(a) which is connected with an agreement for the supply of water
in bulk by a water undertaker to a qualifying person, and

(b) in respect of which section 35(1) of the Competition Act 1998
applies because of an investigation under section 25 of that Act
5relating to a suspected infringement of the Chapter 2
prohibition imposed by section 18(1) of that Act.

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

(a) facilitating effective competition within the water supply
10industry;

(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
15likely future obligations, to supply water without having to
incur unreasonable expenditure in carrying out works;

(d) not putting at risk the ability of the supplier to meet its existing
obligations, or likely future obligations, to supply water.

(10) In this section and section 40A “the appropriate agency”, in relation to
20a determination whether to make an order under subsection (3) or
section 40A(1) which would result in, or which would vary or
terminate, a bulk supply agreement, means—

(a) the Environment Agency, in a case where all parties to the bulk
supply agreement are or would be—

(i) 25a water undertaker whose area is wholly in England, or

(ii) a person who would, if the person’s application for an
appointment or variation is determined in accordance
with the application, be such a water undertaker;

(b) the NRBW, in a case where all parties to the bulk supply
30agreement are or would be—

(i) a water undertaker whose area is wholly in Wales, or

(ii) a person who would, if the person’s application for an
appointment or variation is determined in accordance
with the application, be such a water undertaker;

(c) 35both the Environment Agency and the NRBW, in any other
case.

(11) In this section and sections 40A to 40J “bulk supply agreement” means
an agreement with one or more water undertakers for the supply of
water in bulk and includes—

(a) 40an order under subsection (3) which is deemed to be an
agreement by virtue of subsection (5), and

(b) any agreement which has been varied by order under section
40A(1).

40A Variation and termination of bulk supply agreements

(1) 45On the application of any party to a bulk supply agreement, the
Authority may—

(a) if it appears to the Authority that it is necessary or expedient for
the purpose of securing the efficient use of water resources, or

the efficient supply of water, that the bulk supply agreement
should be varied or terminated, and

(b) if the Authority is satisfied that variation or termination cannot
be achieved by agreement within a reasonable time,

5by order vary or terminate the bulk supply agreement.

(2) Before making an order under subsection (1), the Authority must
consult the appropriate agency, in particular about whether the
proposed variation or termination of the bulk supply agreement would
secure an efficient use of water resources, taking into account the effect
10on the environment of what is proposed.

(3) If an order under subsection (1) is made in relation to a bulk supply
agreement, the agreement—

(a) has effect subject to the provision made by the order, or

(b) ceases to have effect (as the case may be).

(4) 15An order under subsection (1) may require any party to the agreement
to pay compensation to any other party.

(5) Neither the CMA nor the Authority may exercise, in respect of an
agreement to vary or terminate a bulk supply agreement, the powers
conferred by—

(a) 20section 32 of the Competition Act 1998 (directions in relation to
agreements);

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

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

(a) 25which is connected with an agreement to vary or terminate a
bulk supply agreement, and

(b) in respect of which section 35(1) of the Competition Act 1998
applies because of an investigation under section 25 of that Act
relating to a suspected infringement of the Chapter 2
30prohibition imposed by section 18(1) of that Act.

(7) In exercising its functions under this section, the Authority must have
regard to the expenses incurred by the supplier in complying with its
obligations under the bulk supply agreement in question and to the
desirability of—

(a) 35facilitating 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) 40the supplier’s being able to meet its existing obligations, and
likely future obligations, to supply water without having to
incur unreasonable expenditure in carrying out works;

(d) not putting at risk the ability of the supplier to meet its existing
obligations, or likely future obligations, to supply water.

(8) 45In this section and sections 40B to 40J—

• “qualifying person” has the meaning given by section 40;

Water BillPage 12

• “supplier”, in relation to a bulk supply agreement, means any
  water undertaker which is required by the agreement to
  provide a bulk supply of water.

40B Codes in respect of bulk supply agreements

(1) 5The Authority may issue one or more codes in respect of bulk supply
agreements.

(2) A code may make provision about—

(a) procedures in connection with making a bulk supply
agreement;

(b) 10procedures in connection with varying or terminating a bulk
supply agreement;

(c) procedures to be followed by the Authority in determining
whether to make an order under section 40(3) or 40A(1);

(d) the terms and conditions of a bulk supply agreement, including
15terms as to the duration of such an agreement;

(e) principles for determining the terms and conditions that should
or should not be incorporated into a bulk supply agreement;

(f) the steps to be taken by the Authority in determining whether a
person is complying with a code.

(3) 20A code must include provision requiring persons proposing to make,
vary or terminate a bulk supply agreement to consult the appropriate
agency.

(4) If the Authority considers that a water undertaker is not acting as
required by a code, the Authority may give the undertaker a direction
25to do, or not to do, a particular thing specified in the direction.

(5) The Authority may not give a direction under subsection (4) requiring
a person to enter into, vary or terminate an agreement.

(6) It is the duty of a water undertaker to comply with a direction under
subsection (4), and this duty is enforceable by the Authority under
30section 18.

(7) A code may make different provision for different persons or different
descriptions of person.

