Water Act 2014

(105ZA) (1) This section applies where a person mentioned in section 104(1)(a) or (b) makes a request to a sewerage undertaker under section 104(2). (2) The person or the sewerage undertaker may apply to the Authority for an order under subsection (4) if the person and the sewerage undertaker have not made such agreement as was requested by the person. (3) The Authority may, on the application of the person or the sewerage undertaker, make an order under subsection (4) if the Authority is satisfied that— (a) where the person is such person as is mentioned in section 104(1)(a), it is appropriate for work proposed to be done by a person other than the sewerage undertaker to be so done, and (b) the person and the sewerage undertaker cannot reach agreement within a reasonable time. (4) The Authority may by order— (a) require the sewerage undertaker to give such undertakings as to the vesting of the sewer, such part of the drain as constitutes the lateral drain or the works 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 104 between the person and the sewerage undertaker. (6) The Authority may not make an order under subsection (4) with respect to— (a) a sewer, drain or sewage disposal works situated in the area of another undertaker, or (b) a drain which is intended to communicate with a sewer which— (i) is so situated, or (ii) is vested in another sewerage undertaker, until one of the conditions mentioned in subsection (7) is satisfied. (7) The conditions are that— (a) the other sewerage 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 sewerage undertaker whose area is wholly or mainly in England; (b) the Welsh Ministers, as regards the consent of a sewerage 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 sewer, drain or sewage disposal works in a sewerage undertaker at a future date or on a future event, 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 sewer, drain or sewage disposal works in a sewerage undertaker at a future date or on a future event, 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 sewerage services industry; (b) the recovery by the sewerage 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 sewerage undertaker 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 sewerage undertaker to meet its existing obligations, or likely future obligations, to provide sewerage services. (105ZB) (1) On the application of a party to a section 104 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 104 agreement should be varied (or terminated), (b) if the Authority is satisfied, in the case of an application to vary the agreement involving such person as is mentioned in section 104(1)(a), that it is appropriate for work proposed to be done by a person other than the sewerage 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 104 agreement. (2) If an order under subsection (1) is made in relation to a section 104 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 104 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 104 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 sewerage undertaker in complying with its obligations under the section 104 agreement in question and to the desirability of— (a) facilitating effective competition within the sewerage services industry; (b) the recovery by the sewerage 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 sewerage undertaker 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 sewerage undertaker to meet its existing obligations, or likely future obligations, to provide sewerage services. (7) In this section and sections 105ZC to 105ZI “section 104 agreement” means an agreement with a sewerage undertaker for the vesting of a sewer, drain or sewage disposal works in a sewerage undertaker at a future date or on a future event and includes— (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 subsection (1). (105ZC) (1) The Authority must issue a code in respect of section 104 agreements. (2) The code may make provision about— (a) procedures in connection with making an agreement under section 104; (b) procedures in connection with varying or terminating a section 104 agreement; (c) procedures to be followed by the Authority in determining whether to make an order under section 105ZA(4) or 105ZB(1); (d) the circumstances in which it is, or is not, appropriate for work to be done by a person other than a sewerage undertaker; (e) the terms and conditions of a section 104 agreement; (f) principles for determining the terms and conditions that should or should not be incorporated into a section 104 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)(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. (4) 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 sewerage undertaker; (c) making a communication with public sewers. (5) If the Authority considers that a sewerage 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. (6) The Authority may not give a direction under subsection (5) requiring a person to enter into, vary or terminate an agreement. (7) It is the duty of a sewerage undertaker to comply with a direction under subsection (5), and this duty is enforceable by the Authority under section 18. (8) The code may make different provision for different persons or descriptions of person. (9) The Authority must from time to time review the code and, if appropriate, issue a revised code. (10) A revised code may include provision for applying any of its revisions to section 104 agreements made before the revised code comes into force. (105ZD) (1) Before issuing a code under section 105ZC, the Authority must— (a) prepare a draft of the proposed code under section 105ZC, 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 105ZC 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 this section “the Minister” means— (a) the Secretary of State, so far as the code relates to section 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage undertakers whose areas are wholly or mainly in England; (b) the Welsh Ministers, so far as the code relates to section 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage undertakers whose areas are wholly or mainly in Wales. (6) The power under subsection (3) may not be exercised more than once by the Secretary of State or the Welsh Ministers. (7) If the power under subsection (3) 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. (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. (9) This section is subject to section 105ZE. (105ZE) (1) This section applies if the Authority proposes to issue a revised code under section 105ZC 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 105ZD 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. (105ZF) (1) The Authority may issue rules about charges that may be imposed by a sewerage undertaker under a section 104 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 sewerage undertaker, upon declaring a sewer, drain or sewage disposal works to be vested in the undertaker in accordance with a section 104 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 sewer, drain or sewage disposal works in question; (b) costs that might have been incurred in providing such a sewer, drain or sewage disposal works. (5) The rules may also make provision as to— (a) the amount of security that may be required by a sewerage undertaker for the purposes of any charges imposed by the sewerage undertaker under a section 104 agreement; (b) the type of security that may be required; (c) the payment of interest on a sum deposited with a sewerage undertaker by way of security. (6) 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. (7) It is the duty of a sewerage 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 sewerage 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 105ZI, 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 104 agreements made before the revised rules come into effect. (105ZG) (1) Before issuing rules under section 105ZF, 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 sewerage 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 105ZI in making rules under section 105ZF. (5) Before rules under section 105ZF 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 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage undertakers whose areas are wholly or mainly in England; (b) the Welsh Ministers, so far as the rules relate to section 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage 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 105ZH. (105ZH) (1) This section applies if the Authority proposes to issue revised rules under section 105ZF 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 105ZG 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 105ZG. (105ZI) (1) The Minister may issue guidance as to the content of rules under section 105ZF. (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 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage 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 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage undertakers whose areas are wholly or mainly in Wales.

• (4) In section 107 (right of sewerage undertaker to undertake the making of communications with public sewers), after subsection (1) there is inserted—

(1A) A sewerage undertaker may not give notice to a person under subsection (1) if— (a) the undertaker and the person entered into an agreement under section 104, and (b) the agreement provides for the communication to which the person's proposal relates to be made by the person.

• (5) In section 108 (communication works by person entitled to communication), in subsection (1), after “section 106 above” there is inserted “ or may not make such an election because of section 107(1A) ”.

