Introduction... 1 Outcomes... 4 Outcomes Introduction... 5 Outcome Affordable Bills... 6 Proposals for delivering Affordable Bills Outcome... 6 Performance Measure Percentage of Customers in Water Poverty... 7 Target level of performance... 7 Justification for target... 8 Proposed Investment... 10 Risk Analysis... 11 Outcome Bills that are easy to understand and are accurate... 13 Proposals for delivering bills that are easy to understand and are accurate... 13 Performance Measure Negative Billing Contacts... 14 Target level of performance... 14 Justification for target... 15 Proposed Investment... 16 Risk Analysis... 16 Outcome Easy to Contact... 18 Proposals for delivering Easy to Contact Outcome... 18 Performance Measure Ease of Contact from Surveys... 18 Target level of performance... 19 Justification for target... 20 Proposed Investment... 20 Risk Analysis... 21 Outcome Satisfied Customers... 22 Proposals for delivering Satisfied Customers Outcome... 22 Performance Measures... 22
Target levels of performance... 24 Justification for target... 24 How we will deliver... 26 Proposed Investment... 26 Risk Analysis... 27 Outcome Efficient Use of Resources by Customers... 28 Proposals for delivering Efficient Use of Resources by Customers Outcome... 28 Proposed Investment... 32 Incentives... 33 Incentives... 34 Retail Household Price Pressures and Efficiency... 36 Price Pressures and Efficiency... 37 Price Pressures and Efficiency Assumptions... 37 Retail Household Costs... 39 Costs... 40 Operating Costs and basis of allocation... 40 Investment and Depreciation... 43 Wholesale Funded Costs... 44 Retail Household Average Cost-To-Serve (ACTS)... 45 Average Cost-To-Serve (ACTS)... 46 Assessment... 46 Retail Household - Risk and Reward... 47 Risk and Reward... 48 Risk and Reward Retail Household Summary... 48 Assessment of Retail Household Risks... 48 Risk Mitigation... 50 Financial Impact Analysis of Retail Household Risks... 51 Retail Household Margin Analysis... 52
Our PR14 business plan is comprised as follows: Our plan is structured in this way, because wholesale and retail activities need to be costed separately, partly in preparation for the proposed market opening in 2017 which will introduce retail competition for non-household customers. This is the Retail Household plan, in which we set out the elements of our plan which affect the retail functions of our business serving household customers. Page 1
Ofwat s definition of retail includes: Customer services Billing Payment handling Remittance and cash handling Vulnerable customer schemes Network and non-network customer enquiries and complaints Debt management and doubtful debts Meter reading Operating costs including: Decision and administration of disconnections and reconnections Demand-side water efficiency initiatives Customer-side leaks Other direct costs General and support expenditure Scientific services Other business activities Developer services Providing developer information Administration for new connections Local authority rates Our aim for this plan is to be responsive to our customers; this incorporates the services we provide and the assistance we give to customers. The outcomes it covers are: Many of our retail service functions are performed by our billing company Bristol Wessex Billing Service Ltd (BWBSL), which we jointly own with Wessex Water. This business plan describes the levels of service that we plan for BWBSL to deliver for our customers. We have developed our retail business plans independently of Wessex Water, and as such, their proposed outcomes, targets and incentives for retail services may differ from ours. Page 2
This plan sets out the outcomes we intend to deliver for retail services to our household customers and explains how we will measure customer satisfaction, customer effort and customers perceptions of value-for-money. Like all water companies in England and Wales, our customer service performance is measured and incentivised by Ofwat through the Service Incentive Mechanism (SIM). Our business plan details the other measures we will use to monitor customer satisfaction with aspects of our service, for which we will apply reputational incentives to complement the financial incentive of the SIM. We intend to reduce the percentage of customers whom we assess to be in water poverty in our area from 2.1% now to 1.8% in 2020. In this plan we explain how we will monitor the level of water poverty in our area and the assistance we will provide to customers who struggle to afford their bills through our social tariffs and other affordability schemes. Our retail plan includes proposals to help customers become more efficient in their use of water, and we explain how we intend to do this. We also detail the costs which we have allocated to the retail plan, and our calculation of the margin to be applied to retail costs. We describe the risks that our retail functions face and how we intend to mitigate them. Page 3
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In this section we explain the five outcomes which apply to our : Affordable bills Bills that are easy to understand and are accurate Easy to contact Satisfied customers Efficient use of resources by customers All of these outcomes derive from the priorities which customers identified in our customer research. 1 For each outcome we explain the following: How we will measure our performance and why we have chosen that particular measure; What our target level of performance is for each measure and why we feel that this particular level is justified; Whether customer research has influenced the target and if so, how; How the target compares with past or previous performance; What investment and/or expenditure is being proposed to achieve the target; What we think the risks are, whether for customers or for us, of not performing well or failing to meet customers expectations; What incentives we are proposing, including any penalty for under-performance and any reward for out-performance, in relation to the target; What assumptions we have made, if any, in setting the targets or incentives. 1 Blue Marble Research, Customer Priorities Research, May 2012 Page 5
