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Independent Chair: Andrea Cook For Consumer Council for Water (CCWater): Barbara Leech For Environment Agency (EA): Ian Hodge For Environment Agency (EA): Leonore Frear For Natural England (NE): Ruth Bull For Association of North East Councils (ANEC): Melanie Laws For Youth Advice Service and Citizens Advice Bureau (YAS and CAB): Jon Johannsson For NHS North of Tyne: Mary Coyle For Northumbrian Water (NWL) Heidi Mottram, Ken Oswald, Ros Shedden and Lucy Denham Independent Assurance Advisor: Ben Haywood Smith APOLOGIES: For Drinking Water Inspectorate (DWI): Milo Purcell For North East Chamber of Commerce (NECC): James Ramsbotham For Confederation of British Industry (CBI): Sarah Green For Northumbrian Water (NWL): Graham Neave, Ceri Jones NOTES AND ACTIONS 1. Welcome, Introduction of new members and apologies Andrea Cook (AC) welcomed everyone to the fourth meeting of the Northumbrian Water Forum (the Forum). She especially welcomed Mary Coyle (Vice Chair of NHS Northeast) who was attending for the first time and has a wide range of relevant experience. AC noted that three independent members, namely Milo Purcell, James Ramsbotham and Sarah Green had sent their apologies, and also that Jon Johannsson was attending for Janine Brown. She noted that Graham Neave and Ceri Jones had also sent their apologies and that Heidi Mottram (HM) would leave the room for a short time to take part in a national water company CEO teleconference. AC introduced Ben Haywood Smith (BHS) explaining that he would be assisting the Forum to draft its report to Ofwat. AC also noted that the company were planning to use BHS to independently review its governance arrangements and also to provide the Forum with independent assurance advice. These arrangements were all considered to be complementary to one another. Notes & actions of last meeting held on 28 September 2012 Actions from the last meeting were reviewed. The record in the table at the end of these notes has been updated with progress. Completed actions are shaded grey these will be deleted as the minutes are prepared for the next meeting. This will be reflected in the notes lodged on the Forum web page.


Action 31 requiring the company to produce a brief overview of the key points in Ofwats draft methodology (when it is published) generated debate in that the Chairs of the CCGs and the companies have been advised that the methodology would be further delayed according to the latest brief from Ofwat the expected time for publication was now in the new year.

HMs view was that the company should try and run the business really well for its customers, the community, the environment and the people who work for it: If we stick to common sense in the absence of guidance we will not go far wrong. AC said she had attended an Ofwat workshop where the methodology was mentioned and she would prepare a note on the salient points and circulate this. Action AC AC said the main points from the Ofwat workshop were: There will be a lot of work for the customer challenge groups in 2014 as well as 2013 members are doing this on a voluntary basis and the process is asking a lot of them. There was a lot of time discussing the need for Forum members to make sure they are not just being given a company view. AC said the Forum must build a process which highlights its independence for the first step in this process the Forum members agreed that they would meet together without the company present at the start of each meeting. Action Forum 3. Statutory programmes

Leonore Frear (LF) and Ruth Bull (RB) gave presentations on the likely statutory programmes and expectations of NWL for PR14. Environment Agency (see also slides Securing environmental benefits for Northumbrian Water customers and society) LF said the Environment Agency is looking for innovative approaches to partnership working; the NWL challenge is to collaborate with others and work at a catchment level to secure multiple benefits. LF said some drivers are not flexible but companies can work in the most cost effective way to achieve compliance. The Environment Agency will challenge where standards do not deliver a cost beneficial outcome. This is different to how compliance has been managed in the past. The Environment Agency is looking for clear evidence, but that evidence is continually evolving. The timing is not coordinated with PR14 (final programme available in 2016) but the Environment Agency believe this should be manageable as water companies should have enough information to develop their programmes for PR14.

