Part 5: Managing and recovering customer debt

Watercare Services Limited: Review of service performance.

5.1
In this Part, we look at Watercare's payment and customer debt management policies and processes, including:

Collection time frames

5.2
Watercare's credit process aims to increase pressure on customers to pay as the overdue debt to Watercare gets older. This includes two credit reminder/warning letters and a late payment penalty 24 days after due date.

5.3
The credit process can be summarised as follows:

  • an invoice is issued with a due date for payment (which is 21 days from the invoice date);
  • the first collection letter is sent 17 days after the due date for payment;
  • a second collection letter is sent (including a notification that overdue accounts greater than $150 will result in a water restriction) 24 days after due date;
  • a late payment charge is imposed 24 days after the due date;
  • a 48-hour restriction notice card (saying that water will be restricted) is sent 38 days after the due date;8 and
  • a water restriction is able to be imposed 40 days after the due date for payment (61 days after the invoice date).

5.4
The credit process culminates in the ability to restrict the water supply to a property 61 days after the overdue invoice date or 40 days after the due date. We discuss water restrictions later in this Part.

5.5
We wanted to determine how reasonable Watercare's debt-collection time frames are. To do this, we compared Watercare's time frames with two local network operators who previously supplied water to Auckland customers, before Watercare started its new role in 2010. Figure 16 shows details of our comparison.

Figure 16
Debt-collection actions – comparison with former local network operators

Days from invoice date
Watercare Metrowater Manukau Water
Due date for payment 21 28 21
Invoice reminder/collection letter In next invoice 35 36
Collection letter 1 38 42 45
Collection letter 2 45 49 50
48-hour restriction notice 59 54 None
Water restriction 61 56 61

5.6
Watercare's due date for payment is the same as Manukau Water but seven days earlier than Metrowater. Watercare sends its two main collection letters slightly earlier than both Metrowater and Manukau Water had done. Watercare's restriction notice and time when it can take specific restriction action are slightly later. In our view, there is no substantial difference between the time frames.

5.7
Watercare told us that it considered its collection time frames to be similar to at least one other significant utility provider. We decided to compare Watercare's collection time frames with some other utility providers in New Zealand. Figure 17 sets out the results of our comparison.

Figure 17
Debt-collection actions – comparison with other utility providers

Days from invoice date
Watercare Provider A Provider B Provider C
Due date for payment 21 21 14 14
Invoice reminder/collection letter In next invoice 28 28 17
Collection letter 1/first reminder 38 35 35 22
Collection letter 2 45 44-46 42 None
Disconnection notice/letter 59 53-55 52 25

5.8
Figure 17 shows that Watercare's due date for payment is later than two of the other utility providers but the same as a third provider.

5.9
Based on this data, we consider that Watercare's collection time frames compare favourably to other New Zealand utility providers.

Reducing customer debt

5.10
Watercare has a credit management team of 21, which includes seven temporary staff. This team includes:

  • a manager;
  • an administrative team leader;
  • 16 staff on the telephone actively pursuing debt; and
  • three administrative staff, who complete reports, liaise with debt collection agencies, process customer refunds and write-offs, and recover debt.

5.11
The team previously had a customer liaison officer who met customers with significant outstanding debt issues in person to discuss their accounts and seek resolution. That position's responsibilities have now been amalgamated into an existing position.

5.12
A key measure of outstanding debt is debt that remains unpaid for more than 60 days after the due date (this is known as aged debt).

5.13
Watercare's credit function has been successful in reducing debt. For example, aged debt had reduced from just over $9.0 million in September 2011 to just under $3.8 million as at 20 June 2013 (see Figure 18). It had further reduced to below $3.0 million at the end of October 2013. Watercare's credit management team has a focus on further reducing this amount, and Watercare's aged debt level continues to decline.

Figure 18
Watercare's aged debt, September 2011 to June 2013

Figure 18 Watercare's aged debt, September 2011 to June 2013.

Source: Watercare.

Managing customer debt

5.14
All customers must pay for the water that they receive, and Watercare decides how to collect the payments due in the most cost-effective way. However, we wanted to know how well Watercare dealt with customer debt.

