Role of Consumer Principles in the UK Energy, Water and Postal Industries

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Document title header Role of Consumer Principles in the UK- Do 1 Energy, Water and Postal Industries -

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Role of Consumer Principles - Research Summary June 2017 2

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Document title header - 2 Executive summary ...... 5 Document1. Background title header to the research ...... -...... 2 16

1.1. The Consumer Futures Unit ...... 16 Document title header - 2 1.2. Market research to explore the take up of consumer-focused frameworks ...... 18

Document2. Research title header methodology ...... - 2 19 2.1. Scope of the research...... 19 Do 2.2. Overview of the research methodology ...... - 2 19

3. The role of consumer principles frameworks ...... - 2 22 3.1. Consumer policy tools ...... 22 3.2. Application of consumer principles-based frameworks in other sectors ...... - 2 25 3.3. Application of consumer principles-based frameworks among consumer representative bodies ...... - 2 .. 28 3.4. Pros and cons of principles-based regulation ...... 30 itle header 4. Application in the Great Britain energy sector ...... 32 - 2 4.1. Ofgem’s role ...... 32 Document title header 4.2. Treating Customers Fairly – a regulator-led principles-based framework ...... - 2 33 Document title4.3. header Comparison of Ofgem’s TCF principles with the CFU framework ...... 35 4.4. Application of the Treating Customers Fairly framework by energy service - 2 Document titleproviders header ...... 36 4.5. Comparison of the application of TCF principles by service providers with the- 2 Document titleCFU heClient framework logo ...... position ...... 39 4.6. Evaluation of consumer-based frameworks in the GB energy sector ...... - 2 40 Client logo position4.7. Consumer -focused frameworks used by energy distribution network operators . 41 4.8. Consumer-focused frameworks used by the district heating sector ...... - 2 41 Client logo position 5. Application in the water industry in Scotland ...... 44 - 2 Client logo position5.1. The Scottish domestic water industry ...... 44 5.2. Regulation of the Scottish domestic water industry ...... - 2 45 Client logo position5.3. Application of consumer frameworks in the water industry in Scotland ...... 47 5.4. Comparison with the CFU framework ...... - 2... 48 Client logo position5.5. Evaluation of Scottish Water’s performance...... 49 5.6. Customer focus among non-domestic water suppliers ...... -...... 2 49 Client logo position 6. Application in the water industry in England and Wales ...... - 2 51 Client logo position6.1. Consumer focus of the water industry in England and Wales ...... 51 6.2. Ofwat – regulation and strategy ...... - 2 52 - 2 6.3. Application of consumer frameworks in the water industry ...... 55 6.4. Comparison with the CFU framework ...... - 2... 58 - 2 6.5. Evaluation of consumer-based frameworks in the water industry in England and Wales ...... - 2 58 - 2 - 2 - 2

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7. Application in the energy and water industries in Northern Ireland ...... 60 - 3 7.1. Regulation and consumer principles in the Northern Irish energy and water industries...... 60 Document title header - 3 7.2. Regulation in Northern Ireland ...... 61 Document title7.3. header Application of consumer frameworks by service providers in the Northern Irish- 3 energy sector ...... 63 Document title7.4. header Application of consumer frameworks by service providers in the Northern Irish- 3 water industry ...... 64 Document title7.5. header Evalu ation of consumer-based frameworks in the Northern Irish energy and- 3 water industries ...... 66

Do 8. Application in the UK postal sector ...... - 3 67 8.1. Consumer frameworks in the regulated postal sector ...... 67 8.2. Application of consumer frameworks in the regulated postal sector ...... - 3 68

8.3. Evaluation of consumer-focused frameworks in the regulated postal sector ...... 70 - 3 8.4. The unregulated postal sector ...... 70

9. Summary and conclusions ...... - 3 73 9.1. Policy tools available to consumer protection authorities ...... 73 itle header 9.2. The benefits of a consumer principles framework ...... 73 9.3. The application of consumer-focused frameworks in the energy, water and- 3 Document titlepostal header sectors ...... 75 9.4. Drivers of a more consumer-centric approach to dealing with customers ...... - 3 76 Document title header 9.5. Characteristics of consumer-focused organisations ...... 77 - 3 Document title9.6. header Determining how far along the journey towards consumer principles an organisation is ...... 78 - 3 9.7. Differences by sector ...... 79 Document title heClient logo position 9.8. Role of the CFU consumer principles framework ...... - 3 81 ClientAppendix logo position A: case studies referred to in report ...... 85

Appendix B: research methodology ...... - 3 95 Client logo position Appendix C: topic guide used in the qualitative interviews ...... - 3 98 ClientAppendix logo position D: outline of stimulus for the qualitative interviews ...... 101 - 3 ClientAppendix logo position E: Citizens Advice Scotland Consumer Futures Unit ...... 102 Appendix F: About Purple Market Research ...... - 3 103 Client logo position Appendix G: further information ...... 104 - 3 Client logo position - 3 Client logo position - 3 - 3 - 3 - 3 - 3 - 3 - 3 - 3

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itle header EXECUTIVE SUMMARY - 4 Document title header - 4 Document title header - 4 Document title header - 4 Document title heClient logo position - 4 Client logo position - 4 Client logo position - 4 Client logo position - 4 Client logo position - 4 Client logo position - 4 Client logo position - 4 Client logo position - 4 - 4 - 4 - 4 - 4 - 4 - 4 - 4

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- 5 Executive summary Document title header - 5 1. Introduction Document title header - 5 This report summarises the findings of a research programme on the existence and application of consumer principles within regulators and service providers in the UK energy, water and postal sectors.Document The title research header was conducted by Purple Market Research for the Consumer Futures- 5 Unit (CFU), part of Citizens Advice Scotland (CAS). Document title header - 5 Although the main focus of the research is the regulated UK industries of energy, post and water, whichDo are the sectors falling within CFU’s remit, insights relating to the application of consumer principles frameworks were also sought from other regulated industries, including the legal, financial- 5 and health sectors. - 5 The research was designed to inform policy and practice development by providing a better understanding of which frameworks and tools currently exist, the benefits of adopting- 5 such frameworks, and the relationship between them, corporate policy and consumer outcomes .

- 5 2. Research methodology

Theitle header researc h programme comprised three main phases: a set up and planning stage; data gathering; and the final analysis and reporting stage. - 5 Document title header The data gathering phase in turn comprised three symbiotic methodologies: - 5 Document A review title ofheader intelligence held within the CFU;

 A meta-analysis of information available in the public domain, conducted through- 5 desk Documentresearch; title header - 5 Document Qualitative title heClient interviews logo with position a cro ss section of regulators, service providers and other consumer organisations in the energy, water and postal sectors. - 5 TheClient research logo positionwas conducted between January and March 2017. - 5 3.Client The logo role position of consumer -focused frameworks - 5 TheClient OECD logo hasposition identified a range of policy tools available to authorities with responsibility for consumer protection, both consumer empowerment tools (‘demand-side measures’) and those that focus on modifying the behaviour of service providers (‘supply-side measures’). Supply- 5-side measuClientres logo are position the main focus of this report. - 5 OfClient the differentlogo position supply -side measures, a number lend themselves to prescriptive rules, such as licensing, prohibitions and dispute resolution. Others, notably moral suasion (whereby authorities- 5 seekClient to logo influence position or put pressure on service providers to meet a specific objective regarding consumers without directly regulating their activities), tend to place the onus on the service provider to develop a consumer-focused approach to dealing with consumers. - 5 Client logo position The latter approach is essentially consumer principles-based regulation, and this approach- 5 has been successfully- 5 adopted in a range of markets, including the financial, legal and health sectors, as described below. - 5 - 5 - 5 - 5 - 5 - 5

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In terms of regulatory processes, the provision of products and services, and consumer outcomes,- 6 a principles-based approach has several advantages over a rules-based approach: Document title header  Regulation that is focused on consumer outcomes acknowledges the need to direct -efforts 6 towards maximising consumer benefits and protecting consumer interests; Document title header - 6  It is easier to customise regulation to a specific sector or region when that regulation has the flexibility offered by a principles-based approach rather than a more prescriptive set of Documentrules; title header - 6

Document Principles title header-based regulation that focuses on consumers encourages service providers to define and deliver high quality products or services that meet the needs of consumers, - 6 and to consult and engage with their customers to better understand those needs; Do - 6  Unlike a more prescriptive rules-based approach, regulators do not have to understand the market so thoroughly under a more discretionary principles-based approach, as the regulations do not need to cover all options or eventualities to ensure that there are no- 6gaps or loopholes;

 With a principles-focused approach, regulators can therefore focus more on outcomes - 6than operations; - 6  A principles-based approach to regulation takes service providers away from a ‘box-ticking’ approach to how they deliver products and services towards a more considered and itle headercustomised approach; - 6 Document Service title providers header are given freedom to be flexible on how best to meet their obligations and they are encouraged to innovate; - 6 Document Principles title header-based regulation tends to use more consumer-friendly terminology than rules- based regulation, and is therefore easier for consumers to understand; - 6 Document The title language header used and the processes employed in a principles-based framework are usually simpler and more concise. - 6

InDocument the desk titleresearch heClient and logo a small position number of the qualitative interviews, some concerns were expressed with a principles-based approach to regulation. - 6 Client logo position C ompared with a rules-based approach, an approach based on principles can be vague and- open6 toClient interpretation, logo position potentially leaving a ‘grey area’ for disputes and disagreement. This approach can be subjective and make it difficult to have consistent standards. It can also add a layer of regulation to the existing rules, at least while the transition from a rules-based approach is underway . - 6 Client logo position There is also a perception that a principles-based approach to regulation can be retrospective - 6 and reactive,Client logo judging position the actions of service providers after the event. However, if used correctly, principles will guide the formulation of policies and practices to mitigate against that risk. - 6

ConsumerClient logo bodies position have been using consumer principles to underpin their work for some time, and in a range of sectors there has been a trend away from prescriptive, rules-based regulation towards- 6 theClient adoption logo ofposition principles -based regulation. - 6 TheClient following logo positionare three such examples.

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- 7 Sector Application of consumer principles frameworks Document title header - 7 Legal The Legal Services Consumer Panel has recommended that the legal Document title headersector in England and Wales adopts a set of consumer principles - as7 ‘a simple tool for regulators to help them think about the consumer interest in a structured way.’ Document title header - 7 The recommended consumer principles are almost identical to those Document title headerpromoted by the CFU, covering access, choice, safety, provision- 7 of information, fairness, representation and redress. Do - 7

Financial The Financial Conduct Authority ‘Treating Customers Fairly’ (TCF) framework requires UK financial service providers to show that- 7 fair treatment of customers is ‘at the heart of their business model .’ - 7 The framework specifies six consumer ‘outcomes’ that firms ‘sho uld strive to achieve to ensure fair treatment of customers.’ These cover fair treatment- 7 , being central, meeting the needs of customers, provision of clear and accurate information and advice, standard of products and services, and itle header ease the removal of barriers to change product, switch provider, submit a claim or make a complaint. - 7 Document title header The Institute of Chartered Accountants uses a ‘Code of Ethics’ which- 7 is Document title headeressentially a principles-based approach, based on the International Federation of Accountants' Code of Ethics. - 7 Document title header Health Healthwatch England (‘the national consumer champion in health and- care’)7 Document title heClienthas logo eight position consumer principles based on feedback from the public, covering areas such as access, safety, choice, listening, and being involved. - 7 Client logo position

Thus, it is the view within a range of sectors that better consumer outcomes will result from- 7 the adoptionClient logo of a position principles -based framework for regulation, consumer communications, planning and delivery of information and services. - 7 Client logo position 4. Application of consumer principles frameworks in the energy, water- 7 and postalClient logo sectors position - 7 UnderClient the logo influence position of regulators and consumer bodies, service providers in the energy, water and postal sectors are moving away from a predominant focus on engineering or operations towards being more service orientated, innovative and customer-focused. - 7 Client logo position That transition has gone hand in hand with a movement away from prescriptive rules--based 7 regulationClient logo towards position lighter touch regulation. The latter approach encourages innovation and gives service providers greater autonomy to develop their own consumer-focused frameworks by engaging with their customers to determine what their needs are and how services should- 7 be developed - 7 to better meet those needs. Light touch regulation might ultimately lead to the adoption of principles that focus on customers to support stronger consumer outcomes. - 7 - 7 - 7 - 7 - 7 - 7

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That journey towards a culture based on understanding customers’ needs, providing services- 8 to better meet those needs and putting consumers at the centre of an organisational culture comprises threeDocument main stages. title header - 8

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- 8 Document title header The first stage, the adherence to regulations, involves compliance with legislative and regulatory- 8 requirements,Document title and heClient takes the logo form position of prescriptive rules. Examples are the Guaranteed Service Standards and Codes of Practice, which service providers must state to demonstrate that they comply with regulations. - 8 Client logo position The second stage is a commitment to being customer focused albeit not necessarily with a- 8fully - fledgedClient logoset of position consumer principles. This kind of commitment can take two forms: it can be a top level, overarching declaration that the organisation is customer-focused, such as a strategy, - vision 8 orClient mission logo statement position, such as that used by Scottish Water; or it can be a set of internal consumer principles, such as those used by Ofcom and Royal Mail, which is an organisational tool and is generally not made externally visible. - 8 Client logo position The third stage takes the form of fully-fledged set of consumer principles, which demonstrate - 8 that anClient organisation logo position has taken ownership of the relationship with its customers and that it has gone above and beyond the regulatory requirements. Examples of this level of commitment to consumer principles are the energy companies who have taken the Treating Customers Fairly -(TCF) 8 StandardsClient logo of position Conduct and enhanced these with their own customer promises, and also the Customer Charters employed in the Northern Irish energy sector. - 8 Client logo position There are actually some characteristics that organisations who have embraced consumer principles- 8 consistently - 8 have. These fall into two broad categories: characteristics relating to planning and those relating to implementation. - 8 - 8 - 8 - 8 - 8 - 8

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- 9 Typical characteristics of a consumer-focused organisation Document title header - 9

PLANNING IMPLEMENTATION Document title header - 9 Recognition of a need to be more consumer Implemented services that go above and focusedDocument title header beyond regulation - 9 Consumer engagement to determine needs Innovation in service delivery and Document title header communications - 9

Senior management buy-in Embedded consumer-focused culture Do throughout the organisation - 9

Identification of commercial benefits of a Ongoing evaluation to maintain and improve consumer focus services - 9

Typically, then, such organisations have recognised shortcomings in their service delivery,- have9 addressed those shortcomings by consulting consumers to determine their needs, have proactively gone further than legal or regulatory requirements in developing services to meet those needs- 9 and ensured that a consumer-focused culture pervades the whole organisation. In essence, this transfersitle header ownership and responsibility for these developments from the regulator to the service provider. - 9 UsuallyDocument such title consumer header principles are openly declared and in the public domain, as required within the TCF framework. However, this is now always the case. The Consumer Council for Northern- 9 IrelandDocument has adoptedtitle header a set of consumer principles that is very similar to the CFU framework, but this is an internal tool and has not been prominently communicated outside of the organisation. - 9 TheDocument journey titletowards header the adoption of consumer principles is not generally as clear cut as the above schemata might suggest. While the transition to a principles-based approach is underway,- 9 the sectorDocument will find title that heClient it may havelogo positionboth principles and rules. Some energy companies comment that they have found themselves having to introduce procedural rules internally to ensure that- 9 sta ff adhereClient tologo the position TCF principles . The TCF situation suggests that organisations cannot move easily or quickly from rules-based regulation to principles-based regulation without careful consideration of how to make that transition culturally and operationally. - 9 Client logo position High level consumer principles can actually work hand in hand with prescriptive rules. In the energy- 9 sectorClient in logo Great position Britain, for example, the principles enshrined in the TCF framework are a sub-set of the prescriptive rules. - 9 TheClient Institute logo positionof Chartered Accountants England and Wales reinforces the feasibility of consumer principles working in tandem with prescriptive rules-based regulation, when commenting about- 9 its ownClient principles logo position-based ‘Code of Ethics’: ‘In practice, Codes of Ethics are a mixture of principles and rules. The rules should support the underlying principles of the Code…The key issue is striking- 9 an appropriateClient logo balance position which encourages the spirit of the guidance to be complied with and does not undermine the exercise of judgement and the role of the profession.’ - 9 ThisClient is anlogo important position point, in that the aim is not necessarily to replace a set of rules with a set of principles, and often rules and principles support each other. - 9 - 9 - 9 - 9 - 9 - 9 - 9 - 9

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5. Key drivers of the adoption of consumer principles - 10

KDocumentey drivers title of theheader adoption of a consumer principles-focused approach to regulation - 10 and compliance fall into three main types: Document title header - 10

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- 10 Document title header Regulator -led drivers include: difficulty in maintaining prescriptive rules to ensure that they- 10 are watertight;Document a titledesire header to place the onus on the service provider to determine what a positive outcome is and how to achieve that outcome; and a need to address customer detriment in the market. Another key regulator-led driver is the observation of the successful implementation of consumer- 10 principlesDocument frameworks title header in other sectors. Ofgem, for example, was influenced by the adoption of the TCF principles in the financial sector. - 10 Document title heClient logo position Many of the drivers behind the adoption of consumer principles-based regulation are led - by 10 the marketClient orlogo service position providers. For example, a key driver is whether the market is competitive or a monopoly: monopolistic markets, such as the domestic water industries, are often perceived to require greater prescriptive regulation (although some providers, such as Scottish Water,- 10 have goneClient beyond logo positionregulatory requirements), whereas competition should, at least in theory, encourage consumer -friendly pricing and more innovative service delivery among providers. Another related- 10 marketClient- ledlogo driver position is the development of a consumer-centric culture to give service providers a c ommercial competitive advantage. - 10 TheClient adoption logo position of consumer principles often reflects a customer-focused culture either already existing within a service provider organisation or being the aspiration of such an organisation - 10. In turn,Client the logo more position customer -focused culture is often attributed to the impact of senior managers driving chan ge within their organisations. - 10 Client logo position The adoption of consumer principles is also often influenced by consumer bodies, such as Citizens Advice, the CFU, the Consumer Council for Water and the Consumer Council for Northern Ireland.- 10 TheseClient bodieslogo position all have well-established, prominent sets of consumer principles that underpin their work. This in turn has an impact on the approach of regulators and service providers to dealing- 10 with consumers. - 10 - 10 - 10 - 10 - 10 - 10 - 10

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6. Profiling consumer-centric organisations - 11

ToDocument determine title how header consumer -centric an organisation is, the following questions can be asked.- 11

Document title header 1. Does the organisation have a process of identifying any consumer detriment in its market?- 11

Document2. Has the title organisation header taken any steps to address consumer detriment in its market? - 11 3. Has the organisation consulted customers to determine their needs in terms of services, Documentcommunications, title header and so on? - 11 4. Are senior managers focused on consumer outcomes? Do5. Does the organisation voluntarily go above and beyond legal or regulatory requirements - 11in its dealings with consumers?

6. Is the organisation innovative in the way it deals with consumers? - 11

7. Does a consumer-focused culture exist throughout the organisation? - 11 8. Does the organisation have a formal set of high level consumer principles underpinning service provision and planning? - 11 9. Is a set of consumer principles published or made publicly available? itle10. headerIs the organisation’s consumer culture reviewed on an ongoing basis and improvements implemented accordingly? - 11 Document title header

These questions can be asked of a regulator or a service provider to determine how far it is- along11 theDocument journey towardstitle header adopting a more consumer-centric approach. The more of these questions that are answered in the affirmative, them more consumer-centric it can be considered. - 11 Document title header The corollary is that where less than half of the questions are answered negatively, there is a need to develop a more consumer-centric approach to improve consumer outcomes. - 11 Document title heClient logo position The number of questions which can be answered positively by regulators and service providers- 11 variesClient by logo sector position - 11 7Client. Variations logo position by sector and region - 11 All regulators specify licence conditions in terms of minimum standards that service providers shouldClient meet.logo position That takes the form, for example, of Guaranteed Standards in the Great Britain energy sector and Codes of Practice in the water industry. - 11 Client logo position Also, almost all regulators and service providers consulted in the research claim to be consumer- 11 - focused,Client logo either position to meet regulatory requirements or voluntarily. However, there is some variation by sector in the extent to which regulators have encouraged service providers to develop consumer principles that are above and beyond the conditions of the licence, and the extent to which service- 11 providersClient logo have position themselves voluntarily gone beyond the minimum standards required by regulators. - 11 ThereClient is logo also positionsome variation in the extent to which consumer principles have been published. Many service providers, particularly those in the water and postal sectors, are reluctant to make these principles prominent until they can back them up with action. Some service providers perceive- 11 that consumers - 11 will not be interested in seeing the principles, but rather they will want specific information and guidance when needed. - 11 - 11 - 11 - 11 - 11 - 11

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Energy sector - 12

TheDocument Standards title of header Conduct, specifically the Treating Customers Fairly (TCF) framework, has- been12 introduced by Ofgem as a licence condition, so that energy companies must develop and publish theirDocument TCF promises. title header The extent to which the TCF principles have been articulated by suppliers and made explicit in their marketing communications varies by size of company. Larger energy suppliers- 12 make their TCF promises very prominent on their websites and in brochures. However, smaller suppliersDocument do titlenot necessarilyheader have the resources to do so, and the TCF promises tend to be- 12 less prominent among smaller energy companies. Document title header - 12 In Northern Ireland, energy companies have introduced Customer Charters which cover similar ground to the TCF framework. Do - 12 Water sector - 12 In Scotland, Scottish Water has gone beyond the legal requirement of a Code of Practice and has developed internal consumer-focused ‘pillars’ to guide its philosophy and behaviour. - 12 In England and Wales, Ofwat has declared a ‘Strategy’ with the aim of making the water industry more customer-centric and engendering greater public trust and confidence in the industry. - 12

Mostitle header service providers in the water industry are in the process of transforming themselves from organisations focused on engineering and operational aspects to service-based ones. However, among these service providers, consumer principles are often internal tools, and customer- 12 - orientatedDocument statements title header above and beyond the conditions of licence tend to be restricted to an overarching vision, mission or statement of values. These are often non-specific in terms- 12 of promises.Document title header - 12 PostalDocument sector title header

The regulated postal sector remains heavily reliant on rules-based regulation, although Ofcom- 12 has anDocument internal set title of heClient consumer logo principles position that underpins policy development. Royal Mail also has no prominently stated consumer-focused principles, although like Ofcom it has adopted a - set 12 of consumerClient logo principles position as an internal tool.

In the non-regulated postal sector, there is evidence that service providers are interested- 12 in adoClientpting logo consumer position principles frameworks, although the issue is complicated by the fact that postal companies tend to be go-betweens in a contract between the shipper (for example a retailer)- 12 and theClient end logocustomer. position - 12 HowClient far logo along position journey towards consumer principles is each sector?

The postal sector is only at the start of the journey from rules-based regulation to a principles --based 12 approachClient logo. Theposition regulated postal sector remains dependent on prescriptive rules, although, as indicated above, Ofcom and Royal Mail do have internal consumer principles framework s with- 12 the aimClient of making logo position the sector more consumer-centric.

The water sector in all countries is also aiming to become more consumer-orientated, although- 12 it is alsoClient at anlogo early position stage in the journey towards consumer principles-based regulation, particularly in England and Wales. - 12 - 12 - 12 - 12 - 12 - 12 - 12 - 12

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The energy sector is the most evolved in terms of the adoption of consumer principles --based 13 regulation. Having a ‘Treating Customers Fairly’ set of principles is compulsory in the energy sector inDocument Great Britain title, header but most of the larger energy companies and around half the smaller suppliers- 13 have gone above and beyond the requirements of the Standards of Conduct. In Northern Ireland, theDocument customer title charters header adopted by energy companies also go beyond licence conditions. However, even in the energy sector, it is widely acknowledged that there is considerable work still to be- done13 and that the sector is only at an early stage of the ‘journey’ towards the full adoption of a consumer principleDocuments-based title framework.header - 13

CurrentlyDocument few title organisations header in the energy, water or postal sectors have truly reached the third- stage13 of the process, by which they have adopted a fully-fledged set of consumer principles and embedded these in planning, operations and communications. However, almost all organisations haveDo demonstrated some ambition to move towards that goal. - 13

8 . Conclusions and implications of the research - 13

The CFU employs a set of tried and tested consumer principles which have been developed - 13over time by the CFU and its predecessor organisations and by other consumer-focused organisations in the UK and beyond. - 13 Consumer Principles framework used by the CFU itle header - 13 Access Can people get the goods and services they need or want? Document title header Choice Is there any? - 13 Document title header Safety Are the goods or services dangerous to health or welfare? - 13 Document title header Information Is it available, accurate and useful? - 13 Document title heClient logo position Fairness Are some or all consumers unfairly discriminated against? - 13 ClientRepresentation logo position Do consumers have a say in how goods or services are provided? - 13 ClientRedress logo position If things go wrong, is there a system for putting them right?

- 13 SomeClient regulatorslogo position and service providers see a benefit in using an existing, tried and tested framework, such as the CFU one, and either using that framework as it is or modifying it for- 13 the sectorClient inlogo question. position The legal services sector, for example, proposes using a framework that is identical to the CFU one. Another example is the energy sector taking the TCF framework from- 13 the financialClient logo services position industry.

