Utility acting on behalf of government

Assessment of customer experience and financial risks from the introduction of billing for water services during an industry restructuring

Government chose our client to (1) transform the nation’s water services, (2) create a new utility – National Water (NW) – and (3) deliver a metering programme. NW’s creation from 34 Local Authority (LA) operations was unusual. Facing IR issues, staff remained within LAs while water assets were transferred to NW, rather than statutory transfer of everything to the new entity 34 Local Authorities would form a key part of the National Water operating model This atypical operating model required unique “Service Level Agreements” (SLA) to provide NW with control of cost and quality, each of which had be agreed across a challenging landscape of stakeholders. Our David Costelloe provided expertise and know how to help NW navigate these challenges and deliver Heads of Agreement.

Starting with no ‘customer list’, our client faced a massive challenge, on how do to introduce water charging, and run effective billing and arrears management process, with a populace tired of austerity and tax rises.

David was engaged to assess the risks of the customer engagement programme, designed to support revenue generation from the beginning of 2014. We reviewed customer engagement strategy documents, proposals for customer propositions and campaign designs. We interviewed key players both in the Customer, metering and regulatory work-streams, and obtained the basis for their key assumptions.

We looked at financial projections for revenue and bad debt, and assessed the assumptions underlying them. This showed that there were massive dependency on (1) the timing of campaigns to register and subsequently set up direct debits from a millions of households; (2) uptake of proposition; (3) high risk assumptions on the timing of government decisions, such as pricing basis, price level and measures to help the poor and (4) a usable customer list that could be address citizens would be available from another third party business.

We performed a risk assessment on key metrics and date assumptions underlying the timing and quantum of revenue, arrears and bad debt projections. This showed there were many (very) high risk/high impact assumptions. These ranged from a web campaign delivering a high percentage of citizens registering and subsequently setting up direct debits (high ‘conversion’ rates), low volumes of customer contact via telephone, and the availability of a ‘package’, agreed by government, to market to Irish citizens.

In essence proposed plans were heading for large variances in revenues, customer contact costs for arrears chasing and bad debt. We crystallised the risks into a short paper.

• Our work helped the client use national governance to change the plan, resulting in the postponement for the introduction of billing for one year to allow for better preparation and more progress on metering prior to the introduction of water charges.