Minute of the first meeting of the Water Forum Severn Trent Centre, Coventry 2 March 2012 Present: Chair Consumer Council for Water (CCWater) Drinking Water Inspectorate (DWI) Environment Agency Natural England Severn Trent Water Dame Yve Buckland David Wurr, Christina Blackwell Milo Purcell Greg Marshall, Alan Roe Ian Butterfield Tony Ballance In attendance: Severn Trent Water Rob Salmon, Min Bansel, Frank Grimshaw, Neil Corrigall, Harriet Towler Apologies for absence: Adam Lines (Environment Agency) Item 1.1: Welcome, introductions and Declarations of Interest The Chair welcomed attendees to the first meeting of the Water Forum for the Severn Trent region. Item 1.2: Role of Water Forum and its Chair The Forum discussed and approved the proposed terms of reference without amendment. The Forum approved the appointment of Dame Yve Buckland as its independent Chair. The Forum discussed the creation of the position of Deputy Chair. The Forum agreed that a nomination for the Deputy Chair should be pursued by the 1
Chair once all new members were in place, and in advance of the next meeting. Members would have the opportunity to input to this decision. Action: Dame Yve Buckland to discuss possible options for a Deputy Chair. Agenda Item 1.3: New Membership of the Forum The Forum discussed options to expand its membership to ensure that Severn Trent Water s customer base and stakeholders were appropriately represented. The Forum noted that business customer and local authority representatives have been invited. The Forum suggested that consideration should be given to ensuring business customer representation have expertise in business planning. The Forum agreed that the agricultural sector should be included and a representative invited. The Forum agreed that membership should be reviewed at regular intervals and that other representatives may be invited to future meetings of relevance to them, but without becoming formal members of the Forum. The Forum requested that the interests that existing members would be expected to represent be clarified. Actions: Dame Yve Buckland and Harriet Towler to invite agricultural representation to the Forum. Harriet Towler to identify and illustrate how and which customer representatives and stakeholders would be involved in the engagement process. Agenda Item 2.1 Information Disclosure The Forum discussed a proposed Confidentiality Agreement to protect information provided by Severn Trent Water which is commercially sensitive. The Forum agreed that the proposed agreement should be amended to make it practicable for members to share information with colleagues, but that price sensitive information should be rigorously controlled. The importance of appropriate information disclosure procedures would be discussed with new members of the 2
Forum unfamiliar with the price review process or requirements for a Plc listed on the stock exchange. The Forum agreed that information and materials for future meetings should be clearly classified and public versions of minutes and non-confidential papers should be made available. The Forum approved the proposed media strategy and that media communication should be managed by the Chair in conjunction with Severn Trent Water. Actions: Harriet Towler to develop a classification system for papers at future meetings. Harriet Towler to arrange for Confidentiality Agreement to be amended in line with members comments. Harriet Towler to arrange for minutes and appropriate papers to be made publicly available on the Water Forum area of the Severn Trent Plc website. Item 2.2 Expenses Claims The Forum agreed to the proposed approach to expenses claims, and accepted that claims by members representing statutory bodies may be made public. Item 3.1 Member priorities for Periodic Review 2014 (PR14) Members were asked to discuss their priorities and areas of interest for PR14. The Environment Agency explained that its priority would be to ensure that Severn Trent Water delivers its fair share of environmental improvements. It was also concerned that, particularly given the challenges presented by climate change, sufficient investment should be made against flooding and improving the resilience of public water suppliers. The DWI explained that its priority remained the protection of public health through safe drinking water. It did not expect any new obligations in relation to drinking water standards to arise for PR14, but was awaiting confirmation of this. It noted that whilst there would be no scope to consult on water quality standards, it would expect discussion about the pace at which they could be achieved. The DWI noted that there were issues in relation to existing obligations that would also need to be considered including: the extent to which metaldehyde could be addressed using catchment management as opposed to traditional treatment; the 3
continuation of the current approach to lead rather than a wholesale lead replacement programme; and how disinfection by-products would be treated in the future. It also expressed a concern that capital maintenance expenditure should not be unduly limited in favour of delivering further environmental improvements. Finally, it wished to have further clarification from Ofwat as to the role of its Customer Advisory Panel, and particularly in relation to Customer Challenge Groups. Natural England noted that its priority would be the delivery of the priorities set in out in Biodiversity 2020 particularly relating to the improvement of Sites of Special Scientific Interest, Special Areas of Conservation and Special Protection Areas. It added that where there would be choice on delivering the Water Framework Directive, it would like to see options pursued that could deliver wider ecological benefits. In some areas, such as phosphate removal, it would expect Severn Trent Water to explore options that go beyond Best Available Technology. The Natural England Board would shortly be finalising its objectives for PR14 and these would be shared with the Forum. Action: Ian Butterfield to circulate Natural England priorities once agreed. CCWater noted that it would expect to see robust engagement throughout the PR14 process that represented all segments of society. It expected plans that are acceptable, and provide good value, to customers, which are based on customers views and rigorous willingness to pay research, which