(8) 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) 5the 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
10incur 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.

40A Variation and termination of bulk supply agreements

(1) On the application of any party to a bulk supply agreement, the
15Authority 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) 20if 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) If an order under subsection (1) is made in relation to a bulk supply
agreement, the agreement—

(a) 25has 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
30agreement 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).

(5) 35Subsection (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
bulk supply agreement, and

(b) in respect of which section 35(1) of the Competition Act 1998
40applies 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 supplier in complying with its
45obligations 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
5likely 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.

(7) In this section and sections 40B to 40H—

• 10“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 section 40 which is deemed to be an
  agreement by virtue of section 40(4), and

  (b)

  15any agreement which has been varied by order under
  subsection (1);

• “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
  20provide a bulk supply of water.

40B Codes in respect of bulk supply agreements

(1) The Authority may issue one or more codes in respect of bulk supply
agreements.

(2) A code may make provision about—

(a) 25procedures 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
30whether 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) 35the steps to be taken by the Authority in determining whether a
person is complying with a code.

(3) Provision under subsection (2)(c) may, in particular, require the
Authority to consult the appropriate agency.

(4) If the Authority considers that a water undertaker is not acting as
40required 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
45subsection (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 review a code issued under this
section and issue a revised code.

(9) 5A 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 subsection (3), “the appropriate agency”, in relation to a
determination whether to make an order under section 40(3) or 40A(1)
10which 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) 15a 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) 20a 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
25case.

40C Codes under section 40B: procedure

(1) Before issuing a code under section 40B, the Authority must—

(a) prepare a draft of the proposed code under section 40B;

(b) consult such persons about the proposed code as it considers
30appropriate.

(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,
35the 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) 40the 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
45appointment 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) 5a 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
10agreements 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
15respect 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
20subsection (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,
25and 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) This section is subject to section 40D.

40D Codes under section 40B: minor or urgent revisions

(1) 30This 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
35delay.

(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) 40as 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) 45Unless 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 Rules about charges for the supply of water in bulk

(1) The Authority may issue rules about charges that may be imposed by a
5water undertaker under a bulk supply agreement.

(2) The rules may in particular specify—

(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
10charge;

(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.

(3) 15If 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
20subsection (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) 25make different provision for different purposes;

(c) make provision subject to exceptions.

(6) The Authority may from time to time review rules issued under this
section and issue revised rules.

(7) Revised rules may include provision for applying any of their revisions
30to bulk supply agreements made before the revised rules come into
effect.

40F Rules under section 40E: provision about the reduction of charges

(1) Rules under section 40E may provide for the reduction of charges
payable for a supply of water under a bulk supply agreement where
35conditions 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
40managing 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
45satisfy 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) 5Rules 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
10to 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 15Rules under section 40E: procedure

(1) Before issuing rules under section 40E, the Authority must—

(a) prepare a draft of any proposed rules, and

(b) consult such persons about the proposed rules as it thinks
appropriate.

(2) 20The 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 40H
in making rules under section 40E.

(4) 25Before rules under section 40E prepared by the Authority are issued,
the Minister may direct the Authority—

(a) not to issue the rules, or

(b) to issue the rules with specified modifications.

(5) In subsection (4) “the Minister” means—

(a) 30the 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
35appointment 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
40Wales, 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
45far 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
5days 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.

40H Rules under section 40E: guidance

(1) The Minister may issue guidance as to the content of rules under
section 40E.

(2) 10Before 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) 15the 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
20original 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
25which 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
30with 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) 35a 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) 40a person falling within paragraph (a)(i) or (ii) is party,
and

(ii) a person falling within paragraph (b)(i) or (ii) is party.”

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

(a) 45a 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
5substituted under subsection (1).

9 Main connections into sewerage systems

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

“110A Main connections

(1) 10This 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;

15and 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) 20a 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
25the 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
30for such period and on such terms and conditions as may be specified
in the order.

(4) Subject to subsection (5), an order under subsection (3) has effect as an
agreement between the established undertaker and the qualifying
person.

(5) 35If 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) 40the 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).

(6) Neither the CMA nor the Authority may exercise, in respect of an
agreement with a sewerage undertaker for it to permit a main
45connection 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).

(7) Subsection (6)(b) does not apply to the exercise of powers in respect of
5conduct—

(a) which is connected with such agreement as is mentioned in
subsection (6), 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
10relating to a suspected infringement of the Chapter 2
prohibition imposed by section 18(1) of that Act.

(8) In exercising its functions under this section, the Authority must have
regard to the desirability of—

(a) facilitating effective competition within the sewerage services
15industry;

(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
20obligations, 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
25provide such services.

(9) In this section and sections 110B to 110F a “main connection” means a
connection—

(a) between a sewer or disposal main and a sewer or disposal main,
or

(b) 30a connection which allows a sewer or disposal main to
discharge directly into a sewage disposal works.

110B Variation and termination of main connection agreements

(1) On the application of any party to a main connection agreement, the
Authority may—

(a) 35if 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,

40by order vary or terminate the main connection agreement.

(2) 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).

(3) 45An 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 main connection agreement, the
powers conferred by—

(a) section 32 of the Competition Act 1998 (directions in relation to
5agreements);

(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
10main 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.

(6) 15In 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
20industry;

(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
25obligations, 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
30provide such services.

(7) In this section and sections 110C to 110I—

• “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
  35includes—

  (a)

  an order under section 110A which is deemed to be an
  agreement by virtue of section 110A(4), and

  (b)

  any agreement which has been varied by order under
  subsection (1);

• 40“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 Codes in respect of main connection agreements

(1) 45The Authority may issue one or more codes in respect of main
connection agreements.

(2) A code may make provision about—