Water Act 2014

Part 1 — Water industry

CHAPTER 1 — Water supply licences and sewerage licences

Expansion of water supply licensing

Types of water supply licence and arrangements with water undertakers

1

• (1) For section 17A of the Water Industry Act 1991 there is substituted—

(17A) (1) The Authority may grant to a person a licence in respect of the use of the supply system of a water undertaker (a “water supply licence”). (2) A water supply licence may give the holder of the licence one or more of the following authorisations and combination of authorisations— (a) a retail authorisation; (b) a wholesale authorisation; (c) a restricted retail authorisation; (d) a restricted retail authorisation and a supplementary authorisation. (3) Schedule 2A makes provision as to the authorisations (including their operation in England and Wales). (4) In the case of each of the authorisations, an authorisation to do a thing is an authorisation to do it in accordance with Chapter 2A of Part 3. (5) The Authority may exercise the power to grant a water supply licence only in accordance with a general authorisation given by the Secretary of State. (6) Before giving a general authorisation as regards the Authority, the Secretary of State must consult the Welsh Ministers. (7) References in this Act to a water supply licensee are references to a person that is the holder for the time being of a water supply licence. (17AA) (1) Before the Authority grants a water supply licence giving a wholesale authorisation, it must consult— (a) the Secretary of State; (b) the Chief Inspector of Drinking Water; (c) the Environment Agency; (d) the NRBW. (2) Before the Authority grants a water supply licence giving a supplementary authorisation, it must consult— (a) the Secretary of State; (b) the Chief Inspector of Drinking Water; (c) the Environment Agency; (d) the Welsh Ministers; (e) the Chief Inspector of Drinking Water for Wales if there is one; (f) the NRBW. (3) A water supply licence may not be granted to a water undertaker. (4) A water supply licence may not be granted to a person unless that person is a limited company. (5) The restriction in subsection (4) does not apply if the water supply licence gives only— (a) a retail authorisation, (b) a restricted retail authorisation, or (c) a retail authorisation and a restricted retail authorisation.

• (2) After Schedule 2 to the Water Industry Act 1991 there is inserted the Schedule set out in Schedule 1.

• (3) Schedule 2 (which amends Chapter 2A of Part 3 of the Water Industry Act 1991 which relates to water undertakers' duties to enable operations of water supply licensees) has effect.

The supply system of a water undertaker

2

• (1) Section 17B of the Water Industry Act 1991 (guidance and interpretation) is amended as follows.

• (2) After subsection (4) there is inserted—

(4A) In this Chapter, references to the supply system of a water undertaker are, in the case of an undertaker whose area is wholly or mainly in England, references to the system comprising the following— (a) any reservoirs and other places of storage and any treatment works developed or maintained by the water undertaker for the purpose of complying with its duty under section 37, and (b) any water mains and other pipes which it is the water undertaker's duty to develop and maintain by virtue of section 37.

• (3) In subsection (5) (interpretation of references to the supply system of a water undertaker), after “undertaker are” there is inserted “ , in the case of an undertaker whose area is wholly or mainly in Wales, ”.

The threshold requirement

3

• (1) The Secretary of State may by order made by statutory instrument repeal section 17A(3)(b) of the Water Industry Act 1991 (the threshold requirement affecting premises in England and Wales), so far as it relates to premises supplied using the supply system of a water undertaker whose area is wholly or mainly in England.

• (2) The Welsh Ministers may by order made by statutory instrument repeal section 17A(3)(b) of the Water Industry Act 1991, so far as it relates to premises supplied using the supply system of a water undertaker whose area is wholly or mainly in Wales.

• (3) The references in subsections (1) and (2) to section 17A of the Water Industry Act 1991 are to the section 17A that is to be repealed (by substitution) by section 1 of this Act.

• (4) The Welsh Ministers may by order made by statutory instrument repeal paragraph 7(b) of Schedule 2A to the Water Industry Act 1991 (inserted by Schedule 1 to this Act).

• (5) An order under subsection (1), (2) or (4) may make such amendments of the Water Industry Act 1991 and this Act as are necessary or appropriate in consequence of the repeal made by the order.

• (6) A statutory instrument containing an order to be made by the Secretary of State under subsection (1) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.

• (7) A statutory instrument containing an order to be made by the Welsh Ministers under subsection (2) or (4) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the National Assembly for Wales.

Introduction of sewerage licences

Types of sewerage licence and arrangements with sewerage undertakers

4

• (1) After section 17B of the Water Industry Act 1991 there is inserted—

(17BA) (1) The Authority may grant to a person a licence in respect of the use of the sewerage system of a sewerage undertaker whose area is wholly or mainly in England (a “sewerage licence”). (2) A sewerage licence may give the holder of the licence one or more of the following— (a) a retail authorisation; (b) a wholesale authorisation; (c) a disposal authorisation. (3) Schedule 2B makes provision as to the authorisations. (4) In the case of each of the authorisations, an authorisation to do a thing is an authorisation to do it in accordance with Chapter 2A of Part 4. (5) The Authority may exercise the power to grant a sewerage licence only in accordance with a general authorisation given by the Secretary of State. (6) References in this Act to a sewerage licensee are references to a person that is the holder for the time being of a sewerage licence. (7) References in this Chapter to the sewerage system of a sewerage undertaker are references to the system comprising— (a) the system of public sewers, the facilities for emptying public sewers and the sewage disposal works and other facilities for dealing effectually with the contents of public sewers that the undertaker is required to provide by section 94, and (b) the lateral drains that the undertaker is required to maintain by section 94. (17BB) (1) The Authority must consult the Secretary of State, the Environment Agency and the NRBW before granting a licence that gives— (a) a wholesale authorisation, or (b) a disposal authorisation. (2) A sewerage licence granted to a sewerage undertaker may not give the holder— (a) a retail authorisation, or (b) a wholesale authorisation. (3) A sewerage licence may not be granted to a person unless that person is a limited company. (4) The restriction in subsection (3) does not apply if the sewerage licence gives only a retail authorisation.

• (2) After Schedule 2A to the Water Industry Act 1991 (inserted by section 1) there is inserted the Schedule set out in Schedule 3.

• (3) Schedule 4 (which amends Part 4 of the Water Industry Act 1991 to add a Chapter 2A relating to arrangements between sewerage undertakers and sewerage licensees) has effect.

Application as regards Wales

Water supply and sewerage licensing changes applied as regards Wales

5

Schedule 5 (which contains amendments in connection with applying licensing changes to relation to relevant undertakers whose areas are wholly or mainly in Wales) has effect.

Licensing arrangements between England and Wales and Scotland

Arrangements with the Water Industry Commission for Scotland

6

• (1) The Water Industry Act 1991 is amended as follows.

• (2) After section 17F (procedure for granting and varying licences) there is inserted—

