(c) the ability of the sewerage undertaker to meet its existing
obligations, and likely future obligations, to provide sewerage
services without having to incur unreasonable expenditure in
carrying out works;

(d) 5not putting at risk the ability of the sewerage undertaker to
meet its existing obligations, or likely future obligations, to
provide sewerage services.

(7) In this section and sections 105ZC to 105ZI “section 104 agreement”
means an agreement with a sewerage undertaker for the vesting of a
10sewer, drain or sewage disposal works in a sewerage undertaker at a
future date or on a future event and includes—

(a) an order under section 105ZA which is deemed to be an
agreement by virtue of section 105ZA(5), and

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

105ZC Codes in respect of section 104 agreements

(1) The Authority must issue a code in respect of section 104 agreements.

(2) The code may make provision about—

(a) procedures in connection with making an agreement under
20section 104;

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

(c) procedures to be followed by the Authority in determining
whether to make an order under section 105ZA(4) or 105ZB(1);

(d) 25the circumstances in which it is, or is not, appropriate for work
to be done by a person other than a sewerage undertaker;

(e) the terms and conditions of a section 104 agreement;

(f) principles for determining the terms and conditions that should
or should not be incorporated into a section 104 agreement;

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

(3) Provision under subsection (2)(d) may include in particular provision
about circumstances relating to—

(a) the nature of the work;

(b) 35the kind of premises supplied or to be supplied.

(4) Provision under subsection (2)(e) may include in particular provision
about terms and conditions as regards—

(a) constructing associated infrastructure;

(b) vesting associated infrastructure in a sewerage undertaker;

(c) 40making a communication with public sewers.

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

(6) The Authority may not give a direction under subsection (5) requiring
45a person to enter into, vary or terminate an agreement.

(7) It is the duty of a sewerage undertaker to comply with a direction under
subsection (5), and this duty is enforceable by the Authority under
section 18.

(8) The code may make different provision for different persons or
5descriptions of person.

(9) The Authority must from time to time review the code and, if
appropriate, issue a revised code.

(10) A revised code may include provision for applying any of its revisions
to section 104 agreements made before the revised code comes into
10force.

105ZD Codes under section 105ZC: procedure

(1) Before issuing a code under section 105ZC, the Authority must—

(a) prepare a draft of the proposed code under section 105ZC, and

(b) consult such persons about the proposed code as it considers
15appropriate.

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

(3) Before a code under section 105ZC prepared by the Authority is issued,
20the Minister may direct the Authority—

(a) not to issue the code, or

(b) to issue the code with specified modifications.

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

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

(a) 25the Secretary of State, so far as the code relates to section 104
agreements for the vesting of sewers, drains or sewage disposal
works in sewerage undertakers whose areas are wholly or
mainly in England;

(b) the Welsh Ministers, so far as the code relates to section 104
30agreements for the vesting of sewers, drains or sewage disposal
works in sewerage undertakers whose areas are wholly or
mainly in Wales.

(6) The power under subsection (3) may not be exercised more than once
by the Secretary of State or the Welsh Ministers.

(7) 35If the power under subsection (3) is not exercised by the Secretary of
State or the Welsh Ministers on the first occasion on which it may be
exercised by the Secretary of State or (as the case may be) the Welsh
Ministers, it may not be exercised by the Secretary of State or (as the
case may be) the Welsh Ministers on a later occasion.

(8) 40A direction under subsection (3) must be given within the period of 28
days beginning with the day after the end of the consultation period,
and a code in relation to which a direction may be given may not be
issued before that period of 28 days has expired.

(9) This section is subject to section 105ZE.

105ZE Codes under section 105ZC: minor or urgent revisions

(1) This section applies if the Authority proposes to issue a revised code
under section 105ZC and, in the view of the Authority, the revision or
each of the revisions proposed to be made is—

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

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

(2) Section 105ZD does not apply to the proposed revised code.

(3) Once the Authority has issued the revised code, it must give notice as
10soon as reasonably practicable of—

(a) the issuing of the revised code, and

(b) as regards each revision contained in it, whether in the view of
the Authority the revision falls within paragraph (a) or (b) of
subsection (1).

