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Meeting held (via video conference) onMonday 23rd January 2017 at 10.00amat Fulbourn Road, Cambridge and Green Lane, Walsall MINUTESAttendees:Panel MembersSimon Sperryn (Chair)Nicola Terry Neal Jennion (first half of meeting)Roger Gray Christina Blackwell (CC Water)Bernard Crump (CC Water)John ThompsonMaz Chari (representing John Giles, Environment Agency)Jonathan Conder (report writer)Company RepresentativesRachel Barber, Retail Customer Services DirectorPete Aspley, Wholesale Service Delivery DirectorAlex Martin, Head of Water StrategyPhil Saynor, Director of Finance & RegulationCaroline Cooper, PR19 Programme LeadAPOLOGIESApologies had been received from John Giles, who was represented by Maz Chari, and Tracey Richardson.WELCOME AND INTRODUCTIONThe Chairman thanked everyone for attending the meeting and reported that Jonathan Conder had been appointed as Report Writer for the Panel and would be joining later. His role with the Panel would include minute taking, progress chasing, compiling a log of the challenges made by the panel and drafting the Panel’s reports.CONFLICTS OF INTERESTNo conflicts of interest were declared.MINUTESThe minutes of the meeting held on 10th October 2016 had been circulated and were agreed as an accurate record. MATTERS ARISINGA chart tracking the action points from the last meeting had been circulated with the agenda. Most appeared on the day’s agenda or had been completed by email. Among these it was noted that the Chairman was now automatically receiving a copy of any Initial Notification which the Company made to the Drinking Water Inspectorate (DWI). The only one so far had been in October related to water discolouration at Barr Beacon, but the Panel was informed of another incident the previous weekend caused by burst water in West Bromwich.Regarding CCWater’s Annual Complaints Report, Christina Blackwell shared a breakdown of the ‘other’ category, which had been the only category in which the Company had scored badly. The Panel was reassured that the category contained merely a variety of minor failures and no systemic problem.The Company gave an update on the Hampton Loade Treatment Works. Tenders were being invited to improve the disinfection process at the treatment works. Trial work had been ongoing to assess the efficacy of alternative methods, this information would support the tender process. The Panel had asked about the effect of UV treatment on carbon emissions. The Company reported that, although the UV plant at Seedy Mill had not been running for a full year, it was clear that the higher energy requirement would be greater than could be compensated by the solar panels in place at Seedy Mill and would result in a modest increase in the Company’s carbon emissions.At the last meeting it had been unclear whether the regulator would allow continuation of the price differential between South Staffs and Cambridge that had been inherited on merger and stood currently at around ?14. The Company now confirmed that no stipulation had been made about the differential, which would therefore remain for the time being.The Company’s draft Drought Plan for Cambridge was up for Board approval this week before submission to Defra by the end of February. The Plan for South Staffs was not due until two months later, but the two would be aligned next time. The Company was grateful for the comments on the drafts which Nicola Terry had prepared on the Panel’s behalf and reported that as a result they were proposing a significant reduction in the notice period for a hose pipe ban from 9 weeks to 5. CCWater had also provided very helpful comments. Christina offered to review the non-technical summary of the full plan which the Company would prepare for publication when Defra had indicated that the Company might proceed. CHAIRMAN’S REPORTThe Chairman’s report had been circulated. Points covered included the following:CCWater Board Meeting held in public in Birmingham on 10th January 2017A presentation made at this public meeting by the Managing Director of South Staffs on progress with the current capital programme AMP6 had been circulated to the panel.Drinking Water InspectorateThe DWI had now clarified its position with regard to its relationship with Customer Challenge Groups, following its decision not to accept places on each one as in the last planning round. Instead the DWI would engage with CCGs on generic matters via meetings with CCG Chairs and would engage with individual CCG panels only when the DWI had significant water quality issues with the Company. The Panel was concerned that this might result in the outcome of bilateral talks between the Company and regulator being presented to the Panel as fait accompli.Environment AgencyEconomists from the EA had given a two hour training session to CCG Chairs after their last quarterly meeting on the subject of different techniques for