Natural England (see also slides Overview from February) Natural Englands specific objectives are focussed on biodiversity; it ensures protection of current designated sites and looks to designate more. Natural England looks for benefits in the short, medium and long term. RB said there were regulatory objectives and referenced Defras Statement of Obligations (2012) and Defras consultation on marine conservation, but emphasised there was even more to gain from looking beyond regulation. RB introduced the term ecosystem services essentially these are provided/enhanced by working together and integrating how we manage the environment. RB said there are many benefits to be gained from taking a wider approach when planning water company activity. Working in partnerships and taking the catchment approach is the sustainable approach aiming at getting added value at the least cost. To this end there will be a joint regulator statement for the catchment-based approach published in 2013 (this is now lodged in the Members area publications). RB said that, from a compliance perspective, the North East was in a good position with one possible Habitats Directive scheme in discussion. RB said Northumbrian Water should look to the wider (integrated catchment) approach to support government aspirations to address issues such as climate change risk and resilience. The company should take opportunities to add in more for the environment into what it does. 2

The company agreed that getting involved in the wider opportunities is right, but only where it is relevant to the core business (e.g. water catchment management). The Forum challenge to this approach was that care must be taken so that the polluter pays principle applies; the Forum noted that historically the farming community (for example) has not paid for its pollution; the Forum thought that customers money should not be used where a polluter should pay this area, therefore, is potentially controversial. Challenge Periodic Review 2014 CCWaters expectations see also paper (Working with Northumbrian Water customer forum to achieve the right outcomes for customers for the next price review). Barbara Leech (BL) described the aims of CCWater. It represents consumers and is therefore focussed on consumers interests. CCWater is independent; it does its own research into customers views and uses it to apply pressure on companies to focus their activities in the long and the short term on what customers want. For PR14 CCWater wish to facilitate an improved price review, putting the customer at the heart of the process. CCWater can achieve this by working with the Forum, especially where there are decisions, trade-offs or compromises to be made. CCWater will challenge the company to increase innovation and give more value for money. BL ended her presentation with a challenge to the Forum how can CCWater best assist the Forum? Governance and assurance framework (see also paper in pack)



Ken Oswald summarised the companys proposed approach to PR14 governance and made the following points: In line with the new regime for annual reporting, it is a reasonable assumption that Ofwat will not require Reporters reports on business plans and companies will take charge of their governance and assurance processes. NWL will ensure that assurance is risk based and focussed upon the material issues in the business plan. NWL plan to take a bespoke approach to external assurance consultants and to finding the bestin-class, best-fit approach for each area of the business plan rather than one external assurance provider for everything. NWL considered there was a requirement for external assurance that the entire assurance approach is sound; NWL propose to use Ben Haywood Smith (BHS); a former Reporter with good credentials and well versed in what is required for expert business planning. It was proposed by AC that the Forum should engage BHS to assist it in challenging the company and that in this capacity he would be reporting to the Chair of the Forum. This would provide the Forum with a suitable resource for drafting reports although the structure and content would remain the overall responsibility of the Forum. A draft set of questions for the assurance providers to ask of the business plan was tabled for discussion it was considered that if the questions can be answered in the affirmative the plan could be considered a success. The Forum members welcomed the governance paper and offered a number of suggestions for improvement. AC and BHS agreed that reputation counts with Ofwat; NWL do not have any issues in this area. BHS said it may be significant that no other company appears to be managing governance in this way it could be said to be innovative.

AC led a debate on the role of the Forum vs Ofwat in the more financial governance aspects.

Heidi Mottram (HM) said that the business plan is a prediction and it is not possible to get it absolutely right. The end result should feel right. Uncertainty can result in losses as well gains. The company should not disproportionately win through things that dont seem fair but should be rewarded for innovation. However AC highlighted that in the past and currently some companies have outperformed the expectations of the Price Determinations and the Forum would need to look at the balance between shareholder and customer interests. This was supported by Forum members. 6. Water Forum actions required to carry out duties set in terms of reference (see also paper) The Forum agreed that this paper was helpful and supported the discussions on their activities, especially in connection with item 5. The Forum wondered how they could best use BHS. AC said she would draft a proposal. Action AC The Forum agreed that their participation in assurance of the customer area is fundamental while their participation in assurance of financial and technical issues is lower, particularly where there may be limited ability to influence. The members considered that BHS could help with interpretation with regards to the governance questions 17 to 21. The Forum would like to know what other companies are doing. The Forum agreed that, for this review, Ofwat will not have any local knowledge when assessing the plans; the Forums will provide this. This had also been highlighted in the Ofwat workshop. Report to Ofwat see also slides provided in pack


