UK: Water Bill Commences In UK Parliament

Last Updated: 12 July 2013
Article by Paul Thompson

It has been a long time a-coming but, at last, the Government's Water Bill was presented to the House of Commons last Thursday, 27 June 2013. It now has every chance of becoming law before the next election in May 2015.

Currently, a date for Second Reading has not been announced but it looks most likely to be in the final sitting week (15-18 July) before the parliamentary summer recess.

The Bill provides for the introduction, amongst other things, of long heralded market reforms which are intended to increase competition and revolutionise the regulation of the water supply and sewerage industry in England and Wales. It also includes a number of important water resources, environmental permitting and flood defence/land drainage reforms.

The Bill has grown from the 34 Clause, 7 Schedule, 157 pager number, presented for pre-legislative scrutiny a year ago, to a more meaty 57 clauses, 10 Schedules and 177 pages, and it will probably get longer as it makes its way through Parliament.

The Government highlights in particular the following new features of the Bill:

  • changes to make it easier for owners of small scale water storage to sell excess water into the water supply market;
  • powers for the Secretary of State to specify a level of service for which water companies must plan;
  • changes that will make funding of water company schemes to restore sustainable abstraction quicker and easier, in order to tackle unsustainable abstraction more effectively;
  • measures to make it easier for developers to connect new developments to water and sewerage systems;
  • clarification that the functions of a sewerage undertaker include building and maintenance of Sustainable Drainage Systems, so that these can then be funded through the Price Review mechanism;
  • and a new resilience duty for Ofwat.

In relation to the proposed market reforms, out have gone the proposed new "network infrastructure authorisation" (in response to concerns about stranding of assets and fragmentation of networks) and the proposed new "retail infrastructure authorisations" (the inset regime is to be maintained and improved instead), both of which featured in the draft Bill. In has come, amongst other things, a duty on ministers to produce charging guidance, a ministerial power of veto over changes proposed by Ofwat to undertakers' licences and a right of appeal to changes in market codes. Also of particular note in terms of the regulation of water and sewerage companies more generally are a new overarching resilience duty, changes to make it easier for owners of small scale water storage to sell excess water into the water supply market and powers for the Secretary of State to specify a level of service for which water companies must plan.

Additionally, the Bill now covers clarification that the functions of a sewerage undertaker include building and maintenance of Sustainable Drainage Systems, so that these can then be funded through the Price Review mechanism, removal of compensation rights for changes to abstraction licences and provision for flood insurance for high risk household premises.

Published simultaneously with the Bill is the Government's response to the EFRA committee's pre-legislative scrutiny of the draft Bill and also a consultation (till 8 August) concerning the headline agreement now reached by the Government with the Association of British Insurers as respects the new "Flood Re" scheme for insuring homes at flood risk and possible alternative options for regulation

In relation to the proposed water and sewerage market reforms, see also the helpful resume produced by "Open Water" (which is nothing to do with wild swimming but rather the name now given to the programme steered by the High Level Group to agree and deliver the new retail market arrangements).

As is so often the case with Government responses to departmental Select Committee's reports on draft legislation, the Government has rejected most recommendations of the EFRA Committee beyond responding positively to its requests for updates and further explanations. The introduction of the new "resilience duty" for Ofwat (in place of changes to the order of Ofwat's existing duties proposed by the Committee) can be seen however as an advance on that recommendation.

The EFRA Committee recommendations rejected include those asking for the Government to publish draft charging guidance alongside the Bill, the Government stating that this would be "premature". But it does promise that it will "set out clearly the high level principles that will govern the future guidance during the passage of the Bill"; and that these will:

  • represent a fair deal for all customers – charges should a stable, transparent and affordable;
  • better reflect the costs of supply, increasing the long-term resilience and sustainability of our water resources;
  • and facilitate a more competitive sector, providing space for both incumbent water and sewerage companies and new entrants to the market to innovate in order to deliver benefits for customers.

Other recommendations rejected include those asking for the Bill to enshrine protection for householders from subsidising the non-household sector, to provide for the functional separation of incumbent companies' wholesale and retail arms, to enable incumbent companies to voluntarily exit the retail market, to bring further forward upstream market reforms, to further encourage water meters, to advance the prospective new abstraction regime and the implementation of the existing provisions for sustainable drainage systems (SuDs).

As is to be expected, the Government strikes a robust and confident stance in rejecting Committee recommendations and in asserting that "we are convinced we have struck the right balance". It will now be for the markets to let it know if they agree and that onward investment in our water industry remains secure.

Those who like jargon and strange acronyms will love this Bill and the commentary surrounding it, others may find the new vocabulary a whole lot more challenging. As well as the technical stuff ("restricted retail authorisation" and the like) references will be found to such wonders as a "market strawman", "a placeholder clause", and "unbundling". Through this blog, we will seek to keep you in touch in plain English with the key points on the Bill and its potential implications as it makes what may be a bit of a roller coaster ride through Parliament. Enjoy!

To facilitate following the progress of the Bill and this blog, you will find in the following links:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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