It’s a familiar feeling for many businesses, especially those in regulated industries: you pour your heart and soul into a comprehensive plan, only to have it met with a detailed critique. For a company like the one behind the 2020-2025 Business Plan, responding to Ofwat's draft determination was precisely this kind of moment. It wasn't just about ticking boxes; it was about a deep dive into what truly matters to customers and how to deliver it efficiently.
When a regulator like Ofwat weighs in, it’s not just a bureaucratic hurdle. It’s an opportunity, albeit a challenging one, to refine your vision. This particular plan, initially submitted in September 2018 and updated in April 2019, was built on a foundation of customer partnership. The goal? To achieve significant service improvements at prices that customers could comfortably afford, focusing on the areas they cared about most.
The draft determination, published in July 2019, presented a mixed bag. The company accepted the majority of Ofwat's interventions, recognizing that many of them provided strong incentives for top-tier performance and customer protection. It’s a testament to the collaborative spirit that when feedback aligns with your core objectives, embracing it feels natural.
However, as is often the case, there were aspects of the draft determination that didn't quite hit the mark. The company found that certain points failed to acknowledge its unique circumstances or weren't entirely rational given the extensive preparation and evidence underpinning their original plan. Crucially, some recommendations seemed to diverge from the very customer priorities they had worked so hard to understand and incorporate. This is where the real dialogue begins – bridging the gap between regulatory perspective and customer reality.
Interestingly, the company wasn't alone in its concerns. Their Customer Scrutiny Panel independently shared their views with Ofwat, highlighting valid customer impact concerns. Even external bodies like the Environment Agency lent their support to the company's submission. This kind of multi-faceted backing underscores the importance of genuine stakeholder engagement.
Let's look at some of the key areas where the response focused:
Delivering Outcomes for Customers
The company embraced most of Ofwat's proposed performance commitments and Outcome Delivery Incentives (ODIs). For instance, they accepted changes to the leakage ODI, but with a crucial condition: ensuring adequate funding was provided to meet the ambitious targets. This highlights a pragmatic approach – ambitious goals require commensurate resources.
They also agreed to a new performance commitment for 'softening' (likely referring to water quality or treatment) and its associated ODI. However, they proposed an alternative ODI structure that better reflected the nature of their activities and the actual customer impact of failing to meet the target. It’s about making sure the incentives are precisely aligned with the desired outcomes.
Perhaps one of the most significant points was the push to reinstate the 'risk of supply failures' performance commitment. This was tied to securing funding for the final phase of a network resilience program. The message here is clear: maintaining a robust and reliable supply is paramount, and it requires ongoing investment.
Further evidence was presented, revisiting customer willingness-to-pay research. This reinforced strong customer backing for proposed mains replacement rates aimed at sustainably reducing leakage and ensuring supply resilience through multiple treatment works. It’s a powerful reminder that customer support is a vital currency in business planning.
In total, the plan encompassed 25 performance commitments, with 16 tied to financial ODIs. This included 16 underperformance penalties and six outperformance payments, striking what the company considered an appropriate balance of financial and reputational incentives for their stretching targets. Transparency was also key, with commitments to report progress regularly through annual reports, customer bills, and their website. It’s about building trust through consistent communication and demonstrable progress.
