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THIRD MEETING OF THE ESSEX & SUFFOLK WATER FORUM 13.30 16.

.45, TUESDAY 9 OCTOBER 2012, SANDON VALLEY HOUSE, HANNINGFIELD MEETING NOTES PRESENT: Independent Chair: Dame Yve Buckland For Consumer Council for Water (CCW): Steve Grebby For Consumer Council for Water (CCW): Keith Andrew For Essex Chamber of Commerce (ECC): Robert Leng For Natural England (NE): Gareth Dalglish For Drinking Water Inspectorate (DWI): Milo Purcell For Environment Agency (EA): John Russon For East of England Local Government Authority (EELGA): Adrian Cannard For Citizens Advice Bureau (CAB): Lesley Crisp For Essex & Suffolk Water (ESW): Heidi Mottram (HM), Ceri Jones, John Devall, Ken Oswald, Ros Shedden and Colum Goodchild (agenda item 4 only) APOLOGIES: For Suffolk Chamber of Commerce (SCC): Iain Dunnett For Essex & Suffolk Water Corporate Responsibility Advisory Group (CRAG): Richard Powell For Essex County Council: Cllr Derrick Louis NOTES AND ACTIONS 1. Welcome, Introduction of new members, apologies & disclosure of interests Dame Yve Buckland welcomed everyone to the third meeting of the Forum. She welcomed Lesley Crisp and Adrian Cannard to the group and noted that three members, Iain Dunnett, Richard Powell and Cllr Derrick Louis had sent their apologies. Notes & actions of last meeting held on 27 June 2012 Actions from 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. The notes of the inaugural meeting of the ESWF were approved by members with one substantive correction; item 6 gave the wrong impression of the purpose of Ken Willis contribution. It is more accurate to state that he assured the group about the quality of the work. KO had talked to Martin Silcock (Anglian Water) and he is willing to engage in a dialogue. While companies cannot engage in joint research they can work together to ensure research is undertaken in a joined up way. It was understood that Martin Baggs (Thames Water) is to send out a leaflet shortly to Thames customers indicating a 70-80 sewerage bill increase for Thames Tideway. The Forum agreed that it would be important that ESW customer research respondents make decisions about future water services with an understanding of this. Action ESW To consider implications for customer research and YB to consider how to press Anglian and Thames regarding better integration and communication of their approach to engagement with ESW.
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3. Business plan assurance 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.

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ESW will ensure that assurance is risk based and be focussed upon the material issues in the business plan. ESW plan to take a bespoke approach to external assurance consultants and find the best- inclass, best-fit approach for each area of the business plan rather than one external assurance provider for everything. In addition ESW propose to appoint an additional external challenge to give assurance that the entire plan is sound; ESW propose to use Ben Haywood Smith; an ex reporter with good credentials and well versed in what is required for expert business planning. KO said that Andrea Cook (Northumbrian Water Forum Chair) has proposed that Ben Haywood Smith draft the Water Forum report to Ofwat. Decision The ESWF discussed this arrangement and agreed that there is a good fit; BHS could challenge ESW on its business plan and assurance, and then taking direction from the Forums he could draft the report on both Forums behalf. NWL agreed to assess the time required for this work and agree a work commitment from BHS. Action NWL. BHS will also be invited to a future Forum meeting. Action NWL Stakeholder process see also paper provided in pack John Devall introduced discussions on the wider stakeholder process. The proposal was for the following principles of the stakeholder consultation to be used: not as a replication of the customer consultation; but a method of extending stakeholder input to the process (in effect extending the Forum) thus providing a wider, richer view for the Forum and ESW to take into consideration. The previous ESWF decision that it wished to be the face of the stakeholder engagement (rather than the company) was discussed in the light of similar discussions at the NWF. Similarly, it was agreed that the company would take responsibility for stakeholder engagement. In the light of discussions it was agreed that: a list of stakeholders would be finalised; each stakeholder would then be assigned to a Forum member; the process would start with an introductory letter and questionnaire from HM, with an insert from YB Forum members would warm up stakeholders to the questionnaire and process in person or by email and encourage them to take part; and the two major stakeholder events in March 2013 could be planned Challenge the Forum members thought that other ways of contacting stakeholders and soliciting views should also be used; e.g. mini-stakeholder meetings for Local Government Associations; using groups that already meet, meetings at schools and universities to capture the future customers. Decision ESW agreed to broaden the approach as above. Where possible a Forum member should be present for the additional stakeholder meetings. Action ESW and Forum members ESW agreed to draft letter. The letter will be sent out to Forum members to review. Action ESW and Forum members The Forum members agreed to review the draft stakeholder list and feed back to ESW. Action Forum members and ESW ESW agreed to finalise the stakeholder list and also to produce a draft for the warm up email for the Forum members. Action ESW

