Introduction

1. Last year, the Government published a consultation paper on its proposals for establishing independent consumer councils for the water, energy and telecommunications sectors. The establishment of independent consumer councils for the utility sectors is a vital element in the Government’s broader agenda for reforming the framework of utility regulation so that it delivers a fair deal for consumers.

2. The Government received over 130 responses to the consultation paper. In addition, it held discussions with a wide range of interested parties. These indicated strong support for the approach set out in the consultation paper.

3. The consultation paper looked in detail at a number of important issues such as the functions and powers of the future consumer councils; their structure and organisation; and the framework for establishing strong and constructive links with the utility regulators’ offices. The Government has considered the representations made on these matters and has now taken decisions on the way forward.

4. In taking forward proposals for the consumer councils, the Government has had four key concerns: firstly to create independent and influential consumer advocates, with a voice at the heart of the regulatory system, advising the utility regulators, utility companies and others on consumer issues; secondly, to ensure that all consumers have a one stop shop they can go to when they have unresolved grievances about the standards of service or conduct of a utility company; thirdly, to provide consumers with a source of good quality information and advice on getting the best deal from the utility markets. Influential councils and well-informed consumers can play a key part in driving standards up, and prices down. Finally, the new arrangements must provide for an open, professional and co-ordinated relationship between the new councils and the utility regulators.

5. Implementation of the Government’s proposals will require legislation. We intend to introduce legislation to implement these proposals along with the Government’s other proposals for the reform of utility regulation as soon as Parliamentary time permits.

6. These proposals are generally intended to apply to consumer arrangements in the whole of the UK. They do not, however, extend to Northern Ireland, in respect of the water and energy sectors, nor to Scotland in respect of the water sector.

Functions of the consumer councils

7. We propose to give the councils broad functions within the regulatory system. They will act as public advocates for all utility consumers in their sectors, and will be expected to provide information and advice on consumer issues to regulators, Government, Parliament, the Scottish Parliament, the Welsh Assembly, the media and others. They will draw attention to areas requiring action by the companies, utility regulators and others. And they will publish information and advice of interest and assistance to consumers, such as advice on securing the best deal from utility companies. These broad functions will ensure that the councils have flexibility to investigate and advise on the consumer issues of the moment.

8. These functions will be underpinned by a research capacity to ensure that issues of concern to consumers, including particular groups of consumers such as the disadvantaged or small businesses, or those in a particular region, can be investigated, and that the councils can speak with knowledge and authority.

9. In addition, we propose giving the councils the specific task of handling consumer complaints against utility companies where these have not been resolved by the company concerned. Where possible, we will expect the councils to try to mediate a satisfactory outcome between the company and the complainant. Where further action such as enforcement action may be required, the council will also pass the complaint on to the appropriate regulatory authority. We also anticipate the councils working constructively with the utility companies to reduce the causes of complaints.

Relationship between councils and regulators

10. An effective framework for collaboration between the councils and the utility regulators will be required. To achieve this, we intend to place a duty on the council and the relevant utility regulator to agree and then publish a memorandum of understanding (MoU). The detailed content will be a matter for the parties to agree, but we expect it to cover such matters as the practical arrangements for consultation between them, the co-ordination of requests for information from the utility companies, the exchange of information, and the co-ordination of work on consumer-related issues. We also propose that the water consumer council and the drinking water inspectorate should be placed under a similar duty to agree and publish an MoU to cover co-operation between them on water quality issues and the handling of water quality complaints.

Access to information

11. The councils’ powers to access information will need a basis in statute. We intend to give the councils direct rights of access to the information they need from utilities so that unresolved customer complaints can be investigated. In addition, we propose that councils should receive copies of any monitoring returns that utility companies are required to send to the utility regulators to demonstrate compliance with codes of practice on complaints handling. This is intended to assist the councils in their task of tackling the causes of consumer complaints at source.

12. We propose that other types of information should be obtained by making a request to the relevant utility regulator, or to the drinking water inspectorate, where it cannot be obtained from the utility companies on a voluntary basis. Consistent with their existing functions, we intend to give the utility regulators and the drinking water inspectorate powers to obtain information from the utilities on behalf of the councils as well as for themselves, and we intend to make the councils bodies to whom they can disclose information. These bodies will be required to comply with reasonable requests from the councils for information, both information that they hold already or have generated themselves, and new information which needs to be obtained from the utility companies. Where a request is declined, these bodies will need to give reasons. There will be reciprocal obligations on the councils to provide information to the utility regulators or to the drinking water inspectorate on similar terms.

13. These are strong information-gathering powers which will ensure that the councils have access to the information they will need in order to play an influential and informed role within the regulatory system. The powers are consistent with the Government’s vision of the councils as independent, effective consumer champions.

