Ofwat’s consultation on changes to the service incentive mechanism (SIM) for PR14 advised that water companies should focus on customer service for households that have no choice.
The SIM rewards or penalises water companies on customer satisfaction levels, but according to Ofwat has said that as there has been an introduction of retail competition in 2017, changes are needed during 2015-20.
Ofwat said: “The current SIM has worked well. At a sector level, customer complaints have reduced and customer satisfaction has increased. This suggests that the incentive is working. But as we update to focus on household customers, there is an opportunity to review the balance of all the measures to ensure the SIM remains fit for purpose.”
According to the regulator, the SIM needs to evolve because in 2017 service incentives will no longer be relevant for non-household customers in England, who will be able to choose their supplier.
The companies are individually scored out of 100 on their service, with metrics including abandoned or engaged calls, unwanted phone contacts and written complaints.
High performance is rewarded with a maximum of 0.5% of revenue of the appointed company’s integrated business where the maximum penalty is capped at 1%.
The consultation also asks companies if the SIM should continue to be used to incentivise service improvements throughout the value chain, rather than being focused entirely on retail activities. If so, it asks how these incentives might be passed through from retail to wholesale businesses.