determining and evaluating customer priorities. The Panel accepted the offer of Maz Chari to see if a similar session could be arranged for them.Action: Maz Chari to seek a training session for the Panel drawing on the EA’s experience of evaluating public preferences in environmental protectionAction: Chairman to circulate a brief publication explaining customer preference research techniques for the layman, which he had found usefulPanel membershipThe Chairman had invited the Stoke on Trent and Staffordshire Local Enterprise Partnership to offer a representative for the Panel, but had been unsuccessful in recruiting an ethnic minority entrepreneur who had volunteered in reply to the previous year’s advertisement on the Company website. He asked the Panel for further ideas of how to bring relevant knowledge and experience to the Panel whilst at the same time strengthening (a) business representation (b) diversity and (c) the balance between Cambridge and the West Midlands. Ideas included local authorities, Citizen’s Advice or similar support organisation for people in need, faith communities or Council of Churches, and the Cambridge Institute of Sustainability Leadership.Action: Chairman to follow up suggested avenues for broadening the Panel’s representationAction: John Thompson to approach the local Chair of the Society of Local Authority Chief Executives for a possible representative of local governmentAction: Bernard Crump to consult CCWater’s new outreach officer on the potential offered by local Financial Inclusion PartnershipsFuture meetingsFollowing a Doodle poll it had emerged that almost all members of the Panel could attend meetings on the following four dates, which were therefore agreed:Wednesday 26 AprilMonday 10 JulyMonday 16 OctoberMonday 15 JanuaryThe Chairman would give these dates to the Company’s non executive Directors whom he had invited the previous year to attend as observers if they wished. They had opted for one of them to attend an occasional meeting. Action: ALL TO DIARIZE THE DATES FOR FUTURE MEETINGS Action: Chairman to invite NEDs to a future meetingBUSINESS UPDATERachel Barber and Pete Aspley provided the Company’s update on business developments in Q3 of 2016/17. The update highlighted performance against ODIs, about which the Company’s internal report had been circulated with the agenda. The update also covered comparative performance against other companies as revealed in the comparison website Discover Water and in CCWater’s annual report ‘Delving into Water’. Links to these two had been provided to the Panel by the Chairman in an email of 1 December, and his summary of the Company’s rankings on the comparison website had been circulated with the agenda. Of concern were the SIM measure of customer satisfaction and the ODI relating to Acceptability of Water to Customers, in which the Company had been near the bottom of the league table the previous year and had incurred a penalty. Acceptability had improved year on year by 18%, but the current year’s target would be missed and the following year’s target was aggressively more difficult. A pie chart was tabled showing analysis of the triggers for customer contacts, which revealed that half of all complaints followed action by the Company itself and were therefore capable of improvement. An example of action already taken was new procedures to ensure that if it were necessary to reverse the flow in a main, the main would first be flushed to reduce the likelihood of discolouration.The Panel was told that CCWater, whilst applauding the success of the SIM regime in helping to halve the level of customer complaints nationally, now believed that it was time for change. One result of lower levels of complaint was that small changes in the number of calls brought disproportionate changes in the quarterly rankings between companies. The Company’s SIM score was expected to get worse. Complaints had gone up in Staffordshire and even more in Cambridge, partly because of a significant reduction by Ofwat in the Company’s allowed expenditure on customer service, which in the previous planning cycle had been higher than other companies. Resulting cost reductions had included centralising customer contact in Walsall and alignment of billing and debt recovery.The Panel challenged the Company on the level of leakage in Cambridge, which was forecast to exceed the performance target. An action plan was in place, monitored by fortnightly meetings, and the trend was improving. The two-fold approach consisted of better data through enhanced reporting, combined with more resource for monitoring consumption so as to identify targets for action.CONSULTATION ON THE OUTCOMES FRAMEWORKPhil Saynor presented a paper (Paper 7) about Ofwat’s current consultation on the outcomes framework for PR19. The regulator was seeking views by 31 January on four main proposals:how to make performance commitments more stretchinghow