Organisational issues

14. The Government wishes to establish focused and professional consumer councils. The optimum number of council members may vary between the utility sectors, and over time. Accordingly, we propose that the legislation should not specify a minimum or a maximum number of council members. This will provide the necessary flexibility. Appointments to the councils and approval of their budgets will be a matter for the Government, thus ensuring their independence from the utility regulators. Their resources will be raised, wherever possible, through licence fees, and they will be required to operate in an accountable and transparent fashion.

15. The Government fully recognises the importance of the regional dimension in the provision of utility services, and recognises that some issues and concerns may be best addressed at a regional level. It also recognises that regional arrangements will need to be different in different sectors, depending on the structure of the industry.

16. We propose to give the telecoms and energy councils a duty to ensure that regional needs are addressed efficiently and effectively, and that their work is informed by an awareness of regional issues. To meet this duty, the telecoms and energy councils will be given flexible powers to establish regional offices where they need them, and to appoint regional committees or panels where these are needed to help address customer complaints and other issues. These powers will give the councils the flexibility to change their regional arrangements in response to market developments in their utility sectors. The councils will be required to obtain the consent of the Secretary of State for their regional arrangements and to consult the Secretary of State on the appointment of any regional chairmen. In addition, the national energy council will be required to maintain offices and an appropriate consumer committee or panel structure in Scotland and Wales. The national telecommunications council will be required to maintain similar arrangements in Scotland, Wales and Northern Ireland.

17. In the water sector, the Government proposes to take an approach which reflects the particularly strong regional dimension in water supply, and the forthcoming devolution of certain functions to the National Assembly for Wales. The Secretary of State for the Environment, Transport and the Regions will therefore be given powers to determine the regional structure of the water consumer council (to include an office and consumer committee in Wales), and powers to appoint both the regional chairmen of committees operating in England, and members of the national council. The appointment of the chairman to the Welsh consumer committee will be made by the Welsh Assembly. The national council will make the other appointments in line with guidance issued by the Secretary of State in respect of English regional committees, and guidance issued by the Welsh Assembly in respect of the Welsh consumer committee. The guidance will be designed to ensure that the appointments adequately reflect local consumer interests. As for the other utility councils, it is intended that the regional organisation will operate as part of a single public body.

18. More generally, detailed operational matters are best left to the councils. The Government does not therefore wish to legislate on specific matters such as call centre arrangements, or on the detailed arrangements for handling complaints. These arrangements may need to change over time, and are not matters for legislation.

19. The Government wishes to ensure that the work of all the councils and any regional or other specialist committees is professional, and that work on such committees is attractive to a wide cross-section of the community. To this end all the councils will be given powers to remunerate the members of any regional or other specialist committees where appropriate.

20. More generally, the councils may find it useful to establish operational links with other regulators such as the Environment Agency, the Health and Safety Executive and the Electricity Engineering Inspectorate, and with consumer bodies such as local authority Trading Standards Offices, and Citizens’ Advice Bureaux We propose to give the councils powers to establish MoUs or other arrangements with these and other organisations where appropriate, to ensure the effective referral of consumer concerns to those who can best deal or act on them. [In addition to these general powers, we propose that the national water council and the Secretary of State should be placed under a statutory duty to agree and then publish an MoU in respect of the functions of the Drinking Water Inspectorate in investigating and enforcing certain types of water quality complaint. We also propose that both the Secretary of State and the Welsh Assembly, each consistent with their Drinking Water functions, should be required to comply with reasonable requests from the water consumer council for information, both information that they hold already or have generated themselves, and new information which needs to be obtained from the utility companies]

Other issues

21. In the water sector, the Government also proposes to improve the arrangements by which service standards are set. Standards can currently only be set by the Secretary of State in response to a specific proposition from the economic regulator. We believe that this is no longer appropriate in a sector where standards may need to be set for environmental and public health reasons beyond the scope of the economic regulator’s functions. We propose, therefore, to extend the existing arrangements so that the Secretary of State for the Environment, Transport and the Regions in respect of England, and the Welsh Assembly in respect of Wales, can initiate proposals for new or amended service standards, subject to public consultation. The new procedure would normally only be exercised by the Secretary of State and the Welsh Assembly in respect of standards raising environmental and public health issues. Where any new or amended standards had a significant financial effect, they would trigger existing provisions in the water companies’ conditions of appointment that enable costs to be passed through.

22. Steps will be taken to ensure a smooth transition from the existing consumer bodies to the new councils, with the existing bodies being wound up when the transition has been achieved. This will ensure that consumer interests are effectively addressed during the interim, and that the councils can operate effectively from the moment they take over.