Regulators and service providers generally demonstrate little appetite for a harmonised - set 13 of principlesClient logo across position all sectors , with the majority of respondents in the research believing that each sector should find its own solution that fits its own unique needs. - 13 Client logo position Priorities will be different for different types of organization. For example, for network operators, safety is a prime consideration whereas suppliers are essentially just providing a billing service.- 13 For suppliers -, 13communication is a bigger issue. - 13 - 13 - 13 - 13 - 13 - 13

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The CFU consumer principles framework, or a very similar framework, has been applied in- othe14 r markets, including the legal and health sectors, and by other consumer bodies such as CCWater andDocument the Consumer title header Council for Northern Ireland. The fact that so many sectors and organisations- 14 have recognised the benefits of this kind of framework demonstrates its usefulness as a checklist to assessDocument consumer title header focus and inform policy development. - 14 The CFU framework is therefore sufficiently robust to act as a good yardstick against which other consumerDocument-focused title header frameworks can be measured. The level of match with the CFU framework- 14 is therefore a good way of determining how robust and consumer-focused other frameworks are. Document title header - 14 By that test, the TCF framework used in the Great Britain energy sector and the customer charters developed by Northern Irish energy companies have the highest level of match with the CFU frameworkDo and can therefore be judged the most robust currently in place. Throughout the- water14 and postal sectors, the degree of match with the CFU principles is slightly lower, indicating that the frameworks, even where they exist, are less robust and could be improved. - 14

Although each of the energy, water and postal sectors claim to be consumer-focused, the existing way in which this is implemented is different to the approach of the CFU, and many of the existing- 14 consumer -focused statements or frameworks do not cover all the CFU consumer principles. For example, access is often implied rather than explicitly stated as a consumer principle. Another- 14 principle, choice, is perceived to be less relevant in monopoly situations, although it is a key aspect initle com headerpetitive markets such as energy. Choice can, however, be interpreted in a less literal way, namely as a determination of consumer requirements based on consultation (the kind of service that the consumer chooses). Indeed, representation is a key principle, and increasingly - 14 the ‘customerDocument voice’ title informsheader service delivery and customer promises. - 14 SDocumentafety, fairness title header and the provision of information that is clear, accurate and unbiased are all important principles, and tend to be reflected in the different frameworks employed. - 14 Document title header Also there is almost always a complaints procedure, although redress is not always cited as a consumer principle. - 14 Document title heClient logo position There are items covered by existing frameworks that are not covered by the CFU framework, - 14such asClient value logo for money,position trust, honesty, confidence, and also the environment and sustainability. There is some concern among regulators and service providers that the CFU consumer principles are too rigid, asking ‘yes or no’ questions rather than reflecting the subtleties of real situations. - 14 Client logo position It should be recognised that the CFU principles may not all be applicable in every case . In particular- 14 regulatorsClient logo may position be responsible for different aspects. In the Scottish water industry, for example, SPSO is responsible for redress, and so WICS would not be expected to address this principle.- 14 Client logo position The consumer principles framework used by CFU does, however, have an important role to play. Th e framework has the significant benefit of being tried and tested over time in a range of sectors.- 14 It canClient therefore logo position be used by CFU staff to guide its own work and also applied by regulators and service providers in different contexts with only minor modification. It can act as a good checklist- 14 to testClient policy logo formulation position and service provision.

There is potentially an opportunity to use the CFU framework where no framework currently - exists 14 forClient example logo in position the unregulated postal services market, for Distribution Network Operators, and also for smaller water companies in England and Wales. - 14 - 14 At the very least it can be used to test other frameworks to ensure that they are relevant,- 14 comprehensive - 14 and fit for purpose, and that they truly have consumers at their centre. - 14 - 14 - 14 - 14

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- 15 DocumentBACKGROUND title header AND RESEARCH - 15 Document title header METHODOLOGY - 15

Document title header - 15 Document title heClient logo position - 15 Client logo position - 15 Client logo position - 15 Client logo position - 15 Client logo position - 15 Client logo position - 15 Client logo position - 15 Client logo position - 15 - 15 - 15 - 15 - 15 - 15 - 15 - 15

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- 16 1 . Background to the research Document title header - 16 1 .1. The Consumer Futures Unit Document title header - 16

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- 16 The Consumer Futures Unit (CFU) is part of Citizens Advice Scotland (CAS). The CFU seeks to put consumers at the heart of policy and regulation in the regulated industries of energy, post- 16 and water and thereby to improve consumer outcomes in these sectors. It develops evidence-led, practical policy solutions that lead to consumers being informed, engaged, protected and empowered to make the right choices. - 16

Theitle headerCFU employs a set of tried and tested consumer principles which have been developed over time by consumer-focused organisations in the UK and beyond. One of the CFU’s predecessors - 16 is theDocument National title Consumer header Council, which stated the importance of having a consumer principles framework in place to support its development of consumer-focused policy and practice: - 16 ‘InDocument order to achieve title header an impact, it is important that our work is seen as authoritative and credible. Our legit imacy is underpinned in part by the extent to which we demonstrably connect into consumer- 16 experience,Document title support header our analysis with evidence and have suitable quality controls. It is therefore important to have some kind of agreed framework underpinning the way we approach issues,- 16 so thatDocument we are consistenttitle heClient across logo subject position areas, can extend our previous thinking to new topics and are not driven by individual preference. This framework should also help us identify what is or is not a consumer policy topic, as opposed to a wider policy or political matter.’ 1 - 16 Client logo position The CFU and its predecessors have identified some key benefits of adopting consumer principles- 16: Client They logo can position be used to assess the consumer interest; - 16  They can form the framework within which policy is developed and communicated; Client logo position  They allow consumer bodies, regulators and other organisations to champion consistent- 16 and Clienttransparent logo position policy positions across a diverse range of subject areas;  They help management and staff to operate confidently and effectively when new- 16 or Clientunfamiliar logo position issues arise;  They provide a straightforward way of explaining to stakeholders how a consumer - 16 body Clientidentifies logo position and analyse s consumer issues. - 16 Client logo position - 16 - 16 - 16 - 16 1 Consumer Focus Scotland ‘Underpinning our Consumer Policy Analysis’ (2009) - 16 - 16 - 16 - 16

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Role of Consumer Principles - Research Summary June 2017 17

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The adoption of a set of principles focusing on consumers can therefore support the work- 17 of regulato rs and service providers in providing beneficial outcomes for consumers. Document title header - 17 The consumer principles adopted and used by the CFU and its predecessors has its origins in a 1962Document speech title given header by John F. Kennedy to the US Congress, in which he outlined the ‘Kennedy Principles’ of the rights to choose, to be informed, to safety and to be heard. These rights- 17were further developed in the European Community’s 1975 Council Resolution on Consumer Policy, includingDocument the title addition header of a new one relating to redress. - 17

TheDocument United Nations title header ‘Guidelines for Consumer Protection’ were initiated in the 1970s, and expanded- 17 in 1999, and add a further three principles relating to standards of safety and quality; access to essential goods and services; and the promotion of sustainable consumption. The guidelines were adoptedDo by the UN in 1985 after 10 years of campaigning by Consumers International (CI)-. They17 gave important legitimacy to the principles of consumer rights and practical support and guidance for developing national consumer protection legislation. - 17

Consumers International (CI) uses a similar list itself, expressed as eight ‘rights’ rather than seven principles2. These are the rights to: - 17

 Satisfaction of basic needs - 17  Safety itle header Be informed  Choose - 17 Document title header  Be heard - 17  Redress Document title header  Consumer education - 17 Document A healthy title header environment - 17 This,Document then, is title the heClientlineage of logo the positionprinciples adopted by the CFU to underpin its work , which are as follows . - 17 Client logo position Access Can people get the goods and services they need or want? - 17 Client logo position Choice Is there any? - 17 Client logo position Safety Are the goods or services dangerous to health or welfare? - 17 InformationClient logo position Is it available, accurate and useful? - 17 FairnessClient logo position Are some or all consumers unfairly discriminated against? - 17 RepresentationClient logo position Do consumers have a say in how goods or services are provided?

Redress If things go wrong, is there a system for putting them right? - 17 Client logo position - 17 - 17 - 17 - 17 2 Consumer International (www.consumersinternational.org) - 17 - 17 - 17 - 17

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There is an argument that they should be expanded to cover elements such as the quality of -goods 18 and services, how they are delivered and sustainability. However, these principles or rights are tried aDocumentnd tested, welltitle established header and accepted by consumer organisations globally. They also have- 18 the significant merit of being concise and memorable. Document title header The CFU uses its consumer principles framework as a checklist to assess consumer focus and- 18form the framework within which policy is developed and communicated. The principles allow CFU to championDocument consistent title header and transparent policy positions across a diverse range of subject areas,- 18 and help the CFU to operate confidently and effectively when new or unfamiliar issues arise. The consumerDocument principles title header provide a straightforward way of explaining to stakeholders how the- 18CFU identifies and analyses consumer issues. Do 1.2. Market research to explore the take up of consumer-focused frameworks - 18

The CFU believes that if principles that focus on consumers were more widely understood - 18 and adopted by regulators and service providers that this would result in the development of greater consumer -focused policy at a ‘grass roots’ or strategic level, that would deliver better consume- 18 r outcomes. - 18 There is currently a lack of insight relating to the existence and application of consumer principles- based frameworks within regulation, the development of policy and the delivery of services. It is alsoitle header unclear whether existing frameworks are made publicly available as part of a corporate statement of intent or customer ‘promise.’ - 18 Document title header The CFU has therefore sought a clearer understanding of how consumers are currently considered- 18 byDocument other industries title header during the formulation of policy and practice. The aim is to identify which mechanisms, if any, regulators and service providers currently use to ensure their policy and practices are designed around consumers, and to determine if there is potential for using- 18 the consumerDocument principles title header to improve performance in this area, leading to more positive consumer outcomes . - 18 Document title heClient logo position Research has been conducted to explore these issues, in the form of a meta-analysis of information already available in the public domain together with qualitative interviews with a cross sectio- 18n of regulatorsClient logo and position service providers. - 18 PurpleClient Marketlogo position Research, an independent research consultancy, conducted the research on behalf of the CFU. - 18 Client logo position

***** - 18 Client logo position - 18 InClient this report,logo position we outline the key findings of the research on the existence and application of cons umer principles frameworks together with key conclusions and implications arising out of the research. - 18 Client logo position - 18 Client logo position - 18 - 18 - 18 - 18 - 18 - 18 - 18 - 18

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- 19 2 . Research methodology Document title header - 19 2 .1. Scope of the research Document title header - 19 The primary focus of the research is the UK energy, water and postal sectors. Document title header There are a number of regulators responsible for these sectors in the UK, and the remit of- 19each regulator varies by sector and region. Document title header - 19  Ofgem is responsible for regulating the energy sector in Great Britain (England, Wales and Do Scotland), whereas the energy market in Northern Ireland is regulated by the - Utility19 Regulator Northern Ireland.

 The water industry is different, with three different regulators operating: Ofwat- 19 is responsible for the water industry in England and Wales; the Water Industry Commission for Scotland (WICS) regulates the industry in Scotland; and the Utility Regulator Northern- 19 Ireland regulates the Northern Ireland water industry (in addition to the energy sector in Northern Ireland). - 19

 Regulation of the postal sector is the responsibility of Ofcom and their remit is UK-wide (and itle headercovers multiple communications industries in addition to post, such as broadcasting , telecommunications and broadband services). - 19 Document title header In diagrammatic form, this rather complicated situation can be summarised as follows. - 19 Document title header The regulatory landscape

- 19 Document title header Energy Water Post - 19 Document title heClient logo position England & Wales Ofwat - 19 Client logo position Ofgem Water Industry Scotland Commission for Ofcom - 19 Client logo position Scotland - 19 NorthernClient logo Ireland position Utility Regulator for Northern Ireland - 19 InClient this report, logo positionwe have considered the different segments separately, although we have determined any commonalities and key differences in the ‘Summary and Conclusions’ section towards the- 19 end of this document. Client logo position

2.2. Overview of the research methodology - 19 Client logo position

The research programme comprised three main phases: a set up and planning stage;- 19 data gathering;Client logo and position the final analysis and reporting stage. The data gathering phase in turn comprised three symbiotic methodologies, namely a review of intelligence held within the CFU, a - meta19 - analysis -of 19 information available in the public domain and qualitative interviews with a cross section of regulators, service providers and other consumer organisations in the energy, water and -postal 19 sectors. - 19 - 19 - 19 - 19 - 19

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Role of Consumer Principles - Research Summary June 2017 20

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The key elements of the data gathering exercise are described below. - 20

Document title header - 20 Internal data mining A review of market intelligence already available within the CFU, including policy documents and research conducted on consumer Document title header principles. - 20

MetaDocument-analysis title header Secondary (desk) research was employed to identify and summarise- 20 consumer principles currently adopted by regulators and service Document title header providers. The analysis involved a review of relevant regulator- 20and service provider websites and a general information search to explore the key elements of a consumer principles-based approach Do and best practice in this area. - 20

The focus was on organisations within the regulated UK industries of energy, post and water, although the desk research also explore- 20d best practice in other industries, such as the legal, financial and health sectors. - 20

Qualitative research Qualitative research among regulators and service providers- 20 to explore further the extent to which consumer principles are the basis for planning and operations in such organisations. itle header As for the meta-analysis, the qualitative research focused mainly on UK regulators and service providers in the energy, post and - water 20 Document title header industries although the research scope embraced best practice in other sectors and markets. - 20 Document title header The main qualitative research technique employed was depth interviews (a mix of face to face and telephone interviews) . - 20 Document title header Forty interviews were conducted in the qualitative research. Organisations consulted in the research are listed in the appendices- 20 Document title heClient logoto thisposition document.

All interviews were conducted by Purple Market Research . - 20 Client logo position - 20 MoreClient information logo position on the research methodology can be found in the appendices to this report.

The research was conducted from January to March 2017. - 20 Client logo position - 20 Client logo position - 20 Client logo position - 20 Client logo position - 20 Client logo position - 20 - 20 - 20 - 20 - 20 - 20 - 20 - 20

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Document title header - 21

Do - 21

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- 21 KEY RESEARCH FINDINGS itle header

- 21 Document title header - 21 Document title header - 21 Document title header - 21 Document title heClient logo position - 21 Client logo position - 21 Client logo position - 21 Client logo position - 21 Client logo position - 21 Client logo position - 21 Client logo position - 21 Client logo position - 21 - 21 - 21 - 21 - 21 - 21 - 21 - 21

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Role of Consumer Principles - Research Summary June 2017 22

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- 22 3 . The role of consumer principles frameworks Document title header - 22

KeyDocument findings: title header - 22

 The benefits of adopting a consumer principles-based approach to regulation have been Documentdemonstrated title header in a range of markets, including the legal, financial and health sectors. - 22

 There is a strong body of evidence that regulation is moving from a prescriptive rules-based Documentapproach title towards header one based on principles or ethics. - 22

Do A principles-based approach to regulation has several key benefits, including being briefer, simpler and easier for consumers themselves to understand. - 22

 With principles-based regulation, the regulator does not have to understand every nuance- 22 and detail of the market, and the regulations do not need to cover every option or eventuality to ensure that there are no gaps or loopholes. - 22  Principles-based regulation, importantly, places the onus on the service provider to consult consumers, better understand their needs and develop more customised, innovative and consumer-focused service provision, leading to more positive consumer outcomes. - 22

itle header - 22 3.1. Consumer policy tools Document title header - 22 ConsumerDocument policy title header tools available to authorities with responsibility for consumer protection

The Organisation for Economic Co-operation and Development (OECD) estimates that consumers- 22 accountDocument for moretitle headerthan 60% of GDP in OECD countries and therefore play a vital role in economies. When they are empowered, consumers can improve economic performance by helping to- 22 drive competitionDocument andtitle market heClient innovation. logo position

However, to maximise the contribution of consumers, the OECD stresses the importance -of 22 ‘an effectiveClient logo consumer position policy regime in which consumers are protected from unfair marketplace practices and are in a position to make well informed decisions, and in which both business- 22 and 3 consumersClient logo are position aware of their rights and responsibilities.’ - 22 The OECD describes consumer policy making in terms of six main steps: Client logo position 1. Defining the consumer problem, its sources and the institutions and stakeholders that- could22 Client logobe involved position in the potential policy development process; 2. Measuring the consumer detriment (how consumers are being harmed and how many);- 22 Client3. logoDetermining position whether the consumer detriment warrants a policy action;

4. Setting a policy objective and identifying a range of policy options; - 22 Client logo position 5. Evaluating options and selecting a policy action; - 22 Client6. logoDeveloping position a policy review process to evaluate the effectiveness of the policy. - 22 - 22

- 22 3 - 22 Chapter 4 of the OECD report ‘Consumer Policy Toolkit’ (http://www.keepeek.com/Digital-Asset- Management/oecd/governance/consumer -policy-toolkit_9789264079663-en#.WOdNdk11qUk) - 22 - 22 - 22 - 22

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Role of Consumer Principles - Research Summary June 2017 23

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There is a range of policy tools available to authorities with responsibility for consumer protection,- 23 both consumer empowerment tools (‘demand-side measures’) and those that focus on modifying theDocument behaviour title of serviceheader providers (‘supply-side measures’). - 23

TheDocument OECD presents title header these sets of tools as follows. - 23

Document title header - 23

Do - 23

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itle header - 23 Document title header - 23 Document title header - 23 Document title header - 23 TheDocument supply-side title measures heClient arelogo the position main focus of this report. Of these different measures, a number lend themselves to legislation and prescriptive rules, such as licensing, prohibitions and dispute resolution. Others, notably moral suasion (whereby authorities seek to influence or put pressure- 23 on serviceClient logoproviders position to meet a specific objective regarding consumers without directly regulating their activities) , tend to put the onus on the service provider to develop a consumer-focused approach- 23 to dealingClient logowith consumers. position The latter approach is essentially consumer principles-based regulation. - 23 ConsumerClient logo principles position-based regulation has been adopted in a range of markets, including the financial, legal and health sectors, demonstrating the benefits of a set of consumer principles as a framework for regulation, consumer communications, planning, and the delivery of information - 23 and services.Client logo position

4 - 23 EthicalClient logoBusiness position Regulation

There is a body of evidence that regulation is moving from a rule-based approach to a princi- 23ples - basedClient one, logo where position the onus is on the provider of a product or service to demonstrate that they are treating customers with respect and fairness. - 23 Client logo position - 23 - 23

4 - 23 C Hodges- 23 ‘Law and Corporate Behaviour: Integrating Theories of Regulation and Enforcement’ (2015). - 23 - 23 - 23 - 23

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Role of Consumer Principles - Research Summary June 2017 24

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A good example of an approach to regulation that puts the onus on suppliers to take responsibility for their treatment of customers is ‘Ethical Business Regulation,’ (EBR) advocated by Professor- 24 Chris Hodges of Oxford University’s Faculty of Law. Hodges has conducted extensive research to exploreDocument why title people header obey rules, or break rules, and based on that research has determined - 24best practice in ensuring compliance and maximizing performance and innovation, both internally within companiesDocument and title externally header in public regulatory and enforcement systems. - 24 Based on that research, Hodges has proposed a model of Ethical Business Regulation. Within this model,Document the regulatorytitle header system is most effective in affecting the behaviour of individuals where- 24 it ‘supports ethical and fair behaviour.’ Regulators should adopt ‘unimpeachable, consistent and transparentDocument ethicaltitle header practice ’ and product and service providers should demonstrate constant- 24 and satisfactory evidence of their ‘commitment to fair and ethical behaviour that will support the trust of regulators and enforcers, as well as of employees, customers, suppliers and other stake holders.’ Do - 24 Hodges contention is that a ‘blame’ culture will inhibit a culture of learning and ethical behaviour, so businesses and regulators should encourage and support an essentially ‘no blame’ culture, -that 24 is open and collaborative.

There are many examples of a positive response to this proposed approach to regulation. The- 24 idea of EBR has influenced the UK Government in adopting its major January 2017 policy on Future Regulation, involving ‘regulated self-assurance’ and ‘assured advice.’ The Scottish Government - 24 has approved of the approach in its 2016 Competition and Consumer Protection Policy. The Committee onitle Standards header in Public Life strongly supported the EBR policy in its 2016 report on ethics in regulators ‘Striking the Balance: Upholding the Seven Principles of Public Life in Regulation. The work has been cited in the European Commission’s July 2016 report on ‘Innovation, Opportunity- 24 Now:Document Europe’s title mission header to innovate.’ - 24 TheDocument concept title of EBR header has been used as the basis for the Government's Regulatory Futures Review published in January 2017. The Review recommends that all UK regulators should move towards- 24 modelsDocument of 'regulatorytitle header self -assurance' and 'earned recognition', which would permit savings of approximately £600 million in the government's funding of regulators. The Review notes that such a system must be based on evidence of trust, that people will all 'do the right thing', based on -ethical 24 businessDocument practices, title heClient in return logo for position which they would be regulated with a 'very light touch' in a no- blame relationship. That is the EBR model proposed by Hodges. - 24 Client logo position 5 Institute of Chartered Accountants England and Wales Code of Ethics - 24 TheClient Institute logo ofposition Chartered Accountants England and Wales (ICAEW) uses a ‘Code of Ethics’ which is essentially a principles-based approach, based on the International Federation of Accountants'- 24 CodeClient of logo Ethics position. - 24 TheClient ICAEW logo considers position this approach to be robust and flexible for several reasons:  It provides guidance that can be applied to the infinite variations in circumstances that- arise24 Client logoin practice position;  It can cope with rapid changes of the modern business environment; - 24 Client logo position  It prevents the development of a mechanistic, "box-ticking" approach to decision -making and the use of legalistic loopholes to avoid compliance with guidance; - 24 Client logo position  It focuses on the spirit of the guidance and encourages responsibility and the exercise of professional judgement, which are key elements of professions. - 24 - 24 - 24 - 24 5 ICAEW (www.icaew.com) - 24 - 24 - 24 - 24

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The ICAEW recognises that there are some potential drawbacks and a rules-based approach- 25 has benefits, namely that compliance with such guidance is easier since the requirements are prescriptiveDocument andtitle leaveheader little room for misunderstanding. Furthermore, rules-based approaches - 25 are easier to enforce. Document title header The ICAEW notes that, in practice, Codes of Ethics are often a mixture of principles and rules- 25 and ‘the key issue is striking an appropriate balance which encourages the spirit of the guidance to be compliedDocument with title and header does not undermine the exercise of judgement and the role of the profession- 25 .’ This is an important point, in that the aim is not necessarily to replace a set of rules with a set of principles,Document and title often header rules and principles support each other. - 25

3.2. Application of consumer principles-based frameworks in other sectors Do - 25

Consumer principles-based frameworks have been applied within many sectors, including the following. - 25

The legal sector - 25

The role of the Legal Services Consumer Panel is to provide independent advice to the - Legal25 Services Board about the interests of users of legal services. This is done by investigating issues that affect consumers and by seeking to influence decisions about how lawyers are regulated. itle header The Legal Services Consumer Panel has recommended that the legal sector in England and -Wales 25 adoptDocuments a set title of consumerheader principles as ‘a simple tool for regulators to help them think about the consumer interest in a structured way.’ The recommended consumer principles are the same- 25 as thoseDocument promot titleed byheader the CFU, namely access, choice, safety, information, fairness, representation and redress. - 25 Document title headerLegal Service Consumer Panel Consumer Principles6 - 25 DocumentAccess title heClient Canlogo people position get the goods and services they need or want? - 25 ClientChoice logo position Is there any? - 25 Safety Are the goods or services dangerous to health or welfare? Client logo position Information Is it available, accurate and useful? - 25 Client logo position Fairness Are some or all consumers unfairly discriminated against? - 25 Client logo position Representation Do consumers have a say in how goods or services are provided? - 25 ClientRedress logo position If things go wrong, is there a system for putting them right? - 25 Client logo position - 25 Client logo position - 25 - 25 - 25 - 25 6 Legal Service Consumer Panel ‘The Consumer Interest: Using Consumer Principles’ (January 2014) - 25 - 25 - 25 - 25

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The financial sector - 26

TheDocument Financial title Conduct header Authority is the conduct regulator for UK financial services firms- 26and markets. Its remit is to protect customers, enhance the integrity of markets and promote competition.Document title header - 26 The FCA ‘Treating Customers Fairly’ (TCF) framework states: ‘All firms must be able to show consistentlyDocument thattitle fairheader treatment of customers is at the heart of their business model.’ 7 - 26

TheDocument TCF principle title header aims to raise standards in the way firms carry on their business by introducing- 26 changes that will benefit consumers and increase their confidence in the financial services industry. Specifically, TCF aims to help customers fully understand the features, benefits, risks and costs of theDo financial products they buy, and minimise the sale of unsuitable products by encouraging - 26best practice before, during and after a sale. - 26 The FCA doesn’t specify a standard way in which TCF should be assessed and implemented, but it has highlighted key areas within the product life cycle where extra checks should be in place. These include product design, financial promotion and marketing practices, the sales process, information- 26 provision, customer support after the point of sale and complaint handling. In practice this means identify ing potential gaps in TCF practice and developing procedures and checks to plug these- 26 in staff training, marketing and sales materials, product understanding, advice and sales processes, anditle complaintheader handling.

The framework specifies six consumer ‘outcomes’ that firms ‘should strive to achieve to ensure- 26 fair treatmentDocument of titlecustomers header.’ The outcomes are: - 26 Document title header 1. Consumers can be confident they are dealing with firms where the fair treatment of customers is central to the corporate culture; - 26 Document title header 2. Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly; - 26 Document title heClient logo position 3. Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale; - 26 Client logo position 4. Where consumers receive advice, the advice is suitable and takes account of- 26 their circumstances; Client logo position 5. Consumers are provided with products that perform as firms have led them to expect,- 26 and Client logothe associated position service is of an acceptable standard and as they have been led to expect; 6. Consumers do not face unreasonable post-sale barriers imposed by firms to change- 26 Client logoproduct, position switch provider, submit a claim or make a complaint. - 26 TheClient TCF logo framework position has been adopted by Ofgem as an appropriate model for the energy sector in Gre at Britain (see section 4 of this report). - 26 Client logo position The health sector - 26 HealthwatchClient logo Englandposition is ‘the national consumer champion in health and care,’ with statutory powers to ensure the voice of the consumer is strengthened and heard by those who commission, deliver- 26 and regulate- 26 health and care services.

