They are based upon the Company proposals outlined in the Southern Water Business Plan for 2015-2020 (AMP6) and the Ofwat Customer Engagement Policy Statement and Expectations of PR19 (May 2016).
- The CCG will have three primary functions.
1. To be the Southern Water Customer Challenge Group (CCG) for PR19.
2. To provide independent challenge and advice to the Board on the Company’s delivery in AMP6 of the six priorities and twenty-six customer promises identified during the PR14 customer research and stakeholder engagement programme and the performance commitments made during the price review.
3. To provide challenge and advice to the Board on the approach to the selection of bathing waters for action during AMP6.
In addition to the above, and in light of recent Ofwat publications around the issue of vulnerability and affordability, the CCG will take on an additional advisory role providing advice and challenge around Southern Water’s affordability work.
The Customer Challenge Group (CCG) shall be the name used for all functions and in all reports. The specific functions regarding PR19 are subject to Ofwat guidance and requirements and will be updated accordingly as and when required.
The first duty of the CCG will be to work with the Company during PR19 to provide independent challenge to the Company and independent assurance to Ofwat on:
• the quality of the Company's customer and stakeholder engagement for PR19; and
• the extent to which the results of this engagement are driving decision-making and are reflected in the Company's final business plan for 2020-25.
In particular, this will include the following:
• Has the company developed a genuine understanding of its customers’ priorities, needs and requirements – and where appropriate customer valuations – drawing on a robust, balanced and proportionate evidence base? Has the company engaged with customers on the issues that really matter to them?
• Where appropriate, has the company engaged with its customers on a genuine and realistic range of options? For example, in relation to a need to rebalance supply and demand, this might include increasing its own capacity, purchasing water from another company or demand management options. Where appropriate, has the company considered how customers could help co-create and co-deliver solutions to the underlying challenges?
• Has customer engagement been an on-going, two-way and transparent process, where companies are informing their customers as well as soliciting feedback from them?
• Has the company effectively engaged with and understood the needs and requirements of different customers, including those in circumstances that make them vulnerable? Has the company considered the most effective methods for engaging different customers, including those that are hard to reach?
• Has the company effectively engaged with its customers on longer term issues, including resilience, impacts on future bills and longer-term affordability? Does the business plan adequately consider and appropriately reflect the potential needs and requirements of future customers? Wherever appropriate, has the company engaged with its customers on the long-term resilience of its systems and services to customers?
• Has the company effectively informed and engaged with customers on its current levels of performance and how does this compare to other companies in a way customers could be expected to understand?
• Has the evidence and information obtained from customers (including through the company’s day-to-day contacts with customers) genuinely driven and informed the development of the business plan to benefit current and future customers? What trade-offs (for example between different customers) have been identified and how has the company proposed to deal with these?
• Has the company developed a clear understanding of who its stakeholders are, consistently engaged with them in ways that stakeholders find appropriate and taken proper account of their views in the plans made and actions taken?
• Commentary on any concerns the CCG process has highlighted regarding tensions between delivery of the proposed plan and compliance with statutory environmental and drinking water quality obligations.
• How has the company identified and targeted those consumers who are, or might become, vulnerable and have products and services, including the social tariff, been developed in ways which meet these needs?
The CCG will provide an independent report to Ofwat at the same time as the company submits its business plan in 2018 covering the above issues.
The CCG is not expected to challenge or assure costs (including operating costs, financing costs or whether the costs associated with new schemes are efficient).
AMP6 PRIORITIES AND PROMISES
The second duty of the CCG is to monitor delivery and provide assurance that the six priorities identified in the 2015-20 business plan are being delivered and that the twenty-six promises made by the Company are being kept. The CCG will ensure that its view of Company performance is communicated in a clear and transparent way to the Board, customers, stakeholders and the broader community Southern Water serves.
The duties of the CCG will therefore be to:
• advise the Board on the delivery of the business plan to ensure that customers’ and stakeholders’ priorities remain at the heart of business decision making;
• provide assurance and challenge the delivery of business plan promises, including the way in which business performance is communicated to customers and stakeholders;
• advise and provide scrutiny of the Company’s customer and stakeholder engagement programme, impact assessment and customer research, to ensure that the Company continues to have a clear and robust understanding of customer and stakeholder priorities; and,
• provide insight and challenge, from within and outside the sector, on best practice developments in customer and stakeholder engagement and research, partnership working and behavioural change.
The CCG will also have a duty to report annually to the Board on:
• the advice and challenge it has offered on delivery of the business plan and how it is reflective of the six customer and stakeholder priorities;
• the Company’s response to advice and challenge given by the CCG around the delivery of the twenty-six customer promises made in the business plan and subsequent commitments made to Ofwat during the price review.
The reporting timeline for the CCG will align with the publication of Southern Water’s Annual Report. The CCG will, however, publish its own report independently of the Southern Water Annual Report.
DUTIES REGARDING BATHING WATERS PROGRAMME
As well as the duties outlined above the CCG has a third and final duty.
The Company agreed with Ofwat a mechanism which involves the CCG in the selection process of the specific Bathing Waters to be included in the AMP6 Bathing Waters Enhancement Programme.
The CCG will therefore be required to be involved in the Bathing Waters selection process by:
• providing both advice and challenge on the engagement programme design; and,
• giving the CCG’s views to the Board on how well the Bathing Waters identified meet the Ofwat agreed selection criteria set out in the Business Plan.
