(5) If an order under subsection (4) is made in relation to a section 66D
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.

(6) 5An order under subsection (4) may require one party to the
agreement to pay compensation to the other.

(7) Neither the CMA nor the Authority may exercise, in respect of an
agreement for the performance of a duty under sections 66A to 66C
by a water undertaker, the powers conferred by—

(a) 10section 32 of the Competition Act 1998 (directions in relation
to agreements);

(b) section 35(2) of that Act (interim directions).

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

(a) 15which is connected with an agreement for the performance of
a duty under sections 66A to 66C by a water undertaker, 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
20prohibition imposed by section 18(1) of that Act.

(9) In this Chapter a reference to a section 66D agreement is a reference
to—

(a) an agreement for the performance of a duty under sections
66A to 66C by a water undertaker, or

(b) 25an order deemed to be such an agreement under subsection
(3), or

(c) an agreement varied by order under subsection (4).”

4 After section 66D of the Water Industry Act 1991 (as substituted by
paragraph 3) there is inserted—

“66DA 30Codes in respect of section 66D agreements

(1) The Authority may issue one or more codes in respect of section 66D
agreements.

(2) A code may make provision about—

(a) procedures in connection with making a section 66D
35agreement;

(b) procedures in connection with varying or terminating a
section 66D agreement;

(c) the terms and conditions of a section 66D agreement,
including terms as to the duration of such an agreement;

(d) 40principles for determining the terms and conditions that
should or should not be incorporated into a section 66D
agreement.

(3) A code may make provision about the steps to be taken by the
Authority in determining for the purposes of section 66D(2) whether
45a water undertaker is, in the particular case, required to perform a
duty under sections 66A to 66C.

(4) If the Authority considers that a water undertaker or a water supply
licensee is not acting as required by a code, the Authority may give
the undertaker or the licensee a direction to do, or not to do, a thing
specified in the direction.

(5) 5The 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 or a water supply licensee to
comply with a direction under subsection (4), and this duty is
enforceable by the Authority under section 18.

(7) 10A code may make—

(a) different provision for different persons or descriptions of
person;

(b) different provision for different duties under sections 66A to
66C.

(8) 15The Authority may from time to time revise a code issued under this
section and issue a revised code.

(9) A revised code may include provision for applying any of its
revisions to section 66D agreements made before the revised code
comes into effect.

66DB 20Codes under section 66DA: procedure

(1) Before issuing a code under section 66DA, the Authority must—

(a) prepare a draft of the proposed code under section 66DA;

(b) consult persons in accordance with subsections (2) to (4).

(2) If the proposed code relates to section 66D agreements made with
25water undertakers whose areas are wholly or mainly in England, the
Authority must consult the following about the proposed code—

(a) the Secretary of State;

(b) the Chief Inspector of Drinking Water;

(c) the appropriate agency;

(d) 30the Council;

(e) any relevant undertakers likely to be affected by the
proposed code;

(f) any water supply licensees likely to be affected by the
proposed code;

(g) 35such other persons as the Authority thinks appropriate.

(3) If the proposed code relates to section 66D agreements made with
water undertakers whose areas are wholly or mainly in Wales, the
Authority must consult the following about the proposed code—

(a) the Welsh Ministers;

(b) 40the Chief Inspector of Drinking Water for Wales if there is
one, or the Chief Inspector of Drinking Water if section
86(1B)(b) applies;

(c) the appropriate agency;

(d) the Council;

(e) 45any relevant undertakers likely to be affected by the
proposed code;

(f) any water supply licensees likely to be affected by the
proposed code;

(g) such other persons as the Authority thinks appropriate.

(4) The Authority must specify the period (“the consultation period”)
5within which a person may make representations about the
proposed code.

(5) Before a code under section 66DA prepared by the Authority is
issued, the Minister may direct the Authority—

(a) not to issue the code, or

(b) 10to issue the code with specified modifications.

(6) Subsection (5) is subject to subsections (8) and (9).