- 26 - 26 7 Financial Conduct Authority (www.fca.org.uk/firms/fair-treatment-customers) - 26 - 26 - 26 - 26

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Role of Consumer Principles - Research Summary June 2017 27

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Healthwatch has eight consumer principles based on feedback from the public. 8 - 27  Essential services Document Access title header - 27

 A safe, dignified and quality service Document title header - 27  Information and education Document Choice title header - 27

 Being listened to Document title header - 27  Being involved Do  A healthy environment - 27

- 27 *****

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Looking at the above applications, the excellent match between these and the CFU consumer principles framework is demonstrated below. - 27

itle header Comparison with the CFU consumer principles framework - 27 Document title header FCA ‘Treating Healthwatch Legal Services Customers Fairly’ consumer Consumer Panel - 27 Document title header framework principles Access - 27

Document title header Choice - 27 Document title heClient logo position Safety - 27 ClientInformation logo position

- 27 Fairness Client logo position Representation - 27 Client logo position Redress - 27 Client logo position

Indicates a match with the CFU consumer principles - 27 Client logo position - 27 ThereClient is logo clearly position a high degree of matching. The overall spirit of these frameworks and much of the detail is entirely consistent with the CFU consumer principles. - 27 Client logo position This reinforces the proposition that the CFU set of consumer principles is a good, robust framework which can be applied in a range of contexts. - 27 - 27 - 27 - 27 8 Healthwatch (www.healthwatch.co.uk) - 27 - 27 - 27 - 27

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3.3. Application of consumer principles-based frameworks among consumer - 28 representative bodies

Document title header - 28 In addition to the CFU, there are several other bodies providing consumer protection and representing the consumer voice in the UK energy, water and postal sectors (and in other sectors). Document title header - 28 All such bodies consulted in the research have adopted consumer principles frameworks to underpinDocument their title work header in consumer protection, advocacy, policy development and education. -In 28 this section of the report we discuss some examples of the way consumer principles have been used by consumerDocument bodies title .header - 28 Consumer Council for Water Do - 28 The Consumer Council for Water (CCWater) represents the consumer’s voice in the water industry in England and Wales. - 28

Established in 2005 to provide consumers with strong representation, including making sure their interests are at the heart of decision-making in the water industry, CCWater provides free advice- 28 to consumers and keep them informed on the issues that affect their water and sewerage services. It also takes up the complaints of household and non-domestic customers when they are unable- 28 to resolve them directly with their water company. itle header In terms of overall strategy, CCWater states that ‘Our values define what we stand for as an organisation, and are there to guide us in our day-to-day work and decisions…Consumers -are 28 at theDocument heart of ourtitle organisation header .’ - 28 In its Forward Work Programme and also in the Annual Report 2016, CCWater identifies a set of Document title header 9 ‘key strategic issues’ that underpin its work. - 28 Document1. Speaking title up header for and informing consumers by providing a trustworthy, independent voice that informs consumers about key water issues and ensures governments, water companies and other stakeholders understand water consumers’ views; - 28 Document title heClient logo position 2. Pressing for fair, value for money and affordable charges that are acceptable to customers;- 28 Client3. Water logo companiesposition provide services that are right first time and sort out problems quickly and without hassle; - 28 Client4. A logo reliable, position resilient, sustainable, safe, good quality water supply that consumers value and use wisely; - 28 Client5. A logo sustainable, position resilient sewerage service that works and is used responsibly by consumers. - 28 TheseClient issues logo positionare very prominent and visible on CCWater website and documents. - 28 TheClient Consumer logo position Council for Northern Ireland

The consumer’s voice is also represented by the Consumer Council for Northern Ireland (CCNI),- 28 whoseClient remit logo coversposition energy, water, postal services and food. - 28 TheClient CCNI logo applies position a set of consumer principles that are very similar to those used by the CFU, albeit refined for the CCNI remit. Consumer principles are used by CCNI ‘to assess the consumer 10 interest and form a consistent framework within which policy is developed and communicated .’- 28 - 28 - 28 - 28 9 CCWater Forward Work Programme and Annual Report 2016 10 Consumer Council for Northern Ireland ‘Draft Forward Work Programme 2017/2018’ - 28 - 28 - 28 - 28

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Role of Consumer Principles - Research Summary June 2017 29

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The eight principles are: - 29 • The right to access to and satisfaction with basic needs e.g. food clothing, public utilities, water, etc. Document title header - 29 • The right to safety – protection from dangerous products or services Document• The right title to header be informed and protected from dishonest & misleading advertising or labelling- 29

• The right to choose – to be able to select from a range of products & services, offered at Documentcompetitive title header prices with assured quality - 29

• The right to be heard – to have consumer interests represented in government policy and the Documentdevelopment title header of products & services - 29

Do• The right to redress – to receive a fair settlement of just claims including compensation for unsatisfactory products or services - 29

• The right to education – knowledge to inform decision making - 29 • The right to a healthy environment - 29 These principles cover all seven CFU consumer principles with the possible exception of ‘fairness.’ They also include satisfaction and education, which are not explicitly covered by the CFU framework . - 29

Titlehese header consumer principles are not currently very visible on CCNI website and in documents . They can be accessed in the Consumer Council for Northern Ireland’s ‘Draft Forward Work Programme- 29 2017/2018Document,’ buttitle they header are not prominent in the public domain. Consideration is being given to making them more prominent on a newly reworked website. - 29 ConsumerDocument and title Competition header Policy for Scotland 11 - 29 TheDocument Scotland title Act header 2016 gave the Scottish Parliament new consumer advocacy and advice powers. The Scottish Government is working with stakeholders to develop a Consumer and Competition Strategy for Scotland to determine the best way to deliver new consumer advice and advocacy- 29 powersDocument in Scotland. title heClient Keith Brown,logo position the Scottish Government’s Cabinet Secretary for the Economy, Jobs and Fair Work, commented in 2016: ‘It is vital that we create a system of consumer protection,- 29 competitionClient logo andposition regulation in Scotland which is fully aligned with the needs of our citizens and businesses and which improves people’s lives.’ - 29 Client logo position To help achieve this goal and to take forward its work on delivering better outcomes for consumers and businesses in Scotland, a set of principles have been adopted: - 29 Client logo position  Consumer protection and competition policy will support economic growth while upholding our values of a fairer, more equal Scotland; - 29 Client logo position  Collaboration and flexibility will be at the heart of our approach; - 29 Client logoConsumers position will be protected from harm, and empowered to challenge organisations to take their needs into account; - 29 Client logoProtecting position consumers will also protect and support businesses, and encourage fair competition; - 29 Client logo position  Scotland’s competition policy should reflect its specific needs and circumstances. - 29 - 29 - 29 - 29 11 Scottish Government ‘Delivering better outcomes for consumers and businesses in Scotland (December 2016)’ - 29 - 29 - 29 - 29

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The CFU principles of safety, choice, fairness, representation and redress are all reflected in these commitments , as indicated below. - 30

TheDocument Scottish title Government header has committed to some specific actions in pursuit of the above- aims,30 including delivering on its commitment on a unified consumer body, tackling nuisance calls, co- ordinatingDocument publicly title header funded advice services, forming a taskforce (to identify consumer harm and market failings and ways of tackling them), understanding how markets work and develop- ing30 a ‘collaborative economy.’ One of those actions is to embed ethical based regulation (‘securing complianceDocument bytitle changing header organisational culture through collaboration and developing ethical values’- 30 ) into the regulatory toolkit during the course of 2017. This is the essence of consumer principles basedDocument regulation. title header - 30

***** Do - 30 There is a high degree of match between the different frameworks used by the consumer bodies discussed above and the CFU consumer principles framework. - 30

Comparison with the CFU consumer principles framework - 30

Scottish Consumer - 30 Government Consumer Council for Consumer & Council for Water Northern Ireland’s itle header Competition 8 principles Policy - 30 Document title header Access - 30 DocumentChoice title header

- 30 Safety Document title header

Information - 30 Document title heClient logo position Fairness - 30

Client logo position Representation - 30 Client logo position Redress - 30 Client logo position Indicates a match with the CFU consumer principles - 30 Client logo position

This again reinforces the view that the CFU consumer principles framework is a robust one.- 30 We concludeClient logo that position the CFU framework is one that regulators and service providers could use with confidence, either by adopting it as their own framework or as a yardstick to test their- 30 own frameworkClient logos. position - 30 3.4. Pros and cons of principles-based regulation Client logo position

The key benefit of a principles-based approach to regulation rather than a rules-based approach,- 30 is that it is -e 30asier for consumers themselves to understand, in that it tends to use consumer -friendly te rminology and tends to be simpler and briefer. - 30 - 30 - 30 - 30 - 30 - 30

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Another important benefit of a principles-based approach to regulation is that it places the onus on the service provider to consult consumers, to better understand their needs. So it encourages- 31 communicatio n between service providers and consumers. This approach also makes it easier to tailorDocument the principles title header to the specific sector or region in question. The corollary is that the regulator- 31 does not have to understand every nuance and detail of the market, and the regulations do not needDocument to cover title every header option or eventuality to ensure that there are no gaps or loopholes. Rules- based regulations also have to be constantly updated. - 31

LastDocument by not title least, header a principles -based approach makes it less likely that service providers- 31 can continue using a mechanistic, ‘box-ticking’ approach to their customers. Rather they are given leewayDocument on how title best header to meet their obligations and encouraged to innovate. - 31

Of course, there are some potential drawbacks to a principles-based approach to regulation. This approachDo can be vague and open to interpretation, potentially leaving a ‘grey area’ for disputes- 31 and disagreement. There is a risk that it can be subjective and makes it difficult to have consistent standards across an industry. A principles-based approach can also add a layer of regulation - to 31 the existing rules, at least while a principles-based approach is bedding in.

A principles-based approach can be retrospective and reactive, with the regulator judging- 31 the actions of service providers after the event rather than setting out rules about what should happen in advance of non-conformances. However, used correctly a principles-based approach can- 31 be a proactive tool, guiding the formulation of policies and practices to reduce that risk. itle header In summary, the main benefits and drawbacks of a principles-based approach to regulation are: - 31 Document title header 12 Benefits and drawbacks of a principles-based regulation - 31 Document title header Benefits Drawbacks - 31 ConsumerDocument understanding title header Vague - 31 Simplicity and brevity Open to interpretation / subjective Document title heClient logo position Onus on the service provider to communicate Adds to regulatory burden - 31 with consumers & better understand their needs Client logo position Retrospective and reactive Easier customisation to market or region Lack of consistent standards across sectors- 31 LessClient need logo for position the regulator to have comprehensive understanding of the industry - 31 LessClient need logo to positioncover every option / eventuality - 31 Do not need to be constantly updated Client logo position Discourages a mechanistic, ‘box-ticking’ - 31 approachClient logo position Gives service providers flexibility on how to - 31 satisfyClient principles logo position Encourages companies to innovate in service - 31 provisionClient logo position - 31 - 31 - 31 - 31 12 Interviews with regulators & service providers / Utility Week / ICAEW & others - 31 - 31 - 31 - 31

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Role of Consumer Principles - Research Summary June 2017 32

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4Document. Application title header in the Great Britain energy sector - 32

Document title header - 32 Key findings: Document Despite title gas header and electricity companies in Great Britain requiring a licence to operate, -in 32 the form of prescriptive conditions, Ofgem is committed to moving to a greater reliance on Documentenforceable title header general principles rather than prescriptive rules, with the principles taking- 32 the form of Standards of Conduct with the Customer Objective that service providers treat customers fairly (TCF). Do - 32  Suppliers are each responsible for determining how to achieve the objective of treating customers fairly; they must publish an annual TCF statement setting out how they seek to meet the objective and the main actions taken to that end, based on Ofgem’s standards. - 32

 The main drivers behind the introduction of the Standards of Conduct were: - 32 o A need to reduce grey areas and loopholes in the rules; o A desire to place the onus is on the service providers, encouraging them to consult- 32 with customers to determine what their needs are, to develop products and services itle header that meet those needs, and, importantly, to innovate in the way they treat customers; o A need to address customer detriment in the market due to poor customer satisfaction,- 32 Document titlea lack header of transparency regarding pricing and the difficulty of changing supplier.

 The extent to which the TCF principles have been articulated by suppliers and made explicit- 32 Documentin their title marketing header communications varies by size of organisation, with larger energy suppliers making their TCF promises very prominent on their websites and in brochures, whereas- 32 Documentsmaller title suppliers header do not necessarily have the resources to do so, with TCF promises tending to be less prominent among smaller energy companies. - 32 Document Distribution title heClient Networks logo Operators position (DNO s) have expressed some interest in a consistent consumer principles framework and believe that they would benefit from such a framework.- 32 Client Another logo position market segment that might benefit from the introduction of a consistent, tried and tested consumer principles framework, is the district heating sector. - 32 Client logo position - 32 Client logo position 4 .1. Ofgem’s role - 32 Client logo position Ofgem is Great Britain’s National Regulatory Authority for the electricity and natural gas markets- 32 . OfgemClient islogo governed position by the Gas & Electricity Markets Authority (GEMA), which determines strategy and sets policy priorities. - 32 GasClient and logo electricity position suppliers are required to be licenced by Ofgem in order to operate . Until 2103, licence conditions took the form of prescriptive and detailed supplier conditions. - 32 Client logo position Since 2013, Ofgem has been committed to moving to a greater reliance on enforceable general- 32 principles rather than prescriptive rules. - 32 - 32 - 32 - 32 - 32 - 32 - 32

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Role of Consumer Principles - Research Summary June 2017 33

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- 33 4.2 . Treating Customers Fairly – a regulator-led principles-based framework Document title header - 33 The Standards of Conduct Document title header - 33 These principles take the form of Standards of Conduct, which are now incorporated as a condition of an energy supplier’s licence to operate. The overall aim of this condition (the ‘Customer Document title header 13 - 33 Objective’) is to ensure that each customer is treated fairly. The Standards of Conduct require that the licencee and any representatives of the licencee: Document title header - 33  Behave in a fair, honest, transparent, appropriate & professional manner; Do  Provide information that is appropriate, fair, complete, accurate, not misleading and in- 33plain & intelligible language;  Make it easy for the customer to contact the licencee; - 33

 Act promptly and courteously to correct any mistakes; - 33  Otherwise ensure that customer service arrangements & processes are complete, thorough, fit for purpose & transparent. - 33

Moreover , the licencee must provide annual updates on how they treat customers fairly . itle header The key drivers behind the introduction of the Standards of Conduct were threefold. - 33 Document A need title to header addres s gaps in the licence conditions. Prescriptive rules need to be comprehensive to avoid grey areas and loopholes and Ofgem was finding it challenging- 33 to Documentensure title that header the rules were watertight.  A desire to encourage energy suppliers to take responsibility. The aim of the Standards- 33 of DocumentConduct title is headerto ensure that there are positive outcomes for consumers, but the onus is on the service provider to determine what that positive outcome is and how customers should- 33 be Documenttreated title fairly. heClient This encourageslogo position services providers to consult with customers to determine what their needs are, to develop products and services that meet the needs of customers and, importantly, to innovate in the way they treat customers. Thus, customers are put- at33 the Clientheart logo of position the organisation. - 33 Client A logo need position to address customer detriment in the market due to poor customer satisfaction, a lack of transparency regarding pricing and the difficulty of changing supplier. - 33 OfgemClient formulatelogo positiond the Standards of Conduct principles based on a public consultation and input from key stakeholders, such as energy companies, trade bodies and consumer bodies . Particular- 33 regardClient waslogo taken position to the Treating Customers Fairly framework introduced into the financial services sector by the Financial Conduct Authority (FCA), which involved the introduction of principles alongside the retention of many of the prescriptive rules. - 33 Client logo position Ofgem is, however, seeking to remove prescription, and views principles as an alternative- 33 to prescription,Client logo whileposition rejecting rules that aren’t fit for purpose in that they do not support the principles. For example, the rules relating to customer bills are very detailed, specifying aspects such -as 33 the content,Client logo how position bills are presented and even the font size used. The aim of the introduction of the Standards of Conduct was to remove much of this detailed prescription, placing the onus on suppliers to develop their own customer-orientated and innovative approach to billing. - 33 - 33 - 33 - 33 13 Ofgem Current Domestic Standards of Conduct - 33 - 33 - 33 - 33

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Role of Consumer Principles - Research Summary June 2017 34

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Furthermore , service providers should be able to demonstrate where consumer consultation - 34 or research has influenced service delivery. Document title header - 34 Ofgem’s focus has moved from enforcement towards the prevention of poor practices that could negativelyDocument impact title header on the consumer, with the aim that this will give more scope to optimising the spread of good practice. - 34

OfgemDocument has heldtitle Challengeheader Panels on the Standards of Conduct. These look at how the standards- 34 are being embedded at different stages or elements of the customer process, sales and marketing forDocument example .title The header Panels identify and highlight good practices (which are attributed to companies)- 34 and areas of concern (which are not attributed).

StepsDo have been taken to encourage innovation. Ofgem has recently opened an Innovation Link- 34 to encourage particularly smaller suppliers and potential new entrants to discuss where they think regulations might be obstructing innovation. Ofgem has also issued invitations to a ‘Regulatory- 34 Sandbox ’ where suppliers can be given temporary exemptions from the licence conditions to try out innovative solutions, an idea taken from the FCA. - 34 Ofgem requires that service providers make their TCF statement accessible within four clicks from the home page on their websites. - 34

Thereitle header is evidence of positive consumer outcomes. Ofgem has recorded a reduction in the number of complaints for each of the last three years running the number has gone down. However, the Challenge Panels have determined that some providers have performed well and some less- 34well, andDocument Ofgem acknowledgestitle header that there is still a considerable amount of work still to do to fully realise TCF practices that maximise consumer benefits. - 34 Document title header Suppliers’ obligations - 34 Document title header Guaranteed standards are written into suppliers’ Standard Licence Conditions or throug h legislative instruments (for example the Complaint Handling Regulations 2008). These commitment - s34 are mostlyDocument very title transactional, heClient logo for example position relating to fixing appointments, compensation for missing appointments and information to be contained in bills. - 34 Client logo position Suppliers are each responsible for determining and demonstrating how they achieve the objective of treating customers fairly. They must publish an annual TCF statement setting out how they- 34seek toClient treat logocustomers position fairly and the main actions taken in line with the Customer Objective, based on Ofgem’s standards. - 34 Client logo position Thus, the directions of the regulator, Ofgem, take the form of Licence Conditions, one of which- 34 is theClient Standards logo position of Conduct, which requires that suppliers treat customers fairly. Suppliers meet their obligations through promises to consumers in accordance with the Standards Licence Conditions, presented as ‘promises’ or ‘guaranteed standards.’ One of the conditions is the Standards- 34 of Conduct,Client logo which position in turn requires that suppliers declare how they will treat their customers fairly. - 34 ServiceClient logo providers position have different ways of focusing on the customer to meet their obligations. Essentially, they must define how they will meet the Customer Objective and show that they have achieved that objective. Although most suppliers use the expression ‘Treating Customers Fairly’- 34 or aClient variation logo of positionthat expression, they have freedom to use their own language and also to choose how they prefer to present their principles or promises. Suppliers also have the opportunity to go -above 34 and beyond- 34 the regulatory requirements by determining the best way to meet consumers’ needs and finding innovative ways to meet those needs. Some energy companies have taken- 34 that opportuni -ty. 34

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Role of Consumer Principles - Research Summary June 2017 35

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Ofgem’s aim is to move towards a principles-based approach to regulation, although this is likely to be a slow process. For a time, the principles-based approach will sit alongside the rules specified- 35 in licence conditions, but ultimately they should replace the rules-based approach. Document title header - 35 In summary, the journey towards a principles-based approach is as follows. Document title header - 35

Document title header - 35

Do - 35

- 35

itle header - 35 Document title header - 35 Document title header

- 35 ForDocument Ofgem andtitle GBheader energy companies, both large and small, the movement from a rule-based regulation to a principles-based one remains a work in progress, with strong direction from Ofgem.- 35 TheDocument regulator title and heClient energy logo companies position frequently describe the transition to a principles -based approach as a ‘journey’ and acknowledge that it has not yet been completed. - 35 WhileClient the logo transition position to a principles-based approach is underway, service providers may find that they have both principles and prescriptive rules determined by the regulators. A small number- 35 of energyClient companieslogo position complain that the ‘burden’ on suppliers has increased with the introduction of a princ iples-based approach. Some companies also comment that they have found themselves- 35 having to introduce strict procedural rules internally to ensure that staff adhere to the TCF principles.Client logo However, position this may be a temporary situation during the transition to principles -based regulation. - 35 Client logo position The more customer-focused service providers are striving to embed the TCF principles throughout- 35 theClient organisation, logo position as discussed below.

4.3. Comparison of Ofgem’s TCF principles with the CFU framework - 35 Client logo position

In the following table the TCF principles, as stipulated by Ofgem, are compared with consumer- 35 principlesClient logo within position the CFU framework. - 35 - 35 - 35 - 35 - 35 - 35 - 35 - 35

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Role of Consumer Principles - Research Summary June 2017 36

- 36

Comparison with the CFU consumer principles framework - 36

Document title header CFU principles Ofgem TCF principles - 36

Document titleAccess header - 36 Choice Document title header Safety - 36

Information Document title header - 36

Fairness Do - 36 Representation

Redress - 36

Indicates a match with the CFU consumer principles - 36

- 36 There is therefore only a partial match between the TCF framework and the CFU consumer principles. However, if the TCF standard is considered alongside the regulatory requirements to provideitle header access, choice and safety, there is a good match. - 36 AlsoDocument Ofgem title does header require that energy companies consult with their customers and that service delivery is informed by that consultation. The principles of access, choice, safety and representation- 36 areDocument therefore title addressed header by Ofgem, although they are not explicitly referenced in the TCF specifications. - 36 4.4Document. Application title header of the Treating Customers Fairly framework by energy service providers - 36 Document title heClient logo position All energy companies declare their Standards of Conduct, although the prominence they are -given 36 , andClient the logoextent position to which they go beyond the regulatory requirements, varies by size of company. - 36 HowClient large logo energy position companies in Great Britain apply Treating Customers Fairly

Large energy companies usually have explicit and highly prominent statements of their Standard- 36 LicenceClient logoConditions position (the customer guarantees that they must offer under the terms of their licence from Ofgem), usually including separate documents or brochures stating their ‘Treating Customers- 36 Fairly’Client promises. logo position The following are good examples.

E.ON14 - 36 Client logo position E .ON provides a prominent link to its Guaranteed Service Standards of Service (‘Because keeping- 36 aClient promise logo matters position’), a 26-page document outlining its standards for aspects of service such as access, safety, pricing, making a complaint and contacting E.ON, together with compensation - levels 36 forClient breaches logo ofposition promises. One of the Guaranteed Service Standards is ‘Treating Customers Fairly,’ which is described in a separate statement. - 36 - 36 - 36 - 36 14 Appendix A and E-on (www.eonenergy.com) - 36 - 36 - 36 - 36

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Role of Consumer Principles - Research Summary June 2017 37

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Treating customers fairly is one of the goals of E.ON’s strategy to ‘help us achieve our vision of becoming your partner of choice for energy solutions.’ E.ON states: ‘Our customers continue- to37 be at the heart of everything we do and our aim is to treat you fairly at all times. We’ve defined what we thinkDocument that means title headerfor our customers in our definition of fairness above, and have been putting- it37 into practice. We set out in this statement the things we have done in 2016, in-line with Ofgem’s StandardsDocument of title Conduct header.’ - 37 E.ON ’s key customer promises relating to Treating Customers Fairly are: Document title header  Being honest with you – giving you simple, clear and accurate information so that you- 37 can make informed decisions Document title header  Saying sorry if we make a mistake – telling you promptly how and when we’ll put - things 37 right, and keeping you informed of progress Do  Making it easy for you to contact us, because we know your time is precious,- 37 and communicating with you in easy to understand language and in a way of your choice  Giving you help to meet your energy needs, like ways to help you use less - 37  Listening to you so that we focus on improving the things that are important.