5.15
To do this, we benchmarked Watercare's performance against the five principles that Ofwat (the economic regulator of the water and sewage industry in England and Wales) considers that water companies should apply when dealing with household water customers who are in debt. The principles can be found in Ofwat's March 2007 publication, Dealing with household customers in debt – Guidelines (the Guidelines).

5.16
Ofwat's five principles are:

  • 1 Water companies should be proactive in attempting to contact customers who fall into debt as early as possible and at all stages of the debt management process.
  • 2 Water companies should provide a reasonable range of payment frequencies and methods.
  • 3 All correspondence sent to customers should be written in plain language, be courteous and non-threatening, and clearly set out the action a water company will take if a customer fails to make payment, along with the possible consequences for the customer.
  • 4 When agreeing payment arrangements with customers, the customer's circumstances should be taken into account wherever possible.
  • 5 Customers whose accounts are managed by debt-recovery agents should receive the same level of service and care as those whose accounts remain with a water company.

Principle 1 – be proactive in attempting to contact customers

5.17
The Guidelines highlight the balance needed between contacting the customer to ensure that they know that payment is a priority and avoiding sending unnecessary reminders. Frequent reminders could constitute undue pressure on the customer.

5.18
The Guidelines expect water companies to provide at least two prompts (including the bill) for the customer to contact the water company. The customer should be contacted before any debt-recovery action is started. "Good practice" would be to allow a minimum of 14 days after the bill's due date before sending a reminder. Also, water companies should keep records showing how many times they have tried to telephone or visit individual customers (whether attempts were successful or not), and the dates of reminders and notices, along with any actions taken as a result.

5.19
Watercare's first late payment reminder is sent with the next monthly invoice, which would be about nine days after the due date for payment of the previous month's invoice. This is earlier than the "good practice" recommended in the Guidelines. However, Watercare considers that using the next month's invoice as the first reminder is the most efficient and cost-effective way to handle the issue, and that sending everyone who is a few days late paying an invoice a separate letter 14 days after the due date is expensive and makes more of an issue than is needed. We agree.

5.20
We also expected Watercare to:

  • use a variety of ways to contact customers (for example, telephone calls, text messages, and emails) and keep records of contacts made with customers; and
  • tailor its debt-recovery action to particular groups.

5.21
The credit management team mainly contacts customers by telephone. In August 2013, the team made 10,844 outbound calls and received 3766 calls. On average, each Watercare credit controller handled 44 calls every day (both inbound and outbound).

5.22
Watercare uses email as its main other method for corresponding with customers. Some other utility providers use text messages as part of their core debt-recovery processes – for example, as part of their reminder processes.

5.23
In terms of customer segmentation, the Guidelines suggest that water customers should be segmented, to tailor debt-recovery action to particular debtor groups. We reviewed some other utility providers and found that they segment customers into separate bands, depending on their historical and ongoing payment behaviour. Each band has separate credit action consequences. This allows for a more flexible approach to those who have a "one-off" payment issue and, conversely, a more managed and stringent approach to those who are regularly incurring debt.

5.24
Watercare adopts a "one size fits all" approach in the early part of the debt-recovery process. It sends the same reminder letters in the same time frames, regardless of a customer's profile. Watercare adopts this approach because of its technology limitations, which do not allow it to adapt debt-recovery actions to a customer's payment profile. It also considers that customer segmentation is an unrealistic and unnecessary requirement.

Principle 2 – provide a reasonable range of payment frequencies and methods

5.25
We expected Watercare to provide a reasonable range of payment frequencies and methods to all customers. The available options should also be properly and widely advertised so that customers can select the arrangement that best suits their needs.

5.26
Watercare offers a good range of payment options, including direct debit, credit card, internet and telephone banking, cheque, and payment through any Post Shop or Bank of New Zealand branch, where an invoice can be paid by cash, cheque, or EFTPOS.

5.27
These payment options are listed on the back of the Watercare's first invoice, all subsequent follow-up debt-collection letters, and on Watercare's website.

5.28
Watercare also allows a customer to pay a fixed amount each week, fortnight, or month. If an amount is still owing when the customer receives their invoice, then the customer can adjust their next payment to cover the shortfall by the due date.