Arrangements for water undertakers to take water

Arrangements for water undertakers to take water from other persons

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In Part 3 of the Water Industry Act 1991, after Chapter 2A there is inserted—

(66M) (1) The Minister may by regulations make provision about the supply of water to a water undertaker by a person other than a water undertaker. (2) Regulations under this section may, in particular— (a) confer functions on the Authority, the Secretary of State and the Welsh Ministers; (b) make provision preventing the CMA or the Authority from exercising powers under the Competition Act 1998 in respect of a water supply agreement; (c) include provision described in sections 66N and 66O; (d) make provision excepting water supply agreements of such description as the regulations may specify from the effect of— (i) any provision of the regulations, or (ii) any provision of the codes or rules made under the regulations. (3) In this Chapter— - “the Minister” means— 1. the Secretary of State, in relation to the supply of water to a water undertaker whose area is wholly or mainly in England, and 2. the Welsh Ministers, in relation to the supply of water to a water undertaker whose area is wholly or mainly in Wales; - “relevant person” means a person other than a water undertaker; - “water supply agreement” means an agreement for the supply of water to a water undertaker by a relevant person. (4) Nothing in provision made under this Chapter affects a water supply agreement made before any regulations under this section first come into force. (66N) (1) Regulations under section 66M may, in particular, make provision for the Authority by order— (a) to require a water undertaker to take a supply of water from a relevant person, and (b) to vary or terminate a water supply agreement. (2) Provision made under subsection (1)(a) must provide that— (a) the Authority may make an order only on an application by the water undertaker or the relevant person, and (b) before making an order the Authority must be satisfied that the water undertaker and the relevant person cannot reach agreement. (3) Provision made under subsection (1)(b) must provide that the Authority may make an order only on an application by a party to the agreement. (4) The provision that may be made under subsection (1) includes— (a) provision about the circumstances in which the Authority may make an order; (b) provision requiring the Authority to consult the Environment Agency, the NRBW or both of them before making an order; (c) provision requiring the Authority to have regard to whether a person has complied with a code or rules described in section 66O; (d) provision enabling the Authority to specify the times at which, the period during which and the terms and conditions on which the supply of water must be taken; (e) provision for an order made by the Authority requiring a supply of water to be taken to have effect as an agreement between the water undertaker and the relevant person (or those persons and other persons); (f) provision requiring a party to a water supply agreement to pay compensation to another party on the variation or termination of the agreement. (66O) (1) Regulations under section 66M may, in particular, make provision for the Authority to issue one or more codes in respect of water supply agreements, including— (a) provision for a code to include provision about procedures in connection with making, varying or terminating a water supply agreement; (b) provision for a code to include provision about the terms and conditions of water supply agreements; (c) provision for a code to include provision about procedures to be followed by the Authority in determining whether to make an order described in section 66N; (d) provision for the Authority to direct water undertakers to comply with a code; (e) provision for such directions to be enforceable by the Authority under section 18; (f) provision for the Minister to require a code to be revised or to prevent a code being issued or revised (but see subsections (3) and (4)). (2) Regulations under section 66M may, in particular, make provision for the Authority to issue and enforce rules about charges that may be imposed under water supply agreements, including— (a) provision for the making of rules about the amount or maximum amount of a charge; (b) provision for the Authority to direct water undertakers to comply with the rules; (c) provision for such directions to be enforceable by the Authority under section 18; (d) provision for the Minister to issue guidance as to the content of the rules (but see subsection (4)); (e) provision for the Minister to prevent rules being issued (but see subsection (4)). (3) Regulations conferring a power on the Minister as described in subsection (1)(f) must provide that— (a) if the power is exercised to impose a requirement in respect of agreements for such supplies of water as are referred to in paragraph (a) or (b) of the definition of “the Minister” in section 66M(3), it may not be exercised again in respect of such supplies of water as are referred to in that paragraph, and (b) if the power to impose a requirement in respect of agreements for such supplies of water as are referred to in paragraph (a) or (b) of the definition of “the Minister” in section 66M(3) is not exercised on the first occasion on which it may be so exercised, it may not be exercised in respect of such agreements as are referred to in that paragraph on a later occasion. (4) Functions conferred by provision described in subsection (1)(f) or (2)(d) or (e) must be conferred on the Secretary of State and the Welsh Ministers acting jointly so far as the code, guidance or rules relate to— (a) a supply of water to a water undertaker whose area is wholly or mainly in England by means of the supply system of a water undertaker whose area is wholly or mainly in Wales; (b) a supply of water to a water undertaker whose area is wholly or mainly in Wales by means of the supply system of a water undertaker whose area is wholly or mainly in England. (5) References in this section to a water undertaker's supply system are to be construed in accordance with section 17B. (66P) (1) A statutory instrument containing regulations under section 66M may not be made unless a draft of the instrument has been laid before and approved by a resolution of— (a) each House of Parliament, in the case of regulations made by the Secretary of State, or (b) the Assembly, in the case of regulations made by the Welsh Ministers. (2) Before laying a draft of an instrument in accordance with subsection (1), the Minister must consult— (a) the Authority, (b) water undertakers, (c) water supply licensees, (d) the Chief Inspector of Drinking Water, (e) the Chief Inspector of Drinking Water for Wales if there is one, (f) the Environment Agency, (g) the NRBW, (h) the Council, and (i) such other persons as the Minister considers appropriate. (3) The supplemental and consequential provision that regulations under section 66M may include by virtue of section 213(2)(f) includes provision amending, repealing or revoking provision made by or under an enactment. (4) Section 213(2) to (2B) applies to regulations made by the Welsh Ministers under section 66M as it applies to regulations made by the Secretary of State. (5) If a draft of an instrument containing regulations under section 66M would, apart from this subsection, be treated for the purposes of the Standing Orders of either House of Parliament as a hybrid instrument, it is to proceed in that House as if it were not a hybrid instrument. (6) In this section “enactment” includes a Measure or Act of the Assembly.

Appointments and variations

Procedure with respect to appointments and variations

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• (1) Section 8 of the Water Industry Act 1991 (procedure with respect to appointments and variations replacing relevant undertakers) is amended as follows.

• (2) In subsection (2)(a) (the Water Services Regulation Authority to serve notice of application), for “on the existing appointee the NRA and on every” there is substituted

on— (i) the existing appointee, (ii) if the application relates to the replacement of a water undertaker whose area is wholly or mainly in England, the Chief Inspector of Drinking Water, (iii) if the application relates to the replacement of a water undertaker whose area is wholly or mainly in Wales, the Chief Inspector of Drinking Water for Wales if there is one, or the Chief Inspector of Drinking Water if section 86(1B)(b) applies, (iv) the appropriate agency, and (v) every

.

• (3) In subsection (4)(b) (the Secretary of State or the Water Services Regulation Authority to serve notice of proposed appointment or variation), for “on the existing appointee the NRA and on every” there is substituted

on— (i) the existing appointee, (ii) if the proposed appointment or variation would replace a water undertaker whose area is wholly or mainly in England, the Chief Inspector of Drinking Water, (iii) if the proposed appointment or variation would replace a water undertaker whose area is wholly or mainly in Wales, the Chief Inspector of Drinking Water for Wales if there is one, or the Chief Inspector of Drinking Water if section 86(1B)(b) applies, (iv) the appropriate agency, and (v) every

.