Ben Haywood Smith (BHS) led the discussion on the old versus new regulatory regime (relating to items 5 and 6 on the days agenda) and the requirements for the Forum Report to Ofwat. The Forum agreed the following: Ofwat will not view a report as being more or less successful depending on the extent that it agrees with the company. However, in their report, the Forum must demonstrate to Ofwat that it is independent of company. Therefore, the report will by necessity have a sceptical slant. There should be no fence sitting there should be clear conclusions. The Forum agreed that the writing should start now with an interim report (Chapter 1) on willingness to pay (customer engagement research challenges and observations). This will be a trial in terms of heading and structure; it could possibly be tested on Ofwat in or around April 2014. The members noted that the Report on Forum activity: must capture all their substantive challenges and subsequent outcomes (evidence currently spread around in meeting notes and consultation documents) . Action BHS be coordinated with the Essex & Suffolk Water Forum to ensure consistency. Action AC The Forum agreed the Report document is not only for Ofwat; it is for customers and stakeholders and therefore must be suitable for non-experts, and be in plain English with clear objectives and conclusions. Also a process diagram or map at the front of the document would help readers find what they are looking for. 8. Customer consultation and stakeholder update see also paper provided in pack

Feedback from members who worked in sub-groups developing research questions Barbara Leech, Ruth Bull, Jon Johannsson, Leonore Frear and Mary Coyle worked with one or more of the sub-groups. Their feedback to the Forum on the work of the groups was very positive. They said this was an intensive, iterative process and therefore time consuming for them and the company but that it was worthwhile.

The groups discussions were wide ranging and the Forum members were able to use their expertise to influence and advise. Ultimately their advice had been taken on board and this has improved the companys research. The challenges and results are documented in detail in the customer research documentation (see Members Area). Social Tariffs focus group discussions Barbara Leech (BL) reported on her observations from attending two Social Tariff focus discussion groups (first round of two). The groups were having general discussions on Social Tariffs, i.e. what is a Social Tariff, who should benefit, what is meaningful level assistance, what appetite is there for cross subsidisation? BL thought that the market research company were good at getting views from the participants. BL said that two things came out strongly from the groups she observed: There was great support for metering the groups felt that this was the fairest way of charging. Social Tariffs shouldnt be developed without water efficiency being considered in parallel. BL also said that the participants were very surprised when they found out what others were paying. There was a lot of variation in bills. This seemed to cause interesting outcomes. People in social housing felt they could pay a little more towards Social Tariffs where people with high rateable values were sometimes struggling to pay. BL thought that it would be very difficult for the researchers to pull out a consensus. The Forum discussed the changing benefits landscape and recognised that there are a lot of people in the North East who will be financially affected by this. The Forum felt they needed to further understand debt; Jon Johansson agreed to provide some anonomised example profiles of how people fall into debt. Action CAB. Stakeholder engagement KO gave an update on Stakeholder Engagement: Letter sent out to all on the stakeholder list Development of Planning for the Future web page (which will eventually have polls and surveys embedded) Arrangements be made for face to face meetings with stakeholders in the North East and Essex & Suffolk Main meetings in March Additional smaller breakfast debates AC asked for the March meetings and Breakfast Debates discussion proposals to be copied to the members for review. Action NWL 9. What drives bills

The good quality discussion on the previous items including assurance and Forum work in customer consultation sub-groups had taken up the time available and the Forum agreed that this item should be transferred to the Induction Day in January 2013.