Principle 3 – correspondence should be in plain language, courteous, and non-threatening

5.29
We expected all correspondence Watercare sends to customers to be written in plain language, courteous, and non-threatening. It should clearly set out the action that Watercare will take if the customer fails to make payment or contact Watercare, along with the possible consequences for the customer.

5.30
Like most utility providers, Watercare uses standard letters and notices to advise customers that they have failed to pay an invoice on time. We reviewed these letters and notices and found them generally straightforward, easy to understand, and non-threatening.

Principle 4 – when agreeing payment arrangements, take the customer's circumstances into account

5.31
The Guidelines highlight that a payment arrangement that considers a customer's circumstances, including their ability to pay, is likely to be effective in securing regular payments and future bill payments. Such an approach is more sustainable than one that aims to recover more money more quickly through instalments.

5.32
It is also important that organisations make reasonable inquiries about and consider the customer's ability to pay when setting up instalment arrangements.

5.33
Watercare's credit management team works with customers to agree payment arrangements that will allow customers to reduce their debt over time. For example, Watercare's usual practice is to enter into a payment arrangement with a customer while requiring the customer to keep up to date with ongoing water bills.

5.34
Watercare's contact centre staff, who are not part of the credit management team, have the authority to make a payment arrangement of up to $500 with a customer over a four-week payment time frame. However, if a customer wants to enter into an arrangement for longer than this, it can be approved by the credit manager before being referred formally to the credit management team.

5.35
Watercare has established the Water Utility Consumer Assistance Trust (the Trust) to provide assistance to customers who are in financial difficulty. We discuss the Trust in more detail in paragraphs 5.84-5.107.

5.36
However, we consider that Watercare's credit management policy might limit Watercare's ability to take into account a customer's circumstances when agreeing payment arrangements. In particular, Watercare's credit management policy states that:

In many circumstances customers will not be able to pay the full amount owing to Watercare immediately. The credit services team are able to accept payment arrangements up to a maximum term of 3 months. If the customer cannot meet a payment arrangement within the 3 month term they will be directed to apply to the Water Utility Consumer Assistance Trust (WUCAT). All payment arrangements should be confirmed with the customer in writing.

5.37
Watercare does not want to be "drip-fed" payments over an extended period. However, the three-month policy might unduly limit Watercare's ability to consider a customer's ability to pay. We note that the manager of the credit management team can extend payment arrangements for more than three months, but this is not specifically stated in the policy.

5.38
The short payment period might force Watercare customers into entering payment arrangements that they are unable to meet. We found some evidence that this might be occurring, which we discuss in paragraphs 5.95-5.100.

5.39
We have been unable to determine the length of payment arrangements that overseas water companies or other New Zealand utility providers are prepared to enter into to recover outstanding debt. We note that Ofwat considers that it might not be possible to eliminate, within one year, the debt of a customer who has had payment difficulties for some time.

Principle 5 – customers whose accounts are managed by debt recovery agents should receive the same level of service and care as those whose accounts remain with a water company

5.40
Watercare has arrangements with two debt collection agencies to collect debts on its behalf – Debtworks New Zealand Limited and Accounts Enforcement Limited (AEL). We wanted to know how Watercare determined which customers it would refer to collection agencies. We expected Watercare to refer only the most difficult customers and that its referral processes would be robust.

5.41
We reviewed some files and consider that Watercare does attempt to collect outstanding debts before referring a customer to a debt collection agency. For example, one customer got into debt in June 2012 and was referred to a debt collection agency on 23 September 2013. During that time, Watercare made 22 calls to the customer to resolve the situation.

5.42
Also, before a customer is referred to a collection agency, a designated staff member reviews the customer's file to ensure that the customer should be referred.

5.43
That staff member will look at the amount of contact made with the customer and take a general view on whether the customer should be referred. If the staff member has any doubts, they would refer the matter back to the credit management team.

5.44
We also expected Watercare to have good processes to ensure that the collection agencies were subject to Watercare's standards of service and care. Watercare has contracts with each of its collection agencies that set out the required service levels.

5.45
The contracts require collection agencies to act in a professional manner and to perform their duties with reasonable skill and diligence. Debt collectors are required to ensure that their contact with Watercare's customers and responses to all customer queries or questions are of a professional standard.