• (4) In subsection (5)(b) (the Secretary of State or the Water Services Regulation Authority to serve notice of the making of an appointment or variation), for “on the NRA and on every” there is substituted

on— (i) if the appointment or variation replaces a water undertaker whose area is wholly or mainly in England, the Chief Inspector of Drinking Water, (ii) if the appointment or variation replaces a water undertaker whose area is wholly or mainly in Wales, the Chief Inspector of Drinking Water for Wales if there is one, or the Chief Inspector of Drinking Water if section 86(1B)(b) applies, (iii) the appropriate agency, and (iv) every

.

• (5) After subsection (6) insert—

(6A) In this section “the appropriate agency”, in relation to the replacement of a relevant undertaker, means— (a) the Environment Agency, if the undertaker's area is wholly in England; (b) the NRBW, if the undertaker's area is wholly in Wales; (c) both the Environment Agency and the NRBW, if the undertaker's area is partly in England and partly in Wales.

Duty of CMA to refer mergers of relevant undertakers

Exceptions to duty and undertakings in lieu of merger references

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• (1) In section 32 of the Water Industry Act 1991 (duty to refer merger of water or sewerage undertaking), for “Subject to section 33 below,” there is substituted “ Subject to sections 33 and 33A below, ”.

• (2) After section 33 (exclusion of small mergers) there is inserted—

(33A) (1) The CMA may decide not to make a merger reference under section 32 as regards a case falling within section 32(a) if it believes that— (a) the arrangements concerned are not sufficiently far advanced, or are not sufficiently likely to proceed, to justify the making of a merger reference; (b) the prospective merger is not likely to prejudice the ability of the Authority, in carrying out its functions by virtue of this Act, to make comparisons between water enterprises; or (c) the prospective merger is likely to prejudice that ability, but the prejudice in question is outweighed by relevant customer benefits relating to the merger. (2) The CMA may decide not to make a merger reference under section 32 as regards a case falling within section 32(b) if it believes that— (a) the merger has not prejudiced and is not likely to prejudice the ability of the Authority, in carrying out its functions by virtue of this Act, to make comparisons between water enterprises; or (b) the merger has prejudiced or is likely to prejudice that ability, but the prejudice in question is outweighed by relevant customer benefits relating to the merger. (3) Before forming a view as to the matters in subsection (1)(b) or (c) or (2)(a) or (b), the CMA must— (a) request the Authority to give an opinion under section 33B, and (b) consider that opinion. (4) The CMA may not make a merger reference under section 32 if— (a) it is considering whether to accept an undertaking under section 33D instead of making such a reference; or (b) it is prevented by section 74 of the Enterprise Act 2002 (effect of accepting an undertaking in lieu), in a case where that section as applied by paragraph 1 of Schedule 4ZA may have effect to prevent such a merger reference. (5) In this section “relevant customer benefit” has the meaning given by paragraph 7 of Schedule 4ZA. (33B) (1) Where the CMA makes a request under section 33A(3), the Authority must give its opinion on— (a) whether and to what extent the actual or prospective merger has prejudiced or is likely to prejudice the Authority's ability, in carrying out its functions by virtue of this Act, to make comparisons between water enterprises, and (b) where it forms the view that the actual or prospective merger has prejudiced or is likely to prejudice that ability, whether the prejudice in question is outweighed by any relevant customer benefits relating to the merger. (2) In forming an opinion on the matters in subsection (1), the Authority must apply the methods set out in the statement under section 33C that has effect when the request under section 33A(3) is made. (3) In this section “relevant customer benefit” has the meaning given by paragraph 7 of Schedule 4ZA, except that references in paragraph 7 to what the CMA believes are to be read for the purposes of this section as references to what the Authority believes. (33C) (1) The Authority must prepare and keep under review a statement of the methods to be applied in forming an opinion on the matters in section 33B(1). (2) The statement must in particular set out— (a) the criteria to be used for assessing the effect of any particular water enterprise ceasing to be a distinct enterprise on the Authority's ability, in carrying out its functions by virtue of this Act, to make comparisons between water enterprises; (b) the relative weight to be given to the criteria. (3) Before preparing or altering the statement, the Authority must consult— (a) the Secretary of State, (b) the Welsh Ministers, (c) the CMA, and (d) relevant undertakers. (4) The Authority must from time to time publish the statement as it has effect for the time being.

• (3) After section 33C (inserted by subsection (2)) there is inserted—

(33D) (1) If the CMA considers that it is under a duty to make a merger reference under section 32, it may instead of making such a reference accept undertakings to take such action as it thinks appropriate from such of the parties concerned in the actual or prospective merger as it considers appropriate. (2) The power under subsection (1) is to be exercised for the purpose of remedying, mitigating or preventing the prejudicial effect on the Authority's ability, in carrying out its functions by virtue of this Act, to make comparisons between water enterprises that the actual or prospective merger has had, may have had or may be likely to have. (3) In forming a view for the purposes of subsection (1) as to whether it is under a duty to make a merger reference under section 32, the CMA— (a) is to disregard the effect of section 33A(4)(a), but (b) is to take into account the powers under section 33A(1) and (2) to decide not to make a merger reference. (4) In proceeding under subsection (1), the CMA must, in particular, have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the prejudicial effect on the Authority's ability, in carrying out its functions by virtue of this Act, to make comparisons between water enterprises. (5) In proceeding under subsection (1), the CMA may, in particular, have regard to the effect of any action on any relevant customer benefits in relation to the actual or prospective merger. (6) Before deciding whether or not to accept an undertaking under this section, the CMA must— (a) request the Authority to give its opinion on the effect of the undertakings offered, and (b) consider the Authority's opinion. (7) Where the CMA makes a request under subsection (6), the Authority must give its opinion on the effect of the undertakings offered. (8) An undertaking under this section— (a) comes into force when accepted; (b) may be varied or superseded by another undertaking under this section; (c) may be released by the CMA. (9) An undertaking under this section ceases to be in force if an order under section 75 or 76 of the Enterprise Act 2002 (powers to make an order where an undertaking is not fulfilled) is made, in a case where that provision of the Enterprise Act 2002 as applied by paragraph 1 of Schedule 4ZA may have effect in relation to such an undertaking. (10) The CMA must consider any representations received by it in relation to varying or releasing an undertaking under this section as soon as reasonably practicable. (11) In this section “relevant customer benefit” has the meaning given by paragraph 7 of Schedule 4ZA, except that references in paragraph 7 to what the CMA believes are to be read for the purposes of subsection (7) as references to what the Authority believes.

Exclusion of small mergers: advice of CMA on threshold

15

In section 33 of the Water Industry Act 1991 (exclusion of small mergers from the duty to make a merger reference under section 32), after subsection (6) there is inserted—

(6A) The CMA must— (a) keep under review the conditions set out in subsection (1)(a) and (b), and (b) from time to time advise the Secretary of State as to whether the conditions in subsection (1)(a) and (b), and the sums mentioned in those paragraphs, are still appropriate.