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

(a) the Secretary of State, so far as a code prepared by the
Authority relates to section 66D agreements affecting only
15the supply systems of water undertakers whose areas are
wholly or mainly in England;

(b) the Welsh Ministers, so far as a code prepared by the
Authority relates to section 66D agreements affecting only
the supply systems of water undertakers whose areas are
20wholly or mainly in Wales;

(c) the Secretary of State and the Welsh Ministers acting jointly,
so far as a code prepared by the Authority relates to section
66D agreements not falling within paragraph (a) or (b).

(8) If the power under subsection (5) is exercised to give a direction in
25respect of such section 66D agreements as are referred to in
paragraph (a), (b) or (c) of subsection (7), it may not be exercised
again in respect of such section 66D agreements as are referred to in
that paragraph.

(9) If the power under subsection (5) to give a direction in respect of
30such section 66D agreements as are referred to in paragraph (a), (b)
or (c) of subsection (7) is not exercised on the first occasion on which
it may be so exercised, it may not be exercised in respect of such
section 66D agreements as are referred to in that paragraph on a later
occasion.

(10) 35A 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 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.

(11) 40In this section “the appropriate agency” means—

(a) the Environment Agency, in relation to section 66D
agreements made with water undertakers whose areas are
wholly in England;

(b) the NRBW, in relation to section 66D agreements made with
45water undertakers whose areas are wholly in Wales;

(c) both the Environment Agency and the NRBW, in relation to
section 66D agreements made with water undertakers whose
areas are partly in England and partly in Wales.

(12) This section is subject to section 66DC.

66DC Codes under section 66DA: minor or urgent revisions

(1) This section applies if the Authority proposes to issue a revised code
and, in the view of the Authority, the revision or each of the revisions
5proposed 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 66DB does not apply to the proposed revised code.

(3) 10Once 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)
15of 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
20(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.”

5 For section 66E of that Act there is substituted—

“66E Rules about charges

(1) 25The Authority must issue rules about charges that may be imposed
by a water undertaker under a section 66D agreement.

(2) The rules may in particular make provision about—

(a) the types of charges that may be imposed;

(b) the amount or the maximum amount, or methods for
30determining the amount or maximum amount, of any type of
charge;

(c) principles for determining what types of charges may or may
not be imposed;

(d) principles for determining the amount of any charge that
35may be imposed;

(e) publication of the charges that may be imposed.

(3) The rules must include provision for and in connection with
requiring a water undertaker to impose on a water supply licensee
only such charges as would enable the licensee, where the services it
40provides to a person under its retail authorisation or restricted retail
authorisation are services to which a section 142(2)(b) agreement
would apply if the undertaker had continued to provide the services,
to charge for those services at the same rate or rates as would have
applied if the section 142(2)(b) agreement had applied.

(4) 45In subsection (3) “section 142(2)(b) agreement” means an agreement
to which section 142(2)(b) applies.

(5) If the Authority considers that a water undertaker is not acting as
required by rules under this section, the Authority may—

(a) give the undertaker a direction to do, or not to do, a thing
specified in the direction, or

(b) 5in a case where a section 66D agreement to which the
undertaker is party requires modification in order to conform
to the rules, give a direction to the undertaker and the water
supply licensee in question to modify the agreement.

(6) It is the duty of a water undertaker or a water supply licensee to
10comply with a direction under subsection (5), and this duty is
enforceable by the Authority under section 18.

(7) The rules may—

(a) make different provision for different persons or descriptions
of person;

(b) 15make different provision for different purposes;

(c) make provision subject to exceptions.

(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) 20guidance is issued under section 66ED, 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 section 66D agreements made before the revised rules
25come into effect.

66EA Rules about charges: provision about the reduction of charges

(1) Rules under section 66E may make provision about the reduction of
charges payable under a section 66D agreement where—

(a) a water supply licensee that has a retail authorisation or a
30restricted retail authorisation is party to the section 66D
agreement, and

(b) other conditions specified by the rules are satisfied.

(2) Rules made by virtue of subsection (1) may in particular—

(a) specify conditions relating to any party to the section 66D
35agreement;

(b) specify conditions about persons taking steps for the purpose
of reducing or managing water consumption;

(c) specify conditions about the premises by reference to which
such steps are to be taken;

(d) 40specify conditions about reducing charges payable by a
person who—

(i) is not party to the section 66D agreement, and

(ii) takes or proposes to take such steps as satisfy or
would satisfy a condition specified under paragraph
45(b).

