Select Committee on Constitution Minutes of Evidence

Examination of Witnesses (Questions 360-379)



  360. Or the regulator?
  (Mr Terry) Or the regulator, exactly. All we can do is lobby, cajole, persuade and make a bit of noise about it. But, at the end, we accept entirely, that whatever we might say, Ministers and the regulator will decide. We hope their views will converge and that realism will prevail.


  361. Just very quickly, on Lord MacGregor's first question: earlier you were saying you would like the new CCW to have certain powers, including the power to require the publication of certain information. I wondered though whether you felt the publication of minutes should itself be a statutory requirement, not necessarily confined to this particular authority but to any regulatory body; would you think that would be an advisable provision?

  (Mr Terry) I had not considered that. Yes, I think, yes. The answer to your question is, yes, I think it would be a sensible addition, with the proviso of some form of excising or eliminating commercially-sensitive, points. You do not want the minutes totally neutered but you do have to respect the commercial and price-sensitive confidentiality of certain of the issues.

Lord Elton

  362. Can I just ask a supplementary there, too. Would the minutes be published with the annual accounts, and how fully are the annual accounts now published?

  (Mr Terry) The annual accounts of Ofwat are published, as part of the annual report from Ofwat, I think I am correct in saying, to ministers. And, I would have thought that probably you would publish, much as the MPC does, the minutes as you go along. I cannot see any reason for publishing them only once a year.

  363. I was really after the accounts, because we have heard of some regulators whose accounts appear to be less than transparent when published.
  (Mrs Reiter) Our accounts are not in the annual report, are they? Ofwat's are.
  (Mr Terry) I am not sure.

  364. Let me ask whether you think they should be fully published?
  (Mr Terry) I have to say, I thought they were fully published.
  (Mrs Reiter) No, not at the moment.
  (Mr Wardle) We are in some difficulty, in answering this. Because WaterVoice is part of Ofwat at the moment, really I think those sorts of questions are questions best put to the regulator. We have no direct responsibility at the moment for publishing accounts. What we do at the moment and what I would expect to continue is that we publish the minutes of our Council meetings generally within ten days of each meeting, the minutes are put on our website, they are circulated widely to those with an interest in our work, and I can see no reason whatsoever why that practice should not continue, whether as a statutory requirement or otherwise, under the new Consumer Council for Water arrangements. We are very much in favour of letting people know what we are doing at the time we are doing it.
  (Mr Terry) Just to clarify, My Lord Chairman, I think that I would say that the new Consumer Council for Water should have the duty to publish its accounts.

Lord Acton

  365. On this question of the publication of agenda and minutes of Ofwat, you said you were an advocacy body who lobbied, cajoled and made a bit of a noise. Well, you are lobbying, cajoling and making a bit of a noise today on this subject, but have you been doing it before, have you been lobbying away, cajoling away and making a noise away, and have you been told, "No, we're not interested, we're not prepared to publish, you're going to have to go to Parliament, you're going to have to go to the Constitution Committee;" what has happened?

  (Mr Terry) We have, I suppose, to a certain extent, an inside track, being part of Ofwat, so many of these things we actually see on a confidential basis. I think the point that we are making is that we can see advantages in terms of overall accountability of the regulators to the public at large, not just to WaterVoice.

  366. I am sorry, I appreciate that, but have you said so to them, have you said so to Ofwat, have you said, "We're cajoling you; now, come on, publish"? You have said that to us, have you said it to them?
  (Mr Terry) Probably not directly.

  Lord Acton: I see; thank you.

Lord Morgan

  367. You mentioned you had an auditing role of the industry as well, and there are other auditors.

  (Mr Terry) I am not talking about financial auditing, I am talking about customer service issues.

  368. Yes, I see. Are there other audits of that aspect, too; can you tell me what status or standing your particular audit had in relation to all this?
  (Mr Terry) I know that the company for which I have a responsibility, because it is my region, which is United Utilities, certainly they carry out their own internal auditing procedures, the normal sort of procedure of internal auditing. I am not aware of whether any outside body audits the industry; but, of course, Ofwat, in a way, audits them, by publishing a series of fixed annual reports about certain issues, leakage being one, if you like, which is a sort of audit. I think the audits that we do, as WaterVoice, are audits which relate specifically to areas of customer service that perhaps you cannot measure as a reliability issue, like 99.5 per cent, or whatever it is. It is those slightly softer customer service issues that we work at in terms of our auditing.

  369. So you have a unique role, you think, in that, do you?
  (Mr Terry) Yes.
  (Mrs Reiter) Could I add, just for clarification, obviously the companies are subject to the normal, not only internal audit but the external audit that is required of a plc, but, in addition to that, the regulator does have somebody called a `reporter' for each company, and that reporter is expected to audit submissions that are put to Ofwat at the time of the Periodic Review, and in-between times when there are other issues that are being raised. So there is quite a deal of auditing going on. There is the financial auditing, there is the operational auditing, which is done by the reporters, and then we do mainly the customer service issues.

  370. I see, yes. What I have in mind is that in other areas of public institutions there is a variety of auditors, financial and consumer service, and they can have a sort of domino effect, they can interact on each other and create a momentum?
  (Mr Terry) Yes, My Lord, I think I would say that the companies take our auditing activities very seriously, they do not like it when they get a bad audit. It is perhaps one of those examples where you can touch a raw nerve with really a very, very simple little tool; and they do take them very, very seriously. They put a lot of time and effort into preparing the information for us, and a lot of time and effort in analysing our audit and responding to it.
  (Mrs Reiter) And because we have a common approach across all the committees, we use the same method and the same modus operandi when we go in to do these audits, then there is an opportunity, in fact, very clearly, to do the comparative work, which is, of course, what the economic regulatory system is all about. Therefore, the companies can see, in the published reports, how each other one is doing.