Proposals for delivering Affordable Bills Outcome We recognise that affordability is a major concern for some of our customers. A fifth of the household respondents in our social tariff research in the autumn of 2012 2 indicated that they worried about being able to afford to pay their water bill and 16% said that they could not afford the bill currently. We therefore take our responsibilities in this respect very seriously, providing help for those customers who are experiencing difficulty paying their bills. Our plan for 2015-20 means that customers bills will increase by less than the rate of inflation, but we know that for some customers this will still mean that they struggle to pay. We provide a number of measures to help support those customers who are experiencing difficulty paying their bills. We were one of the first companies to introduce a company social tariff in line with the guidance issued by government in the summer of 2012; we introduced our social tariff in 2013/14. We intend to do more to promote the tariffs and assistance schemes which we provide, both directly with customers and indirectly via partner organisations such as local Citizens Advice Bureaus (CABs), Age UK, debt advice agencies and debt charities. Our aim is to ensure that all customers who need our help are aware of what we can do for them. We will monitor our performance in helping those customers on the lowest incomes and experiencing the most serious financial difficulties by calculating and tracking the percentage of customers in water poverty. 2 Blue Marble Research, Social Tariffs Research, November 2012 Page 6
Performance Measure Percentage of Customers in Water Poverty Definition We have defined water poverty as the percentage of customers within our supply area for whom their water charges represent more than 2% of their disposable income, defined as gross income less income tax. This is different to the definition used by the Government and organisations such as the Joseph Roundtree Foundation and the Consumer Council for Water, which relates to the percentage of customers for whom their water bill, covering water and sewerage charges, represents more than 3% of their disposable income after housing costs and income tax. Because we do not have access to the housing costs used in the Government s definition, we have had to use an alternative definition, and we took advice from one of our main local CABs to do this. Means of Measurement We have acquired bespoke population analysis software from CACI, which showed the percentage of customers who were deemed to be in water poverty in 2012 in our area. We apply assumptions on the growth of incomes and average bills to assess how the percentage of our customers judged to be in water poverty changes over time. We deduct the number of customers to whom we provide support through our Assist and WaterSure tariffs. Reason for choosing this measure This measure allows us to understand the impact of our bills on our customers. This measure also allows us to evaluate the success of our tariffs and assistance schemes for customers who are experiencing difficulty paying their bills. Target level of performance Table 1 details the performance measure for this outcome. Table 1 Target Level of Performance Performance Measure Current Performance Performance Commitment for 2020 Incentive/Promise Percentage of customers in water poverty 2.1% 3 1.8% Reputational Our model shows that without our social tariff the number of customers deemed to be in water poverty would currently be 3.3%, instead of 2.1%, and that this could rise to 4.0% by 2020. Our target is to increase the number of customers on our Assist and WaterSure+ tariffs so that the percentage of customers in water poverty reduces from 2.1% to 1.8% by 2020. 3 2012/13 level Page 7
Justification for target Regulatory/ Statutory requirements There is no specific regulatory or statutory requirement relating to reducing the number of customers in water poverty, but there have been clear messages from government, the industry regulator Ofwat and the Consumer Council for Water (CCWater) that companies should do more to help customers who have difficulty paying their water bills. This is demonstrated by the government s publication of guidance on company social tariffs in 2012. We followed this guidance in order to devise and obtain customer support for a social tariff in the autumn of 2012; we then implemented this with effect from 1 April 2013. Our Charges Scheme, which includes our social tariffs and affordability schemes, is subject to annual approval by Ofwat. Customer research / preferences / willingness to pay Whilst in general customers believe that bills should be kept at a manageable level, our research indicates that there is little support from our customers for cross-subsidies, i.e. for customers to fund tariffs and assistance schemes to help other customers who are experiencing difficulty paying their water bills. We commissioned independent research 4 with household customers in 2012 prior to our introduction of social tariffs for 2013/14. This indicated that: 21% of respondents were worried about not being able to afford their water bills, and 16% said they were already unable to afford their bills; 13% of respondents were aware of the existence of social tariffs in the utility sector, with just 5% aware of our Assist tariff and 9% aware of the statutory WaterSure tariff; 55% of respondents were unwilling to contribute anything towards support through the Assist tariff. The average amount customers were willing to pay was 2.85 per year; 56% of respondents were unwilling to contribute anything towards supporting the WaterSure tariff. The average amount customers were willing to pay was 3.00 per year; When asked whether they found it acceptable to pay 50p per year for the social tariff which we were proposing, 76% of respondents found it acceptable, including many who had previously stated that they did not want to pay anything; Respondents were much more likely to think that water companies (74%) or the government (63%) should pay to help struggling customers than think that customers should pay to help (39%). We explain how we currently help customers through our company social tariff and other assistance schemes in the section Consistency with previous record of delivery. 4 Blue Marble Research, Social Tariffs Research, November 2012 Page 8