to create more powerful ODI incentiveshow to better reflect resilience in outcomesand how to make performance commitments more transparent.The Chairman briefed the Panel on discussions which Ofwat had initiated with CCG Chairs on this matter, which had led to some lively debate. By and large CCG Chairs were sceptical about the logic for ever more stretching targets and disliked the mechanism for rewarding companies for exceeding their targets by allowing them to put prices up. They felt this undermined the process of consulting customers so as to reach an agreed balance between service level and affordability. The Panel discussed whether responding to the consultation was an appropriate activity for the Panel. Although recognizing that any changes introduced by Ofwat after the consultation would have a significant effect on customers and on the Panel’s work, it was noted that time was now short and the Panel’s knowledge of the subject modest. It was therefore agreed that the Panel should not respond, but should take a view on whether the Company’s response took adequate account of customers’ interests.Action: The Company to share with the Panel its response to Ofwat’s consultation on outcomes, once approved by the Company’s BoardFUTURE AVAILABILITY OF WATER IN THE CAMBRIDGE AREAAlex Martin presented a briefing paper (Paper 8). Her presentation had been held over from the Panel’s final induction session at the previous meeting. Its main message was that the adequacy of future water supply in the Cambridge area was challenged by a combination of:the pace of growth and development in Cambridgelow rainfall and shortage of water across the whole of Eastern England.the difficulty of compliance with tightening environmental conditions attached to water abstractionTo exacerbate this challenge, the EU Water Framework Directive had now brought to an end the presumption of renewal of time-limited licenses up to the same permitted level of abstraction if actual usage was lower. Cambridge Water had two of such licenses that were due to expire soon (Euston and Brettenham, in Thetford). Renewal at any level of capacity above current usage now depended on the licensee proving that no environmental deterioration would result. The Company’s current Water Resources Management Plan (WRMP) forecast a comfortable headroom between supply and demand throughout the 25 years planning horizon, but the same was unlikely to be true in the next WMRP which was already in preparation. The new sustainability criteria demanded by government for water catchment areas would result in reductions in deployable output, and the Company was working through the implications with the Environment Agency. The new draft WRMP would include options for mitigation of the likely shortfall including a regional approach with neighbouring water companies.The Panel questioned why the Company did not ensure full deployment of licensed capacity from sources whose licenses were close to expiry. The Company advised that the change in approach was relatively recent and prevented this. In answer to a question about possible involvement of customers in licensing decisions, it was explained that the Environment Agency’s approach was driven by legislation. The Panel noted the unfortunate impact of a lack of synchronisation between the PR19 timetable and the introduction of the Environment Agency’s new Sustainable Catchment PANY’S APPROACH TO PR19Caroline Cooper explained her new role as the Company’s PR19 Programme Lead, reporting to the Managing Director. Her presentation (Paper 9) included a draft timeline showing major milestones for both Ofwat and the Company leading up to submission of the Final Business Plan in September 2017 and draft determination in July 2019. She explained how responsibilities for the various work-streams were being shared among the executive team and outlined where challenge from the Panel would be most appropriate in each of the three core areas the company would focus on: Regulatory; Engagement, and Totex (a combination of capital expenditure, operating expenditure and any special factors). The Panel was alerted to experience gained in previous PR rounds of the fact that Ofwat’s approach to the Weighted Average Cost of Capital would have the most significant impact on company business plans; hopefully this would be settled earlier in the process than it was in PR14.CUSTOMER ENGAGEMENT STRATEGYRachel Barber introduced Paper 10 which included a high level timeline for customer engagement leading up to the PR19 submission. On 18 April Nick Holloway would be joining the company as Customer Insight Manager and he would be a key resource in customer engagement activity. The detailed methodology would not be available until the Spring but the chart showed the principal stages of the engagement programme and the order in which elements were planned to take place. Early stages were already going ahead including