How Your Business Can Stay Afloat When PR19 Enters The Water Market

Adam Lyons

Life is about to change for water utilities companies. The 2019 price review, or PR19 as it’s more commonly known, is taking a thorough look at how the sector works for customers, what constitutes value, and how water services work for the benefit of the public.

For some, this is well overdue. When the final methodology for PR19 was published in December 2017, it was greeted positively by consumers and the media alike, with the BBC running the headline story of a £25 price reduction. Yet for water companies, some of which have had to endure a relatively tough time on the news front, PR19 represents a huge challenge. The spotlight is on them, and how they react to a major change in the regulatory regime under which they operate will have profound consequences over the next couple of years.

Against this backdrop, it’s important to understand how water companies will be measured by their regulator, Ofwat, come 2020; and how they can respond now to make their lives easier and their customers happier.

What the regulators will look at

PR19 is fairly wide-ranging, with more factors than just price being baked into the water provision equation. Also under consideration are areas such as customer service, what constitutes value for money, and the wider role of water utilities companies in protecting the environment.

This all makes perfect sense. Water is unlike other utilities in that customers can’t switch providers unless they move house (which would be a fairly extreme reaction to poor service!). And this unique status of water has a dual impact. For the customer, it means they want to be able to trust the provider on every level – to know their water is not just clean but is being disposed and recycled efficiently for the benefit of the public at large.

With PR19 and Water2020, suppliers will be more focused and companies will be met with larger rewards and penalties, depending on how well they perform under the rules. We’ve seen the beginnings of this already – Ofwat has come down hard on some, citing underperformance and the failure to meet leakage reduction or supply interruption targets, for example.

What’s clear is that the onus is on retail water companies to get on the front foot over the coming months.

Where the gains can be made

Something fundamental has shifted in customer service – and it’s arguably the case that many utility companies either haven’t noticed or haven’t responded. The consumer world is now dominated by successful firms that put the customer experience front and center, from Amazon’s successful and growing Prime scheme, to ASOS’ phenomenal success with a web store boosted with social media service and a huge focus on convenience.

Consumers now expect service that offers more than just a simple transaction from every organization they spend their money with, a study showed.

In utilities, the customer service experience really only comes into play when things go wrong. And even then, that level of service isn’t great in comparison with other sectors, which is doubtless why Ofwat’s  PR19 proposals give it such a high priority. By making sure their service offer to customers is outstanding all the time, providers can go a long way to satisfy the new demands. Particularly if that customer is pinpointed as financially or socially vulnerable – there’s little worse for a provider’s reputation than aggressively pursuing payment or ignoring requests from those living in difficult situations.

Beyond service, it’s also vital for providers to think about the holistic impact of their work. This is where value comes into it. Water providers are at the frontline of the battle against environmentally damaging plastics, and there are few other organizations whose day-to-day work has such a profound and lasting effect on our planet or is so important a part of the response to climate change. This is also in the PR19 mix, proving once again that pricing is more than cost – rather it’s about what that cost is for and how wide a social purpose the utilities serve.

Getting smart with systems

PR19 presents something of a long to-do list for some water companies. But, for me, embracing the changing landscape could deliver a lot of benefits. The watchword here is efficiency, which can be gained through the intelligent acquisition and use of technology to deliver the performance Ofwat expects

Providing a seamless and efficient customer experience can’t be done with systems that fail to aggregate siloed data so a customer can be viewed holistically or enable first-time fixes of leakages or bursts. Nor can it be done without a resilient technological framework that’s built for long-term prosperity. For example, if a customer is struggling with payment, but that information is kept in a different dataset from the one that times their bills, they’re likely to encounter the negative side of the accounts team. Likewise, without a technology suite that enables innovative service offers on apps and live chat platforms, the consumer goods world will remain light years ahead of utilities.

These are the things water providers should be thinking about when they’re preparing for PR19. Not just how much their service costs. As ever, value is calculated in more than simple raw numbers.

For more insight on how you can prepare yourself for PR19, download this whitepaper.

Adam Lyons

About Adam Lyons

Adam Lyons is a senior, experienced strategy and consulting advisor operating at Board level. He has extensive experience in Technology Strategy and Digital Transformation. He has wide sector experience from a career spanning the energy, industrial and consumer goods sectors. He has an established track record of advising C-Suite clients from strategy through to operating model design and implementation. During his experience working in the “Big Four” and at SAP, he has published thought leadership on the Energy Sector and supported his customers’ transformations, developing the vision, strategy and value they can achieve from digital transformation.