5.46
We asked Watercare how it knows that its debt collection agencies meet the required levels of service. The collection agencies maintain a complaints register, and Watercare told us that complaints are escalated to the manager of the credit management team.

Code of Practice for customer debt

5.47
It is important that customers are aware of their obligations to pay their invoice and what to do if they have any problems paying on time.

5.48
We reviewed information that Watercare provides to customers – for example, its invoice, reminder and debt-recovery letters, customer contract, and website. Watercare provides good information about payment options, contact numbers for customer inquiries (including contact numbers for customers having difficulty paying invoices), as well as pricing. However, Watercare provides little information on the processes it will follow if a customer falls behind in paying an invoice. A customer is required to contact Watercare to find this information.

5.49
In our view, Watercare should develop a Code of Practice (or similar document) to fully inform customers of its approach to debt recovery and what it expects of its customers. Licensed water companies in England and Wales have such codes on debt recovery.

5.50
Such a code would explain how Watercare can help customers who have difficulty paying their invoices and what will happen if a customer does not pay on time. The document could consolidate information that Watercare provides in several different ways. The document could include:

  • Watercare's approach to debt recovery and what it expects of its customers;
  • Watercare's billing arrangements, including meter-reading and estimation process;
  • payment options for customers having difficulty making payments;
  • Watercare's debt-recovery time frames;
  • the steps Watercare will take if a customer does not pay an invoice; and
  • information about the Trust.

5.51
Such a document could be placed on Watercare's website. Also, Watercare could send it to customers who contact Watercare expressing concern about their ability to pay. It could also be given to new customers.

Recommendation 5

We recommend that Watercare prepare a Code of Practice for dealing with customer debt, setting out its approach to debt recovery and customers’ rights and obligations.

Water restrictions

5.52
Under normal circumstances, a customer will receive a water flow of about one litre of water every second. When Watercare imposes a water restriction, it restricts the water flow at a property to one litre every minute.

5.53
The method of restriction will depend on the property. Either a restrictor is placed inside the pipe to reduce flow or a can is placed over the toby and padlocked. A tap test is also conducted at the property after the restriction to ensure that the water flow is at least one litre every minute.

Number of water restrictions

5.54
We wanted to know how often Watercare imposed water restrictions on its customers. Since 1 November 2010, Watercare has applied 23 restrictions – nine to domestic properties and 14 to non-domestic properties (see Figure 19).

Figure 19
Water restriction summary, as at 30 August 2013

Number of Domestic Non-domestic Total
inherited restrictions* 4 0 4
restrictions made 9 14 23
restrictions removed 6 12 18
restrictions remaining 7 2 9

Source: Watercare.

* Inherited from Manukau Water on 1 November 2010.

5.55
The frequency with which Watercare has applied water restrictions has been increasing. As Figure 20 shows, Watercare applied no restrictions in 2011, five in 2012, and 18 in 2013 (up to August 2013). Watercare has applied six more restrictions in September 2013, bringing the 2013 total to 24 (up to September 2013).

Figure 20
Water restrictions for every calendar year (up to August 2013)

2010 2011 2012 2013 Total
All restrictions 4* 0 5 18 27

Source: Watercare.

* Inherited from Manukau Water on 1 November 2010.

Watercare's legal basis for applying water restrictions

5.56
Section 193 of the Local Government Act 2002 and section 69S of the Health Act 1956 allow Watercare to restrict a customer's water supply.

5.57
Broadly, the Local Government Act provides that the water supply to a person's land or building may be restricted in any manner that Watercare thinks fit when a person:

  • wastes water;
  • fails to comply with a relevant bylaw;
  • fails or refuses to do anything undertaken or agreed to in respect of the water supply (including payment for use); or
  • refuses to allow entry of an enforcement officer.

5.58
Under the Local Government Act, restricting the water supply must not create unsanitary conditions.

5.59
Section 69S of the Health Act provides that, where the water supply provides drinking water, the supplier may restrict supply if the relevant customer has unpaid accounts for any previous supply of drinking water. However, the supplier must continue to provide an adequate supply of drinking water.