Our quantitative research into customers priorities 5 also found limited support for helping customers in need. Having a range of tariffs suitable for customers in different circumstances was given a mean score of 8.0, indicating that respondents found it important, but it was ranked 13 th of the 16 priorities prompted through the research. The research again highlighted a lack of customer awareness in this area, with 66% unable to comment on our performance in providing alternative tariffs. We intend to try to address this, by carrying our greater promotion of our tariffs and assistance schemes for customers experiencing difficulty paying their bills. We will also look for more effective means of promotion, and we will do this directly with customers and indirectly, via partner organisations such as our local CABs, Age UK, debt advice agencies and debt charities. We will, however, look to target the promotion of our tariffs and assistance schemes to those customers most likely to be in need, rather than put time and resources in to raising the awareness of customers in general. Our CACI software may help us in this respect, identifying certain areas within our supply region where promotional activities would be most effective. Consistency with previous record of delivery Through our billing company, BWBSL, we have already done much to support customers who are experiencing difficulty paying their water bills: We offer Restart and Restart plus schemes for customers in debt, where debt is written off in return for regular payments. We offer an Assist tariff, which provides discounted bills to customers in receipt of certain benefits. A new bottom rate was introduced for 2013/14 to help those on the lowest incomes in our region, and this is being funded by other customers as a social tariff. We offer the statutory WaterSure scheme for customers on benefits with large families or certain medical conditions, but as part of our customer-funded social tariff we have set this tariff at the level of the average household meter bill, rather than the average household bill, saving customers an additional 29 per year. We make donations of around 100,000 per year to local Citizens Advice Bureau (CABs), debt advice agencies and debt charities which help customers who are experiencing financial problems and difficulty paying their water bills. Our debt management procedures are assessed from time to time by the Consumer Council for Water (CCWater). The most recent audit in February 2012 marked all 25 cases assessed as good. Table 2 summarises the number of customers currently benefitting from our Assist and WaterSure+ Tariffs. 5 Blue Marble Research, Customer Priorities Research, May 2012 Page 9
Table 2 Customers benefiting from Assist Tariffs Support measure No. customers supported 2013/14 % discount on average bill 2013/14 Assist Level 0 168 88% Assist Level 1 2782 72% Assist Level 2 1154 54% Assist Level 3 784 35% Assist Level 4 189 17% Assist Level 5 130 15% WaterSure+ 1,236 15% Total 6,443 Proposed Investment We have ear-marked for initiatives to enhance our customer experience and improve aspects of customer service and engagement, with a view to meeting evolving customer expectations and requirements over the period. Additionally, around m is allocated to BWBSL related costs in a rolling programme of investment covering software, vehicles and office equipment which we share jointly with Wessex Water. In relation to this outcome, however, we are not currently planning expenditure on any specific enhancements or improvements, other than the ongoing costs which are included within base operating expenditure. As previously stated though, we do intend to carry out more promotion of the tariffs and assistance schemes which we offer to customers experiencing difficulty paying their bills, both directly with customers and indirectly through partner organisations such as our local CABs, Age UK, debt advice agencies and debt charities. Additionally, we will continue to donate at least 100,000 each year to local CABs, Age UK, debt advice agencies and debt charities. Expected Benefits Expenditure to support customers experiencing difficulty paying their water bills is to some extent self-financing, as it can result in a reduction in our bad debt costs. Even where the money recovered from customers is less than the amount spent on promoting and administering support, there are benefits to the company through improved corporate image and reputation. Figure 1 shows the impact of the support we provide through Assist and WaterSure+ on the percentage of customers we forecast to be classed as being in water poverty. Our forecasted growth in customers benefiting from our company social tariff is consistent with the cross-subsidised cost of 50p per annum, for which we received customer support in our social tariffs research. 6 6 Blue Marble Research, Social Tariffs Research, November 2012 Page 10
% Customers in Water Poverty No. customers supported Bristol Water PR14 Business Plan Figure 1 Impact of Bristol Water assistance for vulnerable customers on water poverty 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Impact of Bristol Water assistance for vulnerable customers on Water Poverty 12000 10000 8000 6000 4000 2000 0 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Year No. customers supported through Assist and WaterSure+ % Water Poverty without intervention % Water Poverty post intervention Risk Analysis Impact of risks on customers The key risk to both customers and us is that the expenditure to help customers experiencing difficulty paying their bills is ineffective. This would be shown by an increase in the level of outstanding revenue, the proportion of customers deemed to be in water poverty and/or a failure to increase the number of customers supported through the schemes. Impact of risks on company As well as the financial risk identified above leading to an increase in bad debts, there is also reputational risk to us if we are not seen to be offering sufficient help to customers in need. Affordability is not only an important issue for some of our customers but it is also an important consideration for government and regulators. Whilst we cannot control a risk which is related to the general state of the economy, we can take steps to help mitigate it. We therefore need to ensure that we are providing targeted assistance effectively and that in doing so, that we are meeting the expectations of our customers and other stakeholders. Consequence of deferral If bad debt levels continue to increase, there may be an increase in bills in future to compensate. Assumptions made in relation to mitigation We assume that our proposals will result in improved affordability, which includes the underlying assumptions that there will be sufficient take up and that the outstanding revenue improves for those customers on these assistance tariffs. Page 11