- 37 E.ON also makes the claim that staff within the organisation are fair to each other, indicating the extent to which fairness is embedded within company values. Each year E.ON publishes- 37 a statement of activities and plans to achieve the aim of treating customers fairly. itle header Scottish Power - 37 AnothDocumenter large title energy header company, Scottish Power, makes a number of statements prominently on its website, including Guaranteed Standards (the standards for eventualities such as making- 37 appointmentsDocument title or fixingheader faults , together with compensation for breaches, required under the licence conditions), a series of ‘Customers Charters’ (15-20 page guides to paying bills, making complaints,- 37 and so on) and a Standards of Conduct commitment that it will treat customers fairly, in that it will: Document title header • Be fair, appropriate, professional, honest and transparent in every interaction - 37 Document• Provide title you heClient with information logo position that is accurate, simple, straightforward and right for you • Provide a level of service to meet your needs and where possible make managing your- 37 Client logoaccount position easier - 37 InClient addition, logo Scottpositionish Power has created headings of its own when describing the actions taken during the year… - 37 Client• logoSimple position and easy to deal with • There when you need us - 37 Client logo position • Fair and socially responsible - 37 Client• logoProvide position value for money. npower - 37 Client logo position The approach of the larger GB energy companies to consumer principles is illustrated by npower- 37 ’s 15 frameworkClient logo ‘Treating position Customers Fairly – Putting You First.’ The npower ‘Treating customers fairly’ document can be accessed through prominent links throughout its website. - 37 - 37 - 37 - 37 15 Appendix A and npower (www.npower.com) - 37 - 37 - 37 - 37

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Role of Consumer Principles - Research Summary June 2017 38

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Key sections of the document are: - 38  You talked, we’ve listened – customers’ views & needs understood through surveys, call Documentcentre title feedback, header online feedback, exit surveys, etc. - 38  Getting the help that you need – alternative ways to contact us, making it easy to contact us Document Caring title for header you – Priority Services, Warm Home Discount, Affordable Solutions and- other38 schemes to ensure that all customers, including vulnerable ones, are treated fairly Document title header  Improving our journey together – commitment to ongoing improvement - 38

Document We’ve title improved header communication – we’ve improved the way we communicate, including - social 38 media, online, phone and post options

Do A better service for you – ensuring that tariff is right for you and service improves. - 38

I n addition to its TCF statements, internally npower uses ‘pub and mum’ tests, that is how would employees feel if the customer was their mum and how comfortable would employees be -telling 38 friend s in a pub what they are doing at npower? These tests are used to help develop and maintain working practices relating to customer service. This illustrates the extent to which npower is working- 38 towards putting customers at the centre of its philosophy and practices. - 38 How smaller energy suppliers in Great Britain apply Treating Customers Fairly

Amongitle header smaller energy companies there is less likely to be a prominent statement relating to TCF. Sometimes the customer promise does not explicitly mention ‘Treating Customers Fairly’ although- 38 theDocument spirit of the title framework header is always present. - 38 SDocumentmaller energy title companiesheader in Great Britain generally claim to be as customer-focused as their larger counterparts, although they may not have the resources to produce glossy ‘Treating Customers Fairly’ brochures. With small energy companies, it is often the case that statements- 38 relatingDocument to ‘ Treatingtitle header Customers Fairly (or equivalent wording) are less prominent than for larger energy companies. Typically, it is necessary to go through three or four clicks to access- 38 TCF promisesDocument or title statements heClient on logo the position websites of smaller energy companies, such as Ovo Energy or Ecotricity. - 38 OvCliento Energy logo position16 - 38 OvoClient Energy, logo position for example, makes the following statements in support of its ‘Treating Customers Fairly’ commitment. - 38 Client• logoWe position do our best to make sure we act honestly, transparently, appropriately and professionally at all times. - 38 Client• logoWe make position it easy for you to contact us in whichever way suits you best

• We keep an eye on the information we give you, so it’s always accurate and easy to- read.38 Client logoWe’ll positionnever try to mislead you - 38 • We’ll only write to you about plans and products that we believe are right for you Client logo position • Our Priority Services Register is a confidential list of customers who have specific needs.- 38 Client logoThis helpsposition us make sure we treat every customer in a way that meets their needs as fairly as possible - 38 • Sometimes- 38 mistakes can happen. If they do, we’ll react fast and do everything we can to sort things out the very first time you get in touch. - 38 - 38 16 www.ovoenergy.com - 38 - 38 - 38 - 38

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Role of Consumer Principles - Research Summary June 2017 39

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However, to find these statements, it is necessary to go through four links on the Ovo website. - 39 Ecotricity 17 Document title header - 39 Similarly, Ecotricity makes the following statements relating to Treating Customers Fairly: Document• We treattitle youheader the way we like to be treated ourselves - 39

• We make it really easy for you to speak to us Document title header - 39 • We’ll tell you everything you need know to make an informed decision – and we’ll always be upfront and clear with you. Document title header - 39 • We operate an Ethical Pricing Policy, which means we have just one simple tariff for Do electricity and one for gas – and all our customers are always on our latest price - 39 • When things do go wrong we have a simple process to support you - 39 There is some match with the spirit of the CFU consumer principles (if not much overlap with the specific principles). But to find these statements, it is again necessary to go through several links on the Ecotricity website. Indeed, the TCF page is hidden in a section called 'The Legal Stuff.-' 39

First Utility 18 - 39

Firstitle headerUtility i s another good example of the approach of smaller GB energy companies. First Utility is very customer-focused, illustrated by the fact that they have life-size cardboard cut -outs of typical customers throughout their offices as a reminder that the customer is the key focus - of 39 the organisation.Document title TCF header is not explicitly referenced, but the ‘Great Service’ promise covers much of the same ground, and is prominent on its website. - 39 ‘WeDocument believe intitle a moreheader positive, engaged and informed relationship between customer and supplier. So, no matter if you’re new or not to First Utility, we’re committed to looking after you fairly by:- 39 Document Treating title youheader as we’d like to be treated - by acting honestly, transparently, appropriately and professionally at all times - 39 Document title heClient logo position  Making it easy for you to get in touch with us - however and whenever is convenient, we’d be pleased to hear from you - 39 Client logo position  Giving you the best possible deals we can - we’ll always offer you our cheapest prices and best deals whether you’re a new or existing customer - 39 Client logo position  Providing the best possible customer service - we invest heavily in staff training and- high39 - tech systems so that our service continues to strengthen as we continue to grow Client logo position  Making it simple to understand and manage your account - through accurate and easy- 39 to Client logounderstand position bills, number one rated customer app and fun account tools.’

The consumer principles of fairness, information and representation are again prominent . - 39 Client logo position 4.5 . Comparison of the application of TCF principles by service prov iders- 39 withClient the logo CFU position framework

- 39 LookingClient logo at theposition frameworks used by specific energy companies, and again comparing these frameworks with that used by the CFU, yields the following comparative table. - 39 - 39 - 39 - 39 17 www.ecotricity.co.uk 18 Appendix A and First Utility (www.first-utility.com) - 39 - 39 - 39 - 39

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Role of Consumer Principles - Research Summary June 2017 40

- 40

Comparison with the CFU consumer principles framework - 40

Scottish Ovo First DocumentCFU principles title header E.ON npower Ecotricity Power Energy Utility- 40

DocumentAccess title header - 40 Choice Document title header Safety - 40

Information Document title header - 40

Fairness Do - 40 Representation

- 40 Redress

- 40 Indicates a match with the CFU consumer principles

- 40 There is consistently a good match for the provision of information, fairness, representation and redress.itle header Redress tends to be implied by promises that it will be easy to contact the company rather than explicitly mentioned in the energy companies’ frameworks, although regulatory rules specify- 40 thatDocument a clear and title prominent header complaints process must be in place.

Access and safety are not explicitly mentioned but are covered by legislative and regulatory- 40 requirements.Document title Choice header is important and suppliers are obliged by Ofgem to make switching easy. However, this is not part of the TCF framework. - 40 Document title header So, although there is only a partial match between the TCF framework and the CFU consumer- 40 principles,Document that title match heClient is greater logo ifposition the TCF principles are considered in tandem with the Guaranteed Standards. - 40 ThisClient is alogo good position example of rules working together with principles towards a more positive consumer outcome. In this case, that might be an interim solution, and Ofgem’s ultimate ambition - is40 for principlesClient logo to replaceposition prescriptive rules. - 40 4.6. Evaluation of consumer-based frameworks in the GB energy sector Client logo position - 40 EnergyClient logo suppliers position are obliged to demonstrate that their consumer principles are being delivered effectively. - 40 AClient series logo of methods position are used to validate and evaluate performance. - 40 ClientEvaluation logo position of consumer-based frameworks in the GB energy sector - 40 TreatingClient logo Customers position Fairly All suppliers required to prepare annual statements highlighting how Statement they are seeking to treat customers fairly and the actions taken- 40 in - 40 line with this objective. - 40 Social obligations reporting Companies obliged to provide quarterly data regarding treatment of - 40 debt and disconnections – published on Ofgem website. - 40 - 40 - 40 - 40

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Role of Consumer Principles - Research Summary June 2017 41

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Consumer complaints Quarterly and annual complaints data published on suppliers’- 41 reporting websites with comparative data published by Ofgem. Document title header - 41 Investigations into supplier Ofgem authorised to investigate supplier behaviour where licence behaviour conditions (incl. Standards of Conduct) may have been breached. Document title header - 41 Consumer research Ofgem undertakes extensive customer research including its Document title header Consumer First panel and biennial research into complaints- 41 to energy companies. Document title header - 41 4.7 . Consumer-focused frameworks used by energy distribution network operatorsDo - 41

Distribution Networks Operators (DNOs) have tended to have less interaction with consumers, - 41 but they are becoming more consumer-focused. - 41 Currently , among DNOs, consumer or customer commitments are framed in a variety of ways, including ‘vision’ statements, Codes of Practice, Standards of Performance, Priority Services and general customer commitments or promises. Some of these are mandatory requirements (such- 41 as the Guaranteed Standards of Performance) and some are more general consumer promises. itle header DNOs express some interest in a consistent consumer principles framework and they believe- 41 that theyDocument would benefit title header from such a framework. There is, however, no evidence of a consistent, formal consumer principles framework currently in place. - 41 AnDocument example: title Scottish header and Southern Electricity Networks19 - 41 ScottishDocument and titleSouthern header Electricity Networks, for example demonstrates its commitment to customers in a number of ways. - 41

ItDocument is mandatory title for heClient the organisation logo position to provide Guaranteed Standards of Performance, which set out the service provider’s obligations, such as how quickly power should be restored following- 41 an interruptionClient logo, andposition a Priority Services commitment to offer extra help to vulnerable customers, together with compensation levels for failures to meet requirements. - 41 Client logo position In addition, SSEN demonstrates its consumer commitment through ‘Our new brand’ which goes beyond mandatory requirements and sets a goal ‘of putting our customers at the heart of everything- 41 weClient do.’ logo position - 41 DespiteClient logothese position declarations, there is no single, prominent, stated set of consumer principles beyond this overall brand statement and SSEN’s consumer commitments are demonstrated - by 41 an adherence to the Guaranteed Standards and an overarching vision to be more customer-focused. Client logo position 4 .8. Consumer-focused frameworks used by the district heating sector - 41 Client logo position

There is another market segment that might benefit from the introduction of a consistent, tried- 41 and testedClient consumer logo position principles framework, namely the district heating sector. - 41 District and- 41 communal heating schemes (also known as heat networks) supply heat and hot water from a central source to multiple consumers through a network of insulated pipes. - 41 - 41 19 Scottish and Southern Electricity Networks (www.ssepd.co.uk) - 41 - 41 - 41 - 41

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Role of Consumer Principles - Research Summary June 2017 42

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In 2015 DECC estimated that district heat met between 1% and 2% of UK heat demand. At this time, there were estimated to be 2000 heat networks, with 210,000 homes and 1,700 commercial- 42 properties connected, with a further 150 schemes under development. 20 Its use is growing, particularlyDocument in title built header-up urban areas. On average, therefore, each scheme covers around 100 homes,- 42 and an estimated 75% of all schemes are small, connecting fewer than 100 households. Just over 21 halfDocument of schemes title are header in London . - 42 District heating has the benefit of being low carbon and it takes away the need to maintain a gas boiler.Document However, title thereheader is currently very little protection for consumers living in properties connected- 42 to district heat networks. Consumers in Great Britain have little or no choice of supplier and the sectorDocument is unregulated, title header so that consumers have no access to an ombudsman should they have- 42 a complaint and no control over the price they pay.

ConsumerDo organisations such as Citizens Advice, the CFU and Which? have expressed concern- 42 over the lack of consumer protection in the sector. As heating policy is devolved, there is the potential to take this forward in Scotland, and the CFU has published research in this area22. - 42

Within the district heating market, the existence and application of consumer principles frameworks is pretty much non-existent. Where consumer promises are made, they tend to be general- 42 and piecemeal. This is not surprising, given that many of the operators are small organisations, with less need for formal processes or procedures. - 42

Typicallitle headery, a provider of a district heating scheme might have several ‘policies’ relating to customer complaints handling, customer compensation, billing and so on. These may well have been ‘borrowed’ from energy companies with more evolved frameworks. - 42 Document title header Feedback from consumers might be sought in a piecemeal fashion, through an occasional- 42 customerDocument satisfaction title header survey or an open day. - 42 TheDocument main consumer title header framework in place in the district heating sector is Heat Trust, a voluntary scheme launched in Nov 2015. The scheme is managed by Heat Customer Protection Limited, a not -for-profit company. The scheme has been adopted mainly by operators in the South East- 42 of England,Document and title appears heClient less logoprevalent position in other parts of the UK. - 42 HeatClient Trust logo setsposition customer service standards and customer protection requirements that heat suppliers should provide to their customers. - 42 WhenClient a logo heat positionnetwork is successfully registered with the Heat Trust Scheme, the customers on the heat network will benefit from the standards set by the scheme. - 42 Client logo position The scheme includes rules on the following: - 42 Client• logoSupport position for vulnerable heat customers

• Heat supplier obligations - 42 Client logo position • Heat customer service and reporting a fault or emergency - 42 Client• logoProcess position for customers joining and leaving • Heat meters & heat Interface Units (HIUs) - 42 Client logo position - 42 20 DECC,- The42 Future of Heating: Meeting the Challenge, 2013; DECC, News Article: £7m Boost to Heat Industry Innovation 2015 21 - 42 DECC,- Summary42 of Evidence on District Heating Networks in the UK, 2013 22 www.cas.org.uk/system/files/publications/different_rules_for_different_fuels_- _cfu_insight_report.pdf - 42 - 42 - 42 - 42

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Role of Consumer Principles - Research Summary June 2017 43

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• Heat bill and heat charge calculations & clarity - 43 • Heat bill payment arrangements and the management of arrears Document• Suspension title header and resumptions of service processes - 43 • Complaint handling and independent complaint handling Document title header - 43 • Privacy policy and data protection.

RequirementsDocument title are header ‘comparable to the quality and performance standards for regulated utilities- 43 and draw on legislation and industry best practice.’ It also provides an independent process with the EnergyDocument Ombudsman title header for settling complaints between customers and their heat supplier. This service- 43 is free for customers to access. Do There is a partial match between the Heat Trust Scheme and the CFU consumer principles- 43 framework: - 43 Comparison with the CFU consumer principles framework - 43 CFU principles Heat Trust Scheme standards

Access - 43

itle header Choice Safety - 43 Document titleInf ormationheader - 43 Document titleFairness header

- 43 Representation Document title header Redress - 43 Document title heClient logo position Indicates a match with the CFU consumer principles - 43 Client logo position Among operators not registered with Heat Trust, there is some interest in the CFU framework- 43 to provideClient logoconsumer position principles, with the perception that it would help to raise standards and establish a minimum level of performance. - 43 Client logo position Many of the district heating providers are social landlords, that is local authorities and housing associations who abide by social housing consumer frameworks, such as the Scottish - Social 43 HousingClient logo Charter. position Some providers have expressed concern about how the Heat Trust scheme would mesh with such existing frameworks. - 43 Client logo position - 43 Client logo position - 43 Client logo position - 43 - 43 - 43 - 43 - 43 - 43 - 43 - 43

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Role of Consumer Principles - Research Summary June 2017 44

- 44

- 44 5 . Application in the water industry in Scotland Document title header - 44

KeyDocument findings: title header - 44

Document The mission title header of the regulator of the Scottish water industry, WICS, is to manage an effective regulatory framework which encourages the Scottish water industry to provide a high--quality 44 service and value for money to customers. Document title header - 44  WICS believes that it is important to ensure that customers are at the heart of decision making in the industry. Do - 44  WICS itself is not directly customer facing but the work carried out by WICS is based on consumer input through an independent ‘Customer Forum’23, which carries out research into customer preferences and negotiates with Scottish Water to ensure that it is customer- 44 - focused.

 Most household customers in Scotland are billed for water and sewerage charges alon- gside44 their Council Tax bill, which means that there is less of a direct supplier / customer relationship than in England or Wales. - 44

 Nevertheless, Scottish Water is a consumer-centric organisation, as illustrated by its vision, itle header(‘six pillars ’), which represents an important enhancement to the rules specified by regulators under the conditions of licence. - 44 Document title header

- 44 5Document.1. The Scottish title header domestic water industry

- 44 TheDocument Scottish title water header industry - 44 ScottishDocument Water title24 isheClient the sole logo provider position of water and waste water services to househol ds in Scotland and acts as the wholesaler of water and wastewater services to licenced providers who provide- 44 retailClient services logo position to non-domestic customers.

M ost household customers in Scotland are billed for water and sewerage charges (alongside - 44their CounciClientl logoTax bill)position by local authorities on behalf of Scottish Water.25 This means that there is less of a direct supplier / customer relationship than in England or Wales. - 44 Client logo position Scottish Water has an obligation to produce a Code of Practice under section 26 of the Water Industry (Scotland) Act 2002. The Code of Practice provides information on the standards of service- 44 thatClient customers logo position can expect and on how Scottish Water will deal with customers. - 44 ScottishClient logo Water’s position also has an overarching vision statement in the form of ‘Six Pillars’ which demonstrate a consumer focus which goes beyond regulatory requirements. It also has an internal- 44 setClient of consumer logo position principles to guide its behaviour and culture.

The ‘journey’ towards the adoption of consumer-focused principles can be summarized as follows.- 44 Client logo position - 44 - 44 23 Set up by the Water Industry Commission for Scotland, the CFU and Scottish Water - 44 (www.cas.org.uk/news/agreement - 44 -reached-establish-customer-forum-water) 24 Scottish Water (www.scottishwater.co.uk) 25 There is one notification but two bills - 44 - 44 - 44 - 44

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Role of Consumer Principles - Research Summary June 2017 45

- 45

Document title header - 45

Do - 45

- 45

itle header - 45 Document title header - 45 5.2Document. Regulation title header of the Scottish domestic water industry - 45 TheDocument ‘Quality titleand headerStandards’ process, run by the Scottish Government, is the mechanism by which the principles of charging and investment objectives for the water industry in Scotland are set by Scottish ministers. Along with the Scottish Government, the Quality and Standards process- 45 involvesDocument the titleWater heClient Industry logo Commission position for Scotland (WICS), the Scottish Environment Protection Agency (SEPA), the Drinking Water Quality Regulator (DWQR), the CFU and Scottish Water. - 45 Client logo position The regulator WICS is a non-departmental public body with statutory responsibilities. Its mission is to manage an effective regulatory framework which encourages the Scottish water industry- 45 to provideClient logoa high position-quality s ervice and value for money to customers. - 45 WICS’Client role logo and position remit is as follows: • Setting prices: WICS has a statutory duty to promote the interests of customers, principally- 45 by Clientsetting logo prices position for water and sewerage services that deliver the lowest reasonable overall cost. • Facilitating competition: it is part of WICS’ role to facilitate competition in the Scottish- water45 Clientindustry logo position(for non-household customers)

• Monitoring performance: It is essential that Scottish customers receive value for money- 45from Clienttheir logo wate positionr services provider. WICS’ role in monitoring and reporting on Scottish Water’s performance focuses on the following key areas: customer service; investment; costs; leakage- 45 . Client logo position The role of WICS is to establish the lowest reasonable overall cost of delivering the principles- 45 of charging - and45 objectives set by ministers. It does this by carrying out a ‘Strategic Review of Charges’ (or ‘Price Review’) for the six-year regulatory period. - 45 - 45 - 45 - 45 - 45 - 45

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Role of Consumer Principles - Research Summary June 2017 46

- 46

WICS itself is not directly customer facing but the work carried out by WICS is based on consumer- 46 input through other bodies. As part of the Strategic Review process, WICS has developed the modelDocument of an title independent header ‘Customer Forum.’ The role of the Customer Forum is to carry- 46 out research into customer preferences and, within acceptable ranges set by WICS, to negotiate directlyDocument with Scottishtitle header Water on the outcome of their business plan for the regulatory period. - 46 WICS supports an approach that gives clarity for consumers and believes that there may be potentialDocument value title in header having principles against which to test policy and procedures. However, -WICS 46 believes that high-level statements do not, in themselves, lead to better outcomes for customers. It is,Document nevertheless, title header important to ensure that customers are at the heart of decision making -in 46 the industry.

WICSDo monitors Scottish Water’s overall performance on customer service and report s on this- 46each year. - 46 Other regulators in the Scottish water industry - 46 Consumer protection is very much the objective of other regulators and consumer representatives in the Scottish water industry, notably the CFU, the Customer Forum, the Scottish Public Services Ombudsman (SPSO), the Drinking Water Quality Regulator (DWQR) and the Scottish Environment- 46 Protection Agency (SEPA). itle header The latter two organisations are not particularly consumer-facing. Nevertheless, they are working- 46 , alongDocument with other title stakeholders, header to deliver a more consumer-focused water industry.

The Scottish Public Services Ombudsman 26 - 46 Document title header The Scottish Public Services Ombudsman is the final stage for complaints about most - water46 companiesDocument title (and header for complaints about other public services such as councils, the National Health Service, colleges and universities, and the Scottish Government). - 46 Document title heClient logo position SPSO’s commitment to a focus on consumers is demonstrated by its core vision and values: - 46 Client logo position Vision: Our vision is to be a world-leading, innovative, - 46 Client logo position accessible and trusted organisation that promotes best practice, learning and improvement. - 46 Client logoValues: position We work independently and fairly

We are customer-focused and value integrity and - 46 Client logo position respect - 46 We value learning and improvement. Client logo position - 46 SPSOClient is logo part position of a programme to set common service principles for all Ombudsman schemes and has supported the development of a set of principles, including respect, dignity, clarity and accessibility, which can be applied across all Ombudsman schemes. - 46 Client logo position - 46 - 46 - 46 - 46 26 https://www.spso.org.uk - 46 - 46 - 46 - 46

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Role of Consumer Principles - Research Summary June 2017 47

- 47

The Drinking Water Quality Regulator 27 - 47

TheDocument Drinking title Water header Quality Regulator (DWQR) provides an independent check that Scottish -Water 47 is complying with the legal standards, set out in regulations, for drinking water in Scotland. The regulatorDocument has title extensive header powers to acquire information, conduct investigations and take enforcement action should this prove necessary. - 47

ScottishDocument Environment title header Protection Agency - 47

TheDocument Scottish title Environment header Protection Agency (SEPA) has worked in the last 2-3 years to - better47 understand the needs of consumers and make itself (and the water industry) more consumer- focused. This is illustrated by the changes in the language used, which reflects a more consumer- orientatedDo approach. - 47

SEPA’s Service Charter 28 makes several promises, including that the organization will be: - 47  Courteous – dealing with you with courtesy and integrity at all times  Accessible – we will make it easy for you to access our services and information - 47  Understanding – we will try to understand your needs

 Good partners – we will work with you to help you protect and improve the environment - 47

 Constantly improving – we will regularly review our performance, listening to and learning itle headerfrom you

 Accurate – we will strive to get it right first time and will act promptly - 47 Document title header  Good communicators – we will express ourselves simply, clearly and within agreed timescales - 47 Document title header  Fair – we will apply the law fairly and consistently and provide a proportionate enforcement response - 47 Document title header  Competent – our staff will be well-trained and equipped with the right knowledge and skills.

- 47 TheDocument SEPA Servicetitle heClient Charter logo brings position its principles together in one prominent place, in the ‘Working with you’ section on the SEPA website. Although the Charter is aimed at businesses, it illustrates- 47 theClient changing logo positionfocus on the organization and its contribution to the wider water industry. - 47 5.3Client. Application logo position of consumer frameworks in the water industry in Scotland - 47 ScottishClient logo Water’s position Code of Practice gives a default set of standards to guide action and covers operational issues that are important to customers, such as arranging and keeping appointments, planning and communicating interruptions to the water supply and handling of enquiries. The- Code47 explainsClient logo the standardsposition of service customers can expect and how they will be compensated if these are not met. However, these are commitments under the licence conditions rather than a consumer- 47 principlesClient logo framework. position - 47 BeyondClient logo the position Code of Practice, Scottish Water’s customer focus is best represented by an overarching statement in the form of ‘Our Vision.’ - 47 ThroughClient logo its engagement position with entities such as the CFU and the Customer Forum, Scottish Water has addressed customer-related issues such as how to measure customer satisfaction and how- 47 to improve -the 47 cons umer experience.

- 47 - 47 27 http://dwqr.scot 28 SEPA website (www.sepa.org.uk) ‘Working with you’ section - 47 - 47 - 47 - 47

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Role of Consumer Principles - Research Summary June 2017 48

- 48

The declaration of its commitment takes the form of a vision statement which sets out six organizational characteristics (‘six pillars’) to influence internal behavior and thereby achieve- bet 48ter outcomes for its customers. Document title header  Serving: show our customers that we care, achieving year on year improvements in- 48 their experience of our service and having a positive impact on customers and communities. Document title header - 48  Strong: work hard to keep customers’ prices low, delivering savings to keep customer price increases below inflation. Document title header - 48  Responsible: always do the right thing for Scotland, providing ever better drinking water, Documentimplementing title header plans to boost water supply resilience to all major communities, fulfilling our environmental obligations and reducing our carbon footprint. - 48

Do Leading: shape our future for the benefit of customers; listening to our customers, - being48 proactive, working with customers, landowners, local authorities and developers to deliver even more efficient services. - 48  Growing: enable a thriving Scotland, supporting developers, seeking innovative and low cost solutions for businesses to grow in Scotland, and supporting an efficient supply chain through world class procurement. - 48

 Committed: behave safely and have agile, healthy people and workplaces, building our- 48skills and diversity to sustain high standards.