5.60
Section 69G of the Health Act defines "adequate supply" as being the minimum quantity of drinking water that is required by the occupants of a property, on an ongoing basis, for their ordinary domestic and food preparation use and sanitary needs.

5.61
The requirements under the Local Government Act and the Health Act are cumulative. That is, Watercare must ensure that it supplies enough water to ensure that there is an adequate supply of drinking water and sufficient water to ensure that the water restriction does not create unsanitary conditions.

5.62
Watercare's customer contract gives effect to these Acts by providing that Watercare might restrict its water supply to a customer.

Watercare's water restriction policy

5.63
Watercare has a formal water restriction policy that sets out the circumstances when a water restriction can be imposed.

5.64
The main points to note from the policy are:

  • water restrictions are part of Watercare's overall debt management strategy;
  • a restriction can be imposed only from 61 days after the invoice date (at the earliest);
  • a restriction will not be imposed when a property has children under the age of five, elderly residents, residents with health concerns (potential or current), a shared meter, or a customer who is registered with the Trust;
  • verbal communication with the customer must have been made before a restriction is imposed;
  • all restrictions must be approved by the Chief Financial Officer, the Chief Services Officer, and the Chief Executive;
  • no restrictions will be imposed in the 14 days leading up to Christmas; and
  • Watercare operates an "if in doubt, do not restrict" policy.

5.65
Figure 21 sets out Watercare's restriction process.

5.66
From our file reviews and our conversations with the credit management team, it was clear that they get an excellent understanding of the customer's situation and circumstances before recommending a water restriction.

5.67
In our view, Watercare applies water restrictions only as a last resort. This is illustrated by the limited number of water restrictions that Watercare applies (see paragraphs 5.54-5.55).

Water restriction reminder letters

5.68
As part of Watercare's standard debt-collection process it sends a water restriction reminder letter 24 days after the due date to all customers who have an overdue account greater than $150. The letter has on its top right-hand corner the word "Restriction Notice" and includes a statement that: "Your water supply may be restricted if the account remains unpaid."9

5.69
For customers whose overdue account is $150 or less, Watercare sends a customer standard reminder letter.

5.70
Watercare sent out 20,998 water restriction reminder letters in the 12 months to 30 June 2013. We have some concerns about this letter.

5.71
In particular, Watercare's debt management system automatically sends the letter out when a customer's account is more than $150 and it is unpaid 24 days after the due date. This means that customers who otherwise have a good credit history or, more importantly, customers who Watercare has explicitly exempted from water restrictions (such as elderly customers and customers with children under five years old) might still receive Watercare's water restriction reminder letter.

Figure 21
Watercare's water restriction process

Figure 21 Watercare's water restriction process.

Source: Watercare.

5.72
In our view, Watercare should not send this letter to customers who could never be subject to a water restriction. Accordingly, we consider that Watercare needs to review the use of its water restriction reminder letter. Ideally, the letter should be sent only to customers to whom the restriction policy applies. We understand that technology constraints may mean that Watercare cannot currently do this. If so, then Watercare could consider:

  • increasing the outstanding amount threshold of $150 that causes a water restriction reminder letter to be sent; and/or
  • segmenting its customer groups and tailoring its debt-recovery action to particular debtor groups.

5.73
Watercare's water restriction policy provides that a water restriction will provide a customer with a daily water flow of 1440 litres. The policy states that:

  • a daily flow of 1440 litres will meet the Health Act requirements because World Health Organisation guidelines provide that 90 litres of water for one person is an appropriate daily water supply; and
  • a daily flow of 1440 litres will not create any adverse health outcomes or unsanitary conditions.

5.74
The policy reflects the intention that Watercare would hold regular meetings with the Auckland Environmental Health Organisation and provide a list of all restricted properties to the Organisation. The Organisation would conduct random visits to restricted properties to further ensure that Watercare is not creating any health risks.

5.75
Watercare has supplied us with the relevant World Health Organisation guidelines, which state that 90 litres of water for one person is an appropriate daily water supply. At the time of our review, Watercare had not held any meetings with the Auckland Environmental Health Organisation. However, Watercare has recently updated its restriction policy to provide for supplying restriction information to the Auckland Environmental Health Organisation each quarter, for its review and monitoring.

