Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Examination of witnesses (Questions 420-439)



Mrs Dunwoody

  420. Good morning. Please introduce yourselves.
  (Ms Reiter) I am Chairman of the Ofwat National Customer Council and on my right is Maurice Terry, who is the deputy chairman. We are both chairmen of independent statutory regional customer committees.

  421. Do you have any general remarks you want to make?
  (Ms Reiter) Just a few, if I may. Our relationship with OFWAT in the past has worked well and we did not seek any change in arrangements. However, we recognise that the government does want to make changes and we are working towards ensuring that these work out to the benefit of customers. The government wants powerful consumer bodies, customers at the heart of regulation, they say, and a one-stop approach. What we have had to do is evaluate the proposals in the Water Bill to make sure they do, in fact, achieve those objectives and do not disadvantage customers. We feel very strongly that we need equal status and recognition, similar to the regulator; clear statutory duties and powers; and we have heard something about that this morning. We feel that the draft Bill does not necessarily give us the powers we feel that we need; these powers in particular are to obtain information, to publish information, to carry out complaint resolution and to audit customer services, and we would need to be able to do all that without dependence on the regulator otherwise there is no change in circumstances. It is very important that we do have those powers because there is a public perception at the present moment, there are questions about our independence and, if we are going to make a change, then it is important that the public should have a change in perception that we have, in fact, got the changes.

Mr Donohoe

  422. Do you see any conflict between yourselves in light of the Consumer Association and the Consumer Council in terms of responsibilities?
  (Ms Reiter) The duties and responsibilities that we have at the present moment?

  423. Yes. The role between the Water Advisory Panel and the Consumer Council. Do you see any areas between these two organisations that could conflict?
  (Ms Reiter) The Water Advisory Panel is not very clearly defined in the draft Water Bill, and I think that is a weakness. We are not sure, therefore, how it would be comprised and what its duties and powers would be. What we would be concerned about is, if it has membership which is said to represent the consumer view, how that would conflict with the work of the Consumer Council for Water.

  424. Do you see these problems being overcome?
  (Ms Reiter) I do not think they can be unless there is a clearer statement of what the WAP would be responsible for.

  425. So do you think it would be sensible at this stage for there to be a common board set up?
  (Ms Reiter) No. I think I would go along with the proposal to have an independent Consumer Council for water based on the regional representation. The regional committees are very strong in the water industry: there are special reasons for having regional committees. Do not forget we are very much based on the water catchment areas, and there are environmental issues which companies have to take into account when fixing matters such as tariffs, so we think it is important that there are regional committees and that those regional chairmen should work towards forming the national Consumer Council for Water.

Mr Brake

  426. On the question of abstraction licensing, do you think that the provisions will lead to higher prices for customers and, if so, why?
  (Mr Terry) The government produced last year a consultation paper on the economic instruments of water abstraction. Until we see that and some of its details and what might be proposed, it is difficult to make an absolute judgment. We come from the position that we would like to make sure that, whatever decisions are taken, the customer does not end up bearing an unjustified cost. We are pleased to see in the Bill that the government says it should have minimum impact but we would like to see the details worked through. It is very difficult for us; we are not experts in the area of abstraction licensing. We would like to ensure on behalf of customers, though, that the economic impact of any changes are well understood, well investigated and documented. We would like to make sure they are in the public domain. In other words, if prices are going to rise as a result of some change in the environmental circumstances, which is something the Environmental Agency determine in terms of abstraction licences, we would like to see a transparent process that demonstrated to customers what the benefit has been and what the cost is.

  427. Do you come down on one side or other of the argument in terms of whether abstraction licences should be withdrawn for environmental reasons?
  (Mr Terry) If I said to you "We do not want to see them withdrawn for environmental reasons", that would make it appear that I am anti-environment which is not the case. Whatever happens, you have to look at all the parameters—at the cost of withdrawing those and the benefit—and there has to be some cost-benefit analysis put in. At the end of the day, it is the customers of the water companies who are going to have to pick up the Bill.

