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Fairer Treatment For Water Consumers

30 June 2000
Speech Notes
Phillida Bunkle
Associate Minister Of The Environment
Address to NZ Water and Wastes Association Forum on Water
Duxton Hotel
Wakefield Street
Wellington

Good afternoon and thank you for the opportunity to come and talk with you.

I would like to start by saying that I think your initiative to have a “high level forum” to discuss strategic issues relating to the supply of water and wastewater services is good.

Using part of your first forum meeting to look at consumer issues is great!

It is a fundamental issue for our society that consumers have a secure supply of good quality water and of wastewater services. Delivery of this service needs to be under fair and equitable terms and conditions as well as being economically efficient. This is a fundamental issue for our society.

Security of this service and fairness in its delivery to the consumer is important to me as the Minister of Consumer Affairs. There are of course many aspects of discussion, ranging from health issues to questions about the best “model” for supplying water and wastewater services. You will be more familiar with progress on such issues than I am at present.

I must admit that I have not sought to research these issues before today because the matter I want to discuss with you is not dependent on any of them.

Fair and equitable treatment for consumers – a Utility Ombudsman?

Today I wish to raise with you the concept of a “Utility” Ombudsman. I have made no secret of my desire for the establishment of a consumer watchdog for utilities such as electricity and water. I see a real need to ensure that New Zealand consumers receive fair and equitable treatment in respect to the supply of water and wastewater services, and all utilities.

You will be aware from both the electricity and telecommunications inquiries that consumers are increasingly concerned they are not getting a fair go in these areas.

The recent Electricity Inquiry has made a number of recommendations that this government will now consider. I am pleased that the Minister of Energy, my colleague the Hon Pete Hodgson, also agrees with me on the value of having an ombudsman in this area.

One of the recommendations is to establish an Ombudsman scheme that was described as

“an effective way to resolve consumer complaints and to identify industry issues that need to be dealt with collectively [and] … provide independent advice on areas where the industry was performing unsatisfactorily.”

The electricity industry is of course an industry that has received a lot of attention from government and from myself. It's also an industry which has a chequered history of concern about how consumers are being treated. While the water industry has not in my understanding received the same public profile, there are issues in the supplier-consumer relationship similar to those raised about the electricity industry. This is particularly so in areas where water services are paid for directly.

Some concerns may include the quality and certainty of supply, disconnection practices and billing disputes. Sounds similar to the electricity issues doesn't it?

You could take the view that because there has not apparently been a high level of complaint about such matters, there is no need to spend time or energy on them. Or you could take the view that it is important to put in place standards and processes that will ensure these and other key consumer matters are addressed so that there never gets to be a high public level of concern about them.

I would encourage the latter approach at this stage, which would amount to “self regulation”. This can avoid the need for consumers, the industry and the government to consider regulation. But I would hasten to add that while voluntary addressing of consumer issues is preferable, I personally have no qualms about urging regulation if the industry doesn't get the consumer issues right.

Having said that the aim of any self-regulation should be to increase business standards and customer satisfaction, and to include an effective means of dealing with consumer concerns. This is where the issue of Ombudsman schemes comes up.

But to have an effective Ombudsman scheme there are foundations that need to be in place:

 An effective code of practice, which would be built around membership of a professional, or industry association.
Codes can range from setting out general statements of principle about how an industry or business will operate, to listing specific business practices that are guaranteed. They can either contain minimum standards, or standards that are aimed at best practice. Codes can differ in their level of sanctions for non-compliance. In addition, compliance by industry with a code can be mandatory or voluntary. John Barker from the Ministry will talk to you about a possible code of practice for water meters. A code on water meters could form one component part of a code that would address a broader range of consumer issues.

 Effective internal complaint resolution procedures.
Generally, before a complaint goes to an external dispute resolution scheme (such as an industry Ombudsman), businesses will be required to try and solve the complaint internally first. There are a range of models and guidelines available to help determine the best procedure.

 And finally, there is the disputes resolution (Ombudsman) scheme itself.
Ideally this would achieve full compliance with internationally recognised principles for industry-based customer dispute resolution schemes.

The underlying principles are:

 Accessibility: The scheme needs to be accessible to customers. It would need to be promoted, easy to use and not have any cost barriers.

 Independence: The decision making process and administration of the scheme need to be independent from scheme members.

 Fairness: The scheme should produce decisions which are fair and seen to be fair by observing the principles of procedural fairness, by making decisions on the information before it and by having specific criteria upon which its decisions are based

 Accountability: The scheme should be publicly accountable for its operations by publishing its determinations and information about complaints and highlighting any systemic industry problems

 Efficiency: The scheme would ideally operate efficiently by keeping track of complaints, ensuring complaints are dealt with by the appropriate process or forum and regularly reviewing performance

 Effectiveness: The scheme must be effective by having appropriate and comprehensive terms of reference and periodic independent reviews of its performance
Should there be a Utility Ombudsman?

We will soon find out whether the Government will ensure that an industry Ombudsman is put in place in the electricity industry.
The issues facing consumers are likely to be very similar whether its electricity, gas, water or telecommunications. I believe there is a case for such a scheme to cover other utilities as well. The electricity inquiry has already suggested that any such scheme in the electricity industry might also include gas. We now know that the Telecommunications Inquiry is giving some consideration to the idea of an Ombudsman.

Further, if there is to be an Ombudsman scheme I think it's time to think seriously about it being a “next generation” scheme. By this I mean, serious thought needs to be given to matters such as:

 Ensuring that there is consumer representation within the body that decides the terms of reference. If this does not occur questions will be asked about the perceived independence of the schemes. Without representation at this level there is no effective consumer input when setting the Rules, and Terms of Reference and that this has implications for what is, and isn’t, included in the scope of the schemes.

 Whether it is appropriate for information to be made available about scheme members and the number and nature of issues raised about them, to help consumers make choices about which members to deal with.

 How well the schemes are marketed and the level of public awareness of their existence.

 Whether it should be compulsory for industry participants to be members of the scheme.

To summarise I would like to reiterate a few points. I believe consumers are demanding a forum for redress in the area of utility services. I would like to see a Utility Ombudsman scheme established as a key component of a consumer complaints process for water, electricity, gas and telecommunication services.

I would like you to discuss the merits of such a scheme for your industries. Before we can embark on an Ombudsman scheme for industries such as water, it's important to set in place foundations that would ensure the scheme would be effective. This includes a Code of Practice for the Water Industry and I see great consumer benefits in establishing standards or a code for water meters.

I look forward to hearing your feedback on these ideas and I wish you well for the forum.

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