We also assume that we can identify those customers in need of assistance, either directly or indirectly through partner organisations; this will be helped substantially if the proposed discussions between the water industry and the Department of Works and Pensions (DWP) take place and result in a data sharing agreement, where we would be able to access information, with customers explicit permission, which identifies which customers are in receipt of state benefits. Our assessment of census data indicates that only a small percentage, currently around 2.1% of our customers, requires targeted support because their water charges 7 account for more than 2% of their disposable income 8. 7 Water charges only; for water and sewerage charges, we estimate that it would be 5% under our definition 8 We have defined disposable income as gross income less income tax Page 12
Proposals for delivering bills that are easy to understand and are accurate We know that our customers want the bills they receive to be clear and easy to understand, and of course our bills must be correct. Each year we review the information we provide on our bills; we try to make sure that it is jargonfree, helpful and easily understood. We also consider how this information is presented, so that our bills are clearly laid out, uncluttered and easy to read. We appreciate though that the way we calculate charges on both our rateable value bills and our meter bills can be confusing. We therefore take great care to make sure that the way we present this information is as simple and straightforward as possible. We check our billing information to ensure that it is accurate and where customers have a water meter, we aim to issue bills based on meter readings, although sometimes we have to estimate the readings. Where we have been unable to obtain a reading, we try to make our estimate as accurate as possible, by using the customer s previous usage as the basis of our calculation; and we put right any incorrect estimates as soon as we become aware of them, usually through the next meter reading. We understand the importance of getting our bills and our billing information right. They are key components of our customer experience. Other than the twice-yearly customer magazine we send to all of the households in our region, our bill may be our only source of contact and communication with customers. Page 13
Performance Measure Negative Billing Contacts Definition The number of negative billing contacts comprises the number of unwanted calls and the number of written complaints which we receive, primarily through BWBSL, in relation to charging and billing issues. The definition of unwanted calls is taken from the Ofwat definition used for the SIM, that is Any telephone contact received from a consumer that, from their point of view, is unwanted. That is, a contact about events/actions that have caused unnecessary aggravation (however mild) on/to the consumer, including repeat or chase calls. This is determined by the subject matter of the call. A call is classed as unwanted by default unless it is defined as wanted on the list below. A repeat or chase call and telephone complaints must be reported as an unwanted contact. Means of Measurement All calls received by BWBSL and our Operational Customer Services (OCS) team are classified from a list of categories to identify the nature of the call. These categories are assigned to wanted and unwanted calls. Written contacts, including those received by email, are assessed to see whether they contain any expression of discontent, however mild, and if so are classified as complaints. These are categorised in the same way as customer calls. Data is stored and reported through the BWBSL and OCS contact management systems. Reason for choosing this measure This measure provides a way of tracking performance against this outcome, because issues with the accuracy or clarity of bills will result in an increase in the level of contacts received. This measure is easy for us to measure and verify because it feeds into Ofwat s Service Incentive Mechanism (SIM). Please refer to Performance Measure Service Incentive Mechanism (SIM) for more information. Target level of performance Table 3 shows the performance target for the number of negative billing contacts. Table 3 Target level of performance Performance Measure Current Performance Performance Commitment 2020 for Incentive/Promise Negative billing contacts 7,166 5,810 Included in SIM We have assumed a reduction in negative billing contacts of just over 3% per annum. Most customer contacts we receive are about bills and payments. We received more than 311,000 telephone calls from customers in 2012/13 of which over 80% related to bills and payments. We also received more than 1,100 written complaints, and just under half of these related to bills and payments. Page 14
The vast majority of the calls we receive about bills and payments are contacts that we want, in the sense that customers are calling to request information, to ask for assistance or to complete simple transactions, for example to tell us about a change of address, to ask for a free meter installation, to set up a Direct Debit or to make a payment. Last year though, around 6,600 calls relating to bills and payments indicated some element of customer dissatisfaction or service failure. We track our performance in this respect every month, and we want to reduce the volume of such calls year-on-year, to achieve a performance level of less than 3,000 per year in the longer term. Improved bill information and smarter technology including online billing and automated meter readings will help us to achieve this. Justification for target Regulatory/ Statutory requirements We have assumed a reduction of just over 3% per annum. There is no regulatory basis for the target, however negative billing contacts form part of the unwanted contacts component of the SIM. Please refer to Performance Measure Service Incentive Mechanism (SIM) for more information. Because of the link to the SIM, our performance for this outcome is not separately incentivised. Customer research / preferences / willingness to pay Bills that are clear and easy to understand was customers 7 th equal priority out of the 16 identified in Stage 1 of our customer priority research. Consistency with previous record of delivery Through BWBSL, we began to monitor unwanted billing contacts in 2009/10 in preparation for the introduction of SIM. Since then we have seen a continuous improvement in the level of contacts we receive. Figure 2 shows the improving trend in unwanted billing contacts since 2009/10. Figure 2 25000 Unwanted Billing Contacts Unwanted billing contacts 20000 15000 10000 5000 0 2009/10 2010/11 2011/12 2012/13 Unwanted billing contacts Page 15
