Water law reform under the new Water Bill

The UK Government's long awaited Water Bill was published on the 20 February 2003. Once finalised, it will make substantial changes to the law relating to water. It has four main proposals:

1) To reform the license regime for water abstraction (Part I);

2) To bring regulation of the water industry into line with energy, as in the Utilities Act 2000 (Part II);

3) To increase the opportunities for competition (Part II); and

4) To achieve changes affecting a variety of water-related matters including fire hydrants, water conservation and the threshold test in relation to contaminated land (Part III).

Point 1 above, contains some of the most controversial changes inherent in the Bill, such as:

• The removal of the right to compensation, in certain circumstances, where existing abstraction licences are varied or revoked in order to protect the environment; and
• The introduction of a new right to someone who has suffered loss or damage as a result of the abstraction of water to bring a civil claim against the abstractor, even where the abstraction is made in accordance with an abstraction licence.

Issues arising out of the proposed changes to the abstraction licensing system were the focus of an earlier Law-Now email entitled 'New Water Bill set to reform water abstraction licensing'. Please copy and paste/click on the following link to access a copy of that article.

This report will therefore highlight certain key features of points 2-4 above.

New Regulatory Authority

Part II of the Bill focuses on better regulation. The Government originally included these provisions in the Utilities Bill, however, they were removed because it was felt that it would be more appropriate to include them with the other reforms to water regulation coming in this draft Water Bill. The provisions do, however, reflect the amendments made to the equivalent energy provisions during the passage of the Utilities Act 2000 through parliament.

The current regulatory framework is set out in the Water Industry Act 1991. It provides for the Director General of Water Services to be responsible for economic regulation and customer interests for the Water Industry in England and Wales. Customer interests are represented through the regional Customer Service Committees. The new Water Bill amends this regulatory structure so that:

• A regulatory board, comprising a number of individuals (and known as "The Regulatory Authority") will replace the existing individual Director General;
• A new independent Consumer Council for Water will replace the Customer Service Committees and the Ofwat National Customer Council (known as WaterVoice)
• The Regulatory Authority and the Council will be required to consult on and publish a 'Forward Work Programme'. The programme must contain a general description of all projects that they plan to undertake which do not comprise routine activities. Future expenditure must also be outlined;
• The Regulatory Authority will be under duty to protect the interests of consumers and to contribute to the achievement of sustainable development;
• The Regulatory Authority must take account of guidance on social and environmental matters issued by the Secretary of State or the National Assembly;
• The Regulatory Authority, Secretary of State and Assembly will be empowered to fine a water company up to 10 per cent of its turnover, if it fails to meet appointment conditions, standards of performance or other obligations;
• Companies will be required to disclose any links between directors' pay and standards of performance. This disclosure is to be made as soon as reasonably practicable after the end of the disclosing company's financial year.

It is intended that these provisions will make regulation and the decision making process more transparent, predictable, accountable and effective.

Competition

Part II of the Bill also includes provisions that aim to increase the opportunities for competition in the supply of water services. Under this section:

• The Regulatory Authority is provided with new regulatory powers to administer the competition framework;
• A system to license new entrants to supply water services to large non-household users is set up. There will be an eligibility threshold set initially at an annual consumption of 50 megalitres (a means to amend this figure has been provided).
• The licensing system will regulate the relationship between the new entrant and the appointed undertakers, and ensure continuing standards for drinking water and coherent water resource planning.
• The Competition Commission's sector-specific utility panel for water will be abolished. Instead the Utilities Panel, established under the Utilities Act 2000 to deal with electricity and gas competition references, will now deal with water competition references.

Miscellaneous provisions

Part III of the Bill contains a range of miscellaneous provisions which amend the Water Industry Act 1991, Environment Act 1995, Water Resources Act 1991, Reservoirs Act 1975 and Environmental Protection Act 1990. It will make a number of useful improvements to the regulatory system.

• The Drinking Water Inspectorate: there will be stronger powers for the Drinking Water Inspectorate to institute proceedings and for magistrates to impose increased fines of up to £20,000 where water companies supply unfit water or fail to provide information (Unlimited fines are already possible in crown courts).
• Water Re-sale: the Regulatory Authority will be given the power to offer greater financial protection to persons paying for water or sewerage services provided with the help of (but not by) a water or sewerage company;
• Flood Defence: the Secretary of State is given the power to make necessary changes to existing legislation to facilitate streamlined arrangements for flood defence organisation and funding;
• Drought Plans: all water companies will be required to maintain up-to-date drought plans and to make them publicly available;
• Water Conservation: a new statutory duty will be imposed upon all water companies to conserve water;
• Fire Hydrants: water companies will be required to pay for replacement fire hydrants that they remove during mains renewal or refurbishment work;
• Coal Mine Water Pollution: there will be new powers for the Coal Authority to take action to prevent and clean up mine water pollution from abandoned coal mines;
• Contaminated Land: small in size but potentially significant in its impact, is the long promised addition of a "significance" threshold to the water pollution limb of the contaminated land regime under Part IIA of the EPA 1990. This change will ensure that minor cases of water pollution are not subject to inappropriate requirements;
• Transfer of discharge consents: there are measures to facilitate the process of transferring a discharge consent from an existing consent holder to a new holder;
• Trade effluent consents: there will be a new power for the Secretary of State to make regulations which clarify and make minor improvements to the trade effluent consenting regime;
• Self Lay of Water Mains and other pipes: organisations (essentially developers) will be able to enter an agreement with water undertakers to lay water mains and communication pipes in accordance with standards set by the undertaker.
• Lateral drains: there will be provisions to allow for new lateral drains (between the curtilage of the property and the main sewer) to be built to an adoptable standard.

The full Bill can be viewed via the following link.

For further information, please contact Richard Temple (Water) at [email protected] or on + 44 (0)20 7367 3738 or Paul Sheridan (Environment) at [email protected] or on +44 (0)20 7367 2186.