(3) The rules may provide that, where a charge falls to be reduced in
accordance with rules made by virtue of subsection (1), the water

undertaker to which the charges are payable must give notice of that
reduction to the Authority.

(4) Rules made by virtue of subsection (3) may—

(a) make provision as to the content of the notice;

(b) 5specify the period within which an undertaker is to give
notice to the Authority.

(5) Provision under subsection (4)(a) may in particular require the notice
to specify—

(a) the amount of the charge, with and without the reduction;

(b) 10the period for which the reduction has effect.

66EB Rules under section 66E: procedure

(1) Before issuing rules under section 66E, the Authority must—

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

(b) consult the relevant persons about the draft.

(2) 15The relevant persons are—

(a) the Secretary of State;

(b) the Welsh Ministers;

(c) the Council;

(d) any water undertakers likely to be affected by the rules;

(e) 20any water supply licensees likely to be affected by the rules;

(f) such other persons as the Authority thinks appropriate.

(3) The Authority must specify the period (“the consultation period”)
within which persons may make representations about the proposed
rules.

(4) 25The Authority must have regard to guidance issued under section
66ED in preparing rules under section 66E.

(5) Before rules under section 66E 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) 30the Secretary of State, so far as rules prepared by the
Authority relate to section 66D agreements affecting only the
supply systems of water undertakers whose areas are wholly
or mainly in England;

(b) the Welsh Ministers, so far as rules prepared by the Authority
35relate to section 66D agreements affecting only the supply
systems of water undertakers whose areas are wholly or
mainly in Wales;

(c) the Secretary of State and the Welsh Ministers acting jointly,
so far as rules prepared by the Authority relate to section 66D
40agreements not falling within paragraph (a) or (b).

(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) 45This section is subject to section 66EC.

66EC Rules under section 66E: minor or urgent revisions

(1) This section applies if the Authority proposes to issue revised rules
under section 66E and, in the view of the Authority, the revision or
each of the revisions proposed to be made is—

(a) 5a revision for which consultation is unnecessary, or

(b) a revision that it is necessary or desirable to make without
delay.

(2) Section 66EB does not apply to the proposed revised rules.

(3) Before issuing the revised rules, the Authority must give notice to the
10Minister 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
15under 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,

20whichever 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
25view 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
30the 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 66EB.

66ED 35Rules under section 66E: guidance

(1) The Minister may issue guidance as to the content of rules under
section 66E.

(2) Before issuing the guidance, the Minister must—

(a) prepare a draft of any proposed guidance;

(b) 40consult 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 guidance issued under
this section and issue revised guidance.

(5) Subsections (2) and (3) apply to revised guidance as they apply to the
original guidance.

(6) 5The 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 section 66D agreements
affecting only the supply systems of water undertakers
10whose areas are wholly or mainly in England;

(b) the Welsh Ministers, in relation to section 66D agreements
affecting only the supply systems of water undertakers
whose areas are wholly or mainly in Wales;

(c) the Secretary of State and the Welsh Ministers acting jointly,
15in relation to section 66D agreements not falling within
paragraph (a) or (b).”

6 Section 66F (section 66D: supplementary) is repealed.

7 (1) Section 66G (designation of strategic supply) is amended as follows.

(2) In subsection (1), for “an agreement under section 66D above” there is
20substituted “a section 66D agreement”.

(3) In subsection (4)(d), for “the agreement under section 66D above” there is
substituted “the section 66D agreement”.

(4) In subsection (10)—

(a) for “section 66A” there is substituted “section 66AA”;

(b) 25for “customers of the licensed water supplier in question” there is
substituted “relevant customers of a water supply licensee”.

(5) After subsection (10) there is inserted—

“(11) A person is a relevant customer of a water supply licensee if the
introduction of water in question is made by reference to the supply
30of water to that person’s premises in accordance with—

(a) a retail authorisation (whether that retail authorisation is an
authorisation of the licensee requesting the introduction of
water or another water supply licensee’s authorisation), or

(b) a restricted retail authorisation of the licensee requesting the
35introduction of water.”