Proposed Investment Around m is allocated to BWBSL related costs in a rolling programme of investment covering software, vehicles and office equipment which we share jointly with Wessex Water. In relation to this outcome, however, we are not currently planning expenditure on any specific enhancements or improvements, other than the ongoing costs which are included within base operating expenditure. Through BWBSL, we will continue to try to reduce and minimise the number of unwanted contacts received, by getting bills right and resolving queries first time. We will also continue to regularly review our bill layout, the content of our website and other customer communications in order to provide customers with the information that they require and reduce the likelihood of them needing to contact us. Expected Benefits We refreshed our website this year, with a new look, improved information and enhanced selfservice facilities, making changes in line with the views expressed by our customers through independent research 9. Similarly, the introduction of online billing services towards the end of the year will address a gap in our service offering; we know that many customers now prefer to manage their household bills this way and will welcome the introduction of these new facilities. Increased use of automated meter reading over the next five years will also mean fewer estimated meter readings and more accurate bills for customers. We will also continue to listen what our customers are telling us, so that we can identify and make further improvements to our bills, our billing information and our payment options, in order to meet current and future customer requirements and expectations. Risk Analysis Impact of risks on customers If we issue customer bills which are incorrect or if customers struggle to understand the information we provide on our bills, this will impact detrimentally upon customer satisfaction. If meter bills are estimated too frequently, customers may be using more water than the estimates assume and may accrue a larger bill in the future, which may in turn cause them an affordability problem. Impact of risks on company Poor performance would have a negative impact on our SIM score, resulting in reputational damage and potentially the application of a SIM penalty. Additionally any increase in, or failure to reduce, contact volumes will impact upon our operating costs. 9 Blue Marble Research, website research, January 2013 Page 16
Assumptions made in relation to mitigation Other causes of negative billing contacts which are not related to the accuracy or clarity of our bills will impact upon our performance in respect of this Outcome. We are therefore assuming that other measures to mitigate those causes will also help us to meet our targets in relation to this Outcome. Page 17
Proposals for delivering Easy to Contact Outcome We understand that it is very important for our customers to be able to contact us easily; obtain information or help from us; provide information or make a request to us, and give us feedback. Being easily accessible and contactable forms an essential part of our service offering and the customer experience we aim to provide on a daily basis. Customers who call us speak to a friendly, knowledgeable person in a local contact centre. We do not use automated telephone systems which require customers to find their way through complicated menu options, having to choose option 1, option 2 etc. Customers may, of course, choose to contact us by other means, such as email, letter or via our website; however we know that our customers preferred method of contact remains the telephone, irrespective of the customer s age group or socio-economic classification, and especially when reporting a problem relating to either the bill or the water supply. 10 We recognise that customers want to make contact with us in a way which is easy, quick and efficient but also one which is personal and empathetic to their needs and circumstances. We are extending the opening hours of our Operational Customer Services team to meet customer expectations and requirements, enhancing our service offering during the evening and on weekends. The growth of social media has had a significant impact on the world in which we all live and work, and we are very much aware of the potential for these facilities as a means or channel of communication for our customers. Performance Measure Ease of Contact from Surveys Definition This is defined as the percentage of customers who consider that we are easy to contact. 10 Blue Marble Research, Website Research, January 2013 Page 18
