Agenda item

1.    Sally Irgin attended to provide an update on the work of Ofwat.  Ms Irgin is a Director of Ofwat’s Casework Programme which is the organisation’s front line service for customer complaints about water companies.  It is also the part of the organisation responsible for determining disputes and taking formal enforcement action where Ofwat has powers to do so. Over the last three years Sally has led Ofwat’s work on developer-related disputes and a specific project working with water companies to improve their delivery of services to their developer customers.

2.    Ms Irgin outlined the background of Ofwat to the Committee, explaining that it served as the independent economic regulator of the water and sewerage sectors in England and Wales.  They had defined duties and responsibilities set out in legislation requiring them to protect customers, enable efficient, well-run companies to finance their functions and to ensure long-term resilience.  These functions were exercised within the framework of published Government police.  Their vision for the water sector was one where customers and society had trust and confidence in the vital public water and wastewater services.

3.    Outlining the scope of their work, Ms Irgin stated that Ofwat regulated ten regional monopoly companies, eight local water only monopoly companies, five new appointees and a growing number of retail licensees.  Ms Irgin explained that they worked on an outcome focuses approach which was supported by a toolkit designed to address the various challenges within the sector.  The focus was always on finding a co-operative solution through liaison and engagement between customers and providers prior to the consideration of formal intervention.

4.    In relation to water company engagement with developers, Ms Irgin explained that historically there had been limited and varied recognition by water companies of developers as customers and this hampered effective joint planning and co-operation.  This was exacerbated by inconsistent levels of service and sometimes complicated where the competitive market has not been as effective as it could be.  The complex charging regime has presented difficulties for the development sector and caused concerns in relation to housing growth.  There was limited precedent in law for handling disputes which sometimes slowed the process and caused greater frustration for customers and water companies.  However, Ms Irgin reassured the Committee that good progress had been made by all parties in responding better to issues and resolving disputes more quickly.

5.    Ms Irgin highlighted the significant benefit brought about by the introduction of the voluntary standards for measured performance.  She explained that 24 levels of service measures had been agreed by WaterUK in consultation with customers and water companies.  This provided transparent comparison of performance for the first time and the resulting company league tables have produced a strong reputational incentive.  This work had helped support the provision of more resources around development work as well as encouraging significant improvements in performance.  Ofwat was also able to make more effective interventions earlier on by targeting particular areas of poor performance, getting assurance on numerous improvement plans from various companies.

6.    Focusing on performance improvement, Ms Irgin explained that the improvement had been substantial following the introduction of voluntary performance measures, with rises from 42% up beyond 90% in some cases as well as a general shift up in performance across all water companies.  She noted though, that the level of improvement had been less stark among sewerage companies.

7.    Ms Irgin highlighted that the area of new connections was one of the few parts of the sector currently open to competition but noted that the effectiveness of this was variable across the country.  She explained that developers could choose to have new infrastructure provided by local monopoly companies, accredited self-lay organisations or a new appointee, however it was explained that the monopoly water company would always have to provide some non-contestable services.  Ms Irgin continued to outline the work undertaken in promoting market competition including the publication of general expectations under competition law in 2014, binding commitments arising from a new connection case linked to Bristol Water in 2015 and continued work on challenging companies on how much information they provide toe customers and competitors.

8.    In a positive update, Ms Irgin explained that ongoing work with all parties on the new charging regime was hoped to bring greater stability and parity to the sector and improve the capacity for long term strategic planning for new developments.  She also highlighted the good progress made across the board by water companies in being more engaged with Ofwat and their customers.  Ms Irgin noted that housing growth was a key factor for long term planning and improvement in the sector but reiterated that progress on this had been good and she reassured the Committee that larger scale development work was now a greater priority and considered more broadly by Ofwat.

9.    Responding to questions from Members, Ms Irgin explained that they were still working on level of service metrics for development but that these were expected in the near future.  She also explained that Ofwat’s role included both advisory work in the sector as well as enforcement, with their approach focused on applying the principles of fair and appropriate practice, promoted through effective communication with and between companies and customers.  She reassured the Committee that the continuing improvement in relationships between the key parties had allowed for quicker resolution of issues through informal communication rather than official enforcement activity.  She explained that Ofwat should be the last resort for resolving disputes as it was hoped that good understanding of the expected standards and the emphasis on fairness within their principles meant that informal resolution would be more common in future.

10. Responding to a question, Ms Irgin explained that KCC could best assist in supporting development and relevant improvement in the water sector by engaging with both parties, facilitating communication and encouraging advance notice of plans through joint strategic planning.  She highlighted examples where developers had shared sensitive information with water companies to ensure long term infrastructure planning was possible but she emphasised that this only happened where the was trust between the parties.

11. Responding to a Member question, Ms Irgin explained that resilience was a new statutory duty for Ofwat and that they were working assessing the issues.  She advised that there were still complaints regarding planning for sewage due to the problems caused by over-connection and that disputes still arose when the relevant infrastructure was not organised in advance.  Similar to the Ofwat’s advice regarding water companies, Ms Irgin confirmed that better relationships were needed between sewage management and developers on forward planning.  She explained that where insufficient provision or provision that lacked appropriate resilience was reported, Ofwat could examine it as an enforcement issue.

12. Mr Balfour, as Cabinet Member for Environment and Transport, commented that there remained a risk that lack of resilience could lead to further health risks and significant damage to property but the he believed the focus should be on improving management of these issues rather than examining the infrastructure elements.  Clarifying the response capacity, Paul Kent of Southern Water, explained that assessments of all assets were undertaken on a criticality and risk basis and this analytical approach was used to consider and justify investment.  He explained that in some cases of severe weather in recent years, back-ups or redundancies were in place but failed to work due to maintenance or technical issues and he confirmed that this was being addressed.  To reassure the Committee, Mr Kent explained that the switch to back-up systems should be automatic and would therefore not require a maintenance crew to implement and that in addition to the core systems, around five or six mobile generator units were stationed at the Aylesford depot, ready for deployment in relevant situations.  This response was also supported by the provision of tankers supplying fuel where the mobile generators could not provide the necessary resilience.  He agreed with the Committee that the very severe weather in the winter of 2013/14 stretched their response beyond capacity and advised them that this had been taken into account in future planning.

13. Ms Irgin advised the Committee that Ofwat was not prescriptive on operational matters but that they expected companies to meet their duties.  She reiterated that KCC’s support would be most beneficial if it was focuses on encouraging and facilitating early discussions between developers and water companies.  Ms Irgin again commented that it was hoped that the new charging scheme would support better engagement and greater fairness as it would be more transparent and accessible as part of long term strategic planning which worked well for both developers and water companies.

14. Responding to questions from Director Katie Stewart, Ms Irgin explained that water companies had been working on a system of measuring effective communication through satisfaction and price control metrics and that Ofwat were keen to engage with this activity.  Ms Irgin explained that the new charging model should improve communication and transparency; the old charging system was based on primary legislation and was very complicated while the new approach was to be based on principles of fairness, with an expectation that companies would work with customers, including developers, to set up a fair charging scheme.  Linked with this was the issue that charging rates were not varied based on the scale of relevant projects, with costs not necessarily changing between small building work and large scale developments.  Again Ms Irgin advised that this issue should be addressed in the new model.

RESOLVED that the Committee thank Ms Irgin for a very informative presentation and for her clear answers to questions from Members and KCC staff.