contracting with a research firm called Accent to carry out the tracking survey in this and future years, devising a pattern of focus groups, and designing a survey of customers via the Company websites. The Panel asked whether an adequate budget was available for the programme and was told this would be set in April. However a sum of ?300K had been allocated for the surveys. Targets for customer engagement were not yet set either. It was noted that Nick Holloway would bring in-house experience of focus group and survey techniques. The Panel pointed out that the timeline was visually misleading since the size of boxes on the chart was proportionate to the duration of the activity but might appear to indicate its significance.The Panel asked if the Company’s waste-water service partners were being engaged. Talks were under way with Severn Trent who seemed keen to share data. Contact had been made with Anglian. With regard to surveys the Panel warned against over-reliance on small samples, a particular danger for relatively small water companies. The Company proposed to open out surveys to all customers by use of its websites and enclosures with customer bills. Payment or similar inducement to take part in surveys was not considered good practice, but the Company was proposing to enter respondents into a prize draw. It was suggested that a prize might be offered in the form of an invitation to visit the Company or a Company asset.It was reported that six Focus Group sessions were planned. Outside expertise was being drawn on to ensure that appropriate cross sections of the customer base were involved. The Panel asked if groups would be asked for their generic preferences or for preferences specific to PR19; the Company advised that the preferences would be generic. The Panel was concerned that not only the questions but also the context given to those questions must be most carefully considered. It was agreed that the Panel should be given sight of both and an opportunity to comment.In terms of Panel workload, it was agreed that sub-groups might need to be formed at a later date but the immediate priority would be to comment on the draft tracking survey, on the website survey, and on the proposed framework for focus groups. The first of these would be needed in the next two weeks. As the size of the Panel was relatively small (albeit with plans to expand) it would be most effective if all were involved. Response times would be short and the Chairman urged Panel members to send him their responses (even, if necessary, a ‘no comment’) so that he could collate them into a single response for the Company. Action: All Panel members to stand by for a swift review of survey and focus group materials as soon as available and to provide responses directly to the Chairman, copied to Jonathan Conder, for submission as a single Panel response.VULNERABILITY STRATEGYA draft Strategy and Plan had been circulated by the Company to the Panel on 30 November, requesting comments by 6 January. The Chairman had summarized the Panel’s response in the agenda paper (Paper 11) containing seven challenges. In her response to these, Rachel Barber advised that the final version of the internal document would be completed by the end of March 2017, with a public facing version to follow. The Company had appointed Amy Anderson to lead in this area and she was to be supported by an experienced new recruit from a major utility provider. The Panel noted that the document was ‘work in progress’ and welcomed being given an early opportunity to share in the development of the strategy. It was agreed that the Panel would review the final document and the customer facing document when ready, perhaps forming a sub group combining volunteer Panel members with selected experts from the Company’s charitable trust.PANEL TERMS OF REFERENCEThe Chairman suggested that the Terms of Reference for the Panel needed to be updated to reflect the remit of CCGs set out in Ofwat’s “Customer Engagement Policy Statement and Expectations for PR19”. Proposed amendments had been circulated together with the text of the existing ToR (Papers 12 & 13). The Chairman proposed that, in view of the adoption by Ofwat and the Company of new three letter acronyms for the Company (SSC), for its South Staffs operation (SST) and for its Cambridge operation (CAM) the opportunity should be taken to apply these correctly in the ToR. These amendments were approved and would now be submitted to the Company Board.Action: The proposed amendments to the TORs to be submitted to South Staffs Group Legal Department for redrafting and then to the Company Board for approval.There being no other business, the Chairman gave his thanks to all for attending and closed the meeting at 13.15. Next MeetingThe next meeting will be held by video conference at 10.30 on Wednesday 26 April 2017. ................
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