considered not only changes in components of bills, but also the total bill impact. Affordability would be a key issue and an approach should be taken that takes into account the needs of those customers least able to pay (bottom quintile) including the innovative use of social tariffs. A transparent process is important, and CCWater expected the Forum to be involved in how the outcome of willingness to pay research is interpreted and translated into actual investment proposals and outcomes. The Forum also discussed the extent to which questions such as the level of profit or expected efficiency savings by companies should be included as part of the engagement process or whether financeability was a matter for companies and Ofwat as the economic regulator. It was noted that it would be important to differentiate between customers having a legitimate interest in the level of profit (and dividend payments to shareholders) and giving them a choice over that level. Item 3.2 What does good engagement look like? The Forum discussed what criteria it believes constitutes good engagement and it would expect to see from Severn Trent Water. 4
The Forum approved the proposed baseline presented but recognised that the Forum considering the full range of opex and capex solutions to deliver outcomes would not be possible. It would instead expect strategic and high value projects to be brought to the Forum for discussion. Agenda Item 4.1 Approach to engagement Severn Trent Water explained its overall approach to engagement with its customers and stakeholders. The Forum noted that Severn Trent Water wanted to ensure that it remained accountable for its approach to, and interpretation of, engagement. It had therefore decided not to create expert panels to report directly to the Forum and which could negate this accountability. Instead, Severn Trent Water wished to engage a wider range of stakeholders through a programme of workshops (see item 4.3). Action: Harriet Towler to inform the Forum which stakeholders had been invited to take part in engagement. The Forum noted and welcomed Severn Trent Water s approach. In addition to reviewing the outcome of engagement at appropriate stages in the process, it agreed it would also seek assurance about how the outcome of engagement had been taken into account in Severn Trent Water s decision making processes. The Forum noted that there may be instances when the outcome of engagement would reveal conflicting priorities or that no clear consensus existed. For example, the outcome of willingness to pay could conflict with the outcome of other engagement. It accepted that there could also be instances when the company, for commercial or operational reasons, would wish to take decisions that did not necessarily reflect the outcome of engagement. It would expect Severn Trent Water to account to the Forum how and why these decisions had been made. Item 4.2 Customer Research The Forum discussed Severn Trent Water s proposed approach to customer research and in particular, willingness to pay research. This followed earlier discussions held with a customer research working group comprising the Environment Agency, CCWater and the DWI. The Forum agreed that there were three issues with Severn Trent Water s approach to willingness to pay that it would like to be resolved: whether social tariffs should be included; whether low pressure should be included; and how the range of improvements on river water quality should be presented. 5
The Forum agreed that the customer research working group should resolve these issues on its behalf on its next meeting on 23 March 2012. The Environment Agency would represent the views of Natural England at this meeting. If agreement could not be reached, this would be discussed with the Chair. The Forum noted Severn Trent Water s concerns that changes in the phrasing of questions relating to river water quality which resulted in a deviation from the UKWIR developed approach could lead to the perception that it had not followed industry best practice. The Forum agreed that if changes in the phrasing of these questions could be demonstrated to produce greater participant understanding of the issue being raised, then it would still regard Severn Trent Water s approach as best practice. Item 4.3 Strategic issues consultation The Forum welcomed Severn Trent Water s decision to produce a consultation document setting out strategic issues for debate with stakeholders. Members raised a series of questions and proposed amendments to the draft copy of the Making the Right Choices paper presented. Members were also invited to provide further comments in writing following the meeting. Severn Trent Water agreed to review and incorporate these amendments where appropriate. The Forum discussed Severn Trent Water s proposal to hold a series of stakeholder workshops to support the strategic issues consultation. The Forum welcomed this approach and noted the proposed dates. It wished to see the outcome of the wholesale workshops at its July meeting and further details about the proposals for retail workshops (scheduled for September). Actions: Members to provide specific comments on the strategic issues by 9 March 2012. Severn Trent Water to review and incorporate comments and report back to the Forum on amendments made. Severn Trent Water to provide more information on retail workshops at the July meeting. Severn Trent Water to report the outcome of the wholesale workshops at the July meeting. 6
Item 4.4 Assurance Severn Trent Water explained its proposed approach to assurance for PR14. As part of its own governance procedures, Severn Trent Water would be using independent scrutiny of its approach, cost assessments and processes. The Forum would be given access to the outcome of this assurance. The Forum agreed that whilst it did not want to duplicate Severn Trent s Water s own governance processes, in some instances it may wish to commission its own assurance directly from Severn Trent Water s provider. The Forum agreed to discuss its requirements again at its next meeting. Action: Harriet Towler to include assurance requirements as an agenda item on the 10 July meeting. Item 4.5 Future Forum Meetings The Forum noted the proposed schedule for future meetings. Members requested further information on when contributions might be expected from them in related engagement activities. 7