Download Submission by the Customer Forum for Water in Scot

Joint Oireacthas Committee on the Future Funding of Domestic Water Services:
Submission by the Customer Forum for Water in Scotland.
Introduction
The Customer Forum for Water in Scotland has been requested to make a short submission to the
Joint Committee in respect of the Public Engagement and Transparency strand of their
considerations on the role played by the Customer Forum in the delivery of water services in
Scotland. Specifically, what is below addresses Q9 c).
Customer role in decision making on water in Scotland
The Customer Forum for Water in Scotland was created in 2011 specifically to bring a customer
voice to the heart of key decisions affecting customers in the delivery of water services.
The water utility in Scotland, Scottish Water, is a publicly owned corporation, operating on strong
commercial principles and independently of government and is regulated by the Water Industry
Commission for Scotland.
In essence, because Scottish Water is a monopoly service provider and does not issue its own
charges direct to customers (this is done through a separately identified charge administered
alongside local tax bills by the local authorities in Scotland), it was felt that `normal’ commercial
provider/customer dynamics could be strengthened, and that a direct voice of customer interests
would also help inform the regulator in the exercise of their statutory responsibilities. The Customer
Forum was therefore specifically designed to bring a new customer/company dynamic into the
delivery of water services.
At the instigation of the Regulator and through a co-operation agreement between the Regulator,
Scottish Water and the statutory consumer agency in Scotland, the Customer Forum was established
to sit equidistantly and independently from each of the partners to the co-operation agreement in
the delivery of its role. The nine Forum members were appointed not as representatives of any
specific sector or interest, nor were they seen as themselves as representative of customers, but as
people of maturity and discretion who should seek to find out (with the Company or independently)
what customers views and priorities were for services, and to then seek to interpret, represent and
advocate those views with the company in the price setting process.
Specifically, the Customer Forum’s role sits inside the regulatory process of price setting which runs
on a (now) 6 year cycle. Within that process the Regulator invited Scottish Water and the Customer
Forum to seek to find agreement, through a comprehensive engagement process, on the Business
Plan of the Company for the 6 year period 2015 to 2021. This Business Plan would determine
investment priorities and levels, set standards for performance and service delivery, and form the
basis on which prices would be determined. Seeking agreement on the price domestic and business
customers would pay for water was a specific part of the remit given.
The Regulator at no point relinquished their statutory position in relation to the price review and set
broad parameters within which the engagement process would take place, but which gave
considerable scope to the Company and the Customer Forum to find an agreed outcome. The
Regulator made clear that if the Company and the Customer Forum could not find agreement they
would be required to set out why, and this would play out in public. Further, and this is perhaps the
key point, the Regulator made clear from the outset that if the Company and the Forum could find
agreement across the range of matters in the Business Plan, the Regulator would be minded to
accept that agreement as the basis for the statutory price determination. This is what gave power to
the whole process: it gave incentives to and impelled the Forum and the Company to seek to work
constructively together to seek agreement; it gave the customer voice real power in the engagement
process.
The Customer Forum saw its role as to constantly ask of the Company, “why is it that what you
propose is in the interests of customers?” If the Company, through the engagement process could
satisfy the Forum of their reasoning on a wide range of propositions, the Forum could, in effect `sign
off’ that proposition for inclusion in the eventual Business Plan. If, however, the Customer Forum
was not satisfied with propositions put to them, they would ask the company to re-consider any
such propositions, refine them, or potentially drop them altogether. Through this iterative process of
engagement, the Company and the Customer Forum, constructively, but with some moments of
healthy tension, worked through a substantial process of considerations and a final `end game
negotiation’, until they did secure agreement on a Business Plan to put to the Regulator.
That agreement, in the form of a Minute of Agreement between the Company and the Customer
Forum formed the basis for the finally agreed price settlement by the Regulator.
The Customer Forum and Company engagement in the decision making process is widely seen to
have added real value to the last price determination and, without question in the view of the
Customer Forum, empowered a customer view in a very real and significant way. The process has
been independently evaluated, and there is now notable international interest in how this
innovative approach might inform other nations and sectors as they seek to address customer
engagement and empowerment in utility service delivery.
With this short summary of what has been developing in Scotland, is attached: a copy of evaluative
work undertaken by Professor Stephen Littlechild, probably the leading international expert in price
regulation; and a copy of a legacy report prepared by the Customer Forum at the end of the process
of engagement and agreement.
There is considerable other documentation that surrounds the whole process and if the Joint
Oireacthas Committee on the Future Funding of Domestic Water Services wishes further
information, every endeavour will be made to meet that request.
Peter Peacock
Chair of the Customer Forum for Water in Scotland
28 January 2017