(17FA) (1) The Secretary of State may by regulations make provision about— (a) treating a 2005 Act application for the grant of a water services licence under section 6 of the 2005 Act as being also an application under section 17F for the grant of a water supply licence giving only a retail authorisation or a restricted retail authorisation or both; (b) treating a 2005 Act application for the grant of a sewerage services licence under section 6 of the 2005 Act as being also an application under section 17F for the grant of a sewerage licence giving only a retail authorisation. (2) The regulations may in particular make provision about— (a) the circumstances in which, and the conditions subject to which, a 2005 Act application is to be treated as an application under section 17F for a water supply or sewerage licence giving a particular authorisation or particular authorisations; (b) the time at which an application is to be treated as having been made; (c) the processing of an application by the Authority. (3) Provision under subsection (2)(a) may require a 2005 Act application that is forwarded to the Authority— (a) to contain, or to be accompanied by, such information or information of such description as is specified by the regulations; (b) to be accompanied by such documents or documents of such descriptions as are specified by the regulations; (c) to be accompanied by a fee, or a fee of a description, specified by the regulations. (4) In this section and section 17FB— - “the 2005 Act” means the Water Services etc. (Scotland) Act 2005; - “2005 Act application” means an application under paragraph 1 of Schedule 2 to the 2005 Act. (17FB) (1) If the conditions in subsection (2) are satisfied, the Authority must— (a) forward to the Commission a copy of an application under section 17F for the grant of a water supply licence or sewerage licence, and (b) send to the Commission such information and such fee as appear to the Authority to be required in order that the application may be treated by the Commission as a 2005 Act application for the grant of— (i) a water services licence under section 6 of the 2005 Act, or (ii) a sewerage services licence under section 6 of the 2005 Act, as the case may be. (2) The conditions are that— (a) the Authority is requested to do so by the applicant; (b) the application under section 17F appears to the Authority to be an application that would be treated by the Commission as a 2005 Act application for the grant of— (i) a water services licence under section 6 of the 2005 Act, or (ii) a sewerage services licence under section 6 of the 2005 Act, as the case may be; (c) the applicant has given the Authority— (i) such information as is mentioned in subsection (1)(b), and (ii) a means of sending to the Commission such fee as is mentioned in subsection (1)(b). (3) The Authority must— (a) forward a copy of the application, and (b) send such information and fee as are mentioned in subsection (1)(b), before the end of the agreed period for an application of that description. (4) In this section— - “the agreed period”, in relation to an application under section 17F of a particular description, means the period agreed between the Authority and the Commission as the period applying to an application of that description for the purposes of subsection (3); - “the Commission” means the Water Industry Commission for Scotland.

Arrangements with the Water Services Regulation Authority

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• (1) The Water Services etc. (Scotland) Act 2005 is amended as follows.

• (2) In Schedule 2 (procedure for granting licences), after paragraph 1 there is inserted—

(1A) (1) The Scottish Ministers may by order make provision about— (a) treating an application under section 17F of the 1991 Act for the grant of a water supply licence giving a retail authorisation or a restricted retail authorisation as being also an application under paragraph 1 for the grant of a water services licence; (b) treating an application under section 17F of the 1991 Act for the grant of a sewerage licence giving a retail authorisation as being also an application under paragraph 1 for the grant of a sewerage services licence. (2) The order may in particular make provision about— (a) the circumstances in which, and the conditions subject to which, an application under section 17F of the 1991 Act is to be treated as an application under paragraph 1 for a water services licence or a sewerage services licence; (b) the time at which an application is to be treated as having been made; (c) the processing of an application by the Commission. (3) Provision under sub-paragraph (2)(a) may require an application under section 17F of the 1991 Act that is forwarded to the Commission— (a) to include, or be accompanied by, information prescribed by the order; (b) to be accompanied by a fee, or a fee of a description, prescribed by the order. (4) In this paragraph and paragraph 1B “the 1991 Act” means the Water Industry Act 1991. (1B) (1) If the conditions in sub-paragraph (2) are satisfied, the Commission must— (a) forward to the Authority a copy of an application under paragraph 1 for the grant of a water services licence or sewerage services licence; (b) send to the Authority such information, documents and fee as appear to the Commission to be required in order that the application may be treated by the Authority as an application under section 17F of the 1991 Act for the grant of— (i) a water supply licence giving a retail authorisation or a restricted retail authorisation or both, or (ii) a sewerage licence giving a retail authorisation, as the case may be. (2) The conditions are that— (a) the Commission is requested to do so by the applicant; (b) the application under paragraph 1 appears to the Commission to be an application that would be treated by the Authority as an application under section 17F of the 1991 Act for the grant of— (i) a water supply licence giving a retail authorisation or a restricted retail authorisation or both, or (ii) a sewerage licence giving a retail authorisation, as the case may be; (c) the applicant has given the Commission— (i) such information and documents as are mentioned in sub-paragraph (1)(b), and (ii) a means of sending to the Authority such fee as is mentioned in sub-paragraph (1)(b). (3) The Commission must— (a) forward a copy of the application, and (b) send such information, documents and fee as are mentioned in sub-paragraph (1)(b), before the end of the agreed period for an application of that description. (4) In this paragraph— - “the agreed period”, in relation to an application under paragraph 1 of a particular description, means the period agreed between the Commission and the Authority as the period applying to an application of that description for the purposes of sub-paragraph (3); - “the Authority” means the Water Services Regulation Authority.

• (3) In section 6 (grant of water services and sewerage services licences)—

• (a) in subsection (1), for “paragraphs 1 and 2” there is substituted “ paragraphs 1, 1A and 2 ”;

• (b) in subsection (3), for “paragraphs 1 and 2” there is substituted “ paragraphs 1, 1A and 2 ”.

• (4) In section 34 (orders and regulations), in subsection (3)(c), after “or (4)” there is inserted “ , 1A(1) ”.

CHAPTER 2 — Water and sewerage undertakers

Arrangements between relevant undertakers

Bulk supply of water by water undertakers

8

• (1) For sections 40 and 40A of the Water Industry Act 1991 (agreements for the bulk supply of water etc) there is substituted—