Relevant undertakers' charges

Charges schemes

16

• (1) In section 143 of the Water Industry Act 1991 (charges schemes), for subsections (6) to (9) (charges scheme not to take effect until approved by the Water Services Regulation Authority, etc), there is substituted—

(6) If the Authority considers that a relevant undertaker's charges scheme does not comply with— (a) subsection (2), (3) or (5), (b) regulations under section 143A, (c) rules under section 143B, or (d) section 144A(9), (10) or (11)(a), the Authority may give the undertaker a direction to do, or not to do, a thing specified in the direction. (6A) The Authority must issue rules (and, if it revises rules it has issued, must issue revised rules) about consulting the Council about proposed charges schemes. (6B) The rules must require a relevant undertaker that proposes to make a charges scheme to consult the Council about its proposed scheme. (6C) If the Authority considers that a relevant undertaker has not complied with those rules, it may give the undertaker a direction to do, or not to do, a thing specified in the direction. (6D) It is the duty of a relevant undertaker to comply with a direction under subsection (6) or (6C), and this duty is enforceable by the Authority under section 18.

• (2) After section 143A there is inserted—

(143B) (1) The Authority may issue rules about charges schemes under section 143. (2) Rules under this section may in particular— (a) make provision about the types of charges that may be imposed; (b) make provision about the amount or maximum amount, or the methods for determining the amount or maximum amount, of any type of charge; (c) make provision about the principles for determining what types of charges may or may not be imposed; (d) make provision about principles for determining the amount of any charge that may be imposed; (e) require particular schemes of charges to be available in specified cases; (f) make provision about the timing of payment of charges; (g) require charges schemes to be published; (h) make provision about how charges schemes are to be published. (3) The rules may provide for the reduction of charges under a charges scheme where conditions specified by the rules are satisfied. (4) Rules made by virtue of subsection (3) may in particular specify conditions about— (a) taking steps for the purpose of reducing or managing water consumption; (b) taking steps for the purpose of reducing or managing the discharge of matter from premises; (c) taking steps for the purpose of reducing the volume of surface water entering public sewers or the rate at which it does so. (5) The provisions of charges schemes must comply with rules issued under this section. (6) The rules may make different provision for different cases, including different provision in relation to different, or different descriptions of, persons, circumstances or localities. (7) The power to make rules under this section may not be exercised for the purpose of limiting the total revenues of relevant undertakers from charges fixed by or in accordance with charges schemes. (8) The Authority may from time to time revise rules issued under this section and issue revised rules. (9) The Authority must issue revised rules if— (a) guidance is issued under section 143E, and (b) the Authority, having regard to that guidance, considers that it is appropriate to revise the rules. (10) Revised rules may include provision for applying any of their revisions to charges schemes under section 143 made before the revised rules come into effect. (143C) (1) The Authority must have regard to guidance issued under section 143E in making rules under section 143B (as well as to any guidance issued under section 43 or 44 of the Flood and Water Management Act 2010). (2) Before issuing rules under section 143B, the Authority must— (a) prepare a draft of the proposed rules, and (b) consult the relevant persons about the draft. (3) The relevant persons are— (a) the Secretary of State; (b) the Welsh Ministers; (c) the Council; (d) any relevant undertakers likely to be affected by the rules; (e) such other persons as the Authority thinks appropriate. (4) The Authority must specify the period (“the consultation period”) within which a person may make representations about the proposed rules. (5) Before rules under section 143B 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 in question affect relevant undertakers whose areas are wholly or mainly in England; (b) the Welsh Ministers, so far as the rules in question affect relevant 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 prepared by the Authority may not be issued before that period of 28 days has expired. (8) This section is subject to section 143D. (143D) (1) This section applies if the Authority proposes to issue revised rules under section 143B 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 143C 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 143C. (143E) (1) The Minister may issue guidance as to the content of rules under section 143B. (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 relevant undertakers whose areas are wholly or mainly in England; (b) the Welsh Ministers, in relation to relevant undertakers whose areas are wholly or mainly in Wales.

Rules about charges for connections etc

17

After section 144 of the Water Industry Act 1991 there is inserted—

(144ZA) (1) The Authority may issue rules about charges that may be imposed by a relevant undertaker under— (a) section 42(2)(a) (provision of new water main); (b) section 45(6) (connections with water main); (c) section 46(7)(b) (ancillary works for domestic connection); (d) section 99(2)(a) or (2A)(a) (provision of public sewer or lateral drain); (e) section 101B(3) (lateral drains); (f) section 107(3)(b)(i) (communications with public sewers); (g) section 185(5) (moving of pipes etc). (2) Rules under this section may in particular— (a) make provision about the types of charges that may be imposed; (b) make provision about the amount or maximum amount, or the methods for determining the amount or maximum amount, of any type of charge; (c) make provision about the principles for determining what types of charges may or may not be imposed; (d) make provision about the principles for determining the amount of any charge that may be imposed; (e) provide for charges to be payable over a period; (f) make provision about publication of the charges that may be imposed. (3) The charges that may be imposed by a water undertaker under section 42(2)(a) for the provision of a new water main may include charges for— (a) providing such other infrastructure, including other water mains, as it is necessary to provide in consequence of the provision of the new water main; (b) doing works to increase the capacity of an existing water main, or procuring the doing of such works, where the use of that increased capacity is a consequence of the provision of the new water main. (4) The charges that may be imposed by a sewerage undertaker under section 99(2)(a) for the provision of a new public sewer may include charges for— (a) providing such other infrastructure, including other public sewers, as it is necessary to provide in consequence of the provision of the new public sewer; (b) doing works to increase the capacity of an existing public sewer, where the use of that increased capacity is a consequence of the provision of the new public sewer. (5) The rules may make provision as to— (a) the amount of security that may be required by a relevant undertaker under section 42(1)(b), 47(2)(a), 99(1)(b), 101B(3A), 107(3)(b)(ii) or 185(4); (b) the type of security that may be required; (c) the payment of interest on a sum deposited with a relevant undertaker by way of security. (6) If the Authority considers that a relevant 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 thing specified in the direction. (7) It is the duty of a relevant 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— (a) different provision for different persons or different descriptions of person; (b) different provision for different powers to impose charges or different descriptions of such powers. (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 144ZD, and (b) the Authority, having regard to that guidance, considers that it is appropriate to revise the rules. (144ZB) (1) The Authority must have regard to guidance issued under section 144ZD in making rules under section 144ZA. (2) Before issuing rules under section 144ZA, the Authority must— (a) prepare a draft of the proposed rules, and (b) consult the relevant persons about the draft. (3) The relevant persons are— (a) the Secretary of State; (b) the Welsh Ministers; (c) the Council; (d) any relevant undertakers likely to be affected by the rules; (e) any water supply or sewerage licensees likely to be affected by the rules; (f) such other persons as the Authority thinks appropriate. (4) The Authority must specify the period (“the consultation period”) within which a person may make representations about the proposed rules. (5) Before rules under section 144ZA 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 in question affect relevant undertakers whose areas are wholly or mainly in England; (b) the Welsh Ministers, so far as the rules in question affect relevant 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 prepared by the Authority may not be issued before that period of 28 days has expired. (8) This section is subject to section 144ZC. (144ZC) (1) This section applies if the Authority proposes to issue revised rules under section 144ZA 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 144ZB 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 144ZB. (144ZD) (1) The Minister must issue guidance as to the content of rules under section 144ZA. (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 relevant undertakers whose areas are wholly or mainly in England; (b) the Welsh Ministers, in relation to relevant undertakers whose areas are wholly or mainly in Wales.

