Prs Spe20140604strategyvision

8/12/2019 Prs Spe20140604strategyvision

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A vision for the future

Cathryn Ross, Chief Executive

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Thank you for coming

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Sharing our

emerging thinking

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Developing Ofwats new strategy 4 June 2014A vision for the future speech by Cathryn Ross, Chief Executive

A vision for the future speech by Cathryn Ross, ChiefExecutive

Thanks and scene setting, setting the tone

Thank youfor coming today.

Thank you also for being so generous with your time and energy in the months

gone by.

I have listened

to what you said. And I hope you will hear a lot of it reflected back inwhat I will set out today.

What I will set out today is our emerging thinking on Ofwats strategy. It is not a final

finished product. It is not the end of a conversation. But it is an inflection point.

Today I will share our thinking on the vision for the water and wastewater sectors.

And I will share our thinking on what this means for the vision for Ofwat how we

can help move the sector to where it needs to be.

There may be some elements of this that you will want to challenge, build on and

explore. And I would welcome that.

But I hope it will be clear from what I say that Ofwat itself, alone, will not deliver that

vision for the sector. Everyone in this room has a critical role to play.

And it is only if we understand each other, only if we at least understand our

interdependency and or preference work with it that we will deliver that vision.

So, when I talk about an inflection point this is the point at which we really need tounderstand what you make of our emerging thinking, have we got it wrong,

missed anything critical? And crucially, we need to understand what this thinking,

this way of working for Ofwat, means for you: what will be the benefits and how

do we maximise them? What are your concerns, what are the risks and how do we

manage them?


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The high-level vision

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Trust and

confidence in an

essential public

service

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The high level vision why and what

Some people have asked me why Ofwat needs a vision for the sector. Doesnt Ofwat

just need a vision for Ofwat?

Well, we do need a vision for Ofwat

...but as an economic regulator we influence the behaviourof those we regulate

and so we must know to what end we do that.

The vision for the sector is our touchstone something that guides us as we think

about what we do, day to day, month to month, year to year.

What is that vision for the sector?

It is simple. Trust and confidence.

Trust and confidence in the quality of our drinking water.

Trust and confidence in the resilience of services, that they will be value for

money, and affordable.

Trust and confidence in customer service, in fair dealing.

Trust and confidence in the stewardship of the environment.

More generally, trust and confidence that decisions taken today wont

impoverish future generations.

Im sure you can think of other aspects where trust and confidence is key.

Indeed, from the conversations that I have had with a lot of you in the last few

months it is a theme that has come up time and time again. Just how important it is

that people have trust and confidence in water and wastewater services

recognising that there is a difference here with other goods and services in theeconomy, that these are essential public services. Recognising that while a lot

has been achieved since privatisation, that the sector is not in a bad place trust

and confidence is hard won and easily lost none of us can be complacent.

One of the virtues of trust and confidence as a vision is that it will endure it will

provide that guiding light over time. But I am conscious that it could sound somewhat

like motherhood and apple pie so lets unpack it.


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Unpacking the vision for the sector

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Customers

Service providers

Relationships

Whole system

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Unpacking the vision for the sector some pointy bits

One thing is absolutely clear whether people have trust and confidence in water

and wastewater services will reflect their experience of those services. What theyget. The outcomesthey see.

If people are not getting what they need, want and can afford. It is very tempting

perhaps especially for those who have just done business plans to think that they

know what customers want. And it is true that you only have to look at those

business plans to see that there are some common themes: Resilience, value for

money, affordability, responsiveness, care for the environment and for future

generations, care for those in society who are vulnerable.

But it is also clear again you just have to look at those business plans that

different customers have different priorities. And that those priorities change over

time. So it isnt as simple as ticking off a list of outcomes and then people will have

trust and confidence in water and wastewater services.

In fact, Id go further and say that that kind of tick-box list would be positively

dangerous because it would work against the precisely the sort of responsiveness,

evolution and innovation that we will need to meet changing customer expectations.

Which brings me to another driver of trust and confidence. Strong relationships.

The most obvious relationship here is between those who provide water and

wastewater services and their customers. This will come as no surprise we have

put this relationship absolutely at the heart of PR14.

Again, it sounds simple. But it is worth unpacking.

Who do we mean when we talk about customers?

Bill payers now obviously. Bill payers in the future only slightly less obvious

perhaps. But we also recognise that the environment is a customer. And that society

more widely benefits from water and wastewater services. It is important to

recognise this.

Who are these service providers? Is that some fancy new term for a water

company? Water companies are certainly service providers. But there are two

important points to make here.


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First, it is important that we start looking at water companies in terms of the services

they provide. Because that is what customers experience. Because we need to start

looking at the sector much more through the customer lens rather than the producer

lens. In PR14 we have been talking a lot about an outcomes-focused approach. Thatmust mean looking through the customer lens looking at services.

Second, it is important that we recognise that services may be provided in different

ways by different providers. And we need to recognise that services are provided at

different stages of the value chain to different customers. A retail business buys

wholesale water and wastewater services from a wholesale business. Who in the

future may or may not be part of the same company. Lets go further a farmer in a

catchment may provide a service to that catchment through the way in which he

manages the land which is what we are seeing through catchment managementapproaches, where that service is being procured by a wholesale water business.

