Thursday, 5 January 2017

Welsh Government urged to intervene to halt Dee Valley Water 'stitch-up'

‘Stand up for workers and the local economy’

The Welsh Government has been urged to intervene to stop an historic Welsh water company from being swallowed by a rival firm based in Coventry.

Plaid Cymru’s North Wales AM Llyr Gruffydd has written to Lesley Griffiths, the cabinet secretary responsible for the environment, urging her to intervene in the takeover of Dee Valley Water by Severn Trent plc before next week’s crucial shareholders’ meeting.

Mr Gruffydd said: 
“The decision by the Competition and Markets Authority not to carry out a full Phase 2 investigation of the proposed takeover of Dee Valley Water by Severn Trent was made in just two weeks and based on out-of-date information. This smacks of a stitch-up by the CMA and Ofwat, the water regulator, and I’m now urging the Welsh Government to intervene before it’s too late.  
“Next week’s shareholders’ meeting will decide whether to accept Severn Trent’s offer and my concern is that, once that vote it taken, it could be too late to take action.  
“Dee Valley Water is among the best-performing water companies in Wales and England when it comes to water quality, customer service and consumer satisfaction. It supplies water at a far lower price than that of Severn Trent and the takeover would result in losing jobs, local suppliers would suffer and a company that has served the Wrexham area for 150 years would disappear.  
“The evidence presented to the CMA by Ofwat is out of date and, as a result, is inaccurate and suggests DVW is performing worse than is the case. New data is available that shows DVW is among the top performing companies in the water industry. Why has Ofwat failed to provide those latest figures to the CMA and why has the CMA carried out an investigation in just two weeks based on information supplied by Severn Trent itself?  
“Dee Valley Water workers are unhappy (see letter below) with the way the authorities are behaving and they, along with the hundreds of thousands of customers who rely on Dee Valley Water, are entitled to have a strong voice to ensure fair play.  
“I and Plaid Cymru will do what we can but I also want the Welsh Government to stand up for Welsh workers, for the local economy here in the north-east and for the excellent service provided. To stand idly by while the powers-that-be fail to carry out a thorough and fair investigation would be a disgrace.”


Lesley Griffiths AM
Cabinet Secretary for Environment and Rural Affairs
National Assembly for Wales
Cardiff Bay
CF99 1NA

5 January 2017

Dear Ms Griffiths

We are writing to you on behalf of the staff at Dee Valley Water in your role as Cabinet Secretary for the Environment and Rural Affairs.  We have now read the detailed reports from Ofwat and the Competition and Markets Authority on the Acquisition of Dee Valley Water by Severn Trent Water.

We understand that this is a transaction between two private companies but we ask that you intervene in response to the poor data supplied by Ofwat to the Competition and Markets Authority that have led to the erroneous decision to grant phase 1 clearance.

  1. The Ofwat report contains numerous misstatements and uses out of date information to make its conclusions.  When finalising this report Ofwat knew that more up to date and better comparative information was readily available (such as the Discover Water website).  Why did it not use this information?

Ofwat Report

a.                   On page 13, last paragraph 1, Ofwat and Frontier Economics state that they have used PR14 data as their counterfactual.  Why, when this is as least two years out of date and Ofwat knows that DVW is now a company with completely different performance levels.  If Ofwat is genuinely interested in the customer then to protect customers it should use the latest available information.

  1. On page 14, paragraph 1, if one of the merging companies is leading or high performing in some areas.

i.                        Using 15/16 data DVW is high performing in all basic network measures, a number of SIM measures and also customer complaints.  Why has Ofwat ignored this information, which would fundamentally change the CMA review?

  1. On page 15 ranking for merging companies – again, why are only these indicators chosen why not use the most recent published data.

  1. On page 18 and pages 20 and 22.  Ofwat uses forward looking metrics but only on a small selection of measures, why have all the measures not been subjected to this analysis and again why has the latest published data not been used?

  1. On page 25, on the last bullet point Ofwat admits that there will come a point in the future when the loss of a comparator will become problematic.  Given current levels of customer performance for water Ofwat will be losing two of its top four ranked companies.  How then can the review so quickly determine that a stage 2 review is not required?

  1. On page 27 Ofwat states that SVT is a more helpful comparator on issues such as customer engagement and ODIs.  How can Ofwat make this statement when DVW outperforms SVT on the vast majority of the performance metrics?  Linked to this point, the main question for Wales and the customers in DVW’s area is how does SVT plan to improve performance so that customers in DVW’s area do not suffer a drop in performance standards?

  1. On page 28, the last paragraph and quote is regarding DVW not demonstrating best practise.  Given the most recent published data shows that DVW have a significant number of measured at upper quartile performance, how can Ofwat make this statement?

  1. On page 44 to 50 the rankings in the table are based on information that is at least two years out of date.  How can Ofwat continue to rank SVT more highly than DVW when DVW outperforms SVT on the vast majority of indicators?  Furthermore with better promotion of its vulnerable customer programmes, CCWater recognises as an industry leader on how it deals with vulnerable customers.

  1. The CMA has made no attempt to challenge the use of the out of date data.  How can the CMA approve something so quickly (in two weeks) without checking if the correct counterfactual has been used?

2.                   Severn Trent, an organisation with a vested interest in the outcome of the review, submitted out of date information to the CMA and then seemed able to predict the outcome of the CMA review on 9 December 2016, less than two weeks after the CMA had started the review.  Why did Ofwat and the CMA not request the latest information to use when making its judgements?

3.                   We are concerned by Ofwat’s impartiality as on more than one occasion representatives from Ofwat have publicly expressed their desire to see DVW disappear from the sector.

We feel that the CMA review process is flawed due to the usage of out of date information that does not effectively show the true performance of a successful small Welsh water company.  To ensure that the interests of our customers are adequately protected, we ask that you challenge the Competition and Markets Authority to carry out the review again using the latest publicly available information.

Yours sincerely

On behalf of Dee Valley Water staff

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