Theseitle header six pillars therefore represent an important enhancement to the rules specified by regulator s under the conditions of licence, although, essentially, they have an organizational focus rather- 48than beingDocument based titleon how header consumers perceive the organization. - 48 ScottishDocument Water title alsoheader has a set of internal consumer principles guiding behavior, culture and promises, which have been developed with customers and other stakeholders. - 48 5.4Document. Comparison title header with the CFU framework - 48 ScottishDocument Water’s title sixheClient ‘pillars’ logomatch position the CFU principles moderately well. - 48 Client logo positionComparison with the CFU consumer principles framework - 48 Client logo position CFU principles Scottish Water Access - 48 Client logo position Choice - 48 Client logo positionSafety - 48 Client logo positionInformation Fairness - 48 Client logo position Representation - 48 Client logo position Redress - 48 - 48 Indicates a match with the CFU consumer principles - 48

- 48 - 48 - 48 - 48 - 48

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Role of Consumer Principles - Research Summary June 2017 49

- 49

There is little choice for Scottish domestic consumers and redress is covered by the Code of Practice. In fact, if aspects of the Code of Practice and Scottish Water’s vision statement - 49 were taken as a whole, there would be a very good match with the CFU framework. Document title header - 49 5.5 . Evaluation of Scottish Water’s performance Document title header - 49 Several methods are used to evaluate the performance of Scottish Water. These are summarised below.Document title header - 49

OutputDocument Monitoring title header Group Performance in delivering the outputs is monitored by the Output- 49 Monitoring Group, comprising representatives from the Drinking Water Quality Regulator, Scottish Environment Protection Agency, Do the CFU, Scottish Water, the Scottish Government and WICS.- 49 The group meets every three months to review progress against ministerial objectives. - 49 WICS collects regulatory information each year and publishes its findings. - 49 Overall Performance The OPA was originally developed by Ofwat to compare customer Assessment (OPA) service performances of companies in England and Wales by scoring- 49 performance across a range of activities that affect customer service. itle header By using the same points system as England and Wales WICS was able to compare Scottish Water’s performance against that of the companies south of the border. - 49 Document title header The hCEM The ‘Household Customer Experience Measure’ (hCEM) is a performance measure that was developed by Scottish Water and- 49 the Document title header Customer Forum to quantify the success of Scottish Water’s interactions with its customers. - 49 Document title header The hCEM score is split evenly between quantitative and qualitative components. The quantitative component is scored based on- 49 the Document title heClient logocontact position between Scottish Water and its customers. The qualitative component is based on customer experience surveys. - 49 Client logo position However, these tools are used to monitor Scottish Water’s performance against its business plan, rather than to check against any consumer-based frameworks. - 49 Client logo position 5.6 . Customer focus among non-domestic water suppliers - 49 Client logo position

The move towards a more consumer-focused approach can be illustrated by other service providers- 49 inClient the Scottishlogo position water industry, namely the providers of water and waste water services to businesses in Scotland’s competitive non-domestic water market, which has been in operation- 49 sinceClient 2008 logo. position

All participants in the retail market for water and wastewater services in Scotland must adhere- 49 to a MarketClient Codelogo ,position which sets out rules to be followed relating to: - 49  The obligations on, and the standards expected of, market participants Client logo position  The processes that govern how licensed providers register their business customers - 49  The- 49 processes that govern how wholesale charges are calculated - 49  The processes that govern how operational activities are carried out. - 49 - 49 - 49 - 49 - 49

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Role of Consumer Principles - Research Summary June 2017 50

- 50

Water companies declare service standards based on minimum standards and compensation - levels 50 set by the regulator, WICS, which are essentially Codes of Practice for key aspects of service: Document title header  Response to complaints and other queries - 50

Document Making, title moving header or cancelling appointments - 50  Interruptions to supply and notifications Document title header  Damage due to flooding - 50

Document Addressing title header emergencies and keeping customers informed. - 50

WICS, with the support of CFU and other stakeholders, has been developing a Code of Practice on pricing,Do selling, switching and complaints handling in the non-domestic water market. - 50

T he proposed Code of Practice has been designed around consumer-focused principles and- 50aims to deliver significant outcomes for (business) consumers in the form of improvements to the quality of services provided by licensed providers in this market. It should also give greater transparency, resulting in consumers being treated more fairly. It could also act as a driver for ongoing- 50 improvements in business practice, and for greater consumer protection against poor service or practices, and direct innovation into positive channels across the non-domestic market. - 50

Aboveitle header and beyond the Market Code and the minimum service standards, water service providers in the Scottish non-domestic market claim to be developing a customer-focused culture. However, consumer-focused frameworks currently tend to be internal tools for business development , -rather 50 thanDocument an openly title expressed header declaration. - 50 CurrentlyDocument there title is header little evidence of service providers in the Scottish non-domestic water market having a prominent, stated set of consumer principles beyond very broad vision statements such- 50 as ‘We are committed to being the most efficient water provider in Scotland and having the highest Document title header 29 level of customer service.’ - 50 Currently,Document therefore, title heClient such servicelogo position providers typically work with a stated set of service standards based on default standards set by WICS, an overarching vision statement and, in some cases, an 30 - 50 internalClient logoset of position principles used to help develop a consumer-orientated focus. The internal principles used tend not to be published, although they may be in future. - 50 AllClient of the logo above position reflects the rather fledgling nature of the competitive non-domestic water market in Scotland. - 50 Client logo position The CFU consumer principles framework has the potential to assist service providers in that market- 50 asClient they logo develop position a more consumer-focused culture, although the consumer in this case is an organization rather than an individual. - 50 Client logo position - 50 Client logo position - 50 Client logo position - 50 - 50

29 - 50 Castle -Water 50 (www.castlewater.co.uk) 30 Due to commercial sensitivities we are unable to give more detail on the internal tools used in this market - 50 - 50 - 50 - 50

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Role of Consumer Principles - Research Summary June 2017 51

- 51

- 51 6 . Application in the water industry in England and Document title header - 51 Wales

Document title header - 51

KeyDocument findings: title header - 51  Under its regulatory model, Ofwat gives explicit and detailed specifications of standards (for Documentcomplaints title headerhandling, billing and so on), which requires service providers to develop Code- 51s of Practice. Do Ofwat has also been working to ensure that service providers in the England and - Wales 51 water industry are more consumer focused, with a ‘Strategy’ aiming to engender greater ‘trust and confidence’ in the sector. - 51  The combination of a consumer focused top-level strategy supported by a regulatory model is reflected in the approach to consumers demonstrated by service providers in the - water51 industry in England and Wales.  Most service providers do claim that they are putting consumers at the centre, although- 51 that consumer focus tends to be an internal framework or a very top level declaration, in the form itle headerof a vis ion or set of values, working together with the mandatory Codes of Practice. - 51 Document title header 6 .1. Consumer focus of the water industry in England and Wales - 51 Document title header 31 Ofwat is the economic regulator of the water and sewerage sectors in England and Wales, -a 51non - ministerialDocument gover titlenment header department established in 1989 when the industry was privatised.

Ofwat ensures that the water industry in England and Wales complies with national and European- 51 legislation.Document Its title regulatory heClient framework logo position has been the main way in which Ofwat imposes compulsory standards on suppliers that they must meet in delivering services to customers, and stipulations- 51 regardingClient logo a Code position of P ractice that service providers must produce, detailing key customer protection obligations . - 51 UnderClient its logo Chief position Executive, Cathryn Ross32, Ofwat has been working to ensure that service providers in the England and Wales water industry are more consumer focused. This takes the form- 51 of engenderingClient logo ‘trustposition and confidence,’ as indicated in Ofwat’s stated vision: ‘As the economic regulator of the water sector in England and Wales, Ofwat’s role is to help the sector build trust- 51 and confidenceClient logo with position customers and wider society.’

The combination of Ofwat’s consumer focused top-level strategy supported by a regulatory model- 51 is reflectedClient logo in theposition approac h that service providers in the England and Wales water industry take towards consumers. - 51 Client logo position Most service providers do claim that they are putting consumers at the centre. However, the consumer focus tends to be an internal framework or a very top level vision or set of values,- which 51 worksClient together logo position with the mandatory Codes of Practice. - 51 - 51 - 51 - 51 31 Ofwat (www.ofwat.gov.uk) 32 Cathryn Ross was appointed Chief Executive of Ofwat in 2013 - 51 - 51 - 51 - 51

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Role of Consumer Principles - Research Summary June 2017 52

- 52

In diagrammatic form, the journey of the water industry in England and Wales towards the adoption- 52 of a consumer-focused approach to service delivery is as follows. Document title header - 52

Document title header - 52

Do - 52

- 52

itle header - 52 Document title header

- 52 Document title header T he Consumer Council for Water (CCWater) also focuses on making sure consumer’s interests- 52 are centralDocument to service title headerdelivery in the water industry. As discussed in section 3.3 of this report, CCWater has identified a set of ‘key strategic issues’ that underpin its work and these focus on key consumer issues such as access, safety, fairness and representation. - 52 Document title heClient logo position 6.2 . Ofwat – regulation and strategy - 52 Client logo position

Legal and regulatory model - 52 Client logo position This top-level strategy works hand in hand with Ofwat’s regulatory model, which describes how- 52 the visionClient is logo to be position achieved.

The legal and regulatory framework for the water industry in England and Wales includes- 52 the following:Client logo position - 52 Client Guar logoanteed position Standards Regulations – currently the Water Supply and Sewerage Services (Customer Service Standards) Regulations 2008 imposes compulsory standards on suppliers that they must meet in delivering services to customers (known as the ‘guaranteed standards- 52 Clientscheme’). logo position  Service providers (‘licencees’) can be required to make payments to customers where they- 52have Clientfaile dlogo to comply. position - 52  Charging Guidance – guidance issued by the Secretary of State or Welsh Ministers (as appropriate)- 52 to which Ofwat must have regard when making charging rules. - 52 - 52 - 52 - 52 - 52 - 52

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Role of Consumer Principles - Research Summary June 2017 53

- 53

 Customer Contracts – contracts between the service providers and the end users of water and sewerage services, incorporating or having regard to a Customer Protection Code of Practice- 53 and Guaranteed Standards Regulations. Document title header - 53  Customer Protection Code of Practice – a code of practice containing key customer protection obligations. Document title header - 53 Under its regulatory model, therefore, Ofwat gives explicit and detailed specification s of standards (Documentfor complaints title handling, header billing and so on), which requires service providers to develop a Code- 53 of Practice . Document title header Ofwat provides some ‘principles’ that are designed to drive more effective customer engagement- 53 and information provision as part of its Price Review policy statement. 33 Do Water companies should deliver outcomes that customers and society value at a price- 53they are willing to pay  Customer engagement is essential to achieve the right outcomes at the right time and- at 53 the right price  Engagement should not simply take place at price reviews. Engagement means- 53 understanding what customer want and responding to that in plans and ongoing delivery  It is the companies’ responsibility to engage with customers and to demonstrate that- 53 they have done it well. itle headerCustomers and their representatives must be able to challenge the companies throughout the process. - 53 Document Engagement title header is not a ‘one size fits all’ process but should reflect the particular circumstances of each company and its various household and non-household customers - 53 Document title header Ofwat also provides ‘information principles’ which specify what it expects each supplier to- do53 to ensure that the information it provides to customers is consistent with its licence obligations. Document title header The re are several requirements from suppliers: to provide information to customers that empowers- 53 themDocument to secure title theheClient lowest logo possible position bills and best possible service; to involve customers and representatives in the information provision approach; and to consider and demonstrate - 53their adherenceClient logo to positionOfwat’s information provision requirements.

The information principles require that information provided is: - 53 Client logo position  Accurate ‒ Suppliers should make sure the information it provides is correct by regularly reviewing it. - 53 Client logo position  Transparent ‒ Information should not be misleading, should be unbiased and enable customers to make informed decisions. - 53 Client Clear logo ‒position Information should highlight key messages and direct customers to more detailed information. - 53 Client Accessible logo position ‒ Suppliers should customise information and communication channels to meet the needs and preferences of particular customer groups (‘customer segmentation’). - 53 Client Timely logo position ‒ Companies should design and deliver information in a way that makes sure customers get the right information at the right time – for example, when a customer moves- 53 Clienthome. logo position  Customer-led ‒ Each company should actively seek its customers’ and their representatives’ - 53 views- 53 on the information it provides and how it is provided. - 53 - 53 33 Ofwat’s customer engagement policy statement and expectations for PR19 (May 2016) - 53 - 53 - 53 - 53

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Role of Consumer Principles - Research Summary June 2017 54

- 54

- 54 Ofwat’ s ‘Trust in Water’ strategy

OfwatDocument has a titleprimary header duty to protect consumers, which it aims to achieve through a three-stranded- 54 approach. Document title header  Empowering consumers by giving them tools to get the services they want and need. - 54

Document Engaging title customers header by making sure that companies take account of customers’ priorities.- 54  Protecting customers by making sure consumers are treated fairly. Document title header - 54 Ofwat’s commitment to making the water industry in England and Wales more consumer-focused has been articulated by Chief Executive, Cathryn Ross, who commented in 2015: Do - 54 ‘We want to…enable and encourage companies to deliver more for less. If we are to maintain trust and confidence in these vital public services, providers need to deliver better- 54 services that are better value for money, while also using scarce resources more smartly and working better for our natural environment. With big challenges ahead, we cannot afford to stand still. The sector needs to innovate to create value that can be shared between- 54 customers, the environment, society, and of course investors. For instance, we have made a lot of progress in focusing companies on what the customer – rather than the regulator- –54 wants. Yet we believe the sector can go further. Companies need to stop seeing customers itleas header passive consumers, and build relationships with them that will enable better value, more 34 sustainable services.’ - 54 OfwatDocument doesn’t title have header a consumer principles framework in the same way as the CFU . Ofwat’s consumer focus is best represented by its ‘Strategy,’ a top-level statement of its vision and values.- 54 ThisDocument is given title a prominent header place on the ‘About us’ page of the Ofwat website. It takes the form of a PowerPoint slide presentation, ‘Trust in Water.’ - 54 Document title header The following is an extract from this strategy statement. 35 - 54 Document‘…customers title needheClient to have logo trust position and confidence in the vital public service they receive… To achieve trust and confidence the sector must listen to their customers and deliver outcomes- 54 Clientwhich logo benefit position customers today and in the future. This means strong relationships throughout the supply chain and with investors, and genuine engagement with government and regulators. - 54 Client logo position As the economic regulator for the water sector in England and Wales, we help build trust and- 54 Clientconfidence logo position in water. We do this through focusing on what matters to customers, the environment and society both now and in the future. We oversee how the sector - is54 Clientperforming logo position and seek assurance that service providers are engaging with customers and delivering services they want and can afford… - 54 ClientOur logo vision position is to be a trusted and respected regulator, working at the leading edge, and stretching ourselves and others to build trust and confidence in water…We need the sector- 54 Clientand everyonelogo position interested in it to work with us and together, listening and communicating to build trust and confidence among customers, investors and our wider society.’ - 54 Client logo position - 54 - 54 - 54 - 54 34 Cathryn Ross, Ofwat Chief Executive, quoted in ‘Waste Water and Treatment’ 2015 35 Appendix A and Ofwat website (www.ofwat.gov.uk) - 54 - 54 - 54 - 54

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Role of Consumer Principles - Research Summary June 2017 55

- 55

Comparis on of Ofwat’s consumer focus with the CFU consumer principles - 55

ComparingDocument Ofwat’s title header strategy statement with the CFU consumer principles framework, there is -only 55 a partial match. Document title header - 55 Comparison with the CFU consumer principles framework

Document title header - 55 CFU principles Ofwat ‘Trust in Water’ Strategy

Document Accesstitle header - 55 Choice Do - 55 Safety

Information - 55 Fairness - 55 Representation

- 55 Redress

itle header Indicates a match with the CFU consumer principles - 55 Document title header Given the lack of competition, at least in terms of the domestic market, choice is less of an issue- 55 in theDocument water industry title header compared to the energy sector.

Safe ty is not explicitly covered by the Ofwat strategy, although consumers are protected by- other55 bodies.Document The Drinkingtitle header Water Inspectorate (E&W) is the drinking water quality regulator, ensuring that companies supply water that is safe to drink and meets the standards set in the Water Quality- 55 Regulations.Document title They heClient do this bylogo checking position the tests that water companies carry out on drinking water and inspecting individual companies. The Environment Agency’s aim is to provide an efficient and integrated environmental protection system and monitor discharges to ensure they - meet55 environmentalClient logo position standards. - 55 Separately,Client logo Ofwatposition also provides principles relating to engaging with customers and information provision. - 55 Client logo position If the Ofwat ‘Trust and Confidence’ strategy and the regulatory model and other consumer protections are taken there is a better match with the CFU consumer principles, although -Ofwat 55 doesClient not logo have position an equivalent unified, prominent set of principles in the same way as CFU does. - 55 6.3Client. Application logo position of consumer frameworks in the water industry - 55 ServiceClient logo providers’ position Code of Practice and overarching consumer-focused vision

Suppliers’ licence obligations require them to submit a Code of Practice to regulators - 55 and customersClient logo. The position Codes of Practice are explicit and detailed statements of obligations under conditions of licence, together with compensation levels for breaches of standards. They typically- 55 cover access,- 55 delivery and incidents, safety, payment and billing, information on metering, customer promises and looking after customers who need help - 55 - 55 - 55 - 55 - 55 - 55

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Role of Consumer Principles - Research Summary June 2017 56

- 56

Codes of Practice therefore cover many of the same areas as the CFU consumer principles- 56 . However, the Codes of Practice tend to be transactional, such as guidance on what to do if somethingDocument goes title wrong header or how to complain. - 56

TheyDocument can take title dheaderifferent forms, from a single lengthy document to a series of short, focused documents. They tend not to be user friendly, although there are exceptions, as indicated -below. 56 They can also be labelled in different ways. Many service providers do refer to the ‘Codes of Practice’Document but title they header are sometimes given alternative labels. Sutton and East Surrey Water,- 56 for example, refers to ‘Our Customer Charter.’36 This ‘charter’ covers the guaranteed standards of serviceDocument for makingtitle header appointments, querying accounts, making complaints, and so on, so- 56 it is, essentially, their Codes of Practice.

TheDo Codes of Practice are usually accompanied by a vision, which is typically an overarching- 56 statement of ambition (for example ‘to be the best supplier’), and often includes very broad principles relating to price or value, customer service in a very general way and environmental- 56 performance . The vision tends to be highly visible on supplier websites and documents and is often a non-specific statement. - 56 That vision may encapsulate an ambition to go beyond the regulatory requirements of a Code of Practice. For example, South West Water presents their Codes of Practice in the form of- 56 ‘Our Customer Promise,’ in which ‘we explain our promises and what you should expect from us. Some ofitle these header are based on standards set by Government; we see these as a minimum requirement and, in many instances, have improved on these or introduced additional standards demonstrating our commitment to providing excellent service.’ - 56 Document title header This illustrates the ambition of service providers to pursue the strategy outlined by Ofwat- 56 to engenderDocument trust title and header confidence in the industry and focus on the consumer. - 56 ExamplesDocument of title how header the Codes of Practice and vision statement work together

The following examples show how the Codes of Practice can work in tandem with an overarching- 56 visionDocument statement. title heClient logo position - 56 SevernClient logoTrent position Water

Severn Trent Water provides its Codes of Practice alongside a set of ‘principles.’ - 56 Client logo position The Codes of Practice outline ‘the standards of service you can expect from us,’ covering - areas56 suchClient as logoaccess, position billing and making complaints, and running to 60 pages,

37 - 56 SevernClient Trentlogo positionWater also has a more overarching set of principles, which cover issue s such as:  Keeping everyone healthy & safe - 56 Client logoSupporting position employees’ rights & diversity  Maintaining ethical & honest behaviour - 56 Client logoKeeping position our communications open & responsible  Delivering excellent customer service - 56 Client logoWorking position within the community  Protecting the environment - 56 - 56

- 56 - 56 36 Sutton and East Surrey Water ‘Our Customer Charter’ 37 Severn Trent Water Annual Report & Accounts 2016 / ‘Doing the right thing’ booklet - 56 - 56 - 56 - 56

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Role of Consumer Principles - Research Summary June 2017 57

- 57

Wessex Water38 - 57 Wessex Water is another good example of consumer focus taking the form of a combination of mandatoryDocument Codes title header of Practice working together with an overarching vision (in the form of mission,- 57 aims and values). Document title header In line with legal and regulatory requirements (provided under licence agreement), Wessex -Water 57 pro vides a number of policy documents relating to issues such as affordability, social tariffs and standardsDocument of titleservice. header These include a series of succinct and focused Codes of Practice documents,- 57 based on standards of service relating to specific service areas, such as accounts and bills, help andDocument advice, wtitleater header meters and water quality. - 57

Each of the documents represents a promise to customers relating to service performance and compensationDo levels for failures to meet promised service standards. - 57

The Wessex Water standards and promises are ‘enhanced beyond the legal requirements -. ’ 57This customer -centric philosophy is illustrated by Wessex Water’s stated mission, aims and values. - 57 Our mission  To provide outstanding, sustainable water and environmental services. - 57 Our aims  To provide customers with excellent affordable services; itle header  To protect and improve the environment and contribute to wider society; - 57 Document title header  To be a great place to work in which all employees can work safely and reach their full potential; - 57 Document title header  To deliver the best possible returns to investors.

Our values (BEST)  Behaviours – we respect and value everyone's contribution - 57 and Document title header always operate with integrity and openness;  Excellence – we aspire to excellence in everything we do; - 57 Document title heClient logo position  Service – serving customers is at the heart of our business and we always go the extra mile; - 57 Client logo position  Teamwork – we are one team working together to deliver our mission. - 57 Client logo position

Wessex Water encourages staff to ‘go the extra mile’ (GEM) whenever they can in order to- 57build trustClient among logo customers, position resolve issues efficiently and treat customers fairly. - 57 ColinClient Skellett, logo position Chief Executive , states: We are a customer centred organisation and believe in putting customers and the communities we serve at the heart of everything we do – our aim is always to achieve the best outcome for them. We focus on understanding customers’ changing- 57 needsClient andlogo responding position to the pressures that many continue to be under in these challenging economic times.’ - 57 Client logo position Wessex Water is therefore a good example of how a consumer-focused philosophy can enhance- 57 the basic consumer protection offered by rules-based regulation. Client logo position - 57 - 57 - 57 - 57 38 Appendix A and Wessex Water website (www.wessexwater.co.uk) / ‘Our Strategic Direction’ (updated in 2017) - 57 - 57 - 57 - 57

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Role of Consumer Principles - Research Summary June 2017 58

- 58

- 58 6.4 . Comparison with the CFU framework Document title header - 58 A comparison can be made between the consumer-focused frameworks of service providers in the waterDocument industry title in Englandheader and Wales and the CFU consumer principles. - 58

Document titleComparison header with the CFU consumer principles framework - 58

Wessex Water Document title header Severn Trent Water - 58 CFU principles mission, aims & ‘principles’ values Do - 58 Access

- 58 Choice

Safety - 58

Information - 58 Fairness

itle header Representation - 58 DocumentRedress title header

- 58 Document title header Indicates a match with the CFU consumer principles - 58 Document title header

Both Severn Trent Water and Wessex Water claim to be customer-centric and to go beyond- 58 the regulatoryDocument requirements. title heClient However logo position, the customer focus does not cover all the areas specified by the CFU consumer principles. - 58 Client logo position Again, there is a better fit with the CFU consumer principles if legal and regulatory responsibilities are also taken into account. - 58 Client logo position 6 .5. Evaluation of consumer-based frameworks in the water industry in - 58 EnglandClient logo and position Wales

- 58 WaterClient providerslogo position in England and Wales are obliged to demonstrate that their consume r-based frameworks are being delivered effectively. Various methods are used to evaluate performance. - 58 Client logo position Evaluation of consumer-based frameworks - 58 Client logo position Annual performance All suppliers are required by Ofwat to submit an annual performance- 58 reportsClient logo position report to demonstrate compliance with their separate price controls. Ofwat expects companies to have processes in place to ensure that- 58 this information can be trusted (‘assurance’). - 58 Company monitoring Ofwat uses its company monitoring framework – a series of tests -of 58 the framework - 58 quality of each company’s information − to provoke and challenge the 17 largest companies to publish information that can be trusted. - 58 - 58 - 58 - 58

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Role of Consumer Principles - Research Summary June 2017 59

- 59

Service Incentive The SIM measures customer service levels and how companies can- 59 get Mechanism (SIM) financial rewards and penalties depending on how well they score. Document title header Each company’s customer service performance is assessed annu- 59ally , and includes a measurement of the number of complaints they receive as well as the results from customer satisfaction surveys. Document title header All monopoly water-only and water and wastewater companies- 59 in England and Wales publish information about their performance each Document title header year, including information about performance against targets, rewards- 59 and penalties and actions to address issues arising. DiscoverDocument Water title header Discover Water is a way for customers to find out more about their- 59own dashboard water company and the water sector overall. Set out like a dashboard, Do the Discover Water website brings already-available company data- 59from a range of sources together in a friendly and interactive way. CCWater Ofwat uses the views of the Consumer Council for Water (CCWater)- 59 on how well companies are communicating with their customers , and insights from other consumer bodies, to inform its risk-based review- 59 of companies’ information provision.

CCWater conducts ongoing consumer research to monitor customer views of their water and sewerage services. - 59

itle header

- 59 Document title header - 59 Document title header - 59 Document title header - 59 Document title heClient logo position - 59 Client logo position - 59 Client logo position - 59 Client logo position - 59 Client logo position - 59 Client logo position - 59 Client logo position - 59 Client logo position - 59 - 59 - 59 - 59 - 59 - 59 - 59 - 59

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Role of Consumer Principles - Research Summary June 2017 60

- 60

- 60 7 . Application in the energy and water industries in NorthernDocument title headerIreland - 60

Document title header - 60

Key findings: Document title header - 60  In 2016 Utility Regulator for Northern Ireland (UR) launched the Consumer Protection DocumentStrategy title (CPS) header to build on existing regulatory protections by enhancing consumer protection,- 60 and attempting to ensure that the energy and water industries in Northern Ireland are consumer-focused. Do - 60  The Consumer Council for Northern Ireland has adopted a set of consumer principles that follow the CFU consumer principles closely, although these are applied internally rather than being prominently displayed. - 60

 Service providers in the Northern Ireland energy and water industries, under the terms of their licences, must provide regulators and consumers with Codes of Practic e, specifying- 60 minimum standards on transactional commitments, such as payment of bills, provision of service for vulnerable customers and complaints handling procedures. - 60

 In addition, Northern Ireland energy companies have developed their own Customer itle headerChart ers, which go beyond the requirements of the Codes of Practice. - 60 Document NI Water title publishesheader a Code of Practice specifying service standards and compensation for failure to meet minimum standards and is also working to be more customer-centric through its customer ‘promises.’ - 60 Document title header - 60 Document title header 7.1. Regulation and consumer principles in the Northern Irish energy and water industries - 60 Document title heClient logo position

Service providers in the Northern Ireland energy and water industries, under the terms of- 60 their licence,Client logo must position provide regulators and consumers with Codes of Practice, specifying minimum standards on transactional commitments, such as payment of bills, provision of service- 60 for vulnerableClient logo customers position, prepayment meter services and complaints handling procedure s. - 60 TheClient consumer logo position frameworks adopted by service providers in the Northern Irish energy and water sectors combine these Codes of Practice with a customer commitment that goes beyond the regulatory requirements. - 60 Client logo position Northern Irish energy companies provide a Customer Charter, based on a triangular conversation- 60 betweenClient logo the position regulator, the Consumer Council and the service providers to scope the charter framework. Service providers are left to develop their own charter based on that framework. - 60 InClient the Northern logo position Irish water industry, the relationship between the sole service provider, NI Water, and its customers is different to the relationship that energy companies have with their customers,- 60 inClient that the logo direct position relationship with consumers is limited. Nevertheless, NI Water gives a number of customer ‘promises’ that go above and beyond the regulatory requirements of the Code of Practice.- 60 - 60 In both the energy and water sectors in Northern Ireland, service providers reflect the position of their regulator, the Utility Regulator for Northern Ireland (UREGNI), in that they combine- 60 a statement - 60 of the regulatory obligations with a more overarching statement of consumer commitments beyond the legal and regulatory requirements. - 60 - 60 - 60 - 60

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Role of Consumer Principles - Research Summary June 2017 61

- 61

Document title header - 61

Do - 61

- 61

itle header - 61

Document title header 7.2 . Regulation in Northern Ireland - 61 Document title header

The Utility Regulator for Northern Ireland - 61 Document title header Utility Regulator for Northern Ireland (UR) is responsible for regulating Northern Ireland’s electricity,- 61 gas,Document water and title sewerage heClient industrieslogo position. UR is a member of the United Kingdom Regulators Network, which co-ordinates policy development and activities with Ofgem, Ofwat and other UK regulators. - 61 UR’sClient work logo involves: position - 61 Client logoIssuing position and maintaining licences for gas, electricity and water companies to operate in Northern Ireland; - 61 Client logoMaking position sure that these companies meet relevant legislation and licence obligations;  Engaging with these companies to ensure that their prices are as low as possible ; - 61 Client logo position  Encouraging regulated companies to be more efficient and responsive to customers; - 61 Client logoWorking position to encourage competition in the gas and electricity markets;  Setting the standards of service which regulated companies provide to customers- 61 in Client logoNorthern position Ireland;  Acting as an adjudicator on certain customer complaints, disputes and appeals. - 61 Client logo position UR issues and enforces licences to gas and electricity suppliers in Northern Ireland . Licence- 61 conditions - 61 refer to Codes of Practice setting minimum standards for suppliers on the payment of bills, provision of service for vulnerable customers, complaints handling procedures and services for prepayment meter customers. - 61 - 61 - 61 - 61 - 61 - 61

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Role of Consumer Principles - Research Summary June 2017 62

- 62

These Codes of Practice contain detailed transactional commitments. There is also a Marketing Code of Practice, which provides mandatory protection for consumers. - 62

ConsumerDocument protection title header is given prominence on the UR website, which includes a dedicated section- 62 relating to the consumer protection for consumers. Document title header In addition, in 2016, UR launched the Consumer Protection Strategy (CPS) to build on existing- 62 regulatory protections but enhance consumer protection, particularly where consumers may be consideredDocument totitle be headervulnerable . It was developed in consultation with consumer bodies. It sets- out62 a five -year (2016-2021) strategy and action plan to address the long-term needs of domestic consumers.Document title header - 62

The objectives of the CPS are: Do - 62 • Focus on affordability – includes treatment of and communication with vulnerable consumers; - 62 • Make sure there is equal access to utility services, including safe provision • Empower customers through education and transparency - 62

• Provide leadership by being a best practice regulator. - 62 Some of the consumer protections are mandatory, but they are pushing service providers to be moreitle header consumer -focused in their philosophy and behaviour. - 62 ThereDocument is a moderate title header match between UR’s CPS and the CFU consumer principles.

