Water Companies to Address the Issue of Bad Debt
With bad debt owed to water companies over £2.2 billion, Ofwat has reported that water companies are lagging in comparison with other sectors in addressing the issue of bad debt. Bad debt impacts on all customers, as the general customer base is billed to recoup these monies. In terms of Ofwat’s report, an estimated cost of £21 per year is added to every customer’s bill to account for bad debt.
Companies have been warned, however, that their days of passing on these costs are numbered and that this is an area that will be examined during the next price review, PR19. In an interview with Utility Week, David Black, senior director of Ofwat, stated that the price review would seek an efficient level of cost and “companies with inefficient levels of bad debt costs will have to bear those costs themselves.”
What is encouraging is the scope for improvement within the sector. As it is analysed for potential growth areas, it seems that the key to the future is a customer-centered approach. As part of its report, Ofwat has called on companies to make affordability schemes available to customers, adopt an anticipatory approach to debt through customer data, adjust billing, improve customer communication, ensure customers are on the appropriate tariff and payment method, and adopt effective methodologies of other sectors on the question of dealing with debt.
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