Under the proposals, there will be a minimum payment of £40.
Based on an average annual water and sewerage bill of £440, this would be around 10% of the average annual customer bill, with several higher payments worth at least a quarter.
An issue like low pressure could see payments of up to £250 and internal flooding from sewers could trigger compensation of as much as £2,000.
The standards companies are expected to meet are outlined in the Guaranteed Standards Scheme, external, which sets a baseline for customer service in the water sector.
They include providing timely restoration of water supply following an interruption, responding to written complaints and managing the risk of sewer flooding.
Subject to an eight-week consultation, the government’s proposals will double payments for all existing standards.
They will also more than double the payments for certain highly disruptive incidents, such as failing to provide notice of supply interruptions and missing arranged appointments with customers.
The proposed new measures could be the first time the levels of reimbursement for customers have changed since 2000.
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