower than at 2016/17 year end Under spend on pay award budget in year will offset Corporate 0 0 Mitigated 0 additional employer's superannuation costs. Total Risks and Opportunities (23) 52 (13) Page 5

60 Finance Report (to December 2017) Budget Setting 2018/ A report on the draft budget and options for the licence fee was presented to the November Board meeting, alongside the FWP, proposing a licence fee for consultation of 5.9m, which includes 500k for capital investment and 50k contingency in addition to the 5.35m agreed last year. There has been one comment on the licence fee during the FWP consultation which welcomes the clarity on the fee and asks how this will be communicated for future years. A response will be provided through the consultation process. 17. A further oral update was presented to the Board in January 2018, an update will be provided to the Board elsewhere on this agenda and final budget will be presented to the Board for agreement in March Page 6

61 Finance Report (to December 2017) Annex One SPEND TO % OF PROFILE TO VAR VAR FULL YR OFFICE COST CENTRE TITLE Dec 17 OFFICE Dec 17 Dec 17 % BUDGET % OFFICE OF CHIEF EXECUTIVE 162,174 4% 163,706 1,532 1% 215,793 4% BOARD 237,942 6% 238, % 322,190 6% GOVERNANCE 202,876 5% 205,344 2,469 1% 274,333 5% ICT SERVICES 271,692 7% 268,066-3,626 (1%) 355,993 7% HUMAN RESOURCES 149,127 4% 147,111-2,016 (1%) 194,416 4% WALES LCAs 23,856 1% 21,856-2,000 (9%) 29,390 1% WALES POLICY 55,068 1% 52,753-2,315 (4%) 71,595 1% TOTAL OFFICE OF DEPUTY CHIEF EXECUTIVE 1,102,735 29% 1,097,228-5,507 (1%) 1,463,710 28% POLICY 108,028 3% 108, % 155,042 3% SOCIAL POLICY 142,305 4% 140,568-1,737 (1%) 189,663 4% ENVIRONMENT 154,722 4% 153,444-1,278 (1%) 206,690 4% REGULATION 345,038 9% 345, % 472,150 9% MARKET INTELLIGENCE 300,826 8% 302,826 2,000 1% 479,163 9% CENTRAL AND EASTERN LCAs 19,277 1% 18, (2%) 25,233 0% NORTHERN LCAs 19,316 1% 19, % 24,162 0% WESTERN LCAs 14,034 0% 14, % 20,539 0% LONDON & SOUTH EAST LCAs 28,711 1% 27,078-1,633 (6%) 36,190 1% TOTAL POLICY AND RESEARCH 1,132,256 30% 1,131,190-1,066 (0%) 1,608,832 31% FACILITIES AND PROCUREMENT 412,068 11% 416,614 4,546 1% 570,621 11% FINANCE AND RESOURCES 130,448 3% 131, % 178,436 3% TOTAL FINANCE AND PROCUREMENT 542,516 14% 547,638 5,122 1% 749,057 14% CONSUMER RELATIONS 267,219 7% 266, (0%) 356,172 7% COMMUNICATIONS 240,256 6% 235,266-4,990 (2%) 311,640 6% BIRMINGHAM - CRM, SCC 137,594 4% 142,639 5,045 4% 193,114 4% BIRMINGHAM - CRM, CC 196,106 5% 205,726 9,620 5% 276,521 5% CARDIFF - CRM, SCC 165,744 4% 162,373-3,371 (2%) 217,626 4% TOTAL CONSUMER RELATIONS AND COMMS 1,006,918 26% 1,012,813 5,895 1% 1,355,073 26% UNALLOCATED 0 0% 0 0 0% 52,328 1% DEP'N & NON CASH ITEMS 16,478 0% 16, % 22,000 0% CCWATER REVENUE TOTAL 3,800, ,805,348 4,446 0% 5,251, % CAPITAL 9,098 0% 9, (1%) 9,000 0% CCWATER GRAND TOTAL 3,809, ,814,348 4,349 0% 5,260, % Page 7

62 Finance Report (to December 2017) Annex Two MONTH YEAR TO DATE BUDGET Actual Budget Actual to Budget to Dec 17 Dec 17 Dec 17 Dec 17 Variance Var % Remaining Total TOTAL STAFF COSTS 281, ,092 2,566,299 2,583,872 17,573 1% 958,252 3,524,551 RESEARCH SERVICES 22,386 22, , , (0%) 185, ,263 TOTAL PERSONNEL OVERHEADS 18,052 15, , ,345-1,100 (1%) 63, ,980 (Excluding Training) TRAINING 3,064 2,792 37,473 37, (1%) 7,527 45,000 PUBLICITY, LIBRARY & PARLIAMENT 6,137 6,791 73,346 68,704-4,642 (7%) 17,991 91,337 COMPUTER SERVICES 18,977 19, , ,502 3,233 2% 61, ,105 OFFICE SUPPORT COSTS 9,918 10, , ,735-3,404 (3%) 38, ,322 ACCOMMODATION 38,618 37, , ,354-6,868 (2%) 112, ,442 SUB TOTAL 399, ,736 3,784,424 3,788,869 4,445 0% 1,444,576 5,229,000 DEPRECIATION & NON CASH ITEMS 1,831 1,831 16,478 16, % 5,522 22,000 CCWATER REVENUE TOTAL 400, ,567 3,800,902 3,805,348 4,446 0% 1,450,098 5,251,000 CAPITAL 0 0 9,098 9, (1%) -98 9,000 CCWATER GRAND TOTAL 400, ,567 3,809,999 3,814,348 4,349 0% 1,450,001 5,260,000 Page 8

63 Consumer Council for Water Board 6 February 2018 Agenda Item 220/17P Title: Regional/Wales Round up February 2018 Report by: Regional/Wales Chairs Responsible Lead: Regional/Wales Chairs Paper for information/discussion Appendix: no Purpose 1. To update the Board on strategic matters arising in each Chair s area of responsibility. Recommendations 2. The Board is recommended to note the update and discuss any issues arising from it. Western 3. There was a significant water quality issue on 12th January when low level contamination of Cryptosporidium was detected in a raw water source serving some Bristol Water customers. Residents in Clevedon and a small number of properties in neighbouring parishes were served with a precautionary Boil Water Notice. Vulnerable customers were provided with bottled water. The treatment works was immediately taken out of operation and the system flushed. 4. No adverse effects were reported, and we were kept notified throughout. Media comment was helpful and constructive. Customers affected received automatic GSS payments of 10. The Boil Water Notice was lifted on 14th January. 5. In due course we will want to discuss with the company the clarity of information given out to customers in the affected area and whether the compensation payment scheme is adequate, but on the whole the company dealt with the incident effectively and with very low risk to customers. Page 1