How efficient are retail services in the water sector compared to other sectors?

Objectives The objective of this work is to inform our PR19 approach to assess the current efficiency of residential retail services- in England and Wales in the water sector through comparison with other sectors, in advance of the 2019 price review. The work will focus on the assessment of bad debt, debt management and customer service costs (bill handling and call centre costs) of water companies. Data on bad debt, doubtful debt, revenue recovery and revenue written off is available at Ofwat database. We expect the contractor to produce a report and provide recommendations that are practical to implement in PR19.

Scope and Key Tasks The project consists of two work packages: Work package 1: assessment of bad debt levels and bad debt management practice

The Contractor will assess the efficiency of bad debt levels and bad debt management practices in the water sector relative to other sectors. - Assess bad debt levels and trends in the water sector and how they compare to other sectors. - If levels are higher than in other sectors, to what extent is it due to factors within company control or beyond company control? Would better company management practices in the water sector reduce level of bad debts? - Identify efficient level of bad debts in the sector, based on comparison with other sectors and evidence on revenue collection and debt management practices. - Review revenue collection and debt management practices in the water sector and make recommendations on how these can be improved. - Develop an assessment framework for Ofwat that can be used at PR19 to help inform our view of the efficiency of water companies in managing revenue recovery and bad debts. - Identify best practice with respect to debt management and recovery in other sectors. And provide recommendations for Ofwat on whether its guidelines on dealing with customers in debt should be updated.

Work package 2: assessment of customer services costs The Contractor will assess the efficiency of customer service costs (bill handling and call centre costs) in the water sector relative to other sectors. The Contractor will recommend whether and to what extent we can use information from other sectors to inform the cost efficiency challenge that we set to water companies in respect to this service.

Additional information: Please note that this is a call-off contract so it is difficult to quantify exact spend.

Also that the PROC number PROC.01.0543 was incorrectly used and should be PROC.01.0566. Apologies for any inconvenience caused.