Select Committee on Constitution Minutes of Evidence

Examination of Witnesses (Questions 380-390)



Lord Jauncey of Tullichettle

  380. You advocate that the new WaterVoice, CCW, will be given a statutory right to be consulted, in the Bill. Now can you ever envisage a situation in which, having been consulted, the new body came to the conclusion that the decision which was made by the regulator was adverse to a large number of consumers, and, in that event, would you think that it would be appropriate to give this new body a right of appeal against Ofwat's decision?

  (Mr Terry) It would have, of course, a right of appeal, or it would have a right of request for judicial review.

  381. Forget about judicial review.
  (Mr Terry) I am not quite sure to whom you would appeal.

  382. I was assuming it would be the Competition Commission, as indeed other companies appeal in relation to licence modifications?
  (Mr Terry) I think, as it is at the moment, we are reasonably content with the status quo. I think, if there was a shift to increase the ability of the companies to appeal to the Competition Commission, for example, we would suggest that that could be considered perhaps as a counter-balancing proposal, that the statutory customer body also, under the circumstances which you outline, might have a right of appeal to the Competition Commission. And I think really it is if the current status quo applies I think we would say, warts and all, we would probably accept it as it is. But if there was a move to increase the ability of a company to appeal then I think we would want some counter-balancing proposal to make sure that, for example, the new Consumer Council for Water, under certain circumstances, had the right of appeal, on behalf of customers, on customer-related issues, to the Competition Commission.

  383. Of course; but are you suggesting that, in respect of their right of appeal, they would have a right to appear as parties in a company's appeal, or that they would have the right to initiate an appeal at their own instance, or both?
  (Mr Terry) I think, probably both. If, for example, a company were to be appealing about a price limit, I think we would expect the new Consumer Council for Water to have the right to appear.

  384. You would like to be heard?
  (Mr Terry) Yes, to be heard. But I think also, if there was a change, and I think it is an `if' there was a change to the current procedure, we would consider that it would be right that there was some balancing right of appeal by customers. Let us bear in mind, My Lord, that for all domestic customers, and the majority of business customers, it is a monopoly supplier. They have no option as to where they take their service from, and, in general, you have no option as to whether you take the service or not. So I think the answer to your question is, under those circumstances, we would want to see some balancing proposal.

Lord Fellowes

  385. I must declare a peripheral interest, in that I am paid on a consultancy basis by a water treatment company, but this question has nothing to do with that, it is a more general one really. If one of the main duties of a regulator is to look after the interests of the consumer, I am still not clear why then WaterVoice, to take one example, is needed; indeed, I wonder whether a proliferation of voices representing the consumer does not add to the confusion for consumers as to precisely who is acting in their interests and who they should go to when they need help?

  (Mr Terry) The water regulator has a number of duties, currently he has a duty to ensure that the companies can finance themselves, and a subsidiary duty to look after the interests of customers. I think the change which was proposed in the new Bill is to make the interests of customers higher up the agenda, but I think the other duty will still remain. I think it is more a process by which an organisation, which is a dedicated organisation looking at customer interests, can actively lobby and actively work and ensure, if you like, it is a sort of a watchdog, that the Director General is actually considering all aspects of the customer's perspective when he makes a particular decision. I take your point about the proliferation of customer bodies, but, in the case of the water industry, where, as I say, it is a regional monopoly, I think a strong body which can reflect, particularly at a regional level, through the particular regional customers' concerns to the Director General, is something that would be a valid part of the process.

  386. You used the word `watchdog' for WaterVoice, but actually the shorthand for `regulator' in the tabloid press is also `watchdog.' is it not? Who is the watchdog, this is what the consumer might be asking; who is on watch?
  (Mr Terry) Yes; that is always a danger, but I think if you actually write the Memorandum of Understanding correctly you will be clear whose responsibility a particular input and a particular output are. I think it can work, but it will require a determination by the parties involved in the new circumstances to make sure it works properly.
  (Mrs Reiter) If I may add something to that, I think the other thing is, we are slightly unique, in the sense that we have not just the supply of the water and the removal of the sewage but, of course, there are tremendous regional environmental overtones. I think there is a requirement therefore for local representation and local feedback to the centre on customer issues, because the customer issues are not just the price of water, however important that may be, but also it is the question of the protection of the environment. And actually it is interesting to see how people are recognising the benefits that they have received as a result of what they have paid in their water bills in the past. It does not mean to say they are prepared to pay a great deal more in the future, but, in fact, they are now beginning to recognise what has been achieved through the water and sewerage bills. I think part of that success, blowing our own trumpet, is to say it is because of the work that we have been able to do with the local media.

Baroness Gould of Potternewton

  387. I wonder if I can go back, I think almost to where I started, in a sense, because I do feel very strongly about the need for a dedicated consumer interest, I think that is absolutely essential. Really it is your relationship with Ofwat and how you achieve that that I am still getting at, and perhaps I can give you a little example: I noticed in the Memorandum of Understanding, on the question of market research, it says `can be done with Ofwat or separately, as the occasion rises.' So my question is, has an occasion ever arisen where actually you have done separate market research, and for what purpose did you do it, and then, the results of that, how did you influence Ofwat to take note of it?

  (Mr Terry) My Lord, could I answer that by saying that currently we are undertaking a piece of work; we, WaterVoice, felt it was necessary to conduct market research associated with the reason customers are getting into debt. We made the business case for that and we went to Ofwat and said, "Look, we would like to conduct this particular piece of research; here are the reasons we would like to conduct it, and this is what we would expect the output to be, and this is what we'd expect to do with the piece of work." Ofwat said, "Well, actually, we'd quite like to join you on that piece of research." So they have actually come alongside us and are working with us in that particular piece of research. But it is a piece of research which we are managing, directly as a result of our identification of this particular piece of work as a need. And it is the one example because, since we signed the Memorandum of Understanding in 2002, it is the one piece of work that actually has fallen into the category that you are talking about. But it was a piece of work which we identified, identified the need, made the case to Ofwat and we are actually conducting it, although Ofwat are working with us, as are, for example, Water UK, on aspects of that particular piece of market research.

  388. Could you envisage a situation where you have a problem with not being able to persuade Ofwat that something is necessary, and therefore would conduct a piece of market research in order to prove that point to Ofwat; could you ever envisage a situation like that?
  (Mr Terry) It would be extremely difficult under the current way we are constituted, it would be extremely difficult to do that, insofar as we come out of the Ofwat stable. I think it will be something the new Consumer Council for Water would be able to do, which is one of the reasons, I think, that we believe that that separation would be a good thing.


  389. One final question, because I think it is something to which you attach importance in your memorandum. Under the new authority you would like to see the members of the CCW involved informally in consultation about the appointment of members of the new authority; I just wondered why informally?

  (Mr Terry) We accept entirely that the appointment of the Director General and the appointment of the Board is a matter for ministers but I think it would be something to which we might add value, because of our knowledge of customer issues. Really, it is trying to help improve the quality of the decision about the selection that ministers would make, it was a sort of not embellishment but a bit of polishing at the edges which we thought we might be able to make by making that sort of contribution. It was not a question of the argument for consultation, just the form that it would take.

  390. Fine; thank you very much indeed. That has been extremely helpful. We are most grateful to you for the memorandum and most grateful to you for being with us this afternoon and answering our questions so fully. It has been extremely helpful to us. Thank you.
  (Mr Terry) My Lord Chairman, can I thank you very much indeed for the opportunity to speak to you. Thank you very much indeed.

  Chairman: Thank you.

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