(40) (1) This section applies where— (a) a qualifying person requests a water undertaker to provide a supply of water in bulk to the qualifying person, or (b) a water undertaker proposes such an arrangement; and references in this section to the supplier are references to the water undertaker who is to provide the supply of water. (2) In this section “qualifying person” means— (a) a water undertaker; (b) a person who has made an application for an appointment or variation under section 8 which has not been determined. (3) On the application of the qualifying person or the supplier, the Authority may— (a) if it appears to the Authority that it is necessary or expedient for the purposes of securing the efficient use of water resources, or the efficient supply of water, that the supplier should give a supply of water in bulk to the qualifying person, and (b) if the Authority is satisfied that the supplier and qualifying person cannot reach agreement within a reasonable time, by order require the supplier to give and the qualifying person to take a supply of water in bulk for such period and on such terms and conditions as may be specified in the order. (4) Before making an order under subsection (3), the Authority must consult the appropriate agency, in particular about whether the proposed supply of water would secure an efficient use of water resources, taking into account the effect on the environment of the proposed supply. (5) Subject to subsection (6), an order under subsection (3) has effect as an agreement between the supplier and the qualifying person. (6) If the Authority makes an order under subsection (3) that affects a person who is a qualifying person by virtue of subsection (2)(b), the Authority must frame the order so that it does not have effect until— (a) the person becomes a water undertaker for the area specified in the order, or (b) the person becomes a water undertaker for an area that includes the area specified in the order (in the case of a water undertaker applying for a variation). (7) Neither the CMA nor the Authority may exercise, in respect of an agreement for the supply of water in bulk by a water undertaker to a qualifying person, the powers conferred by— (a) section 32 of the Competition Act 1998 (directions in relation to agreements); (b) section 35(2) of that Act (interim directions). (8) Subsection (7)(b) does not apply to the exercise of powers in respect of conduct— (a) which is connected with an agreement for the supply of water in bulk by a water undertaker to a qualifying person, and (b) in respect of which section 35(1) of the Competition Act 1998 applies because of an investigation under section 25 of that Act relating to a suspected infringement of the Chapter 2 prohibition imposed by section 18(1) of that Act. (9) In exercising its functions under this section, the Authority must have regard to the desirability of— (a) facilitating effective competition within the water supply industry; (b) the supplier's recovering the expenses of complying with its obligations by virtue of this section and securing a reasonable return on its capital; (c) the supplier's being able to meet its existing obligations, and likely future obligations, to supply water without having to incur unreasonable expenditure in carrying out works; (d) not putting at risk the ability of the supplier to meet its existing obligations, or likely future obligations, to supply water. (10) In this section and section 40A “the appropriate agency”, in relation to a determination whether to make an order under subsection (3) or section 40A(1) which would result in, or which would vary or terminate, a bulk supply agreement, means— (a) the Environment Agency, in a case where all parties to the bulk supply agreement are or would be— (i) a water undertaker whose area is wholly in England, or (ii) a person who would, if the person's application for an appointment or variation is determined in accordance with the application, be such a water undertaker; (b) the NRBW, in a case where all parties to the bulk supply agreement are or would be— (i) a water undertaker whose area is wholly in Wales, or (ii) a person who would, if the person's application for an appointment or variation is determined in accordance with the application, be such a water undertaker; (c) both the Environment Agency and the NRBW, in any other case. (11) In this section and sections 40A to 40J “bulk supply agreement” means an agreement with one or more water undertakers for the supply of water in bulk and includes— (a) an order under subsection (3) which is deemed to be an agreement by virtue of subsection (5), and (b) any agreement which has been varied by order under section 40A(1). (40A) (1) On the application of any party to a bulk supply agreement, the Authority may— (a) if it appears to the Authority that it is necessary or expedient for the purpose of securing the efficient use of water resources, or the efficient supply of water, that the bulk supply agreement should be varied or terminated, and (b) if the Authority is satisfied that variation or termination cannot be achieved by agreement within a reasonable time, by order vary or terminate the bulk supply agreement. (2) Before making an order under subsection (1), the Authority must consult the appropriate agency, in particular about whether the proposed variation or termination of the bulk supply agreement would secure an efficient use of water resources, taking into account the effect on the environment of what is proposed. (3) If an order under subsection (1) is made in relation to a bulk supply agreement, the agreement— (a) has effect subject to the provision made by the order, or (b) ceases to have effect (as the case may be). (4) An order under subsection (1) may require any party to the agreement to pay compensation to any other party. (5) Neither the CMA nor the Authority may exercise, in respect of an agreement to vary or terminate a bulk supply agreement, the powers conferred by— (a) section 32 of the Competition Act 1998 (directions in relation to agreements); (b) section 35(2) of that Act (interim directions). (6) Subsection (5)(b) does not apply to the exercise of powers in respect of conduct— (a) which is connected with an agreement to vary or terminate a bulk supply agreement, and (b) in respect of which section 35(1) of the Competition Act 1998 applies because of an investigation under section 25 of that Act relating to a suspected infringement of the Chapter 2 prohibition imposed by section 18(1) of that Act. (7) In exercising its functions under this section, the Authority must have regard to the expenses incurred by the supplier in complying with its obligations under the bulk supply agreement in question and to the desirability of— (a) facilitating effective competition within the water supply industry; (b) the supplier's recovering the expenses of complying with its obligations by virtue of this section and securing a reasonable return on its capital; (c) the supplier's being able to meet its existing obligations, and likely future obligations, to supply water without having to incur unreasonable expenditure in carrying out works; (d) not putting at risk the ability of the supplier to meet its existing obligations, or likely future obligations, to supply water. (8) In this section and sections 40B to 40J— - “qualifying person” has the meaning given by section 40; - “supplier”, in relation to a bulk supply agreement, means any water undertaker which is required by the agreement to provide a bulk supply of water. (40B) (1) The Authority may issue one or more codes in respect of bulk supply agreements. (2) A code may make provision about— (a) procedures in connection with making a bulk supply agreement; (b) procedures in connection with varying or terminating a bulk supply agreement; (c) procedures to be followed by the Authority in determining whether to make an order under section 40(3) or 40A(1); (d) the terms and conditions of a bulk supply agreement, including terms as to the duration of such an agreement; (e) principles for determining the terms and conditions that should or should not be incorporated into a bulk supply agreement; (f) the steps to be taken by the Authority in determining whether a person is complying with a code. (3) A code must include provision requiring persons proposing to make, vary or terminate a bulk supply agreement to consult the appropriate agency. (4) If the Authority considers that a water undertaker is not acting as required by a code, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction. (5) The Authority may not give a direction under subsection (4) requiring a person to enter into, vary or terminate an agreement. (6) It is the duty of a water undertaker to comply with a direction under subsection (4), and this duty is enforceable by the Authority under section 18. (7) A code may make different provision for different persons or different descriptions of person. (8) The Authority may from time to time revise a code issued under this section and issue a revised code. (9) A revised code may include provision for applying any of its revisions to bulk supply agreements made before the revised code comes into force. (10) In this section “the appropriate agency”, in relation to a bulk supply agreement or proposed bulk supply agreement, means the body that would be consulted by the Authority under section 40(4) or 40A(2) if an order under section 40(3) or 40A(1) were being considered in relation to the agreement or proposed agreement. (40C) (1) Before issuing a code under section 40B, the Authority must— (a) prepare a draft of the proposed code under section 40B; (b) consult the appropriate agency; (c) consult such other persons about the proposed code as it considers appropriate. (2) The Authority must specify the period (“the consultation period”) within which persons may make representations about the proposed code. (3) Before a code under section 40B prepared by the Authority is issued, the Minister may direct the Authority— (a) not to issue the code, or (b) to issue the code with specified modifications. (4) Subsection (3) is subject to subsections (6) and (7). (5) In subsection (3) “the Minister” means— (a) the Secretary of State, so far as a code prepared by the Authority relates to bulk supply agreements to which all parties are— (i) a water undertaker whose area is wholly or mainly in England, or (ii) a person who would, if the person's application for an appointment or variation is determined in accordance with the application, be such a water undertaker; (b) the Welsh Ministers, so far as a code prepared by the Authority relates to bulk supply agreements to which all parties are— (i) a water undertaker whose area is wholly or mainly in Wales, or (ii) a person who would, if the person's application for an appointment or variation is determined in accordance with the application, be such a water undertaker; (c) the Secretary of State and the Welsh Ministers acting jointly, so far as a code prepared by the Authority relates to bulk supply agreements to which— (i) a person falling within paragraph (a)(i) or (ii) is party, and (ii) a person falling within paragraph (b)(i) or (ii) is party. (6) If the power under subsection (3) is exercised to give a direction in respect of such bulk supply agreements as are referred to in paragraph (a), (b) or (c) of subsection (5), it may not be exercised again in respect of such bulk supply agreements as are referred to in that paragraph. (7) If the power under subsection (3) to give a direction in respect of such bulk supply agreements as are referred to in paragraph (a), (b) or (c) of subsection (5) is not exercised on the first occasion on which it may be so exercised, it may not be exercised in respect of such bulk supply agreements as are referred to in that paragraph on a later occasion. (8) A direction under subsection (3) must be given within the period of 28 days beginning with the day after the end of the consultation period, and a code prepared by the Authority in relation to which a direction may be given may not be issued before that period of 28 days has expired. (9) In this section “the appropriate agency” means— (a) the Environment Agency, so far as a proposed code relates to bulk supply agreements to which all parties are persons mentioned in section 40(10)(a)(i) or (ii); (b) the NRBW, so far as a proposed code relates to bulk supply agreements to which all parties are persons mentioned in section 40(10)(b)(i) or (ii); (c) both the Environment Agency and the NRBW, in any other case. (10) This section is subject to section 40D. (40D) (1) This section applies if the Authority proposes to issue a revised code under section 40B and, in the view of the Authority, the revision or each of the revisions proposed to be made is— (a) a revision for which consultation is unnecessary, or (b) a revision that it is necessary or desirable to make without delay. (2) Section 40C does not apply to the proposed revised code. (3) Once the Authority has issued the revised code, it must give notice as soon as reasonably practicable of— (a) the issuing of the revised code, and (b) as regards each revision contained in it, whether in the view of the Authority the revision falls within paragraph (a) or (b) of subsection (1). (4) Notice under subsection (3) is to be given to such persons as the Authority considers appropriate. (5) Unless the Authority gives notice that a revision in a revised code is in the view of the Authority a revision falling within subsection (1)(a), the revision ceases to have effect at the end of the period of six months beginning with the day after that on which the revised code is issued. (40E) (1) The Authority may issue rules about charges that may be imposed by a water undertaker under a bulk supply agreement. (2) The rules may in particular make provision about— (a) what types of charge may be imposed; (b) the amount or the maximum amount, or a method for determining the amount or maximum amount, of any type of charge; (c) principles for determining what types of charge may or may not be imposed; (d) principles for determining the amount of any charge that may be imposed; (e) publication of the charges that may be imposed. (3) If the Authority considers that a water undertaker is not acting as required by rules under this section, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction. (4) It is the duty of a water undertaker to comply with a direction under subsection (3), and this duty is enforceable by the Authority under section 18. (5) The rules may— (a) make different provision for different water undertakers or different descriptions of water undertaker; (b) make different provision for different purposes; (c) make provision subject to exceptions. (6) The Authority may from time to time revise rules issued under this section and issue revised rules. (7) The Authority must issue revised rules if— (a) guidance is issued under section 40I, and (b) the Authority, having regard to that guidance, considers that it is appropriate to revise the rules. (8) Revised rules may include provision for applying any of their revisions to bulk supply agreements made before the revised rules come into effect. (40F) (1) Rules under section 40E may provide for the reduction of charges payable for a supply of water under a bulk supply agreement where conditions specified by the rules are satisfied. (2) Rules made by virtue of subsection (1) may in particular— (a) specify conditions that affect any party to a bulk supply agreement; (b) require that steps be taken for the purpose of reducing or managing water consumption; (c) specify conditions about reducing charges payable by a person who— (i) is not party to the agreement, and (ii) takes or proposes to take such steps as satisfy or would satisfy a condition falling within paragraph (b). (3) The rules may provide that, where a charge falls to be reduced in accordance with rules made by virtue of subsection (1), the water undertaker to which the charges are payable must give notice of that reduction to the Authority. (4) Rules made by virtue of subsection (3) may— (a) make provision as to the content of the notice; (b) specify the period within which an undertaker is to give notice to the Authority. (5) Provision under subsection (4)(a) may in particular require the notice to specify— (a) the provision of the rules that brings about the reduction in the charge; (b) the amount of the charge, with and without the reduction; (c) the period for which the reduction has effect. (40G) (1) Before issuing rules under section 40E, the Authority must— (a) prepare a draft of the proposed rules, and (b) consult such persons about the proposed rules as it thinks appropriate. (2) The Authority must specify the period (“the consultation period”) within which persons may make representations about the proposed rules. (3) The Authority must have regard to guidance issued under section 40I in making rules under section 40E. (4) Before rules under section 40E prepared by the Authority are issued, the Minister may direct the Authority not to issue the rules. (5) In subsection (4) “the Minister” means— (a) the Secretary of State, so far as rules prepared by the Authority relate to bulk supply agreements to which all parties are— (i) a water undertaker whose area is wholly or mainly in England, or (ii) a person who would, if the person's application for an appointment or variation is determined in accordance with the application, be such a water undertaker; (b) the Welsh Ministers, so far as rules prepared by the Authority relate to bulk supply agreements to which all parties are— (i) a water undertaker whose area is wholly or mainly in Wales, or (ii) a person who would, if the person's application for an appointment or variation is determined in accordance with the application, be such a water undertaker; (c) the Secretary of State and the Welsh Ministers acting jointly, so far as rules prepared by the Authority relate to bulk supply agreements to which— (i) a person falling within paragraph (a)(i) or (ii) is party, and (ii) a person falling within paragraph (b)(i) or (ii) is party. (6) A direction under subsection (4) must be given within the period of 28 days beginning with the day after the end of the consultation period, and rules may not be issued before that period of 28 days has expired. (7) This section is subject to section 40H. (40H) (1) This section applies if the Authority proposes to issue revised rules under section 40E and, in the view of the Authority, the revision or each of the revisions proposed to be made is— (a) a revision for which consultation is unnecessary, or (b) a revision that it is necessary or desirable to make without delay. (2) Section 40G does not apply to the proposed revised rules. (3) Before issuing the revised rules, the Authority must give notice to the Minister of its intention to issue revised rules. (4) Before the revised rules are issued, the Minister may direct the Authority not to issue the revised rules. (5) A direction under subsection (4) must be given within the period of 14 days beginning with the day after the day on which notice is given under subsection (3), and the Authority may not issue the revised rules in question before— (a) that period of 14 days expires, or (b) the Minister notifies the Authority that no direction under subsection (4) will be given in relation to the revised rules, whichever is the sooner. (6) Once the Authority has issued the revised rules, it must give notice as soon as reasonably practicable of— (a) the issuing of the revised rules, and (b) as regards each revision contained in them, whether in the view of the Authority the revision falls within paragraph (a) or (b) of subsection (1). (7) Notice under subsection (6) is to be given to such persons as the Authority considers appropriate. (8) Unless the Authority gives notice that a revision in revised rules is in the view of the Authority a revision falling within subsection (1)(a), the revision ceases to have effect at the end of the period of six months beginning with the day after that on which the revised rules are issued. (9) In this section “the Minister” has the meaning given by section 40G. (40I) (1) The Minister may issue guidance as to the content of rules under section 40E. (2) Before issuing the guidance, the Minister must— (a) prepare a draft of the proposed guidance; (b) consult the relevant persons about the draft. (3) The relevant persons are— (a) the Secretary of State; (b) the Welsh Ministers; (c) such other persons as the Minister thinks appropriate. (4) The Minister may from time to time revise the guidance and issue revised guidance. (5) Subsections (2) and (3) apply to revised guidance as they apply to the original guidance. (6) The Minister must arrange for the publication of guidance issued under this section. (7) In this section “the Minister” means— (a) the Secretary of State, in relation to bulk supply agreements to which all parties are— (i) a water undertaker whose area is wholly or mainly in England, or (ii) a person who would, if the person's application for an appointment or variation is determined in accordance with the application, be such a water undertaker; (b) the Welsh Ministers, in relation to bulk supply agreements to which all parties are— (i) a water undertaker whose area is wholly or mainly in Wales, or (ii) a person who would, if the person's application for an appointment or variation is determined in accordance with the application, be such a water undertaker; (c) the Secretary of State and the Welsh Ministers acting jointly, in relation to bulk supply agreements to which— (i) a person falling within paragraph (a)(i) or (ii) is party, and (ii) a person falling within paragraph (b)(i) or (ii) is party. (40J) (1) A supplier under a bulk supply agreement must provide such information as the appropriate agency may request in relation to water supplied under the agreement. (2) The requirement in subsection (1) is enforceable by the Authority under section 18. (3) In subsection (1) “the appropriate agency” means the body that would be consulted by the Authority under section 40A(2) if the agreement were to be varied or terminated by an order under section 40A(1).

