On 24 July the consultation period for the draft Flood and Water Management Bill (the "draft Bill") ended. The next steps are for the Government to assess the responses to the consultation and the impending report from The Environment, Food and Rural Affairs Committee, which has been scrutinising the draft Bill. The draft Bill is included in the government's draft legislative programme for 2009/10 announced by the Prime Minister in the House of Commons on 29 June 2009.
There were a number of drivers behind the draft Bill, including the need to update legislation with its origins in the 1940s and 1950s and implement the recommendations of Sir Michael Pitt's review of the lessons learned from the 2007 floods and the Floods Directive. The draft Bill may yet include measures in response to the Cave Review on Competition and Innovation in Water Markets and the Walker Review of Household Charging and Metering for Water and Sewerage Services.
The draft Bill makes many proposals that relate to management of flood risk and water quality, including clarifying responsibilities for all sources of flood risk. There are also a number of changes to the regulation and powers of water companies, which this article focuses on.
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On 24 July the consultation period for the draft Flood and Water Management Bill (the "draft Bill") ended. The next steps are for the Government to assess the responses to the consultation and the impending report from The Environment, Food and Rural Affairs Committee, which has been scrutinising the draft Bill. The draft Bill is included in the government's draft legislative programme for 2009/10 announced by the Prime Minister in the House of Commons on 29 June 2009.
There were a number of drivers behind the draft Bill, including the need to update legislation with its origins in the 1940s and 1950s and implement the recommendations of Sir Michael Pitt's review of the lessons learned from the 2007 floods and the Floods Directive. The draft Bill may yet include measures in response to the Cave Review on Competition and Innovation in Water Markets and the Walker Review of Household Charging and Metering for Water and Sewerage Services.
The draft Bill makes many proposals that relate to management of flood risk and water quality, including clarifying responsibilities for all sources of flood risk. There are also a number of changes to the regulation and powers of water companies, which this article focuses on.
Power to reconnect misconnected pipes
As highlighted in the consultation document, misconnections (i.e. the connection of wastewater pipes into surface water drains or vice versa) can result in sewer overloading and can lead to pollution of watercourses, groundwater and coastal water. The draft Bill aims to tackle the pollution that can result from misconnections by providing greater powers for water companies to resolve misconnection issues without relying on local authorities to complete the task as is the practice under the current regime.
Increased power to prohibit specified uses of water
Under existing legislation a water company may temporarily ban or restrict the use of hosepipes for watering private gardens or washing private motor vehicles if in its view there is, or could be, a serious deficiency of water for it to distribute to its customers. The draft Bill provides for the list of restricted, non-essential uses to be extended by secondary legislation.
Administration regime
Many regulated industries are subject to special administration regimes that are designed to ensure that customers continue to receive services in the event that a company providing the services becomes insolvent. The special administration regime for the water industry predates the new administration regime that was brought into force by the Enterprise Act 2002 and the draft Bill proposes some changes to update the special administration regime for water accordingly. These include allowing the administrator to pursue the "rescue" objective for the administration for viable companies experiencing financial difficulties rather than automatically pursuing the "transfer" objective.
Recovery of regulatory costs from water companies
Proposals under the draft Bill would enable the Drinking Water Inspectorate (the "DWI") to recover costs it incurs performing its regulatory duty from water companies in line with standard regulatory practice. Currently, Defra funds all of the DWI's activities. It is thought that with an increase in water suppliers (as recommended in the Cave Review) the costs involved in regulation would be better managed by the water companies. This would make the DWI more transparent in the way that it is funded and consequently this will enable it to become more accountable in the way it performs its regulatory functions.
Change to licence conditions by agreement
The draft Bill proposes changes to the Water Industry Act 1991 so that licence conditions can be modified if a certain proportion (to be specified by order) of affected water undertakers agree to the modification. Ofgem has similar powers to modify electricity licences, but investors may see this as increasing the risk profile of water companies.
Dispute resolution
The draft Bill transfers responsibility for handling certain complaints and disputes from Ofwat to other organisations. It also gives powers to Ofwat to determine disputes about the reasonable costs for diverting certain infrastructure from private land.
Creation of regulated project companies
The draft Bill provides a framework for the creation of regulated project companies to deliver infrastructure projects. Much of the detail on this will be set out in secondary legislation.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 10/08/2009.