- The CCG is an independent panel. Its authority to carry out its duties as outlined in these Terms of Reference is given by the Board with regard to the AMP6, and by Ofwat with regard to the requirements for PR19.
The CCG will meet at least four times a year with members of the Executive Management Team (EMT) and, as a minimum, the CCG Chair will attend Southern Water Board meetings at least twice a year to provide a formal report on the CCG’s work and its view on the Company’s performance in relation to the duties of the CCG.
The CCG Chair has open access to the Board Chairman and other NEDs, who are also invited to attend a CCG meeting should they wish.
- The CCG Chair is recruited using a best practice recruitment and selection process, including advertising. The Chair is appointed by the Chief Executive Officer (CEO) of Southern Water on behalf of the Board. The Chair of the CCG is independent of all other interests in the Company and acts in an individual capacity.
The Chair has a job description which includes responsibility for shaping agendas and commissioning papers for the CCG meetings.
- An independent search agency is employed to help identify and select appropriate members, who are interviewed by the Chair and CEO and appointed by the CCG Chair, in consultation with the CEO. Members have a job description which lays out their responsibilities.
Membership of the CCG is constructed to provide it with a wide range of knowledge and experience of the issues affecting customers within the Company’s region of operation, the water sector, the UK utilities sector, and the wider economy.
Additionally, each member of the CCG will possess significant knowledge in one or more of the following areas:
• Customer advocacy / community engagement
• Debt advice
• Customer research
• Behavioural change
• Business planning / strategy
• Environmental concerns
CCG members are both independent of the Company and are appointed on an individual basis. CCG members are not appointed to represent any particular organisation nor specific interest group. Members are appointed based on their background, expertise and experience. The sole exception is that a representative for CCWater is included amongst the members of the group as required by Ofwat.
A conflicts of interest register is maintained and published on the web site. Any specific conflicts of interest which members think they may have, following a change of circumstances or in relation to specific agenda items in meetings or in any other way which could conflict with their role as a member of the CCG, are identified and recorded in meetings.
Members of the CCG will be expected to attend all meetings in person (deputies are not permitted). The Chair is contracted on a retainer basis (with a fee that is in line with Board NED fees and on the expectation of making up to a day a week available for CCG business) and CCG members are paid a day rate for attendance at meetings. The Chair and all members are reimbursed for all reasonable expenses incurred in relation to their membership of the CCG.
Including the Chair, the CCG membership will be between 8-12 people.
- The quorum necessary for the transaction of business shall be five. In the absence of the Chair, the Chair may nominate a deputy to chair a meeting. If the Chair is unable to do so, the members may elect a Chair for the meeting. A duly convened meeting of the CCG at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in, or exercisable, by the CCG.
- To ensure its efficient operation the Company will provide a sufficient secretariat function for the CCG.
- Frequency of meetings
- The CCG shall meet, as a minimum, six times a year.
- Notice of meetings
- Meetings of the CCG, other than those regularly scheduled as above, shall be summoned by the Secretary of the CCG at the direction of the Chair.
Meeting dates, times and venues shall be advised no less than twenty-one days in advance of the meeting. In exceptional circumstances, meetings can be called at shorter notice, at the discretion of the CCG Chair.
Unless otherwise agreed, meetings shall take place at Southern Water premises. Unless otherwise agreed, an agenda of items to be discussed and supporting papers shall be forwarded to each member of the CCG and any other person required to attend, no later than seven days before the date of the meeting.
Any three members may request an urgent meeting by writing to the Chair. The request should specify the purpose of the meeting. The discretion to allow such a meeting rests with the Chair.
- Minutes of meetings
- The Secretary shall minute the proceedings and resolutions of all meetings of the CCG, including recording the names of all those present and in attendance. Minutes of meetings shall be circulated promptly to all members of the CCG for agreement.
- Other bodies or individuals can be invited to attend CCG meetings as observers. Observers can participate in discussions but are not members of the CCG. Observers can be asked to leave the meeting during periods when the information being discussed is of a sensitive or confidential nature.
Invitations to observers to attend CCG meetings are at the discretion of the CCG Chair.
The quality regulators (Environment Agency, Drinking Water Inspectorate and Natural England) will be invited to attend the CCG from time to time (and no less than once a year) to report directly to the CCG on the company performance against statutory objectives. These regulators are also invited to request attendance at the CCG at any time they consider helpful or appropriate.
- The CCG will have a website address (www.southernwater.co.uk/customer-challenge-group) embedded within the company website. There will be a presumption of publication on this website for all materials relating to the CCG; including in particular:
• Terms of reference
• Member biographies
• Remuneration and expenses
• Register of conflicts of interest
• Dates of meetings and attendance records
• Minutes of meetings
• Agendas and papers for meetings (subject to any matters of commercial confidence)
• CCG advice notes to the Board and Company responses
• CCG reports to Ofwat and the Board
- The CCG shall be responsible for periodic reviews of its operational performance and, at least annually, review these Terms of Reference to ensure it is operating at maximum effectiveness. The CCG will recommend any changes it considers necessary to the Southern Water Board for approval.
The Southern Water Board is not obliged to adopt all of the recommendations or act in response to all of the challenges from the CCG. Where this is the case, the Board will publish its reasons.