• (2) In sections 40A to 40J of the Water Industry Act 1991 (as substituted by subsection (1))—

• (a) a reference to a bulk supply agreement includes a reference to an old bulk supply agreement, and

• (b) a reference to a supplier, in relation to a bulk supply agreement, is to be construed accordingly.

For these purposes, an old bulk supply agreement is a bulk supply agreement within the meaning of section 40A, as that section had effect before being substituted under subsection (1).

Main connections into sewerage systems

9

• (1) For section 110A of the Water Industry Act 1991 (new connections with public sewers) there is substituted—

(110A) (1) This section applies where— (a) a qualifying person requests a sewerage undertaker to permit a main connection into the established undertaker's sewerage system for the benefit of the qualifying person, or (b) a sewerage undertaker proposes such an arrangement; and references in this section to the established undertaker are references to the sewerage undertaker who is to permit the main connection. (2) In this section “qualifying person” means— (a) a sewerage undertaker, or (b) a person who has made an application for an appointment or variation under section 8 which has not been determined. (3) On the application of the qualifying person or the established undertaker, the Authority may— (a) if it appears to the Authority that it is necessary or expedient for the purposes of this Part that the established undertaker should permit a main connection into its sewerage system, and (b) if the Authority is satisfied that the established undertaker and qualifying person cannot reach agreement, by order require the established undertaker to permit the connection for such period and on such terms and conditions as may be specified in the order. (4) Before making an order under subsection (3), the Authority must consult the appropriate agency. (5) Subject to subsection (6), an order under subsection (3) has effect as an agreement between the established undertaker and the qualifying person. (6) If the Authority makes an order under subsection (3) on the application of a person who is a qualifying person by virtue of subsection (2)(b), the Authority must frame the order so that it does not have effect until— (a) the person becomes a sewerage undertaker for the area specified in the order, or (b) the person becomes a sewerage undertaker for an area that includes the area specified in the order (in the case of a sewerage undertaker applying for a variation). (7) Neither the CMA nor the Authority may exercise, in respect of an agreement with a sewerage undertaker for it to permit a main connection into its sewerage system for the benefit of a qualifying person, the powers conferred by— (a) section 32 of the Competition Act 1998 (directions in relation to agreements); (b) section 35(2) of that Act (interim directions). (8) Subsection (7)(b) does not apply to the exercise of powers in respect of conduct— (a) which is connected with such agreement as is mentioned in subsection (7), and (b) in respect of which section 35(1) of the Competition Act 1998 applies because of an investigation under section 25 of that Act relating to a suspected infringement of the Chapter 2 prohibition imposed by section 18(1) of that Act. (9) In exercising its functions under this section, the Authority must have regard to the desirability of— (a) facilitating effective competition within the sewerage services industry; (b) the established undertaker's recovering the expenses of complying with its obligations by virtue of this section and securing a reasonable return on its capital; (c) the established undertaker's being able to meet its existing obligations, and likely future obligations, to provide sewerage services without having to incur unreasonable expenditure in carrying out works; (d) not putting at risk the ability of the established undertaker to meet its existing obligations, or likely future obligations, to provide such services. (10) In this section and section 110B “the appropriate agency”, in relation to a determination whether to make an order under subsection (3) or section 110B(1) which would result in, or which would vary or terminate, a main connection agreement, means— (a) the Environment Agency, in a case where all parties to the main connection agreement are or would be— (i) a sewerage undertaker whose area is wholly in England, or (ii) a person who would, if the person's application for an appointment or variation is determined in accordance with the application, be such a sewerage undertaker; (b) the NRBW, in a case where all parties to the main connection agreement are or would be— (i) a sewerage undertaker whose area is wholly in Wales, or (ii) a person who would, if the person's application for an appointment or variation is determined in accordance with the application, be such a sewerage undertaker; (c) both the Environment Agency and the NRBW, in any other case. (11) In this section and sections 110B to 110J— - “main connection” means— 1. a connection between a sewer or disposal main and a sewer or disposal main, or 2. a connection which allows a sewer or disposal main to discharge directly into a sewage disposal works; - “main connection agreement” means an agreement with one or more sewerage undertakers for that undertaker or each of them to permit a main connection into its sewerage system and includes— 1. an order under subsection (3) which is deemed to be an agreement by virtue of subsection (5), and 2. any agreement which has been varied by order under section 110B(1). (110B) (1) On the application of any party to a main connection agreement, the Authority may— (a) if it appears to the Authority that it is necessary or expedient for the purpose of this Part that the main connection agreement should be varied or terminated, and (b) if the Authority is satisfied that variation or termination cannot be achieved by agreement, by order vary or terminate the main connection agreement. (2) Before making an order under subsection (1), the Authority must consult the appropriate agency. (3) If an order under subsection (1) is made in relation to a main connection agreement, the agreement— (a) has effect subject to the provision made by the order, or (b) ceases to have effect (as the case may be). (4) An order under subsection (1) may require any party to the agreement to pay compensation to any other party. (5) Neither the CMA nor the Authority may exercise, in respect of an agreement to vary or terminate a main connection agreement, the powers conferred by— (a) section 32 of the Competition Act 1998 (directions in relation to agreements); (b) section 35(2) of that Act (interim directions). (6) Subsection (5)(b) does not apply to the exercise of powers in respect of conduct— (a) which is connected with an agreement to vary or terminate a main connection agreement, and (b) in respect of which section 35(1) of the Competition Act 1998 applies because of an investigation under section 25 of that Act relating to a suspected infringement of the Chapter 2 prohibition imposed by section 18(1) of that Act. (7) In exercising its functions under this section, the Authority must have regard to the expenses incurred by the established undertaker in complying with its obligations under the main connection agreement in question and to the desirability of— (a) facilitating effective competition within the sewerage services industry; (b) the established undertaker's recovering the expenses of complying with its obligations by virtue of this section and securing a reasonable return on its capital; (c) the established undertaker's being able to meet its existing obligations, and likely future obligations, to provide sewerage services without having to incur unreasonable expenditure in carrying out works; (d) not putting at risk the ability of the established undertaker to meet its existing obligations, or likely future obligations, to provide such services. (8) In this section and sections 110C to 110J “established undertaker”, in relation to a sewerage agreement, means the sewerage undertaker which is required by the agreement to permit a main connection into its sewerage system. (110C) (1) The Authority may issue one or more codes in respect of main connection agreements. (2) A code may make provision about— (a) procedures in connection with making an agreement to permit a main connection into a sewerage undertaker's sewerage system; (b) procedures in connection with varying or terminating a main connection agreement; (c) procedures to be followed by the Authority in determining whether to make an order under section 110A(3) or 110B(1); (d) the terms and conditions of a main connection agreement, including terms as to the duration of such an agreement; (e) principles for determining the terms and conditions that should or should not be incorporated into a main connection agreement; (f) the steps to be taken by the Authority in determining whether a person is complying with the code. (3) If the Authority considers that a sewerage undertaker is not acting as required by a code, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction. (4) The Authority may not give a direction under subsection (3) requiring a person to enter into, vary or terminate an agreement. (5) It is the duty of a sewerage undertaker to comply with a direction under subsection (3), and this duty is enforceable by the Authority under section 18. (6) A code may make different provision for different persons or different descriptions of person. (7) The Authority may from time to time revise a code issued under this section and issue a revised code. (8) A revised code may include provision for applying any of its revisions to main connection agreements made before the revised code comes into force. (110D) (1) Before issuing a code under section 110C, the Authority must— (a) prepare a draft of the proposed code under section 110C, and (b) consult such persons about the proposed code as it considers appropriate. (2) The Authority must specify the period (“the consultation period”) within which a person may make representations about the proposed code. (3) Before a code under section 110C prepared by the Authority is issued, the Minister may direct the Authority— (a) not to issue the code, or (b) to issue the code with specified modifications. (4) Subsection (3) is subject to subsections (6) and (7). (5) In subsection (3) “the Minister” means— (a) the Secretary of State, so far as a code prepared by the Authority relates to main connection agreements under which— (i) the main connection into a sewerage system, or (ii) each such connection, is or would be a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in England for the benefit of another such undertaker; (b) the Welsh Ministers, so far as a code prepared by the Authority relates to main connection agreements under which— (i) the main connection into a sewerage system, or (ii) each such connection, is or would be a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in Wales for the benefit of another such