Charges for providing a water main etc

18

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

• (2) In section 42 (financial conditions for compliance with the duty in section 41 to provide a water main)—

• (a) in subsection (1)(b) (condition as to providing security), for the words from “such security” to “reasonably required” there is substituted “ such security as charging rules allow and the undertaker may have required ”;

• (b) in subsection (2) (undertaking to pay), for paragraph (a) there is substituted—

(a) bind the person or persons mentioned in that subsection to pay to the undertaker such charges as the undertaker may impose in accordance with charging rules, and

;

• (c) subsections (4) and (5) (interest on sums deposited by way of security) are repealed;

• (d) in subsection (6) (reference of disputes to Water Services Regulation Authority), in paragraph (b), after “the amount” there is inserted “ or amounts by way of charges ”.

• (3) In section 45 (duty to make domestic connections to a water main)—

• (a) in subsection (2) (the nature of the duty), the words “, at the expense of the person serving the notice,” are repealed;

• (b) for subsection (6) there is substituted—

(6) Where a water undertaker carries out any works which it is its duty under this section to carry out, the person serving the notice is liable to pay to the undertaker such charges as the undertaker may impose in accordance with charging rules.

;

• (c) in subsection (6A) (reference of disputes to Authority), for “as to whether the expenses were incurred reasonably” there is substituted “ as to the payments required to be made ”.

• (4) In section 46 (duty to carry out ancillary works for the purpose of making a domestic connection under section 45)—

• (a) in subsection (1) (the nature of the duty), the words “, at the expense of the person serving the notice,” are repealed;

• (b) in subsection (7), in paragraph (b), for “under this section at another person's expense” there is substituted “ as its duty under this section ”;

• (c) in subsection (7), in the words after paragraph (b), for “under that section at another person's expense” there is substituted “ as its duty under that section ”;

• (d) in subsection (9) (consequences of exercising power under section 46(8) to lay a water main rather than a service pipe), paragraph (b) (maximum expenses recoverable) and the “but” preceding it are repealed.

• (5) In section 47 (conditions of connection with water main)—

• (a) in subsection (2)(a) (requirement to give security for amounts to be paid), for the words from “such security” to “reasonably require” there is substituted “ such security as charging rules allow and the undertaker requires ”;

• (b) in subsection (3B) (reference of disputes to Authority), in the opening words, “whether” is repealed;

• (c) in subsection (3B), for paragraph (a) there is substituted—

(a) the security required to be provided by a condition imposed under subsection (2)(a),

;

• (d) in subsection (3B)(b), at the beginning there is inserted “whether”;

• (e) in subsection (3B)(c), after “particular case,” there is inserted “ whether ”.

Charges for providing a public sewer etc

19

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

• (2) In section 99 (financial conditions for compliance with the duty in section 98 to provide a public sewer or lateral drain)—

• (a) in subsection (1)(b) (condition as to providing security), for the words from “such security” to “reasonably required” there is substituted “ such security as charging rules allow and the undertaker may have required ”;

• (b) in subsection (2) (undertaking to pay in respect of public sewer), for paragraph (a) there is substituted—

(a) bind the person or persons mentioned in that subsection to pay to the undertaker such charges as the undertaker may impose in accordance with charging rules, and

;

• (c) in subsection (2A) (undertaking to pay in respect of lateral drain), for paragraph (a) there is substituted—

(a) bind the person or persons mentioned in that subsection to pay to the undertaker such charges as the undertaker may impose in accordance with charging rules, and

;

• (d) subsections (4) and (5) (interest on sums deposited by way of security) are repealed;

• (e) in subsection (6) (reference of disputes to the Water Services Regulation Authority), in paragraph (b), after “the amount” there is inserted “ or amounts by way of charges ”.

• (3) In section 101B (power to provide lateral drain following provision of public sewer)—

• (a) in subsection (3) (obligation to pay for drain requested), for “the costs reasonably incurred in or in connection with providing that drain” there is substituted “ such charges as the undertaker may impose in accordance with charging rules ”;

• (b) after subsection (3) there is inserted—

(3A) The sewerage undertaker may require the person making a request under this section to provide such security for the payment of the charges as charging rules allow.

;

• (c) in subsection (4) (reference of disputes to Authority), for paragraph (b) there is substituted—

(b) the amount of any charge imposed,

;

• (d) in subsection (4), after paragraph (b) there is inserted

or (c) the security required to be provided,

.

• (4) In section 107 (right of a sewerage undertaker to undertake the making of a communication with a public sewer)—

• (a) in subsection (3)(b)(i) (no obligation for undertaker to act until paid an estimated cost of the work in advance), for “the cost of the work” there is substituted “ the amount by way of charges that the undertaker may impose in accordance with charging rules for making the connection ”;

• (b) in subsection (3)(b)(ii) (no obligation for undertaker to act until given security for payment), for “such security” to the end there is substituted “ such security for the payment of that amount as charging rules allow and it may have required. ”;

• (c) for subsection (4), there is substituted—

(4) If a payment to a sewerage undertaker under subsection (3) exceeds the charges that may, in the event, be imposed in accordance with charging rules for making the connection in question, the excess is to be repaid by the undertaker; and, if and so far as those charges are not covered by a payment under subsection (3), those charges are to be paid by the person for whom the work was undertaken.

;

• (d) in subsection (4A) (reference to disputes to Authority), in paragraph (a), for “of the cost of works” there is substituted “ of the amount of charges ”;

• (e) in subsection (4A), for paragraph (b) (and the “or” following it) there is substituted—

(b) the security required by the undertaker, or

;

• (f) in subsection (4A), for paragraph (c) there is substituted—

(c) whether any excess is repayable, or any charges are payable, under subsection (4), or the amount of any such excess or charges,

.

• (5) In section 146 (connection charges etc, and charges for highway drainage), in subsection (5)(a), after “expenses incurred by it in” there is inserted “ , or charges imposed by it for, ”.

Charges for moving pipes

20

In section 185 of the Water Industry Act 1991 (duty to move pipes etc in certain cases), in subsection (5) (recovery of undertaker's expenses), for the words from “the undertaker” to the end there is substituted “ the person serving the notice is liable to pay to the undertaker such charges as the undertaker may impose in accordance with charging rules ”.