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

(9) 35A revised code may include provision for applying any of its revisions
to bulk supply agreements made before the revised code comes into
force.

(10) In this section “the appropriate agency”, in relation to a bulk supply
agreement or proposed bulk supply agreement, means the body that
40would be consulted by the Authority under section 40(4) or 40A(2) if an
order under section 40(3) or 40A(1) were being considered in relation to
the agreement or proposed agreement.

40C Codes under section 40B: procedure

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

(a) 45prepare a draft of the proposed code under section 40B;

(b) consult the appropriate agency;

(c) consult such other persons about the proposed code as it
considers appropriate.

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

(3) Before a code under section 40B prepared by the Authority is issued,
the Minister may direct the Authority—

(a) not to issue the code, or

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

(4) Subsection (3) is subject to subsections (6) and (7).

(5) In subsection (3) “the Minister” means—

(a) the Secretary of State, so far as a code prepared by the Authority
relates to bulk supply agreements to which all parties are—

(i) 15a water undertaker whose area is wholly or mainly in
England, or

(ii) a person who would, if the person’s application for an
appointment or variation is determined in accordance
with the application, be such a water undertaker;

(b) 20the Welsh Ministers, so far as a code prepared by the Authority
relates to bulk supply agreements to which all parties are—

(i) a water undertaker whose area is wholly or mainly in
Wales, or

(ii) a person who would, if the person’s application for an
25appointment or variation is determined in accordance
with the application, be such a water undertaker;

(c) the Secretary of State and the Welsh Ministers acting jointly, so
far as a code prepared by the Authority relates to bulk supply
agreements to which—

(i) 30a person falling within paragraph (a)(i) or (ii) is party,
and

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

(6) If the power under subsection (3) is exercised to give a direction in
respect of such bulk supply agreements as are referred to in paragraph
35(a), (b) or (c) of subsection (5), it may not be exercised again in respect
of such bulk supply agreements as are referred to in that paragraph.

(7) If the power under subsection (3) to give a direction in respect of such
bulk supply agreements as are referred to in paragraph (a), (b) or (c) of
subsection (5) is not exercised on the first occasion on which it may be
40so exercised, it may not be exercised in respect of such bulk supply
agreements as are referred to in that paragraph on a later occasion.

(8) A direction under subsection (3) must be given within the period of 28
days beginning with the day after the end of the consultation period,
and a code prepared by the Authority in relation to which a direction
45may be given may not be issued before that period of 28 days has
expired.

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

(a) the Environment Agency, so far as a proposed code relates to
bulk supply agreements to which all parties are persons
mentioned in section 40(10)(a)(i) or (ii);

(b) the NRBW, so far as a proposed code relates to bulk supply
5agreements to which all parties are persons mentioned in
section 40(10)(b)(i) or (ii);

(c) both the Environment Agency and the NRBW, in any other
case.

(10) This section is subject to section 40D.

40D 10Codes under section 40B: minor or urgent revisions

(1) This section applies if the Authority proposes to issue a revised code
under section 40B and, in the view of the Authority, the revision or each
of the revisions proposed to be made is—

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

(b) 15a revision that it is necessary or desirable to make without
delay.

(2) Section 40C does not apply to the proposed revised code.

(3) Once the Authority has issued the revised code, it must give notice as
soon as reasonably practicable of—

(a) 20the 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
25Authority considers appropriate.

(5) Unless the Authority gives notice that a revision in a revised code is in
the view of the Authority a revision falling within subsection (1)(a), the
revision ceases to have effect at the end of the period of six months
beginning with the day after that on which the revised code is issued.

40E 30Rules about charges for the supply of water in bulk

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

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

(a) what types of charge may be imposed;

(b) 35the 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) 40principles for determining the amount of any charge that may
be imposed;

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

(3) If the Authority considers that a water undertaker is not acting as
required by rules under this section, the Authority may give the
45undertaker a direction to do, or not to do, a particular thing specified in
the direction.

(4) It is the duty of a water undertaker to comply with a direction under
subsection (3), and this duty is enforceable by the Authority under
section 18.

(5) The rules may—

(a) 5make different provision for different water undertakers or
different descriptions of water undertaker;

(b) make different provision for different purposes;

(c) make provision subject to exceptions.

(6) The Authority may from time to time revise rules issued under this
10section and issue revised rules.

(7) The Authority must issue revised rules if—

(a) guidance is issued under section 40I, and

(b) the Authority, having regard to that guidance, considers that it
is appropriate to revise the rules.

(8) 15Revised rules may include provision for applying any of their revisions
to 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
20payable for a supply of water under a bulk supply agreement where
conditions specified by the rules are satisfied.

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

(a) specify conditions that affect any party to a bulk supply
agreement;

(b) 25require that steps be taken for the purpose of reducing or
managing water consumption;

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

(i) is not party to the agreement, and

(ii) 30takes or proposes to take such steps as satisfy or would
satisfy a condition falling within paragraph (b).

(3) The rules may provide that, where a charge falls to be reduced in
accordance with rules made by virtue of subsection (1), the water
undertaker to which the charges are payable must give notice of that
35reduction to the Authority.