undertaker; (c) the Secretary of State and the Welsh Ministers acting jointly, so far as a code prepared by the Authority relates to main connection agreements under which one main connection into a sewerage system is or would be— (i) a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in England for the benefit of a sewerage undertaker whose area is wholly or mainly in Wales, or (ii) a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in Wales for the benefit of a sewerage undertaker whose area is wholly or mainly in England. (6) If the power under subsection (3) is exercised to give a direction in respect of such main connection agreements as are referred to in paragraph (a), (b) or (c) of subsection (5), it may not be exercised again in respect of such main connection agreements as are referred to in that paragraph. (7) If the power under subsection (3) to give a direction in respect of such main connection agreements as are referred to in paragraph (a), (b) or (c) of subsection (5) is not exercised on the first occasion on which it may be so exercised, it may not be exercised in respect of such main connection agreements as are referred to in that paragraph on a later occasion. (8) A direction under subsection (3) must be given within the period of 28 days beginning with the day after the end of the consultation period, and a code in relation to which a direction may be given may not be issued before that period of 28 days has expired. (110E) (1) This section applies if the Authority propose to issue a revised code under section 110C and, in the view of the Authority, the revision or each of the revisions proposed to be made is— (a) a revision for which consultation is unnecessary, or (b) a revision that it is necessary or desirable to make without delay. (2) Section 110D does not apply to the revised code. (3) Once the Authority has issued the revised code, it must give notice as soon as reasonably practicable of— (a) the issuing of the revised code, and (b) as regards each revision contained in it, whether in the view of the Authority the revision falls within paragraph (a) or (b) of subsection (1). (4) Notice under subsection (3) is to be given to such persons as the Authority considers appropriate. (5) Unless the Authority gives notice that a revision in a revised code is in the view of the Authority a revision falling within subsection (1)(a), the revision ceases to have effect at the end of the period of six months beginning with the day after that on which the revised code is issued. (110F) (1) The Authority may issue rules about charges that may be imposed by a sewerage undertaker under a main connection agreement. (2) The rules may in particular make provision about— (a) what types of charge may be imposed; (b) the amount or the maximum amount, or a method for determining the amount or maximum amount, of any type of charge; (c) principles for determining what types of charge may or may not be imposed; (d) principles for determining the amount of any charge that may be imposed; (e) publication of the charges that may be imposed. (3) If the Authority considers that a sewerage undertaker is not acting as required by rules under this section, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction. (4) It is the duty of a sewerage undertaker to comply with a direction under subsection (3), and this duty is enforceable by the Authority under section 18. (5) The rules may— (a) make different provision for different sewerage undertakers or different descriptions of sewerage undertaker; (b) make different provision for different purposes; (c) make provision subject to exceptions. (6) The Authority may from time to time revise rules issued under this section and issue revised rules. (7) The Authority must issue revised rules if— (a) guidance is issued under section 110J, and (b) the Authority, having regard to that guidance, considers that it is appropriate to revise the rules. (8) Revised rules may include provision for applying any of the revisions to main connection agreements made before the revised rules come into effect. (110G) (1) Rules under section 110F may provide for the reduction of charges payable under a main connection agreement where conditions specified by the rules are satisfied. (2) Rules made by virtue of subsection (1) may in particular— (a) specify conditions by reference to any party to a main connection agreement; (b) require that steps be taken for the purpose of reducing the cost to a sewerage undertaker of permitting a main connection into its sewerage system; (c) specify conditions about reducing charges payable by a person who— (i) is not party to the agreement, and (ii) takes or proposes to take such steps as satisfy or would satisfy a condition falling within paragraph (b). (3) The rules may provide that, where a charge falls to be reduced in accordance with rules made by virtue of subsection (1), the sewerage undertaker to which the charges are payable must give notice of that reduction to the Authority. (4) Rules made by virtue of subsection (3) may— (a) make provision as to the content of the notice; (b) specify the period within which an undertaker is to give notice to the Authority. (5) Provision under subsection (4)(a) may in particular require the notice to specify— (a) the provision of the rules that brings about the reduction in the charge; (b) the amount of the charge, with and without the reduction; (c) the period for which the reduction has effect. (110H) (1) Before issuing rules under section 110F, the Authority must— (a) prepare a draft of the proposed rules, and (b) consult such persons about the proposed rules as it thinks appropriate. (2) The Authority must specify the period (“the consultation period”) within which persons may make representations about the proposed rules. (3) The Authority must have regard to guidance issued under section 110J in making rules under section 110F. (4) Before rules under section 110F prepared by the Authority are issued, the Minister may direct the Authority not to issue the rules. (5) In subsection (4) “the Minister” means— (a) the Secretary of State, so far as rules prepared by the Authority relate to main connection agreements under which— (i) the main connection into a sewerage system, or (ii) each such connection, is or would be a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in England for the benefit of another such undertaker; (b) the Welsh Ministers, so far as rules prepared by the Authority relate to main connection agreements under which— (i) the main connection into a sewerage system, or (ii) each such connection, is or would be a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in Wales for the benefit of another such undertaker; (c) the Secretary of State and the Welsh Ministers acting jointly, so far as rules prepared by the Authority relate to main connection agreements under which one main connection into a sewerage system is or would be— (i) a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in England for the benefit of a sewerage undertaker whose area is wholly or mainly in Wales, or (ii) a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in Wales for the benefit of a sewerage undertaker whose area is wholly or mainly in England. (6) A direction under subsection (4) must be given within the period of 28 days beginning with the day after the end of the consultation period, and rules may not be issued before that period of 28 days has expired. (7) This section is subject to section 110I. (110I) (1) This section applies if the Authority proposes to issue revised rules under section 110F and, in the view of the Authority, the revision or each of the revisions proposed to be made is— (a) a revision for which consultation is unnecessary, or (b) a revision that it is necessary or desirable to make without delay. (2) Section 110H does not apply to the proposed revised rules. (3) Before issuing the revised rules, the Authority must give notice to the Minister of its intention to issue revised rules. (4) Before the revised rules are issued, the Minister may direct the Authority not to issue the revised rules. (5) A direction under subsection (4) must be given within the period of 14 days beginning with the day after the day on which notice is given under subsection (3), and the Authority may not issue the revised rules in question before— (a) that period of 14 days expires, or (b) the Minister notifies the Authority that no direction under subsection (4) will be given in relation to the revised rules, whichever is the sooner. (6) Once the Authority has issued the revised rules, it must give notice as soon as reasonably practicable of— (a) the issuing of the revised rules, and (b) as regards each revision contained in them, whether in the view of the Authority the revision falls within paragraph (a) or (b) of subsection (1). (7) Notice under subsection (6) is to be given to such persons as the Authority considers appropriate. (8) Unless the Authority gives notice that a revision in revised rules is in the view of the Authority a revision falling within subsection (1)(a), the revision ceases to have effect at the end of the period of six months beginning with the day after that on which the revised rules are issued. (9) In this section “the Minister” has the meaning given by section 110H. (110J) (1) The Minister may issue guidance as to the content of rules under section 110F. (2) Before issuing the guidance, the Minister must— (a) prepare a draft of the proposed guidance; (b) consult the relevant persons about the draft. (3) The relevant persons are— (a) the Welsh Ministers; (b) the Secretary of State; (c) such other persons as the Minister thinks appropriate. (4) The Minister may from time to time revise the guidance and issue revised guidance. (5) Subsections (2) and (3) apply to revised guidance as they apply to the original guidance. (6) The Minister must arrange for the publication of guidance issued under this section. (7) In this section “the Minister” means— (a) the Secretary of State, in relation to main connection agreements under which— (i) any main connection into a sewerage system, or (ii) each such connection, is or would be a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in England for the benefit of another such undertaker; (b) the Welsh Ministers, in relation to main connection agreements under which— (i) any main connection into a sewerage system, or (ii) each such connection, is or would be a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in Wales for the benefit of another such undertaker; (c) the Secretary of State and the Welsh Ministers acting jointly, in relation to main connection agreements under which one main connection into a sewerage system is or would be— (i) a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in England for the benefit of a sewerage undertaker whose area is wholly or mainly in Wales, or (ii) a main connection into the sewerage system of a sewerage undertaker whose area is wholly or mainly in Wales for the benefit of a sewerage undertaker whose area is wholly or mainly in England.

