Water Bill (HL Bill 88)

(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
5(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
10section 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) 15In this section “relevant customer benefit” has the meaning given by
paragraph 7 of Schedule 4ZA.

33B Opinion of the Authority

(1) Where the CMA makes a request under section 33A(3), the Authority
must give its opinion on—

(a) 20whether 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
25has 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
30has 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 35Statement of methods

(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) 40the 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) 45Before 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) 5The 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 Undertakings in lieu of a merger reference

(1) If the CMA considers that it is under a duty to make a merger reference
10under 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
15remedying, 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
20under 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
25regard 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
30regard 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
35undertakings 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) 40comes 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
45under 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
5to 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)
10as references to what the Authority believes.”

15 Exclusion of small mergers: advice of CMA on threshold

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) 15The 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
20in those paragraphs, are still appropriate.”

Relevant undertakers' charges

16 Charges schemes

(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
25Water 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) 30rules under section 143B, or

(d) section 144A(9), (10) and (11)(a),

the Authority may give the undertaker a direction to do, or not to do, a
thing specified in the direction.

(6A) It is the duty of a relevant undertaker to comply with a direction under
35subsection (6), and this duty is enforceable by the Authority under
section 18.”

(2) After section 143A there is inserted—

“143B Rules about charges schemes

(1) The Authority may issue rules about charges schemes under section
40143.

(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
5any 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) 10require 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
15published.

(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) 20taking 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
25water 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,
30persons, 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
35section 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) 40Revised 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 Rules under section 143B: procedure

(1) The Authority must have regard to guidance issued under section 143E
45in 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) 5the 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) 10The 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) 15In 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
20relevant 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
25period of 28 days has expired.

(8) This section is subject to section 143D.

143D Rules under section 143B: minor or urgent revisions

(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
30each 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) 35Before 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
40days 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
45subsection (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) 5as 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) 10Unless 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 15Rules under section 143B: guidance

(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) 20consult 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) 25The 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
30this 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
35areas are wholly or mainly in Wales.”

17 Rules about charges for connections etc

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

“Rules about undertakers' charges

144ZA Rules about charges for connections etc

(1) 40The 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
5drain);

(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) 10make 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) 15make 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) 20make 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) 25providing 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
30increased 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) 35providing 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
40provision 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) 45the 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
5section 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
10different 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) 15the Authority, having regard to that guidance, considers that it
is appropriate to revise the rules.

144ZB Rules under section 144ZA: procedure

(1) The Authority must have regard to guidance issued under section
144ZD in making rules under section 144ZA.

(2) 20Before 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) 25the 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) 30such 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,
35the 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) 40the 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 Rules under section 144ZA: minor or urgent revisions

(1) 5This 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
10delay.

(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
15Authority 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) 20that 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
25soon 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) 30Notice 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
35beginning 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 Rules under section 144ZA: guidance

(1) The Minister must issue guidance as to the content of rules under
section 144ZA.

(2) 40Before 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
5revised 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) 10In 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.”

18 15Charges for providing a water main etc

(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
20from “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) 25bind 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) 30in 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
35the 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
40undertaker 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
45domestic connection under section 45)—