Means of Measurement Each month independent researchers carry out for us a survey of 200 consumers who have contacted us in connection with their bill or an operational issue. Respondents are asked to rate how easy it was to contact us by telephone and get through to someone who could handle their call. Satisfaction is expressed as very satisfied, fairly satisfied, neither satisfied nor dissatisfied, fairly dissatisfied or very dissatisfied. The percentage of customers responding that they are very or fairly satisfied is used to measure ease of contact. Reason for choosing this measure This measure closely fits the outcome Easy to Contact and is akin to a measure of customer effort. Whilst at present the quantitative measures of abandoned calls and all lines busy contribute toward our SIM score, these do not fully reflect the importance of the availability of our telephone service for customers. For example, these measures include significant numbers of calls which are abandoned very quickly through no fault of ours and would not result in customer dissatisfaction. It is, however, likely that any dissatisfaction would be reflected in the qualitative SIM measure. Target level of performance We know that companies and organisations which deliver the best customer experiences do not simply focus upon customer satisfaction but also consider customer effort, the level of effort required from customers to contact them, as a key indicator. To measure this, we track how easy it is for our customers to contact us by telephone, a measure which is often associated with customer effort. We use our monthly customer research programme 11 to do this. Table 4 shows the target level of performance for this measure. Table 4 Target Level of Performance Performance measure Current Performance Performance Commitment for 2020 Incentive/Promise Ease of contact from surveys 96.5% in 2012/13 12 >95% Reputational We currently perform very well against this measure with 96.5% of customers surveyed in 2012/13 indicating that they were able to contact us easily 13 and we intend to continue to meet our customers expectations in this respect, by ensuring that we maintain a performance level of more than 95% of customers satisfied in this respect. Because we have only collected this data in this format for one year, we do not have any historical trends to understand how this indicator may vary. However, we will review the target as more data becomes available. 11 McCallum Layton monthly SIM tracker survey 2013/14 12 This was the first year the data was collected 13 McCallum Layton monthly SIM tracker survey 2012/13 Page 19
Justification for target Regulatory/ Statutory requirements Whilst our customer satisfaction score in the SIM qualitative measure is affected by the ease with which customers can contact us, and whilst the number of abandoned calls and calls receiving the engaged tone is included within the SIM quantitative measure, customer effort is not currently a separate measure contributing to the overall SIM score. As this measure is a contributory factor in the overall SIM score, we do not believe that it is appropriate for both to be incentivised separately. Therefore only our SIM performance will be subject to a financial incentive (using Ofwat s regulatory mechanism) for the 2015-20 period. Customer research / preferences / willingness to pay Whilst ease of contact was not identified specifically within stage 1 of our customer priorities research, resolving problems quickly with no quibbles was ranked equal 3 rd indicating that customers are keen to have things dealt with quickly; this process or customer journey clearly starts with customers being able to contact us with the minimum amount of effort. Consistency with previous record of delivery We only started collecting this data in this format (through our monthly customer surveys) in 2012/13 and therefore do not have sufficient data to evidence consistency with historic performance. However, we will continue to monitor this and address any perceived decline in customers assessment of the ease with which we can be contacted. Proposed Investment We have ear-marked for initiatives to enhance our customer experience and improve aspects of customer service and engagement, with a view to meeting evolving customer expectations and requirements over the period. Additionally, around is allocated to BWBSL-related costs in a rolling programme of investment covering software, vehicles and office equipment; this represents our proportion of the total cost which is shared with Wessex Water. In relation to this outcome, however, we are not currently planning expenditure on any specific enhancements or improvements, other than the ongoing costs which are included within base operating expenditure. Over the next five years, as well as continuing to track our performance against this measure, we will seek and listen to customers views about the communication channels they prefer and want us to provide; we will analyse their comments and feedback in order to anticipate future customer requirements and expectations; and we will act to improve existing communication channels and, if appropriate, introduce new ones to meet those customer expectations. Page 20
We know for example that at present customers do not like automated telephone systems such as IVR systems and that, irrespective of age group or socio economic classification, contacting us via social media is not a priority for them; in fact they do not consider social media be a means by which they would want or expect to contact us. 14 If customers requirements and expectations change, however, we will act accordingly. Expected Benefits If we identify the need for enhancements to existing contact channels or new ones, then this will be to maintain or improve the ease with which our customers can contact us, and in turn we would expect to see this reflected in maintained or improved survey results. Risk Analysis Impact of risks on customers If we do not continue to be accessible to and contactable by our customers, this will impact detrimentally on the customer experience we provide and consequently upon customer satisfaction, how customers rate us in relation to ease of contact and customer perceptions of value-for-money. Additionally, if customers are unable to contact us easily then this may impact our ability to identify and respond to operational issues, for example as a result of an incident affecting water quality or a burst main. Impact of risks on company If we do not continue to be accessible to and contactable by our customers, this will impact detrimentally on customer satisfaction which will impact upon our SIM score and on our reputation. 14 Blue Marble Research, website research, January 2013 Page 21