• (2) In sections 110B to 110J of the Water Industry Act 1991 (as substituted by subsection (1))—

• (a) a reference to a main connection agreement includes a reference to an old main connection agreement, and

• (b) a reference to an established undertaker, in relation to a main connection agreement, is to be construed accordingly.

• (3) For the purposes of subsection (2)—

• (a) “old main connection agreement” means an agreement made before the coming into force of subsection (1) that is an agreement with one or more sewerage undertakers for that undertaker or each of them to permit a main connection into its sewerage system, and includes an order under old section 110A which is deemed to be an agreement by virtue of old section 110A(5);

• (b) references to old section 110A are references to section 110A, as that section had effect before being substituted under subsection (1).

Agreements to adopt infrastructure

Agreements by water undertakers to adopt infrastructure

10

• (1) The Water Industry Act 1991 is amended as follows.

• (2) In section 51A (agreements to adopt a water main or service pipe at a future date)—

• (a) in subsection (3) (application to make an agreement under section 51A), for the words from “make an application” to the end there is substituted “ request a water undertaker to make an agreement under this section. ”;

• (b) subsections (4) to (8) are repealed;

• (c) after subsection (9) there is inserted—

(9A) The reference in subsection (9) to an agreement made under this section includes a reference to— (a) an order under section 51B which is deemed to be an agreement by virtue of section 51B(5), and (b) an agreement which has been varied by order under section 51C(1).

• (3) For section 51B (appeals with respect to adoption) and section 51C (financial conditions of compliance) there is substituted—

(51B) (1) This section applies where a person constructing or proposing to construct a water main or service pipe makes a request to a water undertaker under section 51A(3). (2) The person or the water undertaker may apply to the Authority for an order under subsection (4) if the person and the water undertaker have not made such agreement as was requested by the person. (3) The Authority may, on the application of the person or the water undertaker, make an order under subsection (4) if the Authority is satisfied that— (a) it is appropriate for work proposed to be done by a person other than the water undertaker to be so done, and (b) the person and the water undertaker cannot reach agreement within a reasonable time. (4) The Authority may by order— (a) require the water undertaker to give such undertakings as to the vesting of the water main or service pipe in the undertaker as the Authority may specify, and (b) impose such terms and conditions as regards taking the benefit of the undertakings as the Authority may specify. (5) An order under subsection (4) has effect as an agreement under section 51A between the person and the water undertaker. (6) The Authority may not, by order under subsection (4), require a water undertaker to vest in itself a water main or service pipe as regards which there is a contravention of any of the requirements of section 74 that are prescribed for the purposes of this subsection. (7) The Authority may not make an order under subsection (4) with respect to a water main or service pipe that is situated within the area of another water undertaker, until either— (a) that other undertaker has consented in writing to the making of the order, or (b) the Minister, on an application made to the Minister, has disapplied paragraph (a), either unconditionally or subject to such conditions as the Minister thinks fit. (8) “The Minister” means— (a) the Secretary of State, as regards the consent of a water undertaker whose area is wholly or mainly in England; (b) the Welsh Ministers, as regards the consent of a water undertaker whose area is wholly or mainly in Wales. (9) Neither the CMA nor the Authority may exercise, in respect of an agreement for the vesting of a water main or service pipe in a water undertaker at a future date, the powers conferred by— (a) section 32 of the Competition Act 1998 (directions in relation to agreements); (b) section 35(2) of that Act (interim directions). (10) Subsection (9)(b) does not apply to the exercise of powers in respect of conduct— (a) which is connected with an agreement for the vesting of a water main or service pipe at a future date, and (b) in respect of which section 35(1) of the Competition Act 1998 applies because of an investigation under section 25 of that Act relating to a suspected infringement of the Chapter 2 prohibition imposed by section 18(1) of that Act. (11) In exercising its functions under this section, the Authority must have regard to the desirability of— (a) facilitating effective competition within the water supply industry; (b) the recovery by the water undertaker of the expenses of complying with its obligations by virtue of this section and securing a reasonable return on its capital; (c) the ability of the water undertaker to meet its existing obligations, and likely future obligations, to supply water without having to incur unreasonable expenditure in carrying out works; (d) not putting at risk the ability of the water undertaker to meet its existing obligations, or likely future obligations, to supply water. (51C) (1) On the application of a party to a section 51A agreement to vary (or terminate) the agreement, the Authority may— (a) if it appears to the Authority that it is necessary or expedient that the section 51A agreement should be varied (or terminated), (b) if the Authority is satisfied, in the case of an application to vary the agreement, that it is appropriate for work proposed to be done by a person other than the water undertaker to be so done, and (c) if the Authority is satisfied that variation (or termination) cannot be achieved by agreement within a reasonable time, by order vary (or terminate) the section 51A agreement. (2) If an order under subsection (1) is made in relation to a section 51A agreement, the agreement— (a) has effect subject to the provision made by the order, or (b) ceases to have effect, as the case may be. (3) An order under subsection (1) may require any party to the agreement to pay compensation to any other party. (4) Neither the CMA nor the Authority may exercise, in respect of an agreement to vary or terminate a section 51A agreement, the powers conferred by— (a) section 32 of the Competition Act 1998 (directions in relation to agreements); (b) section 35(2) of that Act (interim directions). (5) Subsection (4)(b) does not apply to the exercise of powers in respect of conduct— (a) which is connected with an agreement to vary or terminate a section 51A agreement, and (b) in respect of which section 35(1) of the Competition Act 1998 applies because of an investigation under section 25 of that Act relating to a suspected infringement of the Chapter 2 prohibition imposed by section 18(1) of that Act. (6) In exercising its functions under this section, the Authority must have regard to the expenses incurred by the water undertaker in complying with its obligations under the section 51A agreement in question and to the desirability of— (a) facilitating effective competition within the water supply industry; (b) the recovery by the water undertaker of the expenses of complying with its obligations by virtue of this section and securing a reasonable return on its capital; (c) the ability of the water undertaker to meet its existing obligations, and likely future obligations, to supply water without having to incur unreasonable expenditure in carrying out works; (d) not putting at risk the ability of the water undertaker to meet its existing obligations, or likely future obligations, to supply water. (7) In this section and sections 51CA to 51CG “section 51A agreement” means an agreement with a water undertaker for the vesting of a water main or service pipe in a water undertaker at a future date and includes— (a) an order under section 51B which is deemed to be an agreement by virtue of section 51B(5), and (b) any agreement which has been varied by order under subsection (1). (51CA) (1) The Authority must issue a code in respect of section 51A agreements. (2) The code may make provision about— (a) procedures in connection with making an agreement under section 51A; (b) procedures in connection with varying or terminating a section 51A agreement; (c) procedures to be followed by the Authority in determining whether to make an order under section 51B(4) or 51C(1); (d) the circumstances in which it is, or is not, appropriate for work to be done by a person other than a water undertaker; (e) the terms and conditions of a section 51A agreement; (f) principles for determining the terms and conditions that should or should not be incorporated into a section 51A agreement; (g) the steps to be taken by the Authority in determining whether a person is complying with the code. (3) Provision under subsection (2)(c) may in particular require the Authority to consult— (a) the Chief Inspector of Drinking Water; (b) the Chief Inspector of Drinking Water for Wales if there is one. (4) Provision under subsection (2)(d) may include in particular provision about circumstances relating to— (a) the nature of the work; (b) the kind of premises supplied or to be supplied. (5) Provision under subsection (2)(e) may include in particular provision about terms and conditions as regards— (a) constructing associated infrastructure; (b) vesting associated infrastructure in a water undertaker; (c) constructing water mains so as to meet additional supply requirements; (d) connecting new water mains or service pipes to the existing supply system of a water undertaker; (e) complying with requirements of the kind referred to in section 47(2); (f) the duration of a section 51A agreement. (6) If the Authority considers that a water undertaker is not acting as required by the code, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction. (7) The Authority may not give a direction under subsection (6) requiring a person to enter into, vary or terminate an agreement. (8) It is the duty of a water undertaker to comply with a direction under subsection (6), and this duty is enforceable by the Authority under section 18. (9) The code may make different provision for different persons or descriptions of person. (10) The Authority must from time to time review the code and, if appropriate, issue a revised code. (11) A