Comparison with the CFU consumer principles framework - 62 Document title header

CFU principles UR’s CPS - 62 Document title header Access - 62 Document titleChoice heClient logo position - 62 Safety Client logo position Information - 62 Client logo position Fairness - 62 Client logo position Representation - 62 Client logo positionRedress - 62 Client logo position Indicates a match with the CFU consumer principles - 62 TheClient CPS logo represents position an enhancement to consumer protection and an attempt to ensure that the energy and water industries in Northern Ireland are consumer-focused. - 62 TheClient Consumer logo position Council for Northern Ireland - 62 The consumer’s- 62 voice is also represented by the Consumer Council for Northern Ireland (CCNI), whose remit covers energy, water, postal services and food. - 62

- 62 - 62 - 62 - 62 - 62

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Role of Consumer Principles - Research Summary June 2017 63

- 63

As indicated in section 3.3 of this report, the CCNI applies a set of consumer principles that are very similar to those used by the CFU, albeit refined for the CCNI remit. These principles cover all -seven 63 CFU consumer principles with the possible exception of ‘fairness’ which is not explicitly stated. Document title header - 63 These consumer principles are not currently very visible on CCNI website and in documents . They canDocument be accessed title headerin the Consumer Council for Northern Ireland’s ‘Draft Forward Work Programme 2017/2018,’ but they are not prominent in the public domain. Consideration is being given to making- 63 them more prominent on a newly reworked website. Document title header - 63 7.3 . Application of consumer frameworks by service providers in the NorthernDocument Irishtitle header energy sector - 63

InDo addition to the Codes of Practice, specifying minimum standards on transactional commitments- 63 , NI energy companies typically publish a Customer Charter. The Customer Charter provides customer commitments above and beyond legal and regulatory requirements. - 63

Firmus Energy - 63 A good example of the Customer Charter is provided by firmus energy, which states: ‘We like to do things differently. We put customers first. That’s why we created the firmus energy Customer 39 - 63 C harter.’ A set of company values and a Customer Charter are very prominent on the firmus energyitle header website .

- 63 TheDocument firmus company title header values  Empathy – putting customers first, understanding & meeting customers’ needs - 63  Clarity – keeping it simple, listening & communicating clearly Document title header  Integrity – open & honest, keeping promises - 63 TheDocument firmus Customer title header Charte r  We will use clear and understandable language.  We may offer a connection if there is an available natural- 63 gas Document title heClient logo positionsupply and if not, will explain the reasons why.  Our fully trained staff will explain the connection process- 63 and Client logo position any associated costs.  We will offer a range of payment options to make paying- 63 for Client logo position your natural gas easy.  We will send you clear bills in plenty of time for you to pay.- 63 Client logo position  We will take responsibility for any issues you raise about our service, our contractors or associates. - 63 Client logo position  We will sort out any complaints quickly and efficiently . - 63 PowerClient NIlogo position - 63 AnotherClient logo good position example of the provision of a Customer Charter is Power NI, Northern Ireland’s leading electricity supplier, with approximately 70% share of the domestic market and 49% share of the commercial market. 40 Power NI’s prices for homes, small businesses and farms are agreed- 63 withClient the logoUtility position Regulator, ‘so our customers can be sure that they will always pay a fair price.’ - 63 - 63

39 - 63 Firmus- Energy63 Customer Charter (https://www.firmusenergy.co.uk/about-us/customer-charter) 40 Power NI (www.powerni.co.uk/powerni/about-power-ni) - 63 - 63 - 63 - 63

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Role of Consumer Principles - Research Summary June 2017 64

- 64

Power NI makes the claim: ‘Excellent customer service is in our DNA…Our DNA also shows- 64 that we have the ‘low complaints’ gene! For the third year running, we’ve been recognised by the ConsumerDocument Council title header as having the lowest level of customer complaints of any local supplier.’ - 64

TheDocument Customer title Charter header very prominent on website and in documents. In the Charter, Power NI promises to: - 64

 Have caring and knowledgeable staff to help advise you on all the services we provide. Document title header - 64  Ensure our services are accessible to all our customers. Document Give you title a choice header of payment options. - 64  Produce clear and accurate bills. Do Provide help if you have difficulty paying. - 64  Provide special help and advice for our most vulnerable customers.  Make it easy for you to contact us - 64  Deal quickly and effectively to resolve any problems you tell us about.

 Provide a list of advice agencies that may be of help to you - 64

The re is a good match between the Customer Charters of Northern Irish energy companies and- 64 the CFU consumer principles. itle header Comparison with the CFU consumer principles framework - 64 Document title header firmus Energy values Power NI Customer CFU principles - 64 Document title header and Customer Charter Charter Access - 64

Document title header Choice - 64 Document title heClient logo position Safety - 64 Information Client logo position Fairness - 64 Client logo position Representation - 64 Client logo position Redress - 64 Client logo position Indicates a match with the CFU consumer principles - 64 Client logo position Only safety is not mentioned in the customer charters, although this is covered by the Codes- 64 of Practice. Client logo position

7.4. Application of consumer frameworks by service providers in the - 64 Client logo position Northern Irish water industry - 64 - 64 Northern Ireland Water (NI Water) is the sole provider of water and sewerage services in Northern Ireland. It is a Government Owned Company (GoCo), which is a statutory trading body owned- 64 by central government- 64 but operating under company legislation, with substantial independence from government , the Department for Intrastructure (DfI). - 64 - 64 - 64 - 64

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Role of Consumer Principles - Research Summary June 2017 65

- 65

Domestic users in Northern Ireland do not pay directly for water services (although non-domestic- 65 users do pay for water services). Government funding via the Northern Ireland Executive makes up theDocument shortfall titlein the header cost of providing water services. This is therefore a very different market- to 65 the en ergy one and the service provider does not have the direct relationship with consumers that energyDocument companies title header have. - 65 NI Water publishes Codes of Practice specifying service standards. As for the NI energy sector, thisDocument is a statutory title headerrequirement under the licence conditions. - 65

NIDocument Water believes title header that having standards of service with a Code of Practice is important, but it- 65does not fully meet customers’ needs. NI Water believes itself to be a provider of Northern Ireland’s most essential service, delivering what really matters in terms of the economy, health & wellbeing and the environment.Do NI Water has become a more customer-centric organization since its formation- 65 in 2007. It recognizes that good customer service correlates with employee engagement. Employees do not all interact with customers but they interact with each other. NI Water recognises - 65 the importance of all employees understanding the part they play in delivering excellent water and sewerage services to the people of Northern Ireland, and a company-wide training programme is currently under development. - 65

From May 2012, the company’s new Vision Statement is: ‘To be a valued and trusted provider- 65 of one of Northern Ireland’s most essential services; an organisation our customers and staff are prouditle header of.’

NI Water’s strategic approach over the period 2015 to 2021 (the ‘PC15 period’) has been shaped- 65 aroundDocument their title identification header of 8 customer promises developed in 2013/14. These promises are detailed in the ‘Our Strategy’ document and they are prominent on the NI Water website and- other65 documents.Document title header  We provide you with customer service you value and expect - 65 Document title header We provide you with clean, safe water to drink  - 65 Document We seek title to giveheClient you value logo forposition money  We adapt to deal with the effects of climate change - 65 Client logo position  We want to protect and enhance the natural environment - 65 Client We logo take position care of your wastewater so it doesn’t pollute your environment  We supply you with the water you need - 65 Client logo position  We provide excellent service by having the right people doing the right thing for you. - 65 NIClient Water logo is focused position on engagement with customers to understand their needs. They conducted deep research into consumer needs in collaboration with CCNI and Perceptive Insight Market- 65 Research,Client logo through position the Consumer Engagement Oversight Group (CEOG). - 65 TheClient CEOG logo soughtposition the views of householders and businesses on the aspects of water and wastewater services that mattered most to them to inform decisions and investment priorities for the PC15 price control period 2015 to 2021. The research was conducted by Perceptive Insight Market- 65 ReClientsearch logo (PIMR) position and Queen’s University, Belfast. - 65 There is -a 65 more modest match between NI Water’s ‘customer promises’ and the CFU consumer principles. - 65 - 65 - 65 - 65 - 65 - 65

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Role of Consumer Principles - Research Summary June 2017 66

- 66

Comparison with the CFU consumer principles framework - 66

Document title header CFU principles NI Water ‘customer promises’ - 66

Access Document title header - 66

Choice Document title header - 66 Safety

Document title header Information - 66

Do Fairness - 66 Representation

- 66 Redress

Indicates a match with the CFU consumer principles - 66

- 66 Neverthel ess, NI Water is a good example of a service provider taking steps to move beyond legal or regulatory requirements to instill a consumer orientation across the organisation. itle header 7 .5. Evaluation of consumer-based frameworks in the Northern Irish energy- 66 andDocument water title industries header - 66 ServiceDocument providers title header in the Northern Irish energy and water industries are obliged to demonstrate that their consumer-based frameworks are being delivered effectively. Several methods are used- 66 to evaluateDocument performance title header, including the following.

- 66 CDocumentustomer surveys title heClient logoA rangeposition of customer surveys are conducted to measure customer satisfaction in the energy and water industries. For example, the Consumer Measures / Customer Satisfaction Working - Group 66 Client logo position (CM/SAT) is a partnership group of the Utility Regulator , the CCNI, NI Water and DfI which has introduced consumer measures - for 66 NI Client logo position Water. Consumer Council for NI The Consumer Council for Northern Ireland publishes an annual- 66 Client logo position Complaint & Enquiries report for NI energy companies.

Annual Information Return NI Water provides the Utility Regulator with a comprehensive Annual- 66 (AIR)Client logo position Information Return (AIR) to monitor the company’s performance. - 66 NetClient Promoter logo position Score (NPS) New consumer service metrics have been developed for the Northern Irish water and sewerage sector, including a Net Promoter Score (NPS), which is included within surveys among customers who- 66have Client logo position contacted NI Water. This is augmented by a province-wide omnibus survey of all- water66 Client logo position and wastewater service customers, which includes the NPS question. NI Water is focused on improving its ability to resolve consumer- 66 - 66 contacts on first response and is developing scoreboards of consumer satisfaction at a very detailed level. - 66 - 66 - 66 - 66 - 66 - 66

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Role of Consumer Principles - Research Summary June 2017 67

- 67

- 67 8 . Application in the UK postal sector Document title header - 67

Key findings: Document title header - 67  Although Ofcom has a set of consumer principles, these are for internal use when considering policy and processes, and there is no prominent set of principles in public view Document title header - 67  Similarly, Royal Mail has a set of consumer principles for internal use, but no prominent, Documentpublicly title declared header pri nciples. - 67  Royal Mail is heavily regulated and there is a perception that current regulation and an Do internal consumer focus are sufficient to deliver positive consumer outcomes in the absence- 67 of market dissatisfaction or consumer detriment.  In the unregulated postal sector, there is little evidence of the adoption of consumer- 67 principles, with the situation complicated by the nature of the shipper / recipient relationship, with the postal operator acting as a ‘middle man.’ - 67

- 67 8 .1. Consumer frameworks in the regulated postal sector itle header The journey towards a more consumer-focused culture in the UK postal sector can be summarised- 67 asDocument follows. title header

- 67 Document title header - 67 Document title header - 67 Document title heClient logo position - 67 Client logo position - 67 Client logo position - 67 Client logo position - 67 Client logo position - 67 Client logo position - 67 Client logo position - 67

Client logo position - 67 In the following- 67 sections, both the regulated and unregulated postal sectors are discussed. - 67 - 67 - 67 - 67 - 67 - 67

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Role of Consumer Principles - Research Summary June 2017 68

- 68

- 68 8 .2. Application of consumer frameworks in the regulated postal sector Document title header - 68 Ofcom is the communications regulator for the whole of the UK, responsible for the broadcasting, videoDocument on demand, title header telecom munications and regulated postal sectors. In the postal sector, Ofcom’s- 68 primary duty in relation to postal services is to secure the provision of a financially sustainable universalDocument postal title service. header - 68

The Ofcom Postal Services website focuses on legislative conditions imposed, such as the complaintsDocument processtitle header and annual monitoring reports, showing key data and trends for the - postal 68 sector, information on pricing, quality of service, efficiency and financial performance. These conditionsDo apply mainly to Royal Mail. - 68

There is no evidence of a prominent Ofcom consumer principles framework for postal services (or other sectors) on the Ofcom website or in Ofcom documents in the public domain. Ofcom- does68 , however, have a set of consumer principles which are used internally to inform and test policy development. - 68

The Ofcom consumer principles are as follows. - 68 • Availability – Is the service available where the consumer wants to use it? itle •header Adoption – Has the consumer got access to the service? - 68 • Engagement – Does the consumer use the service? Document title header • Satisfaction – Is the consumer satisfied with the service? - 68 Document• Harm title – Does header the consumer have concerns with the service?

• Exit – Can the consumer leave or seek a new service? - 68 Document title header These principles are used by Ofcom across all sectors within the regulator’s remit, including- 68 the postalDocument sector title but heClientalso broadcasting, logo position some aspects of the Internet and telecoms. The principles are not prominently communicated in the public domain and are primarily for internal use. - 68 Client logo position Royal Mail is the ‘Universal Service Provider’ of residential postal services in the UK, including six- day collection and delivery to all UK addresses. Royal Mail is required to ensure that customers- 68 areasClient across logo positionthe whole of the UK can access services easily (at least 98% of the population must be within half a mile of an access point e.g. a post box) and at a uniform, affordable pric e. - 68 Client logo position Royal Mail is regulated more closely than other postal operators in the UK. Obligations are imposed on Royal Mail in the regulatory conditions. These include, for example, mail integrity obligations,- 68 publicationsClient logo ofposition complaints and compensation data, adherence to a prescribed complaints and compensation process, publication of quarterly quality of service information by postcode area,- 68 and mandatoryClient logo consumer position access to a redress scheme (ADR). By contrast, other postal operators are only required to provide a complaints process, but the format is not prescribed and complaints - 68 and compensation data is not published. Client logo position Ofcom and Royal Mail’s customer satisfaction monitoring shows that customer satis faction is- 68high andClient improving. logo position Royal Mail has a formal stakeholder engagement procedure and seeks feedback from customers & other stakeholders through a range of methods including research, social -media 68 and events.- 68 Royal Mail is also part of the Keep Me Posted partnership fighting for the consumer’s right to choose how they are contacted, including billing. - 68 - 68 - 68 - 68 - 68 - 68

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Role of Consumer Principles - Research Summary June 2017 69

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Customer focus is one of the three key pillars of Royal Mail’s internal business strategy. Internally, therefore, Royal Mail has a set of consumer principles that it adheres to, in order to ensure that- 69 the consu mer is front of mind in its strategy and service provision. Document title header - 69 However , these principles are not externally stated or referred to as ‘consumer principles,’ somethingDocument that title can header be attributed to a number of features of the regulated postal market: - 69  High customer satisfaction within the postal sector Document A generally title header low level of customer detriment - 69

Document Already title a header high level of regulation. - 69 P ost is only one of Ofcom’s areas of interest (as indicated above) and consumer detriment in post doesDo not affect the same number of people as other issues, such as broadband coverage, although- 69 it can be severe for individuals affected. - 69 Given these features, an additional set of external consumer principles is less of an imperative than it is in the energy or water industries. - 69 Ofcom undertook an assessment of the extent to which the postal services market in the UK is meeting the reasonable needs of users of those services. That assessment was completed in- 201369 and concluded that the reasonable needs of users were being met by the current universal service. Thisitle header is an important point, namely that there is no ‘crisis’ needing to be addressed through additional obligations on Royal Mail. Consumers are happy with the service provided, and there is a low level of consumer detriment. - 69 Document title header There is a partial match between the internal principles adopted by Ofcom and Royal Mail and- 69 the CFUDocument consumer title principles header framework.

Comparison with the CFU consumer principles framework - 69 Document title header

- 69 Ofcom internal principles Royal Mail internal Document CFUtitle principlesheClient logo position (regulated market) principles - 69 Access Client logo position - 69 Choice Client logo position Safety - 69 ClientInformation logo position - 69 Fairness Client logo position

Representation - 69 Client logo position Redress - 69 Client logo position Indicates a match with the CFU consumer principles - 69 Client logo position If the legal and regulatory stipulations were taken into account, then the match with the- 69 CFU consumer - 69principles would be more pronounced. - 69 - 69 - 69 - 69 - 69 - 69

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Role of Consumer Principles - Research Summary June 2017 70

- 70

Both Ofcom and Royal Mail affirm that they abide by the spirit of the CFU framework and- 70 are consumer -focused. However, this has not taken the form of a proclaimed set of consumer principlesDocument along title the header lines of the CFU framework, and remains and internal tool, albeit with the -aim 70 of increasing consumer orientation. Document title header - 70 8.3. Evaluation of consumer-focused frameworks in the regulated postal sector Document title header - 70

RoyalDocument Mail is title required header by Ofcom to provide evidence that it is performing to the standards required. A series of methods are used to validate and evaluate performance. - 70

Do Regulation framework reporting Royal Mail is required under regulatory conditions to publish- 70 requirements annual reports relating to:  Quality of service - 70

 The provision of collection points - 70  Pricing

 Collection & delivery exceptions - 70  Customer complaints & compensation itle header  Arrangements for blind or partially sighted users, and those not within 10km of an access point - 70 CorporateDocument scorecard title header Royal Mail measures (business and consumer) customer satisfaction on a rolling monthly basis. Ofcom also monitors- 70 Document title header and reports on satisfaction with Royal Mail and postal services. Satisfaction is high and increasing. - 70 Document title header Customer-focused measures (customer service & complaints) form approximately half of the corporate scorecard used to measure success - 70 Document title heClient logo position Monitoring by consumer bodies Consumer bodies (Citizens Advice / the CFU / Consumer Council for NI) promote & safeguard interests of consumers- 70 in Client logo position the postal sector, including consideration of complaints & research to monitor supplier performance - 70 Client logo position - 70 8.4Client. The logo unregulated position postal sector - 70 TheClient unregulated logo position postal sector comprises the delivery of letters and parcels outside of the Universal Service Provision. The postal sector, for both letters and parcels, is increasingly competitive and- 70 the UKClient parcels logo sector position is one of the most competitive in Europe. Over 50% of all letters and around 70% of all addressed letters posted by large businesses are handled by operators other than Royal Mail and are largely unregulated by Ofcom. - 70 Client logo position There has been some attempt to introduce principles for the parcel delivery sector, notably- 70 by CitizensClient logo Advice, position but these are aimed more at retailers than postal operators.

That is an important feature of the unregulated postal sector, that the immediate customer -of 70 the postal service- 70 provider is often a business, such as a retailer, shipping the letter or parcel, rather than the consumer (a person or organisation) receiving the letter or parcel. - 70 - 70 - 70 - 70 - 70 - 70

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Role of Consumer Principles - Research Summary June 2017 71

- 71

Therefore, the business transaction is often between the shipper and the recipient. The - postal 71 operator is simply the ‘middle man.’ Where there is evidence of a ‘customer promise’ or consumer principlesDocument framework, title header it is therefore often aimed at the shipper. Such consumer principles- 71 frameworks also tend to be fledgling, as is the case with Parcelforce and Yodel (see below) . Document title header Nevertheless, service providers are evolving to be more consumer-centric, and most service- 71 providers claim that they are becoming more customer-focused, even without the regulatory pressureDocument to dotitle so. header - 71

ParcelforceDocument title header - 71

For example, Parcelforce has demonstrated some interest in consumer principles , possibly influencedDo by their association with the Royal Mail Group. 41 - 71

Parcelforce ’s ‘Customer Promise’ offers: - 71 • Excellent quality & reliable delivery - 71 • Parcel in expert hands

• Serious about security - 71 • Fast, helpful customer service itle •header Outstanding choice of UK and worldwide services - 71 • Convenient local delivery options Document title header • Putting your customer in control - 71 Document• Great title value header for money

• Superior delivery experience - 71 Document title header • Partnership with a trusted UK carrier - 71

ThisDocument Customer title Promise heClient is logo clearly position aimed at the shippers, particularly business customers, but it illustrates the desire to become more customer-focused. - 71 Client logo position Other postal service providers - Yodel and APC Overnight - 71 Client logo position This ambition is also demonstrated by other service providers in the unregulated postal market, such as Yodel and APC Overnight. - 71 Client logo position Yodel applies some internal customer principles relating to contact with end-consumers. - It71 has developedClient logo a position number of rules of conduct in response to well-publicised poor customer service performance and subsequent loss of business. Yodel has not made a public statement- 71 of consumer-focused principles and any statement of principles would need to reflect different shipClientper slogo’ own position contract s with end-consumers (a potentially complex situation). - 71 WithinClient APC logo Overnight, position there is currently no documented statement of consumer principles aimed at end consumers. Customer feedback and competitor analysis informs an undocumented ‘consumer- 71 stClientrategy’ logo on delivery position opt ions (focusing on when, where, what, redirection, information required).

Within both Yodel and APC Overnight there is therefore some interest in the adoption of a national- 71 standard - for 71 dealing with end consumers. - 71 - 71 41 Parcelforce is part of the Royal Mail Group, but operates in the parcel market and is unregulated- 71 - 71 - 71 - 71

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The parcel delivery market in general - 72 Th e parcel delivery market is mainly unregulated and competitive. In theory, its competitive nature shouldDocument encourage title header a greater focus on customers and failure to do so might lead to loss of business,- 72 as happened with Yodel. Document title header By definition there is no regulator imposing standards on providers in the unregulated - postal 72 market, and individual providers must find their own solutions. This has prompted some interest in consumerDocument principles title header framework s to guide the provision of customer services and bring about- more72 p ositive consumer outcomes. This is widely believed to bring commercial benefits. Document title header - 72 However, it is the nature of the parcel company’s business model that the contract is often with the business customer (the shipper) rather than the end consumer (the recipient of the parcel). Any end consumerDo principles must accommodate that feature and take account of the shipper- 72 s’ requirements and the shippers’ own customer promises. - 72

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itle header - 72 Document title header - 72 Document title header - 72 Document title header - 72 Document title heClient logo position - 72 Client logo position - 72 Client logo position - 72 Client logo position - 72 Client logo position - 72 Client logo position - 72 Client logo position - 72 Client logo position - 72 - 72 - 72 - 72 - 72 - 72 - 72 - 72

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- 73 9 . Summary and conclusions Document title header - 73 9 .1. Policy tools available to consumer protection authorities Document title header - 73 The OECD has identified a range of policy tools available to authorities with responsibility for consumerDocument protection, title header both consumer empowerment tools (‘demand-side measures’) and those- 73 that focus on modifying the behaviour of service providers (‘supply-side measures’). Supply-side measures are the main focus of this report. Document title header - 73 Of the different supply-side measures, a number lend themselves to prescriptive rules, such as licensing,Do prohibitions and dispute resolution. Others, notably moral suasion (where by authorities- 73 seek to influence or put pressure on service providers to meet a specific objective regarding consumers without directly regulating their activities), tend to put the onus on the service provider to develop a consumer-focused approach to dealing with consumers. - 73

Another example of an approach to regulation that could support positive consumer outcomes- 73 is ‘Ethical Business Regulation’ (EBR), advocated by Professor Chris Hodges of Oxford University’s Faculty of Law. Within this model, the regulatory system is most effective in influencing - 73 the behaviour of individuals where it ‘supports ethical and fair behaviour.’ Hodges contention is that a ‘blame’ culture will inhibit a culture of learning and ethical behaviour, so businesses and regulators sitlehould header encourage and support a ‘no blame’ culture, that is open and collaborative. - 73 ConsumerDocument principlestitle header-based regulation has been successfully adopted in a range of markets, including the financial, legal and health sectors, which have recognised the benefits of applying- 73 a setDocument of consumer title principlesheader as a framework for regulation, consumer communications, planning and the delivery of information and services. - 73 9.2Document. The benefits title header of a consumer principles framework - 73 OrganisationsDocument title that heClient have adopted logo position consumer principles frameworks have recognised the need to shape their internal processes and service delivery in a way that results in more positive consumer- 73 outcomesClient logo and position experiences. There are many examples, as indicated above, of sectors and organisations moving away from prescriptive rules to a more consumer-focused approach. - 73

CFUClient and logo its position predecessor organisations have identified some key benefits of adopting a set of principles to improve consumer outcomes. Consumer principles form a framework within which- 73 the consumClient logoer interest position can be assessed, policy can be developed and communicated, and consistent and transparent policy positions across a range of subject areas can be championed. A concise- 73 and relevantClient logo set position of consumer principles help an organisation’s management and staff to operate confidently and effectively when new or unfamiliar issues arise. Above all they provide a straightforward way of explaining to stakeholders how a consumer body identifies and analyse- 73 s consumerClient logo issues. position - 73 ThereClient is logo a body position of evidence that regulation is moving from a rule-based approach to a principles- based one, where the onus is on the provider of a product or service to demonstrate that they- 73 are treating customers with respect and fairness. Client logo position In addition to the benefits identified by the CFU, along with other bodies, a key benefit- 73 of a principles -- 73based approach to regulation, compared to a rules-based approach, is that it is easier for con sumers themselves to understand, in that it tends to use consumer-friendly terminology - 73 and tends to -be 73 simpler and briefer.

