Could continuous network monitoring help SIM?

As companies move to improve performance by focusing on customer service, Tony Halker, chief executive at Intellitect Water, explores just where technology fits in and how it can make a difference

Water companies are effectively local monopolies. The key financial driver for them is to deliver the outputs in their asset management plans at the lowest possible costs, and as early as possible, because any savings are retained by the company until the next price review.

Historically, when setting prices, Ofwat has assessed overall company performance against a series of scores for quality and service aspects of its activities, for example, water quality, customer complaints, discharge quality and produced league tables with ranking determined by the total performance score achieved. This is the Overall Performance Assessment (OPA). High ranking companies have been given modest supplementary increases in their prices, reflecting good performance; low ranking companies, the reverse. The OPA has been successful in delivering improved services to customers over the past two decades.

For example, 94% of customers are now broadly happy with the service they receive; there has been an eight-fold decrease in the number of properties at risk of low water pressure; leakage has fallen by 35% since its peak in 1994-95.

Whilst the OPA has been successful in the past, Ofwat now considers that there is a need for a new approach - one which focuses on the qualitative aspects of service.

Customer experience
Ofwat's Service Incentive Mechanism (SIM) seeks to measure the 'customer experience'. It will be an incentive to 'get it right first time' and reward 'speed of issue resolution'.

It will use two main measures: quantitative and qualitative. The first of these can be derived from records in the company; the second by independent customer surveys of a proportion of those customers who have raised issues. Quantitative scores will count such things as lines busy and abandoned calls, unwanted telephone contacts, written complaints, repeat complaints and those referred to the Consumer Council for Water (CCW) as 'unresolved'. Scores will be rated per thousand customers and escalating weighting factors will be applied.

Qualitative scores will be based on a 1-to-5 satisfaction rating from complainants in relation to how well the company dealt with the problem they reported. Both quantitative and qualitative scores will be equally weighted in the final score and no distinction will be made between water and sewerage issues, so that the resulting league table will include all companies ranked by overall SIM score. SIM score assessment began in April 2010 and the first year's results will be available in 2011.

The OPA will not be reported in 2010 and the SIM will become the basis of performance price adjustments for the next price review in 2014. The exact method of application will be the subject of further Ofwat consultation. It is Ofwat's intention that the league table scores and rankings inform the size of performance additions to, or reductions from, prices set in the next periodic review.

Ofwat believes that any increases should be modest on the grounds that water charges are already perceived to be high whereas reductions should be felt by companies as a real penalty for poor service. The range from premium to penalty is the same as used previously under the OPA regime and with larger companies turning over £1B+ the prize and pain could be significant.

Technology
The challenge is to find cost-effective ways to improve customer service. In-pipe water quality monitoring devices provide water companies with an opportunity to follow water quality within the distribution network and at other stages in the water cycle.

This new ability offers the means with which to identify risks and resolve problems before the customer/consumer is even aware of them. This opportunity for early action is extremely important because it reduces the 'failure demand' - the cost associated with handling complaints. Monitoring offers the opportunity to manage the risk to the customer and thereby reduce the number of complaints and indeed the number of incidents. The technology can help water companies improve both their qualitative and quantitative measures.

Coloured or turbid water in the distribution network could be identified within the network at an early stage so that remedial work can be undertaken before large numbers of customers are affected. The presence of devices like Intellitect's 12-parameter monitor, Intellisonde, within the network, will help to identify the location of a problem more quickly, whilst also reducing excavation work. This resolution of a potential problem will substantially reduce the quantitative measure and greatly improve the company's ability to improve the qualitative measure. In competitive markets, businesses have a clear incentive to improve customer service. However, consumers are not able to switch water supplier if they are not happy.


The SIM has been designed to provide a framework within which water companies can develop solutions to meet and exceed customer expectations. Technology that provides greater visibility of water quality, both in the pipe and at the point of delivery, enables improved customer service. It can provide companies with a great opportunity to achieve high relative performance leading to potential financial reward at the next Periodic Review as well improved customer satisfaction.

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