Other business

DEFRA review of the Environment Agency and Natural England Ian Hodge informed the members about a DEFRA triangular review of the Environment Agency and Natural England. The triangular review is routine and is carried out at set timescales. However, there is a potential for significant reform this time. A recent similar review in Wales has resulted in the Environment Agency being combined with Natural England and The Forestry Commission. Any similar change for England will require primary legislation and the timescale for this would mean there will be no impact on the price review. 10. Next steps: consideration of PR14 programme and Forum required business There are several activities in January and February which will feed into the March meeting. Ofwat is due to publish its PR14 draft methodology in early 2013; NWL will produce and circulate a briefing paper focussed on what the Forum needs to know once this is available. January 15 Induction day and dinner January 29 Willingness to pay event February Water Resource Management Plan paper to be circulated for comment. February Results of Social Tariffs research to be circulated. The following items were proposed for discussion at the March meeting (note that the Stakeholder Event will be held on the same day as the meeting: Stakeholders and customers views including consideration of willingness to pay, social tariffs, stakeholder questionnaire and stakeholder event. Water Resource Management Plan company to present paper Reporting to Ofwat Andrea Cook and Ben Haywood Smith to discuss progress with members

SUMMARY OF ACTIONS Description An appendix to the non disclosure agreement to be added and forum members to sign and return a copy of the final agreement to Jill Wisniewski Agreements brought to the December meeting, all who were present who needed to sign did so. For those not present agreements have been posted out with SAEs. Complete The development of an independent Water Forum website is to be considered where online questionnaires could be administered. Web site now in place draft of Chairs message has been checked with AC. Web site link to be made available to members for their review. Complete Consideration on the role the media has to play in the process. Watching brief to be considered as we progress Review and comment to be provided on the pilot choice experiments. Mark Stephenson took part. Ruth Bull and Ian Hodge were unable to take part due to time pressures. Complete Information to be shared with NWL on the statutory programme in advance of the??? October 2012. th DWI presented on 28 November th EA/NE presented on December 14 Note that and early heads-up on the EA ambitions were also th shared with the Forum on 28 September Complete Appropriate induction for Forum members to be arranged (including possibly site visit and dinner around the next meeting). th Induction planned for 15 January Water Forum actions required to fulfil terms of reference - a draft paper is to be produced setting out NWLs views on the key areas it believes the Forum needs to take a view on. This is to be discussed at the October 2012 meeting. th Underway document will be discussed at the December 14 meeting Diary dates - confirm all dates with Forum members. Complete Water quality - comparator data to be provided to the Forum. Stakeholder process letter - draft stakeholder consultation letter and review. Complete stakeholder process fully underway Responsibility NWL/ALL














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Stakeholder process - initial contact finalise list, draft email. Draft email now not required. Complete stakeholder process fully underway Stakeholder process - Northumbrian Water Forum discussion to be shared with Essex & Suffolk Chair. Complete stakeholder process fully underway Customer and stakeholder consultation overview a graphic to be prepared showing all forms of customer and stakeholder consultation and research and their relationships (PR14 specific and other, e.g. tracking surveys, social tariffs). Underway Private drains and sewers research reconsider all aspects of this research (purpose, type, inclusion with environmental research). Challenge accepted this research is to be included in tracking research Complete Customer research sub-groups all Forum members to be offered the opportunity to join any of the sub-groups. Complete this way of working now embedded with Forum and company Ofwat draft methodology brief to be prepared and circulated to Forum members. Methodology now not expected until early 2013 Ofwat customer challenge group workshop brief to be prepared and circulated to Forum members. Independent Forum members to work together to build a process which highlights Forum independence. The first step is to meet together without the company for before each meeting. Use of Ben Haywood Smith (BHS) how can BHS be used with regards to the Forum carrying out their Terms of Reference. Proposal to be drafted Capture of forum challenges and subsequent outcomes this will be an evidence trail to support the writing of the Report to Ofwat Forum Report to Ofwat consistency NWL with E&S there is a need to coordinate the writing process with Essex & Suffolk Water Forum A teleconference is to be arranged between the Chairs Need for the Forum members to understand mechanisms of debt anonomised example profiles how people fall into debt to be provided Stakeholder consultation face to face meetings proposals for the sessions to be provided to forum members for review