The way in which these service providers interact with their customers is critical,

partly because strong relationships here will help deliver the outcomes those

customers want by informing the decisions of the service providers but also by

involving customers so they become part of the solution. But partly also because if

we want trust and confidence those customers need to feel that their service

providers are acting fairly, and engaging with them.

So I have talked about service providers and customers, which are fundamental.

But there is more to strong relationships than this. I have talked about looking

through the customer lens, and we need to recognise that what customers want from

water and wastewater service the customer experience is the result of a very

complex set of interactions across a whole system.

Everyone in this room is part of that system. Companies, customers,government, NGOs, regulators. We need strong relationships between all of us if

that system is to work well, and that system needs to work well if trust andconfidence is to be maintained and grown.

I really want to hear from you about what you think good looks like here in terms of

the relationship between service providers and customers but also more broadly

across the system. What you think the benefits are from really effective, strong

relationships. What you think the barriers are to that, and what you think are the

risks. Which leads me on to the vision for Ofwat what part do we see ourselves as

laying in this system and how can we play our part in helping deliver that trust and

confidence?


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The vision for Ofwat

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Outcomes that matter to customers

The whole sector

Others will need to play their part

Using the full tool kit

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The vision for Ofwat, with more pointy bits

Lets start from first principles. What is an economic regulator for?

Customers are absolutely central to our role. If water and wastewater services didnt

matter enormously to customers we wouldnt exist. And if customers could make

their own choices, if they had power in relation to service providers for example,

because they could choose another provider or stop consuming we wouldnt be

here either. Thats something we must never forget.

As an economic regulator, we are here to align the interests of capital, and

companies, with the interests of customers.

You will have noticed that I have referred to the interests of capital, and the interests

of companies. I know there is an overlap between the two, but I think it would be

dangerous to elide them. Im interested to hear what you think on this point.

So, given the vision of trust and confidence, and given what I have said about what I

think that means what does that mean for how we do our job?

Three points on this...

Point one. We need tofocus on the outcomes that matter to customers. We

have started this through PR14, but we need to build on it. In particular, we need to

look through the customer lens, to understand the different services that they receive

and want. Throughout the value chain. I think there is a lot of work to do here

especially in the wholesale part of the value chain. And we need to have an open

mind about how those services are provided, where when and by whom. We need to

welcome and encourage innovation; we need to be open to experiments.

Point two. We need to look at the whole sector. We need to understand the

relationships between all those who are involved in the sector. And we need todo what we can to facilitate, drive, and encourage strong relationships that benefit

the system as whole.

That means we need to pay attention to our own relationships with others which is

something I am conscious we might not have done enough of in the past, but where I

hope you would agree we have made great strides recently.


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It also means we need to support the relationships that others have. In particular,

this means not re-inserting ourselves in the relationship between service providers

and customers, but doing what we can to encourage really strong, effective

relationships here well-informed engagement, responsiveness, genuine dialogue.

Of course, we will need assurancethat those strong, effective relationships are

there. And we recognise that this is going to require others to step up. And if those

strong, effective relationships arent there if others dont step up we may need to

step in. Otherwise we wouldnt be doing our job. Indeed Id go further and suggest

that our credibility and authority in helping to maintain and build those relationships

comes in part because of our ability to step in and intervene when necessary. But I

do recognise a potential tension here, and I would really like your thoughts on this.

Point three. We need to be ready, willing and able to use all the tools in our tool

kit. Taking decisions on where, when and how to intervene on the basis of a really

good understanding of what is being delivered in terms of those outcomes that

matter to customers, and the strength and effectiveness of the relationships across

the sector. And let me be clear I think we need to be much better on informed on

these questions.

We have a powerful set of traditional regulatory tools price controls, licence

enforcement. But we need to think about what drives service providers to behave in

the way that we do. And we need to think about how we influence that, which will

always be in large part about those traditional tools. But it will also be about the

wider tool kit shining a light on issues, bringing the right people around the table to

have the right conversation at the right time which might avoid a more draconian

intervention later in the way that we have recently on the Board leadership,

transparency and governance issue.

We also need to understand better the influence of others involved with the sector.

And we need to work with them, collaboratively, and in partnership. We need to use

our tool kit in a way that complements the tools that others have, which of coursehas implications for everyone in this room do you agree we need to work

differently?

And what are the implications for you?


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A role for everyone

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Over to you

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Over to you

So, thats where we have got to. I think many of you will recognise the different

threads in what I have said from conversations we have had in recent months. But Istress that this is a work in progress. And you will see from what I have said that the

two defining characteristics of our emerging strategy are:

i. a focus on what customers need, want and can afford, ie, outcomes; and

ii. a recognition of the fact that those outcomes result from a complex set of

relationships, which means we cant take our thinking further none of us will

deliver that trust and confidence in water and wastewater services without

your help.

With that in mind, I will hand over to Sharon Darcy, who many of you will know from

Sustainability First. But she is here in her private capacity, to help challenge us and

provoke discussion today.

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