Sustainable drainage

Drainage systems relieving public sewers

21

• (1) After section 114 of the Water Industry Act 1991 there is inserted—

(114A) (1) Sewerage undertakers may construct, on their own or on another's land, drainage systems for the purpose of reducing the volume of surface water entering public sewers or the rate at which it does so. (2) A sewerage undertaker may maintain and operate a drainage system constructed by it under subsection (1). (3) In this section— - “drainage system” means a structure designed to receive rainwater and other surface water, other than a natural watercourse; - “natural watercourse” means a river or stream; - “rainwater” includes snow and other precipitation; - “structure” includes— 1. any part of an existing or proposed structure, and 2. any feature or aspect of a design that is intended to receive or facilitate the receipt of rainwater or other surface water. (4) The powers conferred by subsections (1) and (2) are not to be regarded as functions of a sewerage undertaker for the purposes of section 155 (compulsory purchase of land required for the purposes of carrying out functions of relevant undertakers).

• (2) In section 158 of that Act (powers to lay pipes in streets), in subsection (7) (meaning of reference to a relevant pipe), in paragraph (b)—

• (a) omit the “or” at the end of both sub-paragraphs (i) and (ii);

• (b) after sub-paragraph (iii) there is inserted

or (iv) any pipe forming part of, or required in connection with, a drainage system constructed under section 114A.

• (3) In Schedule 3 to the Flood and Water Management Act 2010 (sustainable drainage), after paragraph 19 there is inserted—

(19A) The adoption duty does not apply to a drainage system constructed under section 114A of the Water Industry Act 1991 (drainage systems relieving public sewers).

CHAPTER 3 — Regulation of the water industry

General duties of the Water Services Regulation Authority

Primary duty to secure resilience

22

• (1) Section 2 of the Water Industry Act 1991 (general duties with respect to water industry) is amended as follows.

• (2) In subsection (2A)—

• (a) omit the “and” at the end of paragraph (c);

• (b) after paragraph (d) insert

; and (e) to further the resilience objective.

• (3) After subsection (2D) insert—

(2DA) The resilience objective mentioned in subsection (2A)(e) is— (a) to secure the long-term resilience of water undertakers' supply systems and sewerage undertakers' sewerage systems as regards environmental pressures, population growth and changes in consumer behaviour, and (b) to secure that undertakers take steps for the purpose of enabling them to meet, in the long term, the need for the supply of water and the provision of sewerage services to consumers, including by promoting— (i) appropriate long-term planning and investment by relevant undertakers, and (ii) the taking by them of a range of measures to manage water resources in sustainable ways, and to increase efficiency in the use of water and reduce demand for water so as to reduce pressure on water resources. (2DB) For the purposes of subsection (2DA)— (a) the reference to water undertakers' supply systems is to be construed in accordance with section 17B; (b) the reference to sewerage undertakers' sewerage systems is a reference to the systems comprising— (i) the systems 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 undertakers are required to provide by section 94, and (ii) the lateral drains that undertakers are required to maintain by section 94.

General duty as regards undue preference in the provision of services

23

In section 2 of the Water Industry Act 1991 (general duties of the Secretary of State and the Water Services Regulation Authority with respect to the water industry), in subsection (3) (general considerations in exercising powers and duties), after paragraph (b) there is inserted—

(ba) to secure that no undue preference (including for itself) is shown, and that there is no undue discrimination, in the doing by such a company of— (i) such things as relate to the provision of services by itself or another such company, or (ii) such things as relate to the provision of services by a water supply licensee or a sewerage licensee;

.

Strategic priorities and objectives

24

• (1) For section 2A of the Water Industry Act 1991 there is substituted—

(2A) (1) The Secretary of State may from time to time publish a statement setting out strategic priorities and objectives for the Authority in carrying out relevant functions relating wholly or mainly to England. (2) The Authority must carry out those functions in accordance with any statement published under this section. (3) In formulating a statement under this section, the Secretary of State— (a) must have regard to the duties imposed on the Authority under section 2, (b) must have regard to social and environmental matters, and (c) may have regard to such other matters as the Secretary of State thinks fit. (4) Before publishing a statement under this section, the Secretary of State must consult— (a) the Authority, (b) the Council, (c) relevant undertakers, (d) licensed water suppliers, (e) the Environment Agency, (f) the Welsh Ministers, (g) the NRBW, and (h) anyone else the Secretary of State thinks appropriate. (5) Before publishing a statement under this section the Secretary of State must— (a) lay a draft of the statement before Parliament, and (b) then wait until the end of the 40-day period. (6) The Secretary of State may not publish the statement under this section if, within the 40-day period, either House of Parliament resolves not to approve it. (7) “The 40-day period” means the period of 40 days beginning with the day on which the draft is laid before Parliament (or, if it is not laid before each House on the same day, the later of the days on which it is laid). (8) When calculating the 40-day period, ignore any period during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days. (9) In this section “relevant functions relating wholly or mainly to England” means the functions mentioned in section 2(1)(b) so far as they relate to appointment areas wholly or mainly in England. (10) In subsection (9) “appointment area” means an area for which an appointment is held under Chapter 1 of Part 2. (2B) (1) The Welsh Ministers may from time to time publish a statement setting out strategic priorities and objectives for the Authority in carrying out relevant functions relating wholly or mainly to Wales. (2) The Authority must carry out those functions in accordance with any statement published under this section. (3) In formulating a statement under this section the Welsh Ministers— (a) must have regard to the duties imposed on the Authority under section 2, (b) must have regard to social and environmental matters, and (c) may have regard to such other matters as the Welsh Ministers think fit. (4) Before publishing a statement under this section, the Welsh Ministers must consult— (a) the Authority, (b) the Council, (c) relevant undertakers, (d) licensed water suppliers, (e) the NRBW, (f) the Secretary of State, (g) the Environment Agency, and (h) anyone else the Welsh Ministers think appropriate. (5) Before publishing a statement under this section the Welsh Ministers must— (a) lay a draft of the statement before the Assembly, and (b) then wait until the end of the 40-day period. (6) The Welsh Ministers may not publish the statement under this section if, within the 40-day period, the Assembly resolves not to approve it. (7) “The 40-day period” means the period of 40 days beginning with the day on which the draft is laid before the Assembly. (8) When calculating the 40-day period, ignore any period during which the Assembly is dissolved or is in recess for more than 4 days. (9) In this section “relevant functions relating wholly or mainly to Wales” means the functions mentioned in section 2(1)(b) so far as they relate to appointment areas wholly or mainly in Wales. (10) In subsection (9) “appointment area” means an area for which an appointment is held under Chapter 1 of Part 2.

• (2) In section 2(6A), (6B) and (7) of that Act (general duties with respect to water industry), for “section 2A” there is substituted “ sections 2A and 2B ”.