5.76
Watercare's restriction policy requires that all restrictions be approved by its Chief Financial Officer, Chief Services Officer, and Chief Executive Officer.

5.77
To obtain a restriction authorisation, Watercare's credit management team prepare a Water Restriction Approval form documenting the customer's history and confirming that the procedures required before a restriction can be imposed have been completed. These include:

  • confirmation that the customer has received a first and second reminder notice;
  • confirmation that the customer has been called or emailed;
  • all log notes of customer contact;
  • confirmation that Watercare has issued a final reminder notice and a 48-hour restriction notice card;
  • whether any of the policy exemptions apply (see paragraph 5.64); and
  • any other relevant comments.

5.78
Senior managers will review the Water Restriction Approval form (and any attached information, including log notes) and discuss the particular case where appropriate. Watercare will then decide what action should be taken, which might include:

  • putting the case on hold, pending further review;
  • referring the customer to the hardship advisor;
  • referring the customer to a collection agency; or
  • proceeding with a water restriction.

5.79
However, we have concerns about the current approval process.

5.80
We expected that managers approving a water restriction would have to confirm that the requirements of the Local Government Act and the Health Act had been complied with. Such a confirmation would provide Watercare with the appropriate assurance that all restrictions complied with the law. However, Watercare's approval process requires no such confirmation.

5.81
Management might not always be provided with all the relevant information about a customer. For example, the approval form provides no information about whether the customer is registered with the Trust or has a shared meter, which would prohibit a restriction.

Need to review the water restriction policy and approval processes

5.82
Watercare's operational staff get an excellent understanding of a customer's situation before recommending a water restriction, and few water restrictions are applied. However, Watercare's practices are not always consistent with its policy.

5.83
In our view, Watercare should review its water restriction policy and practices to require managers approving a water restriction to confirm in the Water Restriction Approval form that the requirements of the Local Government Act and the Health Act have been met.

Recommendation 6

We recommend that Watercare Services Limited update its water restriction policy and practice such that the policy reflects current practice and specifically requires Watercare managers to confirm that any water restriction meets the requirements of the Local Government Act 2002 and the Health Act 1956.

Water Utility Consumer Assistance Trust

5.84
International guidelines highlight that water utilities need to strike a balance between recovering debt, in the interest of all customers, and dealing sensitively with those customers who find themselves in financial difficulty. To achieve these aims, many water utilities provide financial assistance to customers in financial difficulty.

5.85
To provide assistance to domestic customers who could not afford to pay their bills, Watercare set up the Trust in October 2011. The Trust is charitable and has five trustees. Watercare can appoint two of the trustees, and the other three trustees represent community organisations.

5.86
The Trust is entirely funded by Watercare. The Trust's major budget items are the amount of debt remissions or customer write-offs approved by the Trust and the costs of a full-time administrator.

5.87
The Trust is governed by a Trust Deed. There is a funding agreement between Watercare and the Trust and an accompanying operating policy. The operating policy was prepared by Watercare, in consultation with the Trust, and it covers:

  • eligibility;
  • financial hardship eligibility;
  • the hardship assistance application process;
  • monitoring; and
  • the type of customer support or relief that the Trust can provide.

5.88
The Trust's application process is comprehensive. The main steps are:

  • The customer makes an application by completing an application form (Form 1).
  • The Trust's administrator assesses the application to determine whether the applicant meets the eligibility criteria.
  • When an applicant is assessed as meeting the criteria, they have 21 days to gather relevant documents and meet with an approved budget advisor to fill out a further application form (Form 2) with the assistance of that budget advisor.
  • The budget advisor makes a recommendation to the Trust's administrator, who reports this to the Trust at its monthly meeting.
  • The Trust considers the application and determines the appropriate customer support.
  • Having completed the payment arrangement, the customer might then receive a write-off of part, or all, of the amount that they owe.

5.89
The application process is exhaustive and reflects the policy intent that the Trust will provide support only when a customer is prepared to work with Watercare and a budget advisor to clear outstanding debts and continue to pay the invoices from Watercare.