revised code may include provision for applying any of its revisions to section 51A agreements made before the revised code comes into force. (51CB) (1) Before issuing a code under section 51CA, the Authority must— (a) prepare a draft of the proposed code under section 51CA, and (b) consult the relevant persons about the proposed code. (2) The relevant persons are— (a) the Chief Inspector of Drinking Water; (b) the Chief Inspector of Drinking Water for Wales if there is one; (c) such other persons as the Authority considers appropriate. (3) The Authority must specify the period (“the consultation period”) within which a person may make representations about the proposed code. (4) Before a code under section 51CA prepared by the Authority is issued, the Minister may direct the Authority— (a) not to issue the code, or (b) to issue the code with specified modifications. (5) Subsection (4) is subject to subsections (7) and (8). (6) In subsection (4) “the Minister” means— (a) the Secretary of State, so far as the code relates to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in England; (b) the Welsh Ministers, so far as the code relates to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in Wales. (7) The power under subsection (4) may not be exercised more than once by the Secretary of State or the Welsh Ministers. (8) If the power under subsection (4) is not exercised by the Secretary of State or the Welsh Ministers on the first occasion on which it may be exercised by the Secretary of State or (as the case may be) the Welsh Ministers, it may not be exercised by the Secretary of State or (as the case may be) the Welsh Ministers on a later occasion. (9) A direction under subsection (4) must be given within the period of 28 days beginning with the day after the end of the consultation period, and a code in relation to which a direction may be given may not be issued before that period of 28 days has expired. (10) This section is subject to section 51CC. (51CC) (1) This section applies if the Authority proposes to issue a revised code under section 51CA and, in the view of the Authority, the revision or each of the revisions proposed to be made is— (a) a revision for which consultation is unnecessary, or (b) a revision that it is necessary or desirable to make without delay. (2) Section 51CB does not apply to the proposed revised code. (3) Once the Authority has issued the revised code, it must give notice as soon as reasonably practicable of— (a) the issuing of the revised code, and (b) as regards each revision contained in it, whether in the view of the Authority the revision falls within paragraph (a) or (b) of subsection (1). (4) Notice under subsection (3) is to be given to such persons as the Authority considers appropriate. (5) Unless the Authority gives notice that a revision in a revised code is in the view of the Authority a revision falling within subsection (1)(a), the revision ceases to have effect at the end of the period of six months beginning with the day after that on which the revised code is issued. (51CD) (1) The Authority may issue rules about charges that may be imposed by a water undertaker under a section 51A agreement. (2) The rules may in particular make provision about— (a) what types of charge may be imposed; (b) the amount or the maximum amount, or a method for determining the amount or maximum amount, of any type of charge; (c) principles for determining what types of charge may or may not be imposed; (d) principles for determining the amount of any charge that may be imposed; (e) publication of the charges that may be imposed. (3) The rules may require a water undertaker, upon declaring a water main or service pipe to be vested in the undertaker in accordance with a section 51A agreement, to pay to the other party to the agreement an amount (which may be nil) determined in accordance with the rules. (4) Rules made by virtue of subsection (3) may, in particular, provide for the determination to take into account— (a) revenue that might be derived from the water main or service pipe in question; (b) costs that might have been incurred in providing such a water main or service pipe. (5) The rules may also make provision as to— (a) the amount of security that may be required by a water undertaker for the purposes of any charges imposed by the water undertaker under a section 51A agreement; (b) the type of security that may be required; (c) the payment of interest on a sum deposited with a water undertaker by way of security. (6) If the Authority considers that a water undertaker is not acting as required by rules under this section, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction. (7) It is the duty of a water undertaker to comply with a direction under subsection (6), and this duty is enforceable by the Authority under section 18. (8) The rules may make different provision for different water undertakers or descriptions of undertaker. (9) The Authority may from time to time revise rules issued under this section and issue revised rules. (10) The Authority must issue revised rules if— (a) guidance is issued under section 51CG, and (b) the Authority, having regard to that guidance, considers that it is appropriate to revise the rules. (11) Revised rules may include provision for applying any of their revisions to section 51A agreements made before the revised rules come into effect. (51CE) (1) Before issuing rules under section 51CD, the Authority must— (a) prepare a draft of the proposed rules, and (b) consult the relevant persons about the draft. (2) The relevant persons are— (a) the Secretary of State; (b) the Welsh Ministers; (c) the Council; (d) any water undertakers or other persons likely to be affected by the rules; (e) such other persons as the Authority thinks appropriate. (3) The Authority must specify the period (“the consultation period”) within which the relevant persons may make representations about the proposed rules. (4) The Authority must have regard to guidance issued under section 51CG in making rules under section 51CD. (5) Before rules under section 51CD prepared by the Authority are issued, the Minister may direct the Authority not to issue the rules. (6) In subsection (5) “the Minister” means— (a) the Secretary of State, so far as the rules relate to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in England; (b) the Welsh Ministers, so far as the rules relate to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in Wales. (7) A direction under subsection (5) must be given within the period of 28 days beginning with the day after the end of the consultation period, and rules may not be issued before that period of 28 days has expired. (8) This section is subject to section 51CF. (51CF) (1) This section applies if the Authority proposes to issue revised rules under section 51CD and, in the view of the Authority, the revision or each of the revisions proposed to be made is— (a) a revision for which consultation is unnecessary, or (b) a revision that it is necessary or desirable to make without delay. (2) Section 51CE does not apply to the proposed revised rules. (3) Before issuing the revised rules, the Authority must give notice to the Minister of its intention to issue revised rules. (4) Before the revised rules are issued, the Minister may direct the Authority not to issue the revised rules. (5) A direction under subsection (4) must be given within the period of 14 days beginning with the day after the day on which notice is given under subsection (3), and the Authority may not issue the revised rules in question before— (a) that period of 14 days expires, or (b) the Minister notifies the Authority that no direction under subsection (4) will be given in relation to the revised rules, whichever is the sooner. (6) Once the Authority has issued the revised rules, it must give notice as soon as reasonably practicable of— (a) the issuing of the revised rules, and (b) as regards each revision contained in them, whether in the view of the Authority the revision falls within paragraph (a) or (b) of subsection (1). (7) Notice under subsection (6) is to be given to such persons as the Authority considers appropriate. (8) Unless the Authority gives notice that a revision in revised rules is in the view of the Authority a revision falling within subsection (1)(a), the revision ceases to have effect at the end of the period of six months beginning with the day after that on which the revised rules are issued. (9) In this section “the Minister” has the meaning given by section 51CE. (51CG) (1) The Minister may issue guidance as to the content of rules under section 51CD. (2) Before issuing the guidance, the Minister must— (a) prepare a draft of the proposed guidance; (b) consult the relevant persons about the draft. (3) The relevant persons are— (a) the Secretary of State; (b) the Welsh Ministers; (c) such other persons as the Minister thinks appropriate. (4) The Minister may from time to time revise the guidance and issue revised guidance. (5) Subsections (2) and (3) apply to revised guidance as they apply to the original guidance. (6) The Minister must arrange for the publication of guidance issued under this section. (7) In this section “the Minister” means— (a) the Secretary of State, so far as the guidance is as to the content of rules relating to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in England; (b) the Welsh Ministers, so far as the guidance is as to the content of rules relating to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in Wales.

• (4) In section 51E (sections 51A to 51D: supplementary), in subsection (2), for “In sections 51A to 51C above” there is substituted “ In section 51A ”.

Agreements by sewerage undertakers to adopt infrastructure

11

• (1) The Water Industry Act 1991 is amended as follows.

• (2) In section 104 (agreements to adopt a sewer, drain or sewage disposal works at a future date)—

• (a) in subsection (2) (application to make an agreement under section 104), for the words from “make an application” to the end there is substituted “ request a sewerage undertaker to make an agreement under this section. ”;

• (b) subsections (3), (4) and (6A) are repealed;

• (c) after subsection (5) there is inserted—

(5A) The reference in subsection (5) to an agreement made under this section includes a reference to— (a) an order under section 105ZA which is deemed to be an agreement by virtue of section 105ZA(5), and (b) any agreement which has been varied by order under section 105ZB(1).

• (3) After section 105 there is inserted—