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Regulators quizzed about excluding customers

23/1/14

By Josie Clarke

Regulators aren't taking account of the overall effect of bill increases and are excluding customers from their deliberations, an MP has suggested.

The criticism was aimed at Ofwat – which regulates water and sewerage providers in England and Wales, and Ofgem – which regulates the electricity and gas markets in Great Britain.

Labour MP Austin Mitchell challenged the regulators to disclose how they involved water and energy customers in their deliberations over companies' pricing proposals.

Mitchell quizzed the regulators’ chief executives when they appeared before the Commons Public Accounts Committee.

Companies' business plans scrutinised

Ofwat chief executive Cathryn Ross said: "We are absolutely taking affordability into account when we look at companies' business plans.

"We have challenged companies very hard to understand their consumers' position on affordability and to respond to that in what they propose to do."

Mitchell replied: "But you don't take any account of the way consumers are being struck by other utilities. You're just looking at the affordability of water."

Ross said: "I would accept some truth in that.

"Companies are going to customers and basically saying, 'Look guys, here are things that we can do that will cost a bit more, are you willing to pay for that or not.'

Customers looking at bills they have to pay

"That customer is answering with an eye to the other bills that they think they are going to have to pay.

"But at the end of the day when we produce our final determinations for prices, are we doing that consciously looking across expected energy bills, expected rail fares and all the rest of it?

"No, I'm afraid not."

Ofgem's interim chief executive, Andrew Wright, said: "We require companies to understand what consumers' priorities are.

"That will take account of how consumers are feeling, their willingness to pay for improvements and so on.

Affordability taken into account

"And so in that way affordability is taken into account in the process.

"Exactly the same as Ofwat, we've required companies to demonstrate that they've had that engagement, which their business plans take account of what consumers are telling them.

"In a similar way we will only approve the business plans when we're comfortable that that's happened.

"I think we recognise the shortcomings in that consumers don't necessarily themselves have a full view of all the pressures on bills that may be coming down the road at them."


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