8 (1) Section 66H (designation of collective strategic supply) is amended as
follows.

(2) In subsection (1)(b), for “agreements under section 66D above” there is
substituted “section 66D agreements”.

(3) 40In subsection (4)(d), for “the agreements under section 66D above” there is
substituted “the section 66D agreements”.

(4) In subsection (10)—

(a) for “section 66A” there is substituted “section 66AA”;

(b) for “customers of the licensed water supplier in question” there is
substituted “relevant customers of a water supply licensee”.

(5) After subsection (10) there is inserted—

“(11) A person is a relevant customer of a water supply licensee if an
5introduction of water is made by reference to the supply of water to
that person’s premises in accordance with—

(a) a retail authorisation (whether that retail authorisation is an
authorisation of the licensee requesting the introduction of
water or another water supply licensee’s authorisation), or

(b) 10a restricted retail authorisation of the licensee requesting the
introduction of water.”

9 (1) Section 66I (prohibition on unauthorised use of supply system) is amended
as follows.

(2) In subsection (1), for “of a customer” there is substituted “of—

“(a) 15a customer,

(b) the person so using that system, or

(c) a person associated with that person”.

(3) In subsection (2)(b)—

(a) for “licensed water supplier” there is substituted “water supply
20licensee”;

(b) for “its licence” there is substituted “the licensee’s licence”.

(4) After subsection (8), there is inserted—

“(8A) For the purposes of this section, a person (A) is associated with
another person (B) if they would be associated with each other for the
25purposes of Schedule 2A if A were a water supply licensee.”

(5) In subsection (9), for “section 17B(5) above” there is substituted “section
17B”.

Section 4

SCHEDULE 3 Sewerage licences: authorisations

30Retail authorisation

1 A retail authorisation given by a sewerage licence is an authorisation to the
sewerage licensee to use the sewerage system of a sewerage undertaker for
the purpose of enabling the licensee to provide sewerage services in respect
of the premises of—

(a) 35the licensee,

(b) persons associated with the licensee, or

(c) the licensee’s customers.

2 None of the premises served by a sewerage licensee under a retail
authorisation may be household premises (as defined in section 17C).

3 The requirement in paragraph 2 is enforceable by the Authority under
section 18.

4 5The Authority may from time to time, with the approval of the Secretary of
State, issue guidance as to the factors which are, or are not, to be taken into
account in determining the extent of any premises for the purposes of
paragraph 2.

Wholesale authorisation

5 10A wholesale authorisation given by a sewerage licence is an authorisation to
the sewerage licensee to remove matter from the sewerage system of a
sewerage undertaker where—

(a) the sewerage system is being used to enable a sewerage licensee
(whether the licensee or another sewerage licensee) to provide
15sewerage services in respect of premises in accordance with a retail
authorisation, and

(b) the removing of matter from the sewerage system is done in
connection with sewerage services so provided.

Disposal authorisation

6 20A disposal authorisation given by a sewerage licence is an authorisation to
the sewerage licensee to remove matter from the sewerage system of a
sewerage undertaker.

7 If a sewerage licensee with a disposal authorisation has, or a person
associated with the licensee has, a retail authorisation—

(a) 25the licensee or the person associated with it, or both of them, must
obtain a wholesale authorisation, and

(b) neither the licensee nor the person associated with it (if that person
has a disposal authorisation) may remove matter from a sewerage
system in accordance with the disposal authorisation (or either
30disposal authorisation, if both have such an authorisation) while
matter may be removed in accordance with the wholesale
authorisation (or either wholesale authorisation, if both have such an
authorisation).

Interpretation

8 35For the purposes of this Schedule, a person (A) is associated with a sewerage
licensee (L) if—

(a) where A and L are bodies corporate, one of them is a subsidiary of
the other or both are subsidiaries of the same body corporate;

(b) where A or L is an individual or an unincorporated association and
40the other is a body corporate, that individual or unincorporated
association controls the other or a body corporate of which the other
is a subsidiary;

(c) A is a partnership of which L is a member.

9 In paragraph 8 “subsidiary” has the meaning given by section 1159 of the
45Companies Act 2006; and sections 450(1) to (4) and 451(1) to (3) of the