  Lord Morgan: Yes, I see. Thank you very much.


  371. And, presumably, the leverage, why they pay attention, is that of publicity?

  (Mrs Reiter) I think there are three leverages. One is publicity, because actually it is published in an annual report, but it is interesting also because, as a committee, we meet with the board of each of these companies once a year for an annual review, and it is very interesting to see how the non-executive directors of the companies are particularly interested in the view of the local WaterVoice committee, and its perspective on their own water and water sewerage company. In particular, they will have looked very carefully at all these qualitative reports, some of which we had an input into.

Lord Elton

  372. I understand the delicacy you feel about saying whether Ofwat's accounts should be fully published, and I assume that delicacy perhaps accounts for the answer you gave to Lord Acton a moment ago about not having approached Ofwat directly on its policy on a particular matter. Right at the beginning, you said that when the new Act came in you did not expect that under the new provisions you would be less co-operative or more confrontational. I just wonder whether you see a need actually to be confrontational in an independent consumer organisation, which at the moment you cannot deliver?

  (Mr Terry) I think there is always going to be a relationship between a body such as WaterVoice and the equivalent regulator, and that relationship is always going to depend on individuals and personalities. I think the way to approach it is to equip WaterVoice, for example, with the right powers and then let those two people who manage the respective organisations work it out as to how they exercise those powers. I think that the idea of some constructive tension between two organisations, which I think, My Lord, is what you are hinting at, is probably not necessarily a bad thing, but it is always a fine borderline between when it becomes a constructive confrontation and a destructive confrontation. At this particular point in time, I think we have a very constructive relationship with Ofwat, but it is not always rosy. There are issues on which we fall out quite severely with Ofwat, we do not publish those at the moment, because we are part of Ofwat and we try to work it out between ourselves, but we do have this Memorandum of Understanding, which looks definitively, for the next two years, as to how we should treat other, and respect each other's, independence.

  373. But if you feel you cannot publish, it means you cannot actually report to your constituency, which is the consumers, does it not; you cannot say, "We are fed up; we have been banging on this door and we haven't been able to get results for you"?
  (Mr Terry) I think, if ever we got to that stage, actually we would say and we would put that in our annual report. My Lord, can I say just one other thing on that, because the new, proposed Water Bill says that there will have to be a Memorandum of Understanding between the Director General and WaterVoice. We thought, jointly, Philip Fletcher and WaterVoice, there was an advantage in defining how that would operate in the interim, because we felt that we could deliver many of the benefits, if you like, in advance of the actual formal legislation, within the current statutory framework.
  (Mrs Reiter) I think we think this is why it is so terribly important to get the groundwork properly sorted out in the Water Bill on those areas. For instance, access to information, which could become very contentious once we are fully separated. Whereas now perhaps we can manage that situation, we would not necessarily be able to manage it so well as two separate statutory bodies. If we can resolve that in advance we think it will be to the advantage of customers.
  (Mr Terry) My Lord Chairman, could I make just one other supplementary point, very briefly. It just springs to mind that recently Ofwat put out a paper for consultation on its methodology for the PR04; we lobbied Ofwat very hard, privately, when they published their document, to publish an ancillary document together with it which said what people had said and why Ofwat had rejected that piece of information; this time they did it. So I think, if you like, our sort of cajoling, persuading, worked in that particular case. Now maybe we were not the only people who said it, but I think certainly we added to the voices of those people who, again, tried to impress on Ofwat the need for that openness and transparency.

  Chairman: Fine; thank you. Yes, I read into your submission that you felt things were moving in a right direction; you would like to see them move further but at least there had been some shifts in that direction. Thank you.

Lord Acton

  374. Mrs Reiter, you suggested that the regulator hold a meeting each year with the public, have I got that right?

  (Mrs Reiter) That was just one suggestion, that is something that has not been done before, I think.

  375. It sounds a very good idea to me, but I am dead ignorant, you know far better than I do.
  (Mrs Reiter) It may not work.

  376. But I was interested to know, if that suggestion came up in your Councils, would that appear in your annual report? I am still trying to get at how you thrust things?
  (Mrs Reiter) Well we thrust things through our local committees and through our WaterVoice Council, and then, at the moment, we would go directly to the regulator.

  377. To the regulator, say, with that suggestion?
  (Mrs Reiter) Yes; but that is something that is a thought, of trying to look at actually what other ways one could get greater openness and transparency and greater contact between the regulator and actually the general public. But that is not something that we have pushed through at the present moment.

  378. Will you? will you push it forward?
  (Mr Terry) I think we would push through; bear in mind, at the moment, that the Board that the current Director General has is an advisory board, it has no executive authority, as the powers are vested in Philip Fletcher, as the regulator. Under the new scenario, of the new Water Bill, it will become a water regulation authority, which then would have a board; it is that board that we would suggest maybe should meet possibly once a year, or at a pre-defined frequency, in public, much as, for example, the Environment Agency Board meets in public. It was perhaps extending to the new circumstances, where you have a regulatory board, rather than the current, if you like, somewhat extended management team that Philip Fletcher has.

  379. I understand that. Now supposing we are awfully dozy, and supposing we do not say "This is the most excellent plan;" what would you do to get that to happen?
  (Mr Terry) We would do a number of things. Firstly, it would appear in the minutes of our Council meeting; and we would have access to, and currently we have access to, DEFRA, and I suppose, ultimately, we have access to ministers, if we want to have. I think we would go the route of trying very much to persuade that this is a good plan; that is in our current circumstances. I think, in the new, fully independent circumstances, it may be a proposal which we could table formally, by writing formally to the Water Services Authority and giving them that as a formal proposal.

  Lord Acton: I see; thank you.

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