5.90
According to the Trust's records, the Trust and Watercare have sent out more than 900 application forms since the Trust began. They have received about 630 applications (Form 1). Of the 630 applications, 274 applications (Form 2) have gone on to be reviewed by the Trust. Of these applications, 266 have been approved, five have been declined, and three have been set aside for further information and consideration.

5.91
The approved debt remission for those approved applications totalled $256,000, with Watercare writing off $145,000.

5.92
From our perspective, the most important number is the significant drop-off between the number of customers making the initial hardship application (630) and those making the second application (274).

5.93
The Trust and Watercare are aware of the reasons for the drop-off in applications, including the settlement of accounts without the Trust's assistance or customers not wanting to undergo, for whatever reasons, the required financial evaluation by a budget advisor.

5.94
The drop-off in customer applications is considerable. It could mean that there are a significant number of Watercare customers who might be eligible for funding support but who are not receiving it. Watercare continues to work with these customers, but could take further action to reduce this drop-off.

Understanding a customer's ability to pay

5.95
It is important that Watercare makes reasonable inquiries about a customer's ability to pay when setting up instalment arrangements or referring a customer to the Trust. It is also important that Watercare considers a customer's ability to pay when determining payment arrangements.

5.96
There is some evidence to suggest that Watercare could improve its initial assessment of a customer's ability to pay.

5.97
When a customer contacts Watercare to advise that they are unable to pay their bill, Watercare has several options. One is that it and the customer can agree on a payment plan. Another is that it can refer the customer to the Trust.

5.98
We saw examples where Watercare had set up payment plans with customers who were subsequently unable to maintain these payments and were consequently referred to the Trust.

5.99
For example, we reviewed the applications made to the Trust in its October 2013 meeting. Of the 15 applications considered at that meeting, nine of the customers concerned had previously entered into payment arrangements with Watercare.

5.100
We are concerned that some customers were not referred to the Trust early enough. In our view, Watercare needs to improve its understanding of a customer's ability to pay.

Reporting the achievements of the Trust

5.101
The Trust plays an important part in Watercare's customer "care and management". We expected Watercare to provide clear, concise, and accurate reporting on the Trust's activities. That is currently not the case, and it is difficult to get a clear understanding of the Trust's activities.

5.102
For example, Watercare's Annual Report 2013 records that:

During the last year, 189 customers registered with the Trust and, of these, 178 were eligible to receive hardship relief.

5.103
This can be contrasted with the information provided in Watercare's 2012/13 Global Reporting Initiative report, which states that "Over the last year, 301 customers registered with the Trust and, of these, 134 had hardship relief approved."

5.104
Watercare maintains a separate database of all customers who have applied for hardship, which is updated and reconciled monthly against the Trust's information. Care will have to be taken to ensure that consistency and accuracy is maintained between both information systems.

5.105
In our view, Watercare needs to ensure that its reporting is clear, consistent, and accurate, including the following information:

  • the number of applications received by the Trust (Form 1);
  • the number of applications considered by the Trust (Form 2);
  • the number of applications accepted and the number rejected;
  • the amount of relief provided;
  • the amount of debt written off; and
  • the number of applicants who have ceased being assisted by the Trust because of non-compliance with a payment arrangement.

Referring customers to the Trust

5.106
Watercare has a good range of channels to alert and refer customers to the Trust. Customers can be alerted to the Trust through:

  • Watercare's credit management team;
  • Watercare's customer contact centre;
  • Watercare's invoice;
  • overdue account reminder letters;
  • the Watercare and Trust websites;
  • budget advisory services;
  • Work and Income; and
  • Citizens' Advice Bureau offices.

5.107
There has been a move towards more active promotion of the Trust, which should lead to improved uptake of the Trust's services. For example, the Trust has now established relationships with local advice agencies, voluntary organisations, and Work and Income.

8: This is the earliest that a 48-hour restriction notice card can be sent. In practice, it will be sent later, because Watercare communicates extensively with a customer before deciding to apply a water restriction.

9: This correspondence is different from Watercare's 48-hour restriction notice card, which Watercare sends after it has made a decision to restrict water. That notice gives the customer a final chance to agree payment arrangements with Watercare to avoid a water restriction being imposed.

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