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Another important benefit of a principles-based approach to regulation is that it places the onus on the service provider to consult consumers to better understand their needs. Consequently - 74, it encourages communication between service providers and consumers. The adoption of principles encouragesDocument servicetitle header providers to take responsibility for the relationship with the consumer, and- to74 be more innovative on how service is delivered. Document title header This approach also makes it easier to tailor the principles to the specific sector or region- 74 in question. The corollary is that the regulator does not have to understand every nuance and detail ofDocument the market, title and header the regulations do not need to cover every option or eventuality to ensure- 74 that there are no gaps or loopholes. Rules-based regulations also have to be constantly updated . Document title header - 74 Of course, there are some potential drawbacks to a principles-based approach to regulation. This approach can be vague and open to interpretation, potentially leaving a ‘grey area’ for disputes and disagreement.Do There is a risk that it can be subjective and makes it difficult to have consistent- 74 standards across an industry, although there is a counter argument that a simple set of consumer principles will make it easier to ensure consistency in the way consumer rights are protected . - 74

A principles-based approach can be retrospective and reactive, with the regulator judging the actions of service providers after the event rather than setting out rules about what should happen- 74 in advance of non-conformances. Again, a counter argument is that consumer principles can be used to proactively develop policies and processes, targeting specific consumer experiences - 74 and outcomes. itle header A principles-based approach can also add a layer of regulation to the existing rules, at least on an interim basis, while a principles-based approach is bedding in. - 74 Document title header Overall the benefits outweigh the drawbacks. - 74 Document title header Benefits and drawbacks of a principles-based regulation - 74 Document title header Benefits Drawbacks - 74 Document title heClient logo position Consumer understanding Vague - 74 SimplicClient itylogo and position brevity Open to interpretation / subjective Onus on the service provider to communicate Adds to regulatory burden - 74 withClient consumers logo position & better understand their needs Retrospective and reactive Easier customisation to market or region - 74 Client logo position Lack of consistent standards across sectors Less need for the regulator to have comprehensive understanding of the industry - 74 Client logo position Less need to cover every option / eventuality - 74 DoClient not needlogo toposition be constantly updated Discourages a mechanistic, ‘box-ticking’ - 74 approachClient logo position Gives service providers flexibility on how to - 74 satisfyClient principles logo position

Encourages companies to innovate in service - 74 provision - 74 - 74

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9.3. The application of consumer-focused frameworks in the energy, water- 75 and postal sectors Document title header - 75

Under the influence of regulators and consumer bodies, service providers in the energy, water and postalDocument sectors title are header moving away from an engineering or operational focus towards being service- 75 orientated , innovative and customer focused. That evolution has gone hand in hand with a movementDocument awaytitle header from prescr iptive rules-based regulation towards more open, principles --based 75 regulation, with service providers given greater autonomy and responsibility to communicate with theirDocument customers, title toheader determine what their needs are and how best to meet those needs, and thus to develop their own consumer frameworks. - 75

TheDo transition from rules-based regulation towards consumer principles-based regulation is- o75ften described as a ‘journey.’ That journey is towards a culture based on understanding customers’ needs, identifying what experiences and outcomes consumers should have from engaging- 75 with them, and providing services to better meet those needs and ensure that consumers are the key focus of an organisation. - 75 There are three main stages in that journey. In diagrammatic form, those stages are as follows. - 75

itle header - 75 Document title header - 75 Document title header - 75 Document title header - 75 Document title heClient logo position - 75 Client logo position - 75 Client logo position - 75 Client logo position - 75 Client logo position - 75

Client logo position The first stage, the adherence to regulations, involves compliance with legislative and regulatory- 75 requirements,Client logo position and takes the form of prescriptive rules. Examples are the Guaranteed Service Standards and Codes of Practice, which service providers must state to demonstrate that- 75 they complyClient withlogo regulations. position

The second stage comprises a commitment to being customer focused albeit not a fully -fledged- 75 set of consumer- 75 principles. This kind of commitment can take two forms: it can be a top level, overarching declaration that the organisation is customer-focused, such as a strategy, vision- 75 or mission statement;- 75 or it can be a set of internal consumer principles, such as those used by Ofcom and Royal Mail, which is an organisational tool and is generally not made externally visible. - 75 - 75 - 75 - 75

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Role of Consumer Principles - Research Summary June 2017 76

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The third stage takes the form of fully-fledged set of consumer principles, which demonstrate - 76 that an organisation has taken ownership of the relationship with its customers and that it has gone abDocumentove and beyond title header the regulatory requirements. Although many organisations in the energy,- water76 and postal sectors make a claim to have reached stage two of this process, few can confidently claimDocument to have title reached header stage three. Examples of this third level of commitment to consumer principles are the energy companies who have taken the TCF Standards of Conduct and enhanced- 76 these with their own customer promises (such as npower), and also the energy companies in NorthernDocument Ireland title header who have developed a Customer Charter. In all these cases, service providers- 76 have consulted their customers to determine their key needs and have developed their services to betterDocument meet thosetitle header needs. - 76

9.4. Drivers of a more consumer-centric approach to dealing with customers Do - 76

The key drivers behind the transition from rules-based regulation to a regulation based on consumer principles, fall into three main types: regulator led drivers, consumer led drivers- 76 and market or service provider led drivers. - 76

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itle header - 76 Document title header - 76 Document title header - 76 Document title header - 76 Document title heClient logo position - 76 Client logo position - 76 Client logo position - 76 Client logo position - 76 Client logo position - 76 Client logo position

- 76 OfgemClient citeslogo aposition number of the regulator-led drivers as being behind the introduction of the Standards of Conduct, namely difficulty in maintaining prescriptive rules to ensure that they are waterti-ght, 76 a desireClient to logo put positionthe onus on the service provider to determine what a positive outcome is and how to achieve that outcome, and a need to address customer detriment in the market due to poor customer satisfaction, a lack of transparency regarding pricing and the difficulty of changing- 76 supplier. -Another 76 key regulator-led driver is the observed successful implementation of consumer principles frameworks in other sectors. Ofgem, for example, was influenced by the adoption -of 76 the Treating -Customers 76 Fairly principles in the financial sector. - 76 - 76 - 76 - 76

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Role of Consumer Principles - Research Summary June 2017 77

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Many of the drivers behind the adoption of consumer principles-based regulation are led by the market or service providers. For example, a key driver is whether the market is competitive - 77or a monopoly: monopolistic markets, such as the domestic water industries, are often perceived to requireDocument greater title prescriptive header regulation, whereas competition should, at least in theory, encourage- 77 consumer -friendly pricing and more innovative service delivery among providers. Another related marketDocument-led drivertitle header is the development of a consumer-centric culture to give service providers a commercial competitive advantage; a few the research respondents cited this as a key reason- 77 for adopting a more customer-focused philosophy. Document title header - 77 The adoption of consumer principles often reflects a customer-focused culture within a service providerDocument organis titleation. header In turn, the more customer-focused culture is often attributed to the impact- 77 of senior managers driving a change within their organisations. Cathryn Ross at Ofwat is one example of this driver. Do - 77 The adoption of consumer principles is also often influenced by consumer bodies, such as Citizens Advice, the CFU, the Consumer Council for Water and the Consumer Council for Northern Ireland.- 77 These bodies all have well-established, prominent sets of consumer principles that underpin their work. This in turn has an impact on the approach of regulators and service providers to dealing with consumers. - 77

9.5 . Characteristics of consumer-focused organisations - 77

Theitle headerkey characteristics of organisations that have adopted consumer principles is a desire to be truly customer-centric and to be focused on improving consumer outcomes. There are actually- 77 a numberDocument of characteristicstitle header common to organisations that have embraced consumer principles. These fall into two broad categories: those relating to planning and those relating- 77 to implementation.Document title header

- 77 Document title header - 77 Document title heClient logo position - 77 Client logo position - 77 Client logo position - 77 Client logo position - 77 Client logo position - 77 Client logo position - 77 Client logo position - 77 Client logo position - 77 - 77 - 77 - 77 - 77 - 77 - 77 - 77

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Typically, then, such organisations have recognised shortcomings in their service delivery,- have78 addressed those shortcomings by consulting consumers to determine their needs, have proactively goneDocument further titlethan header legal or regulatory requirements in developing services to meet those needs- 78 and ensured that a consumer-focused culture pervades the whole organisation. In essence, this transfersDocument ownership title header and responsibility for these developments from the regulator to the service provider. - 78

UsuallyDocument such title consumer header principles are openly declared and in the public domain. For example,- 78 energy companies in Great Britain are required to publish their Treating Customer Fairly standards. However,Document this title is nowheader always the case. The Consumer Council for Northern Ireland has adopted- 78 a set of consumer principles that is very similar to the CFU framework, but this is an internal tool and has not been prominently communicated outside of the organisation. Do - 78 Of course, the journey towards the adoption of consumer principles is not generally as clear cut as the above schemata might suggest. While the transition to a principles-based approach- 78 is underway, the sector will find that it has both principles and rules. Several energy companies complain that the ‘burden’ on suppliers has increased with the introduction of a principles-based approach. Some companies also comment that they have found themselves having to introduce- 78 strict procedural rules internally to ensure that staff adhere to the TCF principles. - 78 H igh level consumer principles can work hand-in-hand with prescriptive rules. In the energy sector, foritle example, header the principles enshrined in the TCF framework are a sub-set of the prescriptive rules.

The Institute of Chartered Accountants England and Wales notes that, in practice, Codes of -Ethics 78 areDocument often a title mixture header of principles and rules and ‘the key issue is striking an appropriate balance which encourages the spirit of the guidance to be complied with and does not undermine - 78 the exerciseDocument of judgement title header an d the role of the profession.’ - 78 ThisDocument is an important title header point, in that the aim is not necessarily to replace a set of rules with a set of principles, and often rules and principles support each other, or one can act as a sub-set of the other in their application. For example, the TCF standard is a condition of licence in the energy- 78 sectorDocument in Great title Britain. heClient On logothe other position hand, some energy companies have developed internal rules to ensure that staff abide by the principle of treating customers fairly. - 78 Client logo position The comment about not undermining the exercise of judgement is a key feature of a consumer principles-based approach to regulation, which gives service providers freedom to- 78 take responsibility,Client logo position determine the needs of their customers and develop appropriate, innovat ive ways of dealing with customers. - 78 Client logo position 9.6 . Determining how far along the journey towards consumer principles - an 78 organisationClient logo position is - 78 ToClient determine logo position how consumer -centric an organisation is, the following questions can be asked. - 78 TheseClient questions logo position can be asked of a regulator or a service provider to determine how far it is along the journey towards adopting a more consumer-centric approach. The more of these questions that are answered in the affirmative, them more consumer-centric it can be considered. The corollary- 78 is thatClient where logo less position than half of the questions are answered negatively, there is a need to develop a more consumer-centric approach in order to improve consumer outcomes. - 78 - 78 - 78 - 78 - 78 - 78 - 78 - 78

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Role of Consumer Principles - Research Summary June 2017 79

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The questions are: - 79

Document1. Does title the headerorganisation have a process of identifying any consumer detriment in its market?- 79 2. Has the organisation taken any steps to address consumer detriment in its market? Document3. Has title the organisationheader consulted customers to determine their needs in terms of services,- 79 communications, and so on? Document4. Are seniortitle header managers focused on consumer outcomes? - 79

Document5. Does title the headerorganisation voluntarily go above and beyond legal or regulatory requirements in its dealings with consumers? - 79

Do 6. Is the organisation innovative in the way it deals with consumers? - 79 7. Does a consumer-focused culture exist throughout the organisation? 8. Does the organisation have a formal set of high level consumer principles underpinning- 79 service provision and planning? 9. Is a set of consumer principles published or made publicly available? - 79

10. Is the organisation’s consumer culture reviewed on an ongoing basis and improvements implemented accordingly? - 79

itle header The number of questions which can be answered positively by regulators and service providers varies by sector - 79 Document title header 9.7 . Differences by sector - 79 Document title header

All regulators specify licence conditions in terms of minimum standards that service providers- 79 shouldDocument meet. title Generally, header this takes the form of Guaranteed Standards, Codes of Practice and variations thereof. - 79 Document title heClient logo position All regulators and service providers in the energy, water and postal sectors claim to have started the journey from the slavish adherence to prescriptive rules towards a more custo mer-focussed- 79 approach.Client logo However, position the distance organisations have moved along that journey, and the way the commitment to consumer focus has been addressed, varies by sector and by region. - 79 Client logo position In the energy sector the Standards of Conduct, specifically the Treating Customers Fairly -(TCF) 79 framework,Client logo has position been introduced by Ofgem as a licence condition, so that it is mandatory for energy companies to develop and publish their TCF promises. - 79 LargerClient logo energy position suppliers make their TCF promises very prominent on their websites and in brochures, but smaller suppliers do not necessarily have the resources to do so, and the- 79 TCF promisesClient logo tend position to be less prominent among smaller energy companies. In Northern Ireland, energy companies have introduced Customer Charters which cover similar ground to the TCF framework. - 79 TheClient energy logo sectorposition is the most evolved in terms of the adoption of consumer principles -based regulation, as illustrated by the use of the TCF framework in Great Britain and the development - 79 of customerClient logo charters position by energy companies in Northern Ireland. However, even in the energy sector, it is widely acknowledged that there is considerable work still to be done and that the sector is only- 79 at an early stage of the ‘journey’ towards the full adoption of a consumer principles-based framework. - 79 - 79 - 79 - 79 - 79 - 79 - 79

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Role of Consumer Principles - Research Summary June 2017 80

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In the water industry, Ofwat has declared a ‘Strategy’ with the aim of making the industry more customer -centric and engendering greater public trust and confidence in the industry. Most service- 80 providers are also in the process of transforming themselves from engineering organisations to customerDocument service title header ones. However, among service providers in the water industry, consumer- 80 principles are often internal tools, and customer-orientated statements above and beyond the conditionsDocument of title licence header tend to be restricted to an overarching vision, mission or statement of values. These are often non-specific in terms of promises. So, although the water sector is aiming- 80 to b ecome more consumer-orientated, it is currently at an early stage in the journey. Document title header - 80 The regulated postal sector remains heavily reliant on rules-based regulation, although Ofcom and RoyalDocument Mail have title internalheader sets of consumer principles that underpin policy development. In the- 80non - regulated postal sector, there is evidence that service providers recognise the potential in adopting a consumer principles framework, although the issue is complicated by the fact that postal companiesDo tend to be go-betweens in a contract between the shipper (for example a retailer)- 80 and the end customer. - 80 This is summarised in the following chart. - 80 How sectors are moving towards the adoption of consumer-focused

frameworks - 80

itle header

- 80 Adherence to Document title header Commitment to Consumer focused Sector / region legislation / consumer focus principles adopted regulation - 80 Document title header Energy in Great Standard Licence Vision / values Consumer focus Britain Conditions above & beyond -the 80 Document title header TCF Standards of Including Standards of Conduct (Treating Conduct - 80 Document title heClientCustomers logo position Fairly) - 80 Water in Scotland Legislation / regulation Vision / values Scottish Water 6 pillars Client logo position Codes of Practice Internal consumer - 80 Market Code focus Client logo position Water in England & Licence Conditions Vision / values ‘Trust in water’ - 80 WalesClient logo position Service Standards Internal consumer strategy (Ofwat) Codes of Practice focus - 80 Client logo position Energy & Water in Codes of Practice Consumer Protection Customer Charters (NI

Northern Ireland Marketing Code of Strategy energy suppliers) - 80 Client logo position Practice Vision / values Customer Promises (NI Water) - 80 Client logo position UK post Legislative & Vision / values No publicly stated set

Regulatory Conditions Internal consumer of consumer principles- 80 Client logo position (regulated market) focus – one of 3 pillars above and beyond (Royal Mail) regulatory - 80 requirements - 80 Fledgling voluntary consumer focus - 80 - 80 (unregulated market) - 80 - 80 - 80 - 80

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Role of Consumer Principles - Research Summary June 2017 81

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- 81 Curr ently few organisations in the energy, water or postal sectors have truly reached the third stage ofDocument the process, title header by which they have adopted a fully-fledged set of consumer principles- 81 and embedded these in planning, operations and communications. Document title header However, almost all organisations have demonstrated some ambition to move towards that goal.- 81

9.Document8. Role oftitle the header CFU consumer principles framework - 81

TheDocument CFU employs title header a set of tried and tested consumer principles which have been developed - 81over time by the CFU, its predecessor organisations and other consumer-focused organisations in the UKDo and beyond. - 81

Access Can people get the goods and services they need or want? - 81

Choice Is there any? - 81

Safety Are the goods or services dangerous to health or welfare? - 81

Information Is it available, accurate and useful? itle header Fairness Are some or all consumers unfairly discriminated against? - 81 Document title header Representation Do consumers have a say in how goods or services are provided? - 81 Document title header Redress If things go wrong, is there a system for putting them right? - 81 Document title header The CFU consumer principles framework, or something very similar, has been applied in- other81 markets,Document including title heClient the legal, logo financial position and health sectors, and by other consumer bodies such as CCWater and the Consumer Council for Northern Ireland. - 81 TheClient fact logo that position so many sectors and organisations have recognised the benefits of this kind of framework demonstrates its usefulness as a checklist to assess consumer focus and inform- policy 81 development.Client logo position - 81 TheClient CFU logo framework position is therefore sufficiently robust to act as a good yardstick against which other consumer-focused frameworks can be measured. The level of match with the CFU framework is therefore a good way of determining how robust and consumer-focused other frameworks are.- 81 Client logo position In broad terms, the match between the customer-focused frameworks in place among service- 81 providersClient logo and position the CFU consumer principles is as follows. - 81 Client logo position - 81 Client logo position - 81 - 81 - 81 - 81 - 81 - 81 - 81 - 81

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Comparison with the CFU consumer principles framework - 82

Document title header England & - 82 GB energy Scottish NI energy UK postal Wales NI Water’s sector’s Water’s sector’s sector’s water customer DocumentCFU principles title header TCF six customer internal- 82 industry’s promises standard pillars charters principles vision Document title header - 82 Access

Document title header - 82 Choice

Do Safety - 82

Information - 82 Fairness - 82 Representation

- 82 Redress

itle header Indicates a match with the CFU consumer principles - 82 Document title header By that test, the Treating Customers Fairly framework and the customer charters developed- 82 by NorthernDocument Irish title energy header companies have the highest level of match with the CFU framework and can therefore be judged the most robust currently in place. - 82 ThroughoutDocument thetitle waterheader and postal sectors, the degree of match with the CFU principles is slightly lower, indicating that the frameworks, even where they exist, are less robust and could- 82 be improved.Document title heClient logo position

Many of the existing frameworks do not cover all the consumer principles covered by the- 82 CFU frameworkClient logo. position - 82 AlthoughClient logo each position of the energy, water and postal sectors has some kind of framework in place, the existing frameworks are different to that used by the CFU. - 82 Client logoAccess position is often implicit rather than explicitly stated as a consumer principle;

 Choice is perceived to be less relevant in monopoly situations, although it is a key aspect- 82 in Client logocomp positionetitive markets, notably energy; - 82 Client logoSafety, position fairness and the provision of information that is clear, accurate and unbiased are all important principles, and tend to be reflected in the different frameworks employ ed; - 82 Client logoRepresentation position is a key area, and increasingly the ‘customer voice’ informs service delivery and customer promises; - 82 Client logoThere position is almost always a complaints procedure, although redress is not always cited as a consumer principle. - 82

On the other- 82 hand, there are items covered by existing frameworks that are not covered by the CFU framework, such as value for money, trust, honesty, confidence, and also the environment - 82 and sustainability. - 82 - 82 - 82 - 82 - 82

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Role of Consumer Principles - Research Summary June 2017 83

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There is some concern among regulators and service providers that the CFU consumer principles- 83 are too rigid, asking ‘yes or no’ questions rather than reflecting the subtleties of real situations. For example,Document on title fairness, header the question ‘Are some consumers unfairly discriminated against?’- 83 is a yes/n o question, but for a regulator it’s a question of degrees. Secondly, fairness is about treating allDocument customers title fairly, header such as not being mis-sold to; it’s not just about discrimination. Also, it’s not enough to ask (on redress) whether there is a system for putting things right. The question-s 83 are : D oes the system work? Are people having things put right? Document title header - 83 Another example is choice. The question ‘Is there any?’ is considered to be too black and white. In energy,Document the title answer header is affirmative, that there are multiple suppliers, but the issue s are- more83 complex : is choice serving the intended purpose, is there enough choice, and is the market competitive? This is also linked to information provision: it is not just about giving consumers choice,Do but allowing them to make informed choices. - 83

Some regulators and service providers see a benefit in using an existing, tried and - tested 83 framework and modifying it for use in that sector. The energy sector, for example, has taken the Treating Customers Fairly framework from the financial services industry. - 83 However, regulators and service providers generally demonstrate little appetite for a harmonised set of principles across all sectors, believing that each sector should find its own solution that- fits 83 its own unique needs. itle header Priorities will be different for different types of organization. For example, for network operators, safety is a prime consideration whereas suppliers are essentially just providing a billing service.- 83 For suppliersDocument, communication title header is a bigger issue. - 83 TheDocument consumer title principles header framework used by CFU does have a role to play. The framework has the significant benefit of being tried and tested over time in a range of sectors. It can therefore be- 83both usedDocument by CFU title staff header to guide its own work and also applied by regulators and service providers in different contexts with only minor modification. It can act as a good checklist to test policy formulation and service provision. - 83 Document title heClient logo position There is potentially an opportunity to use the CFU framework where no framework currently - exists 83 forClient example logo in position the unregulated postal services market, for Distribution Network Operators, and also for smaller water companies in England and Wales. - 83 AtClient the logo very position least it can be used to test other frameworks to ensure that they are relevant, comprehensive and fit for purpose, and that they truly have consumers at their centre. - 83 Client logo position - 83 Client logo position - 83 Client logo position - 83 Client logo position - 83 Client logo position - 83 - 83 - 83 - 83 - 83 - 83 - 83 - 83

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Document title header - 84

Do - 84

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itle header APPENDICES - 84 Document title header

- 84 Document title header - 84 Document title header - 84 Document title heClient logo position - 84 Client logo position - 84 Client logo position - 84 Client logo position - 84 Client logo position - 84 Client logo position - 84 Client logo position - 84 Client logo position - 84 - 84 - 84 - 84 - 84 - 84 - 84 - 84

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- 85 Appendix A: case studies referred to in report Document title header - 85

SectionDocument 4: title the header GB energy sector - 85

Document title header - 85 Customer Fairness at E.ON Document title header - 85 As our customer, you’re important to us. Our aim is to give you simpler products, at fair prices and a responsive, friendly and helpful service. Do - 85 Our Treating Our Customers Fairly statement sets out how we’re looking to continue to treat you fairly through what we have done, and plan to do, to make sure we achieve our aim and meet- the 85 Standards of Conduct that you can expect of us. - 85 We’ve been changing and we’ll continue to change to make sure we treat you fairly in everything we do. We won’t forget that you’ve chosen us and we'll work hard for you, so you’ll wa nt to stay- 85 with us. We know that energy bills are a big part of your spend and we’re really focused on keeping our costs down so you pay no more than you need. itle header

So that you, our customers, feel fairly treated by us every time, we worked with customers - 85 and cDocumentolleagues to title seek header to define what fair treatment felt like. - 85 Therefore,Document we title aim header to treat you fairly by:  being honest with you – giving you simple, clear and accurate information so that you- 85 can Documentmake title informed header decisions  saying sorry if we make a mistake – telling you promptly how and when we’ll put - things 85 Documentright, title and heClient keeping youlogo informed position of progress  making it easy for you to contact us, because we know your time is precious,- 85 and Client logocommunicating position with you in easy to understand language and in a way of your choice  giving you help to meet your energy needs, like ways to help you use less - 85 Client logolistening position to you so that we focus on improving the things that are important. - 85 WeClient will logo also position make sure that we are fair to each other at E.ON so that we naturally use this experience to treat you fairly. - 85 EachClient year logo we position publish a statement to share what we’ve done, and plan to do, to continue to treat you fairly, and you’ve told us that it is important to you that we share our progress. Treating- 85 customersClient logo fairly position is one of the goals of our strategy to help us achieve our vision of becoming your partner of choice for energy solutions. - 85 Client logo position Our customers continue to be at the heart of everything we do and our aim is to treat you fairly at all times. We’ve defined what we think that means for our customers in our definition of fairness -above 85 andClient have logo been position putting it into practice. We set out in this statement the things we have done in 2016, in-line with Ofgem’s Standards of Conduct. - 85 - 85 - 85 - 85 - 85 - 85 - 85 - 85

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Role of Consumer Principles - Research Summary June 2017 86

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Document title header - 86

Company npower 42 Document title header - 86 Profile ‘One of Britain’s leading energy companies’ (one of the ‘big six’) and part Document title header of the Innogy group. - 86 Serves approximately 5.1m residential and business accounts with Do electricity and gas. - 86