23. Government will not be able to achieve the results it wants without high quality staff. Already, within existing organisations, there are staff who are doing some of the things the consumer councils will be doing, and doing it well. Steps will need to be taken to ensure that full use is made of this existing expertise. Staff will need to be transferred or seconded to the councils. Staffing arrangements will be a matter for detailed discussion between the staff concerned, the utility regulators, the Gas Consumers’ Council (in respect of the energy council), and any relevant unions.

24. These proposals, taken together, will ensure that consumers have the strong and independent voice they need, and thereby help to ensure that the regulatory regime is able to respond promptly and efficiently to meet their needs.

Appendix 1

Aberdeen Chamber of Commerce

Advisory Committee on Telecommunications for Small Business

Age Concern

Anglian Water Services Ltd

Argyll & Bute Telecoms Advisory Committee (TAC)

BCN Data Systems

BG plc

BOC Gases

Bournemouth & West Hampshire Water Plc

BP Gas Marketing Limited

British Airways

British and Irish Ombudsman Association

British Gas Trading Limited (Centrica)

British Steel plc

British Telecommunications plc

Calderdale TAC & Post Office Advisory Committee

Calortex Limited

Mr S Carne

CCE (English Advisory Committee on Telecoms) with DIEL

The Chartered Institute of Purchasing & Supply

Chemical Industries Association

Chippenham POAC/TAC

Clacton & District, Colchester & District/Harwich

Mr D Cochran

Confederation of British Industry

Consumers' Association

Coventry and Warwickshire TAC

Customer Management Consultancy Ltd (Stirling University)

Valerie Davey MP

Derby & Derbyshire Area POAC & TAC

Devon County Council

DIEL (Advisory Committee on Telecommunications for the Disabled and Elderly) with CCE

Durham County Council

Eastbourne & District POAC & TAC

Eastern Electricity

East Midlands Electricity

East Suffolk TAC

ECCCG, CCE, GCC & ONCC (joint response)

ECC Chairmen’s Group

ECC East Midlands Region

ECC London

ECC Merseyside & North Wales

ECC Midlands Region

ECC North East

ECC North West

ECC South East Region

ECC South West Region

ECC Southern Region

ECC Yorkshire Region

ECC North of Scotland

ECC South Wales

Electricity Association

Energy Action Scotland

Energy Intensive Users Group

Energy Saving Trust

English Nature

Enron Europe Ltd

The Environment Agency

Federation of Small Businesses

Food & Drink Federation

Forest of Dean TAC

Gas Consumers Council

General Consumer Council for Northern Ireland

General Utilities plc

GMB/APEX

Mr John Maynard Hall

Harlow TAC

Health & Safety Executive

Highland TAC

Mr C Howard-Luck

Hull University Centre for Utility Consumer Law

Hyder Utilities (Holdings) Limited

ICSTIS

Institute of Trading Standards Administration

Ipswich & District TAC

Labour Finance and Industry Group

Leicestershire & Rutland TAC

Liverpool City Council Central Policy Unit

Local Authorities Co-ordinating Body on Food & Trading Standards

London Electricity plc

Major Energy Users' Council

Midlands Electricity Board

Mr D J Mitchell

National Consumer Council

National Energy Action

National Federation of Consumer Groups

The National Grid Company plc

National Right to Fuel Campaign Ltd

The Norfolk & Waveney Chamber of Commerce & Industry

North Lancashire & South Cumbria POAC

North West Water Limited

Northern Electric plc

Northern Ireland Advisory Committee on Telecommunications

Northern Ireland Electricity plc

Norwich City Council

Nottinghamshire Area TAC

NTL Group Limited

Office of Electricity Regulation

Office of Gas Supply

Office of Water Services

OFWAT NCC

Orkney POAC & TAC

PayPoint Network Limited

Plymouth & District POAC & TAC

Purbeck & East Dorset TAC

Redcar & Cleveland Council

Royal National Institute for the Blind

Scottish Advisory Committee on Telecommunications

Scottish Consumer Council

Scottish Hydro-Electric plc

Scottish Power

Scottish Telecom

Seeboard plc

Mr B Sellers

Severn Trent Water Plc

Shetland TAC

Shropshire TAC

South Staffordshire Water plc

South West Water Limited

South Western Electricity plc

Southern Electric plc

Swalec, Dwr Cymru & Swalec Gas

Swansea & District POAC

Thames Water Utilities Limited

Mr Roy Thompson

Truro Area TAC

Unison

University of Bath

University of Bristol

University of California at Berkeley

Vodafone

Warwick Business School

Water UK

Welsh Advisory Committee on Telecommunications

Welsh Consumer Council

Welsh Language Board

Wolverhampton Metropolitan Borough Council

Yorkshire Electricity Group plc