(4) 15Notice under subsection (3) is to be given to such persons as the
Authority considers appropriate.

(5) Unless the Authority gives notice that a revision in a revised code is in
the view of the Authority a revision falling within subsection (1)(a), the
revision ceases to have effect at the end of the period of six months
20beginning with the day after that on which the revised code is issued.

105ZF Rules about charges in connection with a section 104 agreement

(1) The Authority may issue rules about charges that may be imposed by a
sewerage undertaker under a section 104 agreement.

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

(a) 25what types of charge may be imposed;

(b) the amount or the maximum amount, or a method for
determining the amount or maximum amount, of any type of
charge;

(c) principles for determining what types of charge may or may not
30be imposed;

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

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

(3) The rules may require a sewerage undertaker, upon declaring a sewer,
35drain or sewage disposal works to be vested in the undertaker in
accordance with a section 104 agreement, to pay to the other party to
the agreement an amount (which may be nil) determined in accordance
with the rules.

(4) Rules made by virtue of subsection (3) may, in particular, provide for
40the determination to take into account—

(a) revenue that might be derived from the sewer, drain or sewage
disposal works in question;

(b) costs that might have been incurred in providing such a sewer,
drain or sewage disposal works.

(5) 45The rules may also make provision as to—

(a) the amount of security that may be required by a sewerage
undertaker for the purposes of any charges imposed by the
sewerage undertaker under a section 104 agreement;

(b) the type of security that may be required;

(c) 5the payment of interest on a sum deposited with a sewerage
undertaker by way of security.

(6) If the Authority considers that a sewerage undertaker is not acting as
required by rules under this section, the Authority may give the
undertaker a direction to do, or not to do, a particular thing specified in
10the direction.

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

(8) The rules may make different provision for different sewerage
15undertakers or descriptions of undertaker.

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

(10) The Authority must issue revised rules if—

(a) guidance is issued under section 105ZI, and

(b) 20the Authority, having regard to that guidance, considers that it
is appropriate to revise the rules.

(11) Revised rules may include provision for applying any of their revisions
to section 104 agreements made before the revised rules come into
effect.

105ZG 25 Rules under section 105ZF: procedure

(1) Before issuing rules under section 105ZF, the Authority must—

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

(b) consult the relevant persons about the draft.

(2) The relevant persons are—

(a) 30the Secretary of State;

(b) the Welsh Ministers;

(c) the Council;

(d) any sewerage undertakers or other persons likely to be affected
by the rules;

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

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

(4) The Authority must have regard to guidance issued under section
40105ZI in making rules under section 105ZF.

(5) Before rules under section 105ZF prepared by the Authority are issued,
the Minister may direct the Authority not to issue the rules.

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

(a) the Secretary of State, so far as the rules relate to section 104
agreements for the vesting of sewers, drains or sewage disposal
works in sewerage undertakers whose areas are wholly or
mainly in England;

(b) 5the Welsh Ministers, so far as the rules relate to section 104
agreements for the vesting of sewers, drains or sewage disposal
works in sewerage undertakers whose areas are wholly or
mainly in Wales.

(7) A direction under subsection (5) must be given within the period of 28
10days beginning with the day after the end of the consultation period,
and rules may not be issued before that period of 28 days has expired.

(8) This section is subject to section 105ZH.

105ZH Rules under section 105ZF: minor or urgent revisions

(1) This section applies if the Authority proposes to issue revised rules
15under section 105ZF and, in the view of the Authority, the revision or
each of the revisions proposed to be made is—

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

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

(2) 20Section 105ZG does not apply to the proposed revised rules.

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

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

(5) 25A 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) 30the 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) 35the 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
40Authority 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) 45In this section “the Minister” has the meaning given by section 105ZG.

105ZI Rules under section 105ZF: guidance

(1) The Minister may issue guidance as to the content of rules under
section 105ZF.

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

(a) 5prepare 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) 10such 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) 15The Minister must arrange for the publication of guidance issued under
this section.

