Future Flood and Water Management Legislation

Supplementary memorandum submitted by Water UK (FFW 25A)

Identifying and assisting customers who have difficulty in paying their water and sewerage bills

1. Identifying "can’t pay" customers

The water industry is acutely conscious of the difficulties that some customers have in paying their water bills, and the need to differentiate between these customers ("can’t pay" customers) and those who could pay but don’t ("won’t pay" customers).

Water companies do many things to help customers who are struggling to pay their bills – for example:

• Helplines - customers can discuss their payment problems with companies and agree appropriate payment plans

• Flexible payment plans – customers can choose how frequently they pay

• Referrals to charitable trusts and hardship funds

• Free water meters – may reduce customer’s charges

• Help in applying for direct payment from benefits – Water Direct

• Advice on the "WaterSure" tariff - metered customers on benefits who qualify can receive a reduced bill.

• Promotion of debt advice agencies and support of local Citizens Advice bureaux

However, in order to help customers who are struggling to pay their bills, companies first need to identify them. To do this, companies rely on information.

The best source of information is from customers themselves, so companies encourage customers who are having difficulties to contact them, for example by providing freephone numbers and by making it clear that customers with genuine difficulties will be treated sympathetically and given assistance in getting back on track.

Companies also use information they hold, for example payment records, to identify customers who may be having payment difficulties – and then use a variety of different methods to try to contact the customer.

An alternative source of information is through contacts from money advice agencies such as Citizens Advice or the Money Advice Trust.

Once contact has been made with a customer, by whatever route, companies will seek to understand the customer’s financial situation, for example through an income and expenditure survey.

This will identify whether it is the customers’ financial situation that is causing them to have difficulties in paying their water bill, and to understand whether the difficulties are temporary, which could be managed by reduced payments for a short period, or are likely to be ongoing.

If the difficulties are likely to be ongoing, companies will seek to understand whether a customer is claiming benefits. If the customer is, then the company may be able help the customer to apply for Water Direct, so that charges can be paid directly from benefits.

If appropriate, the company may suggest that the customer applies to an independent assistance fund for help in paying amounts owed, or contact a money advice agency for help in managing their finances.

Companies will also provide advice on whether switching to a meter would reduce the customer’s bill, and if the customer is already on a meter, whether they may be eligible for the WaterSure tariff.

2. Challenges in identifying "can’t pay" customers

The key first step is identifying and contacting customers who are finding it difficult to pay their bills. This is made more challenging for water companies by the limited rights they have to information about their customers.

Customers do not have to enter into a contract, or provide any information to their water company, to receive a water supply. Water companies do not have any rights to require information to be provided to them about who is liable for charges.

This is a particular problem for rented properties, where the occupancy changes more frequently, and it can be difficult for water companies to keep records of who is occupying a property up to date. This lack of information makes it difficult to identify and contact customers who may have difficulty in paying their bills.

Implementation of Section 45 of the Flood and Water Management Act would make this significantly easier, as for rented properties the landlord would be required to provide information to the water company on who is liable for charges. We are urging the Government to implement this provision as soon as possible.

As well as identifying who is liable for charges, and enabling companies to bill the right customer at the right time, having customers’ details would also improve companies’ ability to access other sources of information, such as data held by credit reference agencies, giving a fuller picture of who is likely to be a "can’t pay" customer.

However, even with this information, companies would still be dependent to a considerable extent on customers voluntarily providing information about their circumstances, for example on whether they are receiving benefits or tax credits. This limits companies’ ability to take a proactive approach, for example by helping customers to apply for Water Direct.

If companies had access to government data on which customers are in receipt of benefits or tax credits, this would greatly enhance their ability to identify customers who could be having difficulties in paying their bills (particularly customers who are reluctant to contact the company themselves), and to proactively offer to help them. This could also potentially identify customers who could be eligible for social tariffs.

3. Social tariffs

Although as discussed above, there are a number of ways in which water companies do help customers having difficulties in paying their bills, there is currently limited provision for direct financial assistance through social tariffs.

However Section 44 of the Flood and Water Management Act 2010 explicitly allows charges to be reduced for individuals who would have difficulty paying in full, to be paid by cross-subsidies from other customers.

While in principle we continue to believe that the fairest way to provide assistance to customers who are having difficulty in paying their water bills would be through the welfare system, we welcome this provision.

We also welcome that it requires Ministers to issue guidance on how eligibility for such social tariffs should be determined, as this is essentially a social policy question that is rightly a matter for government, not for individual private companies (or for the economic regulator). We are urging the Government to implement this provision, and to provide the required guidance, as soon as possible.

In determining eligibility and the scope of social tariffs, it will be important to take into account customers’ views on the scale and scope of cross-subsidies. Recent research carried out for the Consumer Council of Water found support for targeted cross-subsidies, provided they were limited to a few pounds per year.

Whatever eligibility criteria are used, they will need to be clear and objective, practical to implement, and minimise the potential for error or fraud.

This may imply some linkage to receipt of specified benefits or the planned Universal Credit. If this is the case, to implement the tariff effectively companies would need to have access to information on who is in receipt of the appropriate benefits or credits.

This could be on a similar basis to the approaches already used in the energy and telecommunications sectors, where data from companies is matched with government data to identify customers who are eligible for social tariffs.

October 2010