5. Statutory programmes (see also presentation slides provided in email) John Russon presented on behalf of the Environment Agency and Natural England the following points were discussed: There are significant changes needed and therefore potentially could require a significant amount of money We are caught in a difficult time, we need to remove damaging effects of past practices, e.g. abstraction and build in sustainability and resilience for the next fifty years. We need to look at the environment in a different way, in terms of the services and money savings it provides.

We need to develop novel sustainable approaches for the long term. The discussion needed is over customers willingness to pay and statutory obligations what is truly optional? We have to be clear on what is statutory and what is an add on; e.g. protecting the river in drought is that because the company over abstract or is it natural? There will be some statutory requirements that the Environment Agency and Natural England will advise on. It will be for the Government to make the final decision. The Forum will have scope to help shape the best way of delivering the statutory outcomes and to consider further improvements to the environment. Not all initiatives are at cost to the business and there are some areas where there is cross benefit from environmental improvements (e.g. improved water catchments give benefit to water companies and wildlife) these need to be identified There is a growing customer appetite for investment in the environment, tracking research shows it is emerging.

Action ESW to distribute Defras recently published Statement of obligations, it describes the governments understanding of water companies main environmental obligations. Action ESW to bring water resource management proposals to the Forum in due course. Action ESW and environmental regulators environmental outcomes need clarifying and bringing to table with key statutory guidance . 6. Customer research a) Update on programme so far Ken Oswald gave update on the customer research programme The main qualitative phase of the programme to identify customers (domestic and business) priorities for future services had been completed and the results presented to the Forum. This had informed the development of the stated preference willingness to pay research questionnaires and choice experiments. The cognitive testing of the willingness to pay (WTP) approach had been completed. This did not identify any material issues but did lead to tweaks to the approach. The results were sent to Prof. Willis. Extensive pilot testing of the willingness to pay approach was underway and the members of the Forum who expressed an interest in taking part would be contacted in the near future. Prof. Willis would be invited to comment on the outcome of the pilots. Results from the research are expected in December 2012. The company was also proposing qualitative research into affordability/social tariffs, discretionary environmental improvements and leakage; this was next on the agenda. Challenge of the term willingness to pay as it suggests bills will go up Response - this is only the title of the research and there is an option for bills to go down included in the research Challenge a member indicated customers would like to reduce hardness and low pressure, they affect small numbers but need to be dealt with within the plan. Thats the level of service customers expect, they dont expect to pay more for it. Response - the company would be responsive to the customer evidence it collects through WTP and options research. Challenge one member welcomed the context provided by the company around the WTP exercise but questioned the use of WTP research. Need to also explore phasing which isnt provided by WTP. This technical tool should be placed in its proper context and shouldnt be a main driver for recognising what consumers really want. Response the company is using WTP and CBA as one input to the decision-making process. Options research will also be undertaken in June 2013 informed by qualitative research, WTP research and stakeholder views.