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

(a) the Secretary of State, so far as the guidance is as to the content
of rules relating to section 104 agreements for the vesting of
20sewers, drains or sewage disposal works in sewerage
undertakers whose areas are wholly or mainly in England;

(b) the Welsh Ministers, so far as the guidance is as to the content
of rules relating to section 104 agreements for the vesting of
sewers, drains or sewage disposal works in sewerage
25undertakers whose areas are wholly or mainly in Wales.”

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

“(1A) A sewerage undertaker may not give notice to a person under
subsection (1) if—

(a) 30the undertaker and the person entered into an agreement under
section 104, and

(b) the agreement provides for the communication to which the
person’s proposal relates to be made by the person.”

(5) In section 108 (communication works by person entitled to communication), in
35subsection (1), after “section 106 above” there is inserted “or may not make
such an election because of section 107(1A)”.

Arrangements for water undertakers to take water

12 Arrangements for water undertakers to take water from other persons

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

“Chapter 2B

Additional sources of water

66M Arrangements for water undertakers to take water from other persons

(1) 5The Minister may by regulations make provision about the supply of
water to a water undertaker by a person other than a water undertaker.

(2) Regulations under this section may, in particular—

(a) confer functions on the Authority, the Secretary of State and the
Welsh Ministers;

(b) 10make provision preventing the CMA or the Authority from
exercising powers under the Competition Act 1998 in respect of
a water supply agreement;

(c) include provision described in sections 66N and 66O;

(d) make provision excepting water supply agreements of such
15description as the regulations may specify from the effect of—

(i) any provision of the regulations, or

(ii) any provision of the codes or rules made under the
regulations.

(3) In this Chapter—

• 20“the Minister” means—

  (a)

  the Secretary of State, in relation to the supply of water
  to a water undertaker whose area is wholly or mainly in
  England, and

  (b)

  the Welsh Ministers, in relation to the supply of water to
  25a water undertaker whose area is wholly or mainly in
  Wales;

• “relevant person” means a person other than a water undertaker;

• “water supply agreement” means an agreement for the supply of
  water to a water undertaker by a relevant person.

(4) 30Nothing in provision made under this Chapter affects a water supply
agreement made before any regulations under this section first come
into force.

66N Orders in respect of supplies by relevant persons

(1) Regulations under section 66M may, in particular, make provision for
35the Authority by order—

(a) to require a water undertaker to take a supply of water from a
relevant person, and

(b) to vary or terminate a water supply agreement.

(2) Provision made under subsection (1)(a) must provide that—

(a) 40the Authority may make an order only on an application by the
water undertaker or the relevant person, and

(b) before making an order the Authority must be satisfied that the
water undertaker and the relevant person cannot reach
agreement.

(3) Provision made under subsection (1)(b) must provide that the
5Authority may make an order only on an application by a party to the
agreement.

(4) The provision that may be made under subsection (1) includes—

(a) provision about the circumstances in which the Authority may
make an order;

(b) 10provision requiring the Authority to consult the Environment
Agency, the NRBW or both of them before making an order;

(c) provision requiring the Authority to have regard to whether a
person has complied with a code or rules described in section
66O;

(d) 15provision enabling the Authority to specify the times at which,
the period during which and the terms and conditions on which
the supply of water must be taken;

(e) provision for an order made by the Authority requiring a
supply of water to be taken to have effect as an agreement
20between the water undertaker and the relevant person (or those
persons and other persons);

(f) provision requiring a party to a water supply agreement to pay
compensation to another party on the variation or termination
of the agreement.

66O 25Codes and rules in respect of water supply agreements

(1) Regulations under section 66M may, in particular, make provision for
the Authority to issue one or more codes in respect of water supply
agreements, including—

(a) provision for a code to include provision about procedures in
30connection with making, varying or terminating a water supply
agreement;

(b) provision for a code to include provision about the terms and
conditions of water supply agreements;

(c) provision for a code to include provision about procedures to be
35followed by the Authority in determining whether to make an
order described in section 66N;

(d) provision for the Authority to direct water undertakers to
comply with a code;

(e) provision for such directions to be enforceable by the Authority
40under section 18;

(f) provision for the Minister to require a code to be revised or to
prevent a code being issued or revised (but see subsections (3)
and (4)).

(2) Regulations under section 66M may, in particular, make provision for
45the Authority to issue and enforce rules