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

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

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

(5) 40Provision under subsection (4)(a) may in particular require the notice
to specify—

(a) the provision of the rules that brings about the reduction in the
charge;

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

(c) 45the period for which the reduction has effect.

40G Rules under section 40E: procedure

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

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

(b) consult such persons about the proposed rules as it thinks
5appropriate.

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

(3) The Authority must have regard to guidance issued under section 40I
10in making rules under section 40E.

(4) Before rules under section 40E prepared by the Authority are issued,
the Minister may direct the Authority not to issue the rules.

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

(a) the Secretary of State, so far as rules prepared by the Authority
15relate to bulk supply agreements to which all parties are—

(i) a water undertaker whose area is wholly or mainly in
England, or

(ii) a person who would, if the person’s application for an
appointment or variation is determined in accordance
20with the application, be such a water undertaker;

(b) the Welsh Ministers, so far as rules prepared by the Authority
relate to bulk supply agreements to which all parties are—

(i) a water undertaker whose area is wholly or mainly in
Wales, or

(ii) 25a person who would, if the person’s application for an
appointment or variation is determined in accordance
with the application, be such a water undertaker;

(c) the Secretary of State and the Welsh Ministers acting jointly, so
far as rules prepared by the Authority relate to bulk supply
30agreements 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
35days beginning with the day after the end of the consultation period,
and rules may not be issued before that period of 28 days has expired.

(7) This section is subject to section 40H.

40H Rules under section 40E: minor or urgent revisions

(1) This section applies if the Authority proposes to issue revised rules
40under section 40E and, in the view of the Authority, the revision or each
of the revisions proposed to be made is—

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

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

(2) 45Section 40G does not apply to the proposed revised rules.

(3) Before issuing the revised rules, the Authority must give notice to the
Minister of its intention to issue revised rules.

(4) Before the revised rules are issued, the Minister may direct the
Authority not to issue the revised rules.

(5) 5A 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) 10the 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) 15the 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
20Authority 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) 25In this section “the Minister” has the meaning given by section 40G.

40I Rules under section 40E: guidance

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

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

(a) 30prepare 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) 35such 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) 40The Minister must arrange for the publication of guidance issued under
this section.

(7) In this section “the Minister” means—

(a) the Secretary of State, in relation to bulk supply agreements to
which all parties are—

(i) a water undertaker whose area is wholly or mainly in
England, or

(ii) a person who would, if the person’s application for an
appointment or variation is determined in accordance
5with 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) 10a 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) 15a person falling within paragraph (a)(i) or (ii) is party,
and

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

40J Duty to provide information about bulk supplies

(1) A supplier under a bulk supply agreement must provide such
20information as the appropriate agency may request in relation to water
supplied under the agreement.

(2) The requirement in subsection (1) is enforceable by the Authority under
section 18.

(3) In subsection (1) “the appropriate agency” means the body that would
25be consulted by the Authority under section 40A(2) if the agreement
were to be varied or terminated by an order under section 40A(1).”

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

(a) a reference to a bulk supply agreement includes a reference to an old
30bulk 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
35substituted 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) 40This section applies where—

(a) a qualifying person requests a sewerage undertaker to permit a
main connection into the established undertaker’s sewerage
system for the benefit of the qualifying person, or

(b) a sewerage undertaker proposes such an arrangement;

and references in this section to the established undertaker are
references to the sewerage undertaker who is to permit the main
connection.

(2) In this section “qualifying person” means—

(a) 5a sewerage undertaker, or

(b) a person who has made an application for an appointment or
variation under section 8 which has not been determined.

(3) On the application of the qualifying person or the established
undertaker, the Authority may—

(a) 10if it appears to the Authority that it is necessary or expedient for
the purposes of this Part that the established undertaker should
permit a main connection into its sewerage system, and

(b) if the Authority is satisfied that the established undertaker and
qualifying person cannot reach agreement,

15by order require the established undertaker to permit the connection
for such period and on such terms and conditions as may be specified
in the order.

(4) Before making an order under subsection (3), the Authority must
consult the appropriate agency.

(5) 20Subject to subsection (6), an order under subsection (3) has effect as an
agreement between the established undertaker and the qualifying
person.

(6) If the Authority makes an order under subsection (3) on the application
of a person who is a qualifying person by virtue of subsection (2)(b), the
25Authority must frame the order so that it does not have effect until—

(a) the person becomes a sewerage undertaker for the area
specified in the order, or

(b) the person becomes a sewerage undertaker for an area that
includes the area specified in the order (in the case of a sewerage
30undertaker applying for a variation).

(7) Neither the CMA nor the Authority may exercise, in respect of an
agreement with a sewerage undertaker for it to permit a main
connection into its sewerage system for the benefit of a qualifying
person, the powers conferred by—

(a) 35section 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) 40which is connected with such agreement as is mentioned in
subsection (7), and

(b) in respect of which section 35(1) of the Competition Act 1998
applies because of an investigation under section 25 of that Act
relating to a suspected infringement of the Chapter 2
45prohibition imposed by section 18(1) of that Act.

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