  428. In percentage terms do you have a figure in mind that you think would be affordable from a customer's point of view in terms of increased prices to get those environmental benefits?
  (Mr Terry) No, and I do not think that would be our role. What is affordable—and you could hear some of the debate earlier on this morning—depends on where one is in the level of income. Certainly even a small increase at the bottom end of the charges for people who have difficulty affording to pay their water bills as it is would be very unwelcome. Whereas people at the higher end might be prepared to pay more for improved environmental standards. I think it would be wrong, however, for us at this stage to make those sort of judgments. We certainly have not done the research that would suggest that and we are not aware that there is any research that people would say, "We are prepared to pay X per cent more for better environment standards."

Mrs Dunwoody

  429. Why would the change in the abstraction scheme increase costs? You have talked about short-termism—is that what you are saying?
  (Mr Terry) It could do. You could, for example, imagine that overcoming a low flow river situation by withdrawing abstraction of one facility and compensating by giving another abstraction licence would be a more expensive mechanism of withdrawing the water. That is what we would like to see put into the equation. We have some examples where one scheme has been costed out and people have said, "No, it does not look a very cost-effective scheme" and some people have come back with a scheme one-tenth of the cost. That is what we would like to see driven forward, and we think there is a need to do that in a structured manner.

Mrs Ellman

  430. The Bill makes provision for setting up regional committees. How would that work?
  (Ms Reiter) We already have a regional committee structure within the water industry and we would like to see that perpetuated so that there is always an opportunity at national level to take into account any regional implications of decisions being made and policies being developed, at national level. We are statutory bodies at regional level but our current national body, the Ofwat National Customer Council, is not a statutory body and we feel that one of the benefits of the draft Water Bill is that it would provide a statutory body at national level. There are many issues we need to discuss—and do discuss—at national level, such as papers like the Water Bill and so on, and of course our dealings with Europe, and Europe is going to be even more important in terms of legislation and directives than it has been in the past. We need a national committee, therefore, but based on regional committees so that, in fact, any regional variations or peculiarities can be brought to the attention of the main body.

  431. But would the structure provide a strong voice for regional interest in their own right?
  (Ms Reiter) Yes, I think it would. If you have a strong national body and the membership of that body comprises the chairmen of the regional committees, then you would have the strength from the centre perpetuated on a regional basis as well.

  432. What role do you see for the regional chambers and regional assemblies which have now been set up in every region?
  (Ms Reiter) The regional committees are involved in working locally with the companies to ensure, firstly, that there is provision of water—because that is the greatest fear of all customers, that their water supply might dry up—and, secondly, to look at metering and tariffs, and, thirdly, to look at the sort of service given to customers on a local basis. I think there are strengths already there, therefore, amongst the existing customer committees which we would see not diminishing under the proposals that have been discussed here today.

  433. How do you see the link between the regional customer committees and the regional chambers?
  (Ms Reiter) The chairmen of the regional committees, by being members of the national committee, would be able to take the views of the regional committees to the national body and vice versa. If there is a national policy being developed and examined, then it would be able to go back to the regional committees for them to consider and determine if there are any peculiarities in a general sense that would be specific to a particular situation within a region.

  434. How do you see the link within the region between the consumer regional bodies and the regional chambers which have been set up in all regions now? How do you see the connection there so that the regional voice is speaking for the region and is not treated as some subdivision of a national body?
  (Ms Reiter) The regional committees are well established already and do, in fact, speak on behalf of customers in their area on issues that are being raised by the individual water companies for which they are responsible.

  435. How are they going to speak for the consumers, not the companies?
  (Ms Reiter) All customer meetings at the moment on a regional basis are held in public and we would see no reason why that should not continue.

  436. Do you think it must continue?
  (Ms Reiter) It must continue—there is no question about that. I cannot see any reason for changing and, therefore, on that basis, yes it must continue.

  437. But would it have to continue under the terms of this draft Bill?
  (Mr Terry) It would be essential that it does continue. It is not specified in the Bill.

Mrs Dunwoody

  438. Can I ask you about new regulatory arrangements? Do you think they could increase regulatory risk and then put up the customer's bill?
  (Ms Reiter) That is a worry to us at the present moment. There could be a risk and what we would be working to ensure is that none of that risk is passed on to customers.

  439. Who would then pay that increased cost?
  (Ms Reiter) It depends how the risk arises but if it is not a direct cost that can be attributable to customers then it is the shareholders who should pay.

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