Proposals for delivering Satisfied Customers Outcome Customer satisfaction is a key indicator for any service provider wanting to understand how well it is performing. Customers are at the heart of our business; all of the operational activities and programmes of investment we carry out are to maintain or improve the service we provide for our customers, so that we can meet their requirements and expectations. Consequently, our focus is on: Ensuring a continuous, uninterrupted water supply for our customers now and into the future; Supplying drinking water of the highest quality; Providing excellent customer service; and, Keeping our bills affordable. Achieving high levels of customer satisfaction is therefore a priority for us. Performance Measures We have identified three performance measures to monitor our performance against this outcome: Performance Measure Service Incentive Mechanism (SIM) Definition This is Ofwat s measure for comparing the customer service performance of water companies in England and Wales. The Service Incentive Mechanism (SIM) includes quantitative measures relating to the number of written complaints, unwanted contacts, abandoned calls and calls classed as all lines busy that companies receive. It also includes a qualitative measure derived from a survey of consumers views on the service provided. The composition of the SIM for 2015-20 is currently subject to consultation. Page 22
Means of Measurement The quantitative element is calculated from data obtained from our call handling and customer relationship management systems at our operational customer services department and BWBSL. The qualitative element is derived from the outcomes of consumer surveys, which are carried out four times a year by an independent market researcher for Ofwat. Each of these elements produces a score out of 50, which are combined to calculate an overall score out of 100. Reason for choosing this measure SIM is a key comparative measure of our performance and covers all aspects of our service offering, experience and delivery to customers (and consumers). Whilst the mechanics of the calculation may be complex, the overall score out of 100 and comparative ranking are easy to understand by customers and stakeholders. Performance Measure Value-for-Money Definition This measure is defined as the percentage of our customers who consider that we provide good value-for-money. Means of Measurement In the eight months when Ofwat s SIM survey does not take place, we carry out an independent survey of 200 customers who have contacted us in connection with their bill or an operational issue. Within this survey the respondents are asked to rate their satisfaction in terms of the value-formoney we provide. The measure is calculated as the percentage of respondents who rate this as very good or good. Reason for choosing this measure Value-for-money is an important concept in measuring whether customers consider that the service that we provide is worth what they pay for it. Some customers struggle to make this assessment, often citing that they cannot compare because they cannot choose water supplier, but we have found the measure to be sufficiently well understood by most respondents to our surveys. Performance Measure General Satisfaction Definition This is defined as the percentage of our customers responding to our annual household customer tracking survey who say rate their satisfaction in respect of our service as excellent, very good or good. Means of measurement We use an independent market researcher to carry out an annual survey of 1,000 household customers in our area, who may or may not have had cause to contact us during the year, through which we obtain their views on our activities and the services we provide. Page 23
This survey includes a question asking respondents rate overall how satisfied they are with the services we provide. Reason for choosing this measure This measure captures satisfaction from a random sample of all of our customers, whereas the SIM survey is limited only to those who have had cause to contact us. It is closely linked to the outcome and easy to measure and understand. Target levels of performance Table 5 shows the target level of performance for each of the three performance measures. Table 5 Target Level of Performance Performance Measure Current Performance Performance Commitment for 2020 Incentive/Promise Ofwat s measurement of customer service (SIM) 86 (4 th ) Above industry average SIM score (Increased score year-on-year & Top 5 ranking) Reward/penalty General satisfaction from annual tracking surveys Value-for-money rating from monthly consumer satisfaction surveys 93% > 90% Included within SIM 70% 72% Reputational Justification for target Regulatory/ Statutory requirements Ofwat measures the customer service performance of all companies in England and Wales using the Service Incentive Mechanism (SIM), comprising quantitative and qualitative measures. A company s overall SIM score must be greater than the industry average score to receive a positive incentive (reward); those below average may expect to receive a financial penalty. We were ranked second in the SIM in 2011/12 and, whilst we improved our overall score in 2012/13, we were ranked fourth out of the 21 companies. We appreciate that we must continue to improve the service we provide, if we are to meet customers requirements and expectations over time. So, we have set a target of improving our SIM score year-on-year and maintaining a top five industry ranking in the long term. For any sector, including retail, achieving greater than 90% customer satisfaction is considered to be as high performing, and we consider this to be an appropriate target for 2020. The water industry performs relatively well in this respect, but less so in relation to value-for-money. Consumer perceptions are influenced by the media, especially when politicians are involved, and whilst we currently perform well in respect of both measures, we are acutely aware of the pressures currently being exerted on both due to heightened political and media interest. Page 24
