Welsh Water – a different way of doing business

Welsh Water at the Royal Welsh Show 2016, © Welsh Water, 2016

Welsh Water at the Royal Welsh Show 2016, © Welsh Water, 2016

Peter Davies is an FDSD Trustee and Chairs Welsh Water’s Customer Challenge Group.

Where I was born in Pembrokeshire in south west Wales, 61 years ago, our water came from a well. Piped water arrived only after my father dug a ¾ mile trench to connect to the mains. The majority of people around the world still have this very direct relationship with their supply of water. But for those of us fortunate to have water provided as an essential public service, we simply expect high quality water to flow when we turn on the tap, and for waste water to be taken away. This shift from active involvement to being passive receivers has provided huge improvements in quality of life, but also creates challenges for how we better manage our water resources for the long term. One way this can happen is by incorporating stakeholders and customers directly in the business model.

Water and sewage provision in England and Wales

In England and Wales water supply and sewerage services were privatised in 1989. They are now managed through 32 private, monopoly water and sewerage companies operating in a highly regulated sector and providing services to over 50 million household and non-domestic customers. Customers are the life blood of any business, and should be the focus for every public service. However, in regulated sectors (and in public services in general) it is easy to think of customers as passive receivers of utility services.

This lack of consumer involvement was behind Ofwat’s decision, as the economic regulator for the water industry, to: “put current and future customers at the heart of the way companies run their businesses.” Since 2013, Ofwat has required each water company to create an independent Customer Challenge Group (CCG) as a key means to deliver this vision. Each CCG has the responsibility for ensuring that the company engages customers in its business planning process and that their views are properly reflected in the company plans submitted to the regulator.

The CCG is not representative and should not be confused with the statutory role of the Consumer Council for Water. It is however independent and brings together a range of expertise and networks that work alongside the company to ensure that the company’s business plan meets the needs of all its customers. It has a particular responsibility to reflect the needs of vulnerable customers, who find it most difficult for their voice to be heard, and for those future generations of customers who do not yet have a voice, but whose needs will be met by decisions the company takes today. The independent CCG brings together a range of relevant expertise and reference points to ensure the company is both challenged and supported to ensure that its customers are at the heart of how the company operates.

I have the important task of chairing the CCG for Dwr Cymru Welsh Water, providing independent challenge, scrutiny and advice on the:

  • quality of the company’s customer engagement and involvement
  • extent to which the results of this engagement are reflected in the company’s decision making, business planning and operations.
  • return of value to customers

This task has a different context in Wales as we are proud to have a very different delivery model with a very different relationship with its consumers to that in England. The vast majority of our water services are provided through Dwr Cymru Welsh Water − a not for profit company.

Dwr Cyrmu Welsh Water

Welsh Water is the sixth largest water and sewerage business in England and Wales and, since 2001, it has been owned, financed and managed by Glas Cymru. Unique in the water and sewerage sector, Glas Cymru is a company limited by guarantee and as such has no shareholders. It operates as the only not-for-profit water company with all financial surpluses used for the benefit of its customers. Its corporate governance functions are the responsibility of its Board, which has a majority of independent non-executive directors. These roughly 70 members are appointed following a process undertaken by an independent membership selection panel. They cannot be representatives of outside stakeholder groups but rather are unpaid individuals whose duty is to promote the good running of the company, in the best interests of its customers.

Dwr Cymru Welsh Water therefore has a different relationship with its customers than the other water companies in England and Wales. The business model enables customers to help decide how the company should reinvest its financial surpluses. Over 12,000 customers were involved in last year’s consultation on how the company should reinvest its approximate £30 million profit. However, the fact that well under 50% of customers currently realise that their water company is not-for-profit, indicates the size of the challenge to really involve customers.

Increasing consumer power

We are seeing huge changes as technology empowers people making them smarter, better informed and more demanding than ever. Despite our largely passive relationship with waste water and supply, the water industry is not exempt from these changes. The UK Government is introducing competition into business and retail markets giving consumers some element of choice of service. However, in reality it is largely illusory as competition only applies to retail services such as billing, as opposed to the core business of water supply. The industry itself is collaborating to provide consumers with comparative performance data on the core business via www.discoverwater.co.uk.

Ofwat has made it clear that company business plans need to be based on customer views in the next price review. The real goal is to move from consultation to active involvement. The Dwr Cymru Welsh Water business model provides some advantages in that customer trust increases significantly when they are aware of the not for profit business model. However the task of moving customers from passive receivers to active participants focused on the long term wellbeing of future generations remains a real challenge.

Encouraging people to participate in co-creation has the potential to deliver far better solutions that businesses or public bodies can achieve alone. In developed countries this may not now require digging your own trench, or going to the well, but it is critical that we reconnect consumers practically and emotionally to the governance of how we manage such a vital asset.

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