YB indicated that WTP and CBA were expected by Ofwat and other companies were following a similar approach.

b) Affordability and social tariffs see also paper provided in pack Ken Oswald explained the need, in guidance from Defra, for ESW to see if there is broad support from customers for a social tariff and/or other affordability measures. The Forum agreed that there is a high level of deprivation in some areas of the South East. The Forum discussed the concept of social tariffs and the following points were raised: The general economic climate is causing the loss of benefits (e.g. housing benefit loss for under 25s) Challenge traditionally customers have not supported social tariffs can we just use previous research? There could still be no support, even with the proposed approach Need to define broad support. Challenge should a water company be tasked to do something which may be a responsibility of government is it an appropriate role? It will be challenging to come up with a consensus view who to support and how much to cross-subsidise. Challenge ESW could be asking people who are just over the limit for benefits, and therefore struggling to make ends meet, to pay extra for people who get all available benefits this does not seem fair If there was an appetite who should be helped? Is the company able to identify the groups to help? Challenge the question is should you be doing this at all? Response the company needs to ask customers about social tariffs in line with Defra guidance but there is flexibility about how this is done Defra isnt prescribing what companies should do; it is suggesting that something ought to be considered. There has been discussion in the industry and different companies are taking different approaches. HM felt that ESW should at least seek to engage with communities to understand their mood in a little more depth, although initial research doesnt suggest customer empathy. ESW must do this properly without spending an inordinate amount of money. YB said while these are good challenges the forum should not prejudge; the company should put these issues to its customers to test their appetite for social tarrifs and the results of that exercise should be brought back to the forum. Agreement The Forum agreed that deliberative research was an appropriate method for exploring customers appetite for social tariffs. Agreement The Forum agreed that a small working group would help in planning social tariff research; volunteers included Lesley Crisp (CAB) and Adrian Cannard (LAs have been handed a similar thing form government with council tax) and a CCWater representative Discretionary environmental expenditure and leakage see also paper provided in pack

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Proposals for discretionary environment improvement and leakage customer research were discussed and the following points made: There is a need for quantification in terms of the costs/bill increases and what will be achieved by discretionary environmental expenditure. There are some projects (e.g. in drinking water catchments) where there is potential for longterm improvements for these ESW could present a matrix of benefits to customers, e.g. doing X environmental work will add longer term benefits to the quality of drinking water the customer needs to see the relationship between improving the environment and the product/service they receive. 4

There is an opportunity with the non-green customers to promote understanding of the link between environment services/works and water coming out of tap. If the environment degrades it will cost ESW more to get water to the tap. Identify the multiple benefits of actions to improve the environment, including economic benefits. Partnerships to improve the environment work best when there is a tangible benefit to the company. Challenge given the economic situation, any environmental improvements paid for by water customers should have a benefit for water customers (i.e. should have a connection with the services provided). Discretionary expenditure on environmental issues not related to the service provided are a matter for the company to enhance its reputation. May be better to spend on leakage control, its a bigger issue for customers. Challenge for commercial customers, the companys job is to provide them with water. But if you said that improving the environment is a bi-product of doing that job then that would go down well. But to ask people to pay a levy for purely environmental issues not related to the companys core responsibilities will get a big no from business. Challenge there are other subjects the research could tackle, including resilience. Decision The company agreed to configure the research with less emphasis on discretionary environmental expenditure and more emphasis on leakage and environmental improvements linked to the companys core responsibilities. Resilience will be added to the research. This addressed the challenges of the Water Forum Agreement - John Russon and Gareth Dalglish agreed to take part in a working group with ESW on research proposals. A CCWater member will also be invited. Challenge A Forum member asked whether the Forum will have a discussion on company profits and how they are invested for the community and environment? The Forum indicated it would like to understand what are fair profits. The company agreed to provide information at a later meeting. It emphasised that water company profits are strictly regulated. Action ESW

7. Next steps: consideration of PR14 programme & Forum required business The following items were proposed for discussion at the December meeting: Statutory programmes - the DWI will present its views. Forum work planning - at the previous meeting the Forum agreed it would be useful to expand on the Forum terms of reference to identify the areas the Forum will need to take a view on. The Forum and the company could then identify the information required to inform the Forums views. ESW have produced a draft paper setting out its views on the key areas it believes the Forum needs to take a view on. This will be discussed. Reporting to Ofwat - Ben Haywood-Smith will be invited to the meeting to discuss how this can be done. PR14 governance - ESW will outline their PR14 governance framework proposals.

