Examination of witnesses (Questions 420-439)|
TUESDAY 13 FEBRUARY 2001
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
421. Do you have any general remarks you want
(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
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
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.
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 parametersat
the cost of withdrawing those and the benefitand 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
(Mr Terry) No, and I do not think that would be our
role. What is affordableand you could hear some of the
debate earlier on this morningdepends 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."
429. Why would the change in the abstraction
scheme increase costs? You have talked about short-termismis
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.
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 discussand do discussat 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 waterbecause that is the greatest fear
of all customers, that their water supply might dry upand,
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 continuethere 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.
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.