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 Bristol Water PR14 Business Plan Customer research / preferences / willingness to pay Whilst satisfied customers was not identified specifically within stage 1 of our customer priorities research, resolving problems quickly with no quibbles was ranked equal 3 rd, indicating customers are keen to have things dealt with quickly and keeping customers satisfied is essential for any service provider in any sector. Consistency with previous record of delivery Our target of improving our SIM score year-on-year during AMP6, and maintaining a top-5 ranking, is consistent with the performance we have delivered in the first three years of AMP5. Table 6 shows our SIM scores and rank for the period 2010 to 2013. Table 6 SIM scores 2010-2013 Year 2010/11 2011/12 2012/13 SIM Score 81 85 86 SIM Rank 5 th 2 nd 4th Our target of maintaining a customer satisfaction score of >90% of respondents in our annual tracking survey for household customers would represent an improvement against the levels we have achieved historically. Figure 3 graphically represents this information. Figure 3 Customer Satisfaction from Annual Tracking Surveys 100% 95% 90% 85% 80% 75% 86% Customer Satisfaction from Annual Tracking Surveys 87% 91% 87% 88% 87% 84% 85% 93% 87% 93% 70% We only began tracking satisfaction with value-for-money through our monthly consumer satisfaction surveys in 2012/13, when we achieved 70% satisfaction 15. 15 LB Research, monthly customer satisfaction surveys 2012/13 Page 25
How we will deliver Customer satisfaction is a key indicator for any service provider wanting to understand how well it is performing. Customers are at the heart of our business; all of the operational activities and programmes of investment we carry out are to maintain or improve the service we provide for our customers, so that we can meet their requirements and expectations. Consequently, our focus is on ensuring an uninterrupted water supply for our customers now and into the future, supplying drinking water of the highest quality, and providing excellent customer service, whilst at the same time endeavouring to keep our bills affordable. We have a continuous programme of consumer research to help us identify how and where we can improve our services for customers. This includes monthly consumer satisfaction surveys and our annual household customer tracking survey. As well as using research, we use several other insightful ways of measuring the level and quality of the service we provide to our customers. For example, we carry out root cause analysis of the customer complaints we receive, so that we can understand how and where things have gone wrong and learn from them; and we monitor how many of the customer calls we receive indicate dissatisfaction or are repeat calls, again so that we can identify what we need to change in order to improve our service to customers. Proposed Investment We have ear-marked for initiatives to enhance our customer experience and improve aspects of customer service and engagement, with a view to meeting evolving customer expectations and requirements over the period. Additionally, around is allocated to BWBSL related costs in a rolling programme of investment covering software, vehicles and office equipment which we share jointly with Wessex Water. In relation to this outcome, however, we are not currently planning expenditure on any specific enhancements or improvements, other than the ongoing costs which are included within base operating expenditure. Nevertheless, we expect our plan as a whole to improve customer satisfaction and to influence customers perceptions of value-for-money, as our investment programme is focused on improving the levels of service we provide to customers in respect of the aspects of our service which they have prioritised. Additionally, we will continue to seek and to listen to the views of our customers to ensure that we meet their requirements and expectations; where enhancements to our customer experience or improvements to our services are identified, we will act accordingly. To help facilitate this, we are introducing new feedback measures for customers to provide their views on our service. Page 26
Expected Benefits Nine out of ten household customers are satisfied with our service 16, but we know that to maintain or improve on this, we need to ensure that we continue to deliver a high quality, value-for-money service and that we continue to enhance the experience our customers have when they do have to contact us. In short, we must continue to meet our customers requirements and expectations. We will therefore invest and spend money, when and where appropriate, to enhance the customer experience and deliver benefits to our customers. Risk Analysis Impact of risks on customers Our household customers cannot choose their supplier, because we are a monopoly provider of water services in our area. This would present a risk to our customers, if we did not take appropriate steps to ensure that the customer service we provide is as good as or better than customers would receive if they were able to switch to another water company. We can monitor how customers feel about this by tracking customer satisfaction and value-formoney perceptions. Many different things can impact positively and negatively on customer satisfaction. Customers personal experiences of our service are naturally very influential in this respect; and their perceptions can play a part too. We also appreciate that whether customers believe they are getting value-for-money is inextricably linked to how satisfied they feel about the service we provide. Providing value-for-money is therefore very important for us. We recognise that lots of things will influence customers views in this respect, for example the quality and reliability of the water we supply, the quality of our customer service, the impact on customers and commuters of the work we carry out on our water mains, the affordability of our bills and the reputation of our company. We therefore track customers views on value-for-money through our monthly surveys, and 7 in every 10 customers surveyed currently consider that we provide good value-for-money. 17 Whilst this may compare reasonably well to other household utilities and other service providers, we want to improve our performance and we will seek to do so during the next five years and over the long term. Impact of risks on company Performance in Ofwat s SIM has reputational impacts (when published) and can have a financial impact if it results in either a reward or a penalty. An increase in the level of customer contacts and complaints would also incur extra costs to the company in relation to the resources required to respond to them. 16 Future Focus Research annual tracking survey, January 2013 17 McCallum Layton Research monthly SIM tracker survey 2013/14 Page 27