SUMMARY OF ACTIONS completed actions shaded, all uncompleted actions to be rolled forward Description Contact Cllr Louis to see if he is still in a position to be a member of the Forum Not able to make contact; the Forum will have to think again on how to engage local government addressed in discussions on item 5. 2 Final non disclosure agreement to be re-circulated with a deadline st of the 1 July 2012 for final comments to Jill Wisniewski Some agreements have not been returned: ESW to ensure all new members understand agreements Forum members to return their signed agreements if they have not done so. 3 Ofwat note on the customer engagement workshop to be circulated Completed 4 Appropriate induction for Forum members to be arranged (including a possible site visit and dinner around the next meeting). Completed 5 A glossary of common terms used in the Water Industry to be provided to Forum members To be included in induction pamphlet; this will be posted out by end of November. 6 Forum members to provide comments on the draft stakeholder questionnaire and to sign-off of the final version Addressed in agenda item 5 7 Develop further the communications plan stakeholder approach along with a ESW ESW FORUM MEMBERS ESW ESW ESW Responsibility ESW/FORUM MEMBERS

Addressed in agenda item 5 8 Enquiries to be made with the Local Councils to establish what networks already exist Addressed in agenda item 5 9 Make contact with counterparts at Anglian Water to discuss potential stakeholders KO talked to Martin Banks; see notes in minutes for 9 October and new action (15)
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Forum membership to be widened and to increase the number of independents on the Forum by two, if possible. Potential candidates/organisations to be shared with the group Adrian Cannard is now representing East of England Local Government Authority and Lesley Crisp is representing the Citizens Advice Bureau. Possibly two more additional members required NFU Additional member CCWater to take the lead on reviewing customer research but all members consulted and able to comment. ESW to highlight areas of particular interest to Forum members This is working as expected; CCWater took very active part; all members also had opportunity to comment.

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Forum members to provide by email to ESW, where possible, an initial view on what the priorities for outcomes should be at PR14. A st deadline of the 31 July 2012 was agreed No views received but this is now superseded by an outcomes discussion at the Willingness to Pay Research Dissemination event th on the 29 January and an Outcomes event in late April.

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Forum meeting in September/October 2012, to be arranged Completed

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Draft Forum meeting agendas to be circulated to members for comment Circulated to Chairs for this meeting will circulate fully for December meeting.

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Reported increases in Thames and Anglian sewerage charges NWL to actively consider implications for customer research Issue of sewerage bill increases impact on E&S customers; YB to consider how to press Anglian and Thames regarding better integration and communication of their approach to engagement with ESW. ESW to assess the time required for both governance and report writing and agree a work commitment from Ben. Ben Haywood Smith to be invited to a future Forum meeting. Stakeholder meetings broaden approach and include smaller group meetings - where possible a Forum member should be present Letter to stakeholder - ESW to draft and send out to Forum members to review Stakeholder list - Forum members to review and feed back to ESW Stakeholder first contact - ESW to finalise the stakeholder list and produce a draft for the warm up email for the Forum members ESW to distribute Defras recently published Statement of obligations ESW to bring elements of the water resource management to the Forum

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NWL NWL ESW and Forum members ESW and Forum members Forum members ESW ESW ESW

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Environmental outcomes need clarifying and bringing to table with key statutory guidance Financing the business plan ESW to provide the information on this for context.

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ESW and environmental regulators ESW