• (3) In section 192A of that Act (forward work programme), after subsection (3) there is inserted—

(3A) The forward work programme for any year must also include an explanation of how the projects described in it reflect any strategic priorities or objectives published under section 2A or 2B.

Regulation of relevant undertakers, water supply licensees and sewerage licensees

Procedure for granting water supply and sewerage licences

25

• (1) Section 17F of the Water Industry Act 1991 (procedure for granting water supply licences) is amended as follows.

• (2) For subsection (1) (application to be made as set out in regulations) there is substituted—

(1) The Authority must determine for each type of relevant application that may be made— (a) the form and manner in which an application is to be made; (b) the information it is to contain; (c) the documents that are to accompany it; (d) the fee that is to accompany it. (1A) The fees may be different in different circumstances. (1B) The Authority may make a new determination as to a matter referred to in subsection (1). (1C) The Authority must publish a notice of what it has determined under subsection (1) or (1B) in such manner as it thinks appropriate for bringing the determination to the attention of those affected by the determination. (1D) For the purposes of subsection (1) a relevant application is an application for— (a) the grant of a water supply or sewerage licence giving a particular authorisation or combination of authorisations; (b) the variation of a water supply or sewerage licence so that it gives— (i) a particular authorisation only, or (ii) a particular combination of authorisations. (1E) A person making a relevant application must comply with such provisions of a notice published under subsection (1C) as relate to the application.

• (3) Subsections (2), (3) and (5) (requirement for applicant to publish notice of an application made) are repealed.

• (4) In subsection (4) (procedure where the Secretary of State or the Authority proposes to refuse an application), for “the application”, in the first place it occurs, there is substituted “ a relevant application ”.

Extension of time limit for imposing financial penalties

26

• (1) In section 22C of the Water Industry Act 1991 (time limits on the imposition of financial penalties), in subsection (1), for “twelve months” there is substituted “ five years ”.

• (2) But subsection (1) does not apply in relation to a contravention or failure which—

• (a) occurred before the date on which this section comes into force, and

• (b) is not continuing on that date.

Water resources management plans for England: resilience

27

• (1) Chapter 1 of Part 3 of the Water Industry Act 1991 (water supply) is amended as follows.

• (2) In section 37A(3) (water resources management plans: preparation and review), at the end insert—

(and see also section 37AA).

• (3) After that section insert—

(37AA) (1) The Secretary of State may give a direction about the basis on which a water resources management plan for England is to be prepared. (2) A direction under this section may be given only where the Secretary of State considers it appropriate to do so with a view to securing that a water undertaker is able to meet the need for the supply of water to consumers in particular circumstances. (3) A direction under this section may, in particular, require a plan to be prepared on the basis of a specified assumption, including— (a) an assumption as to whether, and how often, specified circumstances are likely to arise; (b) an assumption that a specified power would or would not be exercised by the water undertaker or another person in specified circumstances. (4) Before giving a direction under this section, the Secretary of State must consult— (a) the Authority, (b) the Welsh Ministers, (c) each water undertaker to which the direction would apply, (d) the Environment Agency, (e) the NRBW, and (f) such other persons as the Secretary of State considers appropriate. (5) In this section— - “specified” means specified in a direction under this section; - “water resources management plan for England” means a water resources management plan prepared by a water undertaker whose area is wholly or mainly in England.

• (4) In section 37D(1) (water resources management plans: directions), after “37A” insert “ , 37AA ”.

Frequency of water resources management and drought plans

28

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

• (2) In section 37A (water resources management plans: preparation and review)—

• (a) in subsection (1), after “prepare” there is inserted “ , publish ”;

• (b) in subsection (4), after “preparing” there is inserted “ and publishing ”;

• (c) in subsection (6), in the opening words, after “prepare” there is inserted “ and publish ”.

• (3) In section 37D (water resources management plans: supplementary), after subsection (3) there is inserted—

(4) The Minister may by order made by statutory instrument amend the period for the time being specified in section 37A(6)(c). (5) In subsection (4), “the Minister” means— (a) the Secretary of State, in relation to an order applying to water undertakers whose areas are wholly or mainly in England, and (b) the Welsh Ministers, in relation to an order applying to water undertakers whose areas are wholly or mainly in Wales. (6) A statutory instrument containing an order made by the Secretary of State under subsection (4) is subject to annulment in pursuance of a resolution of either House of Parliament. (7) A statutory instrument containing an order made by the Welsh Ministers under subsection (4) is subject to annulment in pursuance of a resolution of the Assembly. (8) Subsection (9) applies in relation to a statutory instrument containing both— (a) an order made by the Secretary of State under subsection (4), and (b) an order made by the Welsh Ministers under subsection (4). (9) If in accordance with subsection (6) or (7) (negative resolution procedure)— (a) either House of Parliament resolves that an address be presented to Her Majesty praying that an instrument containing an order made by the Secretary of State be annulled, or (b) the Assembly resolves that an instrument containing an order made by the Welsh Ministers be annulled, the instrument is to have no further effect and Her Majesty may by Order in Council revoke the instrument.

• (4) In section 39B (drought plans: preparation and review)—

• (a) in subsection (1), after “prepare” there is inserted “ , publish ”;

• (b) in subsection (6)—

• (i) in the opening words, after “prepare” there is inserted “ and publish ”;

• (ii) in paragraph (c) (long-stop date) for “three years” there is substituted “ five years ”.

• (5) After section 39C (drought plans: provision of information) there is inserted—

(39D) (1) The Minister may by order made by statutory instrument amend the period for the time being specified in section 39B(6)(c). (2) In subsection (1), “the Minister” means— (a) the Secretary of State, in relation to an order applying to water undertakers whose areas are wholly or mainly in England, and (b) the Welsh Ministers, in relation to an order applying to water undertakers whose areas are wholly or mainly in Wales. (3) A statutory instrument containing an order made by the Secretary of State under subsection (1) is subject to annulment in pursuance of a resolution of either House of Parliament. (4) A statutory instrument containing an order made by the Welsh Ministers under subsection (1) is subject to annulment in pursuance of a resolution of the Assembly. (5) Subsection (6) applies in relation to a statutory instrument containing both— (a) an order made by the Secretary of State under subsection (1), and (b) an order made by the Welsh Ministers under subsection (1). (6) If in accordance with subsection (3) or (4) (negative resolution procedure)— (a) either House of Parliament resolves that an address be presented to Her Majesty praying that an instrument containing an order made by the Secretary of State be annulled, or (b) the Assembly resolves that an instrument containing an order made by the Welsh Ministers be annulled, the instrument is to have no further effect and Her Majesty may by Order in Council revoke the instrument.

