Complaints increase shows need for water supply competition

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Between 2016 and 2017, water companies received 2,143,040 "unwanted contacts" (i.e. complaints), representing a 41,356 (or 2%) increase over 2015/16.

Ofwat have put this rise partly down to changes in how some companies record complaints and partly down to complacency among others in how they approach customer service.

Either way, with the non-residential water market having been opened to retail competition in April, the rise in customer issues puts more pressure on Ofwat to do the same for residential customers.

Name and shame

Over the past few years, the numbers of complaints - including written and telephoned complaints - had been steadily decreasing, as shown in the graph below.

Source: Ofwat, Complaints to Water Companies England and Wales April 2016 - March 2017

Ofwat explain that this gradual decline was mostly the result of the following changes and process:

• Bill rises that were below the level of inflation
• The simplification and streamlining of practices that previously were a hassle for customers
• Companies more actively engaging their customers via social media and web chats, discussing activities likely to have an impact on people in specific areas

However, despite unwanted contacts dropping from over six million in 2009/10 to just over two million in 2015/16, the improvement process has plateaued.

For example, aside from the overall increase in unwanted contacts, several specific companies saw quite steep rises.

These aren't the only water providers to have recorded rises in either written complaints or calls, yet they're the worst performers, underlining how some companies appear to be reversing much of the good progress the water industry as a whole has made in recent years.

Addressing this worrying trend, the chief executive of the Consumer Council for Water, Tony Smith, said, "We'll be challenging all of the industry to deliver an even better service, but particularly the poorest performers".

Competition

Yet despite this vow, Ofwat seem unable to propose any new measures beyond requiring the likes of Southern Water, Affinity, and Dŵr Cymru to provide quarterly reports on their complaints handling for 2017/18, with punishment for failure to improve the situation being the compulsion to produce yet more reports.

This suggests that the regulator might be somewhat powerless to guarantee a more substantial and far-reaching solution to the increasing levels of customer complaints.

Because of this, what's needed is something a bit more radical, and it's precisely in this context that the possibility of opening up the domestic retail water market to competition presents itself.

This was in fact proposed as a possibility last September by Ofwat, who submitted a report to the Government which suggested that allowing residential customers to choose who sells on their water supply would bring £2.9 billion in savings over 30 years.

Not only that, but it would make water companies much more responsive to the needs and issues of their customers. That's because failure to do so would result in them losing customers, as opposed to today's regime where water companies - who are allocated exclusive rights to sell water in a specific region - can't lose customers even if they try.

Rising and falling complaints

However, this is only in theory, since there are several problems with the notion that competition will reduce complaints in a straightforward and linear way.

To begin with, the non-residential (i.e. business) water market was opened to competition on April 2017, and Ofwat's new report is the first to take account of how complaints figures have changed for business customers.

While they note that the number of written complaints from non-residential customers to water companies dropped from 12,196 to 11,722, they also write - without giving precise figures - that "CCWater has received more complaints and enquiries from non-household customers" since April.

Given that many of the complaints result from issues with finding tariffs and comparing prices, this suggests that opening up the market to competition could make customers more liable to complain, since they're more inclined to expect more from the market and feel disappointed when it doesn't deliver.

Added to this, the example of the broadband industry - which has more dissatisfied customers than other telecoms industries - suggests that retail competition mixed with wholesale monopolies may not be the best for customer satisfaction.

Then again, past instances of broadband providers (e.g. BT) being shamed by poor showings on Ofcom's complaints tables have led to them making significant improvements to their customer service, since the alternative would be to lose customers to rivals.

Which means that, if Ofwat's experiment with competition in the non-residential water market is successful, and if they can get the Government to actually listen to their recommendations, then water customers may have less cause for complaint in the not-too distant future.