Customer focus Very customer focused. - 86 Internally npower uses ‘pub and mum’ tests i.e. how would employe es feel if the customer was their mum / how comfortable would employees- 86 be telling friend in a pub what they are doing. - 86 Consumer framework The npower framework is ‘Treating Customers Fairly – Putting You First.’

itle header ‘Treating customers fairly’ document accessed through prominent links throughout website. - 86 Document title header Key sections of document are:  You talked, we’ve listened – customers’ views & - needs 86 Document title header understood through surveys, call centre feedback, online feedback, exit surveys, etc. - 86 Document title header  Getting the help that you need – alternative ways to contact npower making it easy to contact company - 86 Document title heClient logo position  Caring for you – Priority Services, Warm Home Discount, Affordable Solutions and other schemes to ensure that- 86 all Client logo position customers, including vulnerable ones, are treated fairly

 Improving our journey together – commitment to ongoing- 86 Client logo position improvement - 86 Client logo position  We’ve improved communication – we’ve improved the way we communicate, including social media, online, phone and post options - 86 Client logo position  A better service for you and your home – ensuring that tariff is right for you and service improves. - 86 Client logo position Good match with CFU principles, notably representation, redress, information, fairness. - 86 Client logo position Brochure outlining the npower TCF promise accessible through- 86 links throughout the npower website. Client logo position TCF principles based framework currently sits on top of original rules.- 86 - 86 - 86 - 86 42 npower (www.npower.com) - 86 - 86 - 86 - 86

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Document title header - 87

Document title header Company First Utility 43 - 87

ProfileDocument title header Launched in 2008. - 87 Supplies gas and electricity to approximately 1m UK homes. Do ‘The largest independent energy and broadband provider in the country- 87 with award-winning customer service.’ ‘Our goals are simple. We want to make the running of your home - 87 (managing energy, broadband and home-services) straightforward, painless and great value for money for everyone.’ - 87 Customer focus Has an INTERNAL framework REPS: Reliable, Engaging, Pioneering, Straightforward – about how to treat customers. - 87 Will be communicated externally at some stage. itle header Customer-centric throughout organisation e.g. life-size cardboard cut outs of customers throughout offices. - 87 Document title header Consumer framework ‘Great Service’ promise is prominent on website: - 87 Document title header We believe in a more positive, engaged and informed relationship between customer and supplier. So, no matter if you’re new or not to- 87First Document title header Utility, we’re committed to looking after you fairly by:

 Treating you as we’d like to be treated - by acting honestly,- 87 Document title heClient logo positiontransparently, appropriately and professionally at all times - 87  Making it easy for you to get in touch with us - however and Client logo position whenever is convenient, we’d be pleased to hear from you - 87 Client logo position  Giving you the best possible deals we can - we’ll always offer you our cheapest prices and best deals whether you’re a new or existing customer - 87 Client logo position  Providing the best possible customer service - we invest heavily in staff training and high-tech systems so that our service continues- 87 Client logo position to strengthen as we continue to grow - 87 Client logo position  Making it simple to understand and manage your account - through accurate and easy to understand bills, number one rated customer app and fun account tools. - 87 Client logo position - 87

Client logo position - 87 - 87 - 87 - 87 43 First Utility (www.first-utility.com) - 87 - 87 - 87 - 87

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Document title header - 88

HeatDocument Trust title44 header - 88 When a heat network is successfully registered with the Heat Trust Scheme, the custome rs on the heatDocument network title will benefitheader from the standards set by the Scheme, including rules on the following:- 88

• Support for vulnerable heat customers Do - 88 • Heat supplier obligations • Heat customer service and reporting a fault or emergency - 88 • Process for customers joining and leaving

• Heat meters & heat Interface Units (HIUs) - 88

• Heat bill and heat charge calculations & clarity - 88 • Heat bill payment arrangements and the management of arrears itle •header Suspension and resumptions of service processes - 88 • Complaint handling and independent complaint handling Document title header • Privacy policy and data protection - 88 Document title header - 88 Document title header - 88 Document title heClient logo position - 88 Client logo position - 88 Client logo position - 88 Client logo position - 88 Client logo position - 88 Client logo position - 88 Client logo position - 88 Client logo position - 88 - 88 - 88 - 88 44 Heat Trust (www.heattrust.org) - 88 - 88 - 88 - 88

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Section 5: the water industry in Scotland - 89

Document title header - 89

Document title header - 89 Profile A publicly owned company, answerable to the Scottish Parliament and the Document title headerpeople of Scotland. - 89 Scottish Water is the sole supplier of water and waste wat er services to Do households across Scotland and runs Scotland’s network of pipes, water sources. - 89

 Serving: show our customers that we care, achieving year on year Our Vision – six - 89 pillars 45 improvements in their experience of our service and having a positive impact on customers and communities.

 Strong: work hard to keep customers’ prices low, delivering savings- 89 to keep customer price increases below inflation.  Responsible: always do the right thing for Scotland, providing- 89 ever better drinking water, implementing plans to boost water supply itle header resilience to all major communities, fulfilling our environmental obligations and reducing our carbon footprint. - 89 Document title header Leading: shape our future for the benefit of customers; listening to our customers, being proactive, working with customers, landowners, - 89 local authorities and developers to deliver even more efficient services. Document title header  Growing: enable a thriving Scotland, supporting develope rs, seeking- 89 innovative and low cost solutions for businesses to grow in Scotland, Document title header and supporting an efficient supply chain through world class procurement. - 89 Document title heClient logoCommitted position: behave safely and have agile, healthy people and workplaces, building our skills and diversity to sustain high standards- 89. Client logo position 46  Keeping you safe Code of Practice - 89  Dealing with a complaint Client logo position  How can you be sure the water is safe? - 89 Client logo position  What are we doing about climate change  All about water meters - 89 Client logo position  Keeping you in the picture  What we charge you - 89 Client logo position  Our promises to you (incidents, payments, etc.)  Complaints - 89 Client logo position  Looking after customers who need additional support

 Who do we answer to? - 89 Client logo position - 89 - 89

45 Scottish Water (www.scottishwater.co.uk) - 89 46 - 89 Scottish Water ‘Our promises to you – code of practice’ (extract) - 89 - 89 - 89 - 89

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Section 6: the water industry in England and Wales - 90

Document title header - 90

TrustDocument in water title header47 - 90

AcrossDocument England title and header Wales, we all rely on the water, drainage and sanitation services that the- water90 sector delivers every day. In our homes, in our work and in our environment. But challenges threatenDocument those title vital header services that we receive, such as population growth, climate change and water scarcity. Everyone involved in the water and wastewater sector has a role to play to help address- 90 these challenges. Do - 90 To meet these challenges, customers need to have trust and confidence in the vital public service they receive. This means trust in the water in the tap, wastewater flushed away and the price- 90they pay. But also, much more than that.

To achieve trust and confidence the sector must listen to their customers and deliver outcomes- 90 which benefit customers today and in the future. This means strong relationships throughout the supply chain and with investors, and genuine engagement with government and regulators. - 90 And investors need to encourage the delivery of new and efficient solutions for customers. itle header As the economic regulator for the water sector in England and Wales, we help build trust and confidence in water. We do this through focusing on what matters to customers, the environment- 90 andDocument society bothtitle nowheader and in the future. - 90 WeDocument oversee titlehow headerthe sector is performing and seek assurance that service providers are engaging with customers and delivering services they want and can afford. We’re ready to step in when things go wrong, and to act clearly and predictably with the right tools to achieve the best results.- 90 Document title header The way that we work, the way we behave and the values we live by will be as important -as 90 the workDocument that we title do. OurheClient vision logo is to positionbe a trusted and respected regulator, working at the leading edge, and stretching ourselves and others to build trust and confidence in water. - 90 Client logo position Delivering trust and confidence in vital public services is ambitious and will take time to achieve. - 90 AndClient we logocannot position do this alone. - 90 WeClient need logo the position sector and everyone interested in it to work with us and together, listening and communicating to build trust and confidence among customers, investors and our wider society. - 90 IfClient together logo we position succeed, we will see:  customers confident in the service they receive at a price they can afford. - 90 Client logosociety position trusting that decisions made today will protect future generations and the environment; and - 90 Client logoinvestors position having the confidence to invest in water and wastewater service providers.

We will all benefit from trust in water. - 90 Client logo position - 90 - 90 - 90 - 90 47 Ofwat website: http://www.ofwat.gov.uk/about-us/ - 90 - 90 - 90 - 90

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Document title header - 91

Profile Wessex Water is a regional water and sewerage business serving 2.8 Document title header million customers across the south west of England. - 91 Customer focus In line with legal and regulatory requirements (provided under licence Document title header agreement), Wessex Water provides a number of policy documents- 91 relating to issues such as affordability, social tariffs and standards of Do service. These include a series of succinct and focused Codes of Practice- 91 documents, based on standards of service relating to specific service areas, such as accounts and bills, help and advice, water meters and water quality. Each of the documents represents a promise to customers- 91 relating to service performance and compensation levels for failures to meet promised service standards. - 91

The Wessex Water standards and promises are ‘enhanced beyond the legal requirements.’ - 91

itle header Wessex Water encourages staff to ‘go the extra mile’ (GEM) whenever they can in order to build trust among customers, resolve issues efficiently- 91 Document title header and treat customers fairly. Colin Skellett, Chief Executive, states : We are a customer centred organisation and believe in putting customers and the communities we serve at the heart of everything we do – our aim is always- 91 Document title header to achieve the best outcome for them. We focus on understanding customers’ changing needs and responding to the pressures that- many91 Document title header continue to be under in these challenging economic times.’ - 91 ConsumerDocument framework title heClient Our logo mission:position To provide outstanding, sustainable water and environmental services. - 91 Client logo position Our aims:  To provide customers with excellent affordable services; - 91 Client logo position  To protect and improve the environment and contribute to wider society; - 91 Client logo position  To be a great place to work in which all employees can work safely and reach their full - 91 Client logo position  Potential;  To deliver the best possible returns to investors. - 91 Client logo position Our values (BEST): - 91 Client logo position  Behaviours – we respect and value everyone's contribution and always operate with integrity and openness; - 91 Client logo position  Excellence – we aspire to excellence in everything we do;  Service – serving customers is at the heart of our business- 91 and - 91 we always go the extra mile;  Teamwork – we are one team working together to deliver- 91 our - 91 mission. - 91 - 91 - 91 - 91

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Section 7: the energy and water industries in Northern Ireland - 92

Document title header - 92

Profile Northern Ireland’s leading electricity supplier. Document title header - 92 Approximately 70% share of the domestic market and 49% share of the commercial market. Do - 92 Customer focus Power NI’s prices for homes, small businesses and farms are agreed with the Utility Regulator, ‘so our customers can be sure that they will always pay a fair price.’ - 92

‘Excellent customer service is in our DNA - and it shows. We have friendly staff in Antrim, Belfast and Omagh and answer most of our calls within- 92 20 seconds, so with us you won’t be left hanging on the line, or be passed from pillar to post. Our DNA also shows that we have the ‘low complaints’ - gene!92

itle header For the third year running, we’ve been recognised by the Consumer Council as having the lowest level of customer complaints of any local supplier.’- 92 Document title headerOur Promise: Power NI aims to provide a first-class service and value for money for all our customers. - 92 Document title headerCustomer Charter very prominent on website and in documents. Customer Charter We promise to: - 92 Document title header  Have caring and knowledgeable staff to help advise you on all the services we provide. - 92 Document title heClient logoEnsure position our services are accessible to all our customers.  Give you a choice of payment options. - 92 Client logo position  Produce clear and accurate bills.  Provide help if you have difficulty paying. - 92 Client logo position  Provide special help and advice for our most vulnerable customers. - 92  Make it easy for you to contact us Client logo position  Deal quickly and effectively to resolve any problems you tell us about. - 92 Client logo position  Provide a list of advice agencies that may be of help to you - 92 Client logo position - 92 Client logo position - 92 Client logo position - 92 - 92 - 92 - 92 - 92 - 92 - 92 - 92

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Northern Ireland Water - 93

Document title header - 93

ProfileDocument title headerNorthern Ireland Water is a Government Owned Company (GoCo), set- 93up in April 2007 to provide the water and sewerage services in Northern Ireland. Do NI Water supplies 560 million litres of clean water a day for almost- 93 1.8 million people as well as treating 320 million litres of wastewater a day.

Customer focus NI Water’s strategic approach over the period 2015 to 2021 (the - ‘PC15 93 period’) has been shaped around their identification of 8 customer promises developed in 2013/14. - 93 These promises are detailed in the ‘Our Strategy’ document and they are prominent on the NI Water website and other documents. - 93 Customer Promises NI Water ‘8 customer promises’ are: itle header  We provide you with customer service you value and expect  We provide you with clean, safe water to drink - 93 Document title header  We seek to give you value for money  We adapt to deal with the effects of climate change - 93 Document title header  We want to protect and enhance the natural environment

 We take care of your wastewater so it doesn’t pollute your environment- 93 Document title header  We supply you with the water you need - 93 Document title heClient logoWe positionprovide excellent service by having the right people doing the right thing for you - 93 Client logo position

- 93 Client logo position - 93 Client logo position - 93 Client logo position - 93 Client logo position - 93 Client logo position - 93 Client logo position - 93 - 93 - 93 - 93 - 93 - 93 - 93 - 93

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Sect ion 8: the UK postal sector - 94

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Document title header Profile Royal Mail is the ‘Universal Service Provider’ of residential postal services- 94 in the UK. Document title header Regulation Royal Mail is governed by regulation, and is regulated more closely- 94 than other postal operators in the UK. Obligations are imposed on Royal Mail in Do the regulatory conditions. This includes, for example, mail integrity- 94 obligations, publication of complaints and compensation data, adherence to a prescribed complaints and compensation process, publication of quarterly- 94 quality of service information by postcode area, mandatory consumer access to a redress (ADR) scheme. - 94 By contrast, other postal operators are only required to provide a complaints process, but the format is not prescribed and complaints and compensation- 94 data is not published. No other postal operator in the UK is subject to this itle header regulation or published quality standards.

Royal Mail is required as the Universal Service Provider to ensure- 94 that Document title headercustomers areas across the whole of the UK can access services easily (at least 98% of the population must be within half a mile of an access- 94 point Document title headere.g. a post box) and at a uniform, affordable price.

Royal Mail has a formal stakeholder engagement procedure and -seeks 94 Document title headerfeedback from customers & other stakeholders through a range of methods including research, social media & events. - 94 Document title heClient logo position Customer Focus Customer focus is one of the three key pillars of Royal Mail’s business- 94 Client logo position strategy. Ofcom and Royal Mail’s customer satisfaction monitoring shows that customer satisfaction is high and improving. - 94 Client logo position Royal Mail is also part of the Keep Me Posted partnership fighting for the consumer’s right to choose how they are contacted, including billing. - 94 Client logo position Internally, therefore, Royal Mail has a set of consumer principles that it adheres to, in order to ensure that the consumer is front of mind- in94 its Client logo position strategy and service provision. - 94 Client logo position However, these are not externally stated or referred to as ‘consumer principles,’ something that can be attributed to a number of features -of 94 the regulated postal market: Client logo position  High customer satisfaction within the postal sector  A generally low level of customer detriment - 94 Client logo position  Already a high level of regulation. - 94 - 94 Given these features, an additional set of external consumer principles is less of an imperative than it is in the energy or water industries. - 94

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- 95 Appendix B: research methodology Document title header - 95 Overview of research methodology Document title header - 95 Our approach to the required research on consumer based frameworks comprised a combination of secondaryDocument (desk)title header research and qualitative research among UK regulated and non-regulated industries, particularly (but not exclusively) in the energy, post and water sectors. - 95

PurpleDocument Market title Research header has a tried and tested approach to this kind of research project, comprising- 95 the following main stages: Do  A set up and planning phase; - 95

 An intelligence gathering phase: in this case, a combination of a review of intelligence already held by the Consumer Futures Unit, additional desk research and qualitative- 95 research among regulators, service providers and other relevant bodies; - 95  An analysis and reporting phase to cross-analyse and integrate the findings from the different intelligence gathering components, and to derive insights and recommendations from the research. - 95

Ouritle researchheader programme for this project conforms to this model, and is therefore as follows. - 95

Document title header Research programme structure - 95 Document title header - 95 Document title header - 95 Document title heClient logo position - 95 Client logo position - 95 Client logo position - 95 Client logo position - 95 Client logo position - 95 Client logo position - 95 Client logo position - 95 Client logo position - 95

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Meta-analysis - 96

SecondaryDocument (desk) title header research was employed to identify and summarise consumer principles currently- 96 adopted by regulators and service providers. Document title header - 96 The meta-analysis explored: Document Evidence title headerof stated consumer or customer frameworks in industry, where they are held,- 96 how they are applied to policy and practice, and how, if at all, they are evaluated. Document In the title absence header of a tangible consumer framework, evidence of stated consum er policy- 96 and practice by regulators and service providers where it implies a consumer outcome. Do  A sense of whether or not applied frameworks adequately cover the seven key - areas96 outlined within the consumer principles, and which aspects require strengthen ing.

 Commonality and diversity in consumer based frameworks identified by participating- 96 regulators and service providers. - 96 This involved the analysis of relevant regulator and service provider websites and also a general intelligence search to explore the key elements of a consumer principles based approach and- 96best practice in this area.

itle header Qualitative research - 96 ThisDocument second title phase header of the project comprised qualitative research among regulators and service providers. This further explored the extent to which consumer principles are the basis for planning- 96 andDocument operations title in headersuch organisations. - 96 TheDocument primary title research header into applied standards for service provision took the form of in-depth interviews with regulators and service providers. - 96 AsDocument for the meta title- analysis,heClient tlogohe qualitative position research focused mainly on UK regulators and service providers in the energy, post and water industries. - 96 Client logo position Qualitative research was conducted with 40 personnel / organisations in a cross-section of the target market. - 96 Client logo position Qualitative interviews were conducted within the following organisations. - 96 Client logo position Energy Water Post - 96 Client logo position Regulators Ofgem Ofwat Ofcom - 96 Client logo positionUtility Regulator NI (Energy) Water Industry Ombudsman for Energy Commission for Scotland - 96 Client logo position (WICS) Utility Regulator NI - 96 Client logo position (Water)

Scottish Environment - 96 - 96 Protection Agency - 96 (SEPA) - 96 - 96 - 96 - 96 - 96

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Ombudsman Services - 97 Scottish Public Services Document title header Ombudsman - 97

Operators / Dundee City Scottish Power Business Stream Royal Mail suppliersDocument title header - 97 Council Energy Networks Castle Water Parcelforce

Document title headerEDF Scottish & NI Water APC - 97 Southern Energy Eon Scottish Water Yodel Document title header Shetland Heat & - 97 First Utility Welsh Water Power Do Fyne Homes Wessex Water West Whitlaw - 97 HOBESCO Housing Co-op Npower - 97

Scottish Power - 97 Consumer & Consumer Council for NI (Energy) Consumer Council for Consumer Council trade bodies Energy UK Water (CCWater) NI (Post) - 97

Heat Trust Consumer Council NI itle header (Water) - 97 Document title header - 97 Document title header - 97 Document title header - 97 Document title heClient logo position - 97 Client logo position - 97 Client logo position - 97 Client logo position - 97 Client logo position - 97 Client logo position - 97 Client logo position - 97 Client logo position - 97 - 97 - 97 - 97 - 97 - 97 - 97 - 97

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- 98 A ppendix C: topic guide used in the qualitative interviewsDocument title header - 98

Document title header - 98 Section Detailed probing Document title header - 98 1 Introduction & The Consumer Futures Unit of Citizens Advice Scotland is currently background conducting research on the application of consumer principles within Document title header UK organisations in the energy, water and postal sectors. - 98

Do The aim of the research is to explore what kind of consumer oriented- 98 frameworks are currently in place and whether there is room for improvement in this area. - 98 2 Existing consumer- What kind of consumer commitments or promises does your focused framework organization make? - 98

Do you currently have an overarching framework encapsulating - your 98 consumer or customer focus?

itle header IF A FRAMEWORK IS IN PLACE: - 98 Document title header What form does your framework take? - 98 Document title header What do you call it?

What are the key consumer principles or promises given? - 98 Document title header How was it formulated? What were the main drivers e.g. legislation,- 98 Document title heClient logoregulation, position commercial (giving a competitive edge), other?

How clear and central is the framework to the way your organization- 98 Client logo position delivers consumer outcomes? - 98 Client logo position How and where do you communicate the framework to consumers (e.g. on website, in brochures, in annual report, other)? - 98 Client logo position How flexible is the framework? - 98 Client logo position How much is the framework used to formulate policy and practices in your organization? - 98 Client logo position How do you evaluate how well your organization is performing in line with the framework? (E.G. MARKET RESEARCH, SIM, ANNUAL- 98 Client logo position REPORTS, ETC.) - 98 Client logo position IF NO FRAMEWORK IS IN PLACE: - 98 - 98 Is there any particular reason that your organization doesn’t have such a framework? - 98 - 98 Are there any particular barriers to adopting such a framework? - 98 - 98 - 98 - 98

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How might these barriers be overcome? PROBE: additional resources, change of strategy, a model or ‘template’ that can be- used99 as the basis for a framework, something else? Document title header - 99 In the absence of such a framework, how does your organization Document title header develop policies and procedures relating to consumer protection - and99 focus?

Document title header Do you think that your organization would benefit from such a - 99 framework? How? Document title header - 99 3 Other consumer Are you aware of any other consumer based frameworks used by Do frameworks other organisations in your sector? - 99  Which organisations?  What kind of frameworks? - 99 Are you aware of consumer frameworks used in other sectors?  Which sectors? - 99  What kind of frameworks? - 99 For other frameworks that you are aware of, what do you think are the benefits of these kinds of framework? itle header Do you think that your organization (and / or your industry) would- 99 Document title header benefit from adopting such a framework? Why / why not? - 99 Do you think that your industry (water / energy / post) would benefit 4Document Need for title a header framework in the from a consistent consumer principles framework? - 99 wider industry Document title header How? - 99 Document title heClient logoWhat position do you think the benefits are?

- 99 5Client Reaction logo position to the Please look at the outline of the consumer principles concept outline of (REFER TO APPENDED CONSUMER PRINCIPLES CONCEPT

consumer OUTLINE)… - 99 Clientprinciples logo position  What are your initial thoughts when seeing this description of consumer principles? - 99 Client logo position  What do you like about it?  What do you dislike about it? - 99 Client logo position Probe: how clear, flexible, easy to implement? - 99 Client logo position Do you agree with the claimed benefits of the consumer principles framework? - 99 Client logo position Application:  How do you think this kind of framework could be used -or 99 Client logo position applied by your organization?  What do you think such a framework could support? (e.g.- 99 - 99 setting corporate goals, establishing the customer promise, establishing a vision or set of values focused on the - 99 - 99 customer)

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- 100 Does your organization currently have a consumer principles framework like this? - Document title header If yes: 100  Please tell me about it. Document title header  What do you call it? (e.g. Customer Promise, Treating - Customers Fairly, Code of Practice, Customer Charter,100 Document title header something else?)  How well does your framework match the Citizens Advice Scotland Consumer Futures Unit one? - Document title header  What are the differences between this framework100 and yours?

Do If not: -  Do you think that your organization and your customers100 would benefit from having such a framework?  Why do you say that? - 100

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Appendix D: outline of stimulus for the qualitative - interviewsDocument title header 101

Document title header - 101 Document titleROLE header OF CONSUMER PRINCIPLES - Document title header 101

Do - 101

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- The Consumer Futures Unit: part of Citizens Advice Scotland (CAS) seeking101 to put consumersitle header at the heart of policy and regulation in the regulated industries of energy, post and water. -

Document title header 101 Consumer principles: the work of the CAS Consumer Futures Unit is underpinned by a numberDocument of consumertitle header principles , which are used as a checklist to assess consumer interest and form the framework within which policy is developed and communicated… -

101 Document title header Access Can people get the goods and services they need or want? - Document title heClient logo position 101 Choice Is there any?

SafetyClient logo position Are the goods or services dangerous to health or welfare? - InformationClient logo position Is it available, accurate and useful? 101

Fairness Are some or all consumers unfairly discriminated against? Client logo position - Representation Do consumers have a say in how goods or services are101 provided? Client logo position Redress If things go wrong, is there a system for putting them right? - Client logo position 101 Benefits: if the Consumer Principles were advocated by Citizens Advice Consumer FuturesClient logo Unit position and more widely adopted by regulators and service providers , this - would result in the development of more consumer-focused policy and practices101 that would deliverClient logobetter position consumer outcomes. - - 101 101

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Appendix E: Citizens Advice Scotland Consumer - FuturesDocument title Unit header 102

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Do - 102

- The Consumer Futures Unit (CFU) is part of Citizens Advice Scotland (CAS), and seeks to put consumers at the heart of policy and regulation in the regulated industries of energy,102 water and post. - The CFU speaks out for consumers across the regulated industries of energy, post and102 water. We coitlembine header policy expertise, research and market intelligence with insights from its advice services about the problems people experience, so its recommendations are evidence based. - Document title header 102

Document title header - 102 Document title header - Document title heClient logo position 102

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Appendix F: About Purple Market Research - Document title header 103

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PurpleDo Market Research is a strategic insight consultancy specialising in research in professional- services and other business-to-business audiences. Purple was founded in 2002103 by Trevor Wilkinson and Stephen Bairfelt.

Purple Market Research Directors Trevor Wilkinson and Stephen Bairfelt are experts - in the integration of consumer, market and competitor information and both speak regularly 103on this subject at market research and insight conferences and seminars. - Over a period of ten years, Purple Market Research has conducted desk research projects for over thirty clients and analysed in excess of fifty sectors and markets, both in the UK and internationally.103 itle header Qualitative business-to-business interviews is another key specialism of Purple. In the last- year aloneDocument we have title conducted header over 300 depth interviews, mainly in business-to-business103 markets, for clients such as Calor Gas, the Open University and St. John Ambulance. Document title header - 103 Document title header - Document title heClient logo position 103

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Appendix G: further information - Document title header 104

For further information on the research, contact: Document title header - 104 TrevorDocument Wilkinson, title header Purple Market Research T: 020 8359 1220 - Document title header E: [email protected] 104

Do Gail Walker, Consumer Futures Unit, Citizens T: 0131 550 7189 - Advice Scotland 104 E: [email protected] - 104

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