Standards of performance: water supply

29

• (1) After section 38 of the Water Industry Act 1991 there is inserted—

(38ZA) (1) For the purpose of establishing overall standards of performance in connection with the supply of water by water supply licensees in accordance with their retail authorisations or restricted retail authorisations, the Minister may, in accordance with section 39ZA, by regulations— (a) impose requirements in connection with such supplies of water; (b) provide for a requirement so imposed to be enforceable under section 18 by— (i) the Minister, or (ii) the Authority, with the consent of or in accordance with a general authorisation given by the Secretary of State. (2) The Minister may, in accordance with section 39ZA, by regulations prescribe such standards of performance in connection with the provision of supplies of water as, in the Minister's opinion, ought to be achieved in individual cases. (3) Regulations under subsection (2) may provide that if a water supply licensee fails to meet a prescribed standard the licensee must pay such amount as may be prescribed to any person who— (a) is affected by the failure, and (b) is of a prescribed description. (4) Without prejudice to the generality of the power conferred by subsection (2), regulations under subsection (2) may— (a) include in a standard of performance a requirement for a water supply licensee, in prescribed circumstances, to inform a person of that person's rights by virtue of any such regulations; (b) provide for a dispute under the regulations to be referred by either party to the dispute to the Authority; (c) make provision for the procedure to be followed in connection with any such reference and for the Authority's determination on such a reference to be enforceable in such manner as may be prescribed; (d) prescribe circumstances in which a water supply licensee is to be exempted from requirements of the regulations. (5) Where the Authority determines any dispute in accordance with regulations under this section it must, in such manner as may be specified in the regulations, give its reasons for reaching its decision with respect to the dispute. (6) In this section— - “the Minister” means— 1. the Secretary of State, in relation to supplies of water made in accordance with a retail authorisation; 2. the Welsh Ministers, in relation to supplies of water made in accordance with a restricted retail authorisation; - “prescribed” means prescribed by regulations made by the Minister.

• (2) Section 38A of that Act (information as to levels of performance of water undertakers) is amended in accordance with subsections (3) to (6).

• (3) In subsection (1) (duty of Water Services Regulation Authority to collect information)—

• (a) the “and” following paragraph (a) is repealed;

• (b) after paragraph (a) there is inserted—

(aa) the compensation paid by water supply licensees under regulations under section 38ZA(2); and

;

• (c) in paragraph (b), after “water undertakers” there is inserted “ or water supply licensees ”.

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

(2A) At such times as the Authority may direct, each water supply licensee is to give the following information to the Authority— (a) as respects each standard established by regulations under section 38ZA(1), such information with respect to the level of performance achieved by the licensee as may be specified in the direction; (b) as respects each standard prescribed by regulations under section 38ZA(2), the number of cases in which compensation was paid and the aggregate amount or value of that compensation.

• (5) For subsection (3) (offence of failing to comply with subsection (2)) there is substituted—

(3) The requirements in subsections (2) and (2A) are enforceable by the Authority under section 18.

• (6) In subsection (4) (publication of information collected), after “water undertakers” there is inserted “ or water supply licensees ”.

• (7) After section 39 there is inserted—

(39ZA) (1) Section 39 applies for the purposes of making regulations under section 38ZA as it applies for the purposes of making regulations under section 38. (2) In the application of section 39 by virtue of subsection (1)— (a) a reference to a water undertaker is to be treated as a reference to a water supply licensee, and (b) a reference to the Secretary of State is to be treated as a reference to the Minister (as defined in section 38ZA(6)). (3) Regulations under section 38ZA are to be made by statutory instrument. (4) A statutory instrument containing regulations under section 38ZA is subject to annulment in pursuance of a resolution of— (a) either House of Parliament, in the case of regulations made by the Secretary of State; (b) the Assembly, in the case of regulations made by the Welsh Ministers. (5) Section 213(2) to (2B) applies to regulations made by the Welsh Ministers under section 38ZA as it applies to regulations made by the Secretary of State.

Standards of performance: sewerage

30

• (1) After section 95 of the Water Industry Act 1991 there is inserted—

(95ZA) (1) For the purpose of establishing overall standards of performance in connection with the provision of sewerage services by sewerage licensees in accordance with their retail authorisations, the Secretary of State may, in accordance with section 96ZA, by regulations— (a) impose requirements in connection with the provision of sewerage services; (b) provide for a requirement so imposed to be enforceable under section 18 by— (i) the Secretary of State, or (ii) the Authority, with the consent of or in accordance with a general authorisation given by the Secretary of State. (2) The Secretary of State may, in accordance with section 96ZA, by regulations prescribe such standards of performance in connection with the provision of sewerage services as, in the Secretary of State's opinion, ought to be achieved in individual cases. (3) Regulations under subsection (2) may provide that if a sewerage licensee fails to meet a prescribed standard the licensee must pay such amount as may be prescribed to any person who— (a) is affected by the failure, and (b) is of a prescribed description. (4) Without prejudice to the generality of the power conferred by subsection (2), regulations under subsection (2) may— (a) include in a standard of performance a requirement for a sewerage licensee, in prescribed circumstances, to inform a person of that person's rights by virtue of any such regulations; (b) provide for a dispute under the regulations to be referred by either party to the dispute to the Authority; (c) make provision for the procedure to be followed in connection with any such reference and for the Authority's determination on such a reference to be enforceable in such manner as may be prescribed; (d) prescribe circumstances in which a sewerage licensee is to be exempted from requirements of the regulations. (5) Where the Authority determines any dispute in accordance with regulations under this section it must, in such manner as may be specified in the regulations, give its reasons for reaching its decision with respect to the dispute.

• (2) Section 95A of that Act (information as to levels of performance of sewerage undertakers) is amended in accordance with subsections (3) to (6).

• (3) In subsection (1) (duty of Water Services Regulation Authority to collect information)—

• (a) the “and” following paragraph (a) is repealed;

• (b) after paragraph (a) there is inserted—

(aa) the compensation paid by sewerage licensees under regulations under section 95ZA(2); and

;

• (c) in paragraph (b), after “sewerage undertakers” there is inserted “ or sewerage licensees ”.

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

(2A) At such times as the Authority may direct, each sewerage licensee is to give the following information to the Authority— (a) as respects each standard established by regulations under section 95ZA(1), such information with respect to the level of performance achieved by the licensee as may be specified in the direction; (b) as respects each standard prescribed by regulations under section 95ZA(2), the number of cases in which compensation was paid and the aggregate amount or value of that compensation.

• (5) For subsection (3) (offence of failing to comply with subsection (2)) there is substituted—

(3) The requirements in subsections (2) and (2A) are enforceable by the Authority under section 18.

• (6) In subsection (4) (publication of information collected), after “sewerage undertakers” there is inserted “ or sewerage licensees ”.

• (7) After section 96 there is inserted—

(96ZA) (1) Section 96 applies for the purposes of making regulations under section 95ZA as it applies for the purposes of making regulations under section 95. (2) In the application of section 96 by virtue of subsection (1), a reference to a sewerage undertaker is to be treated as a reference to a sewerage licensee.

Interim duty: water supply

31

For section 63AC of the Water Industry Act 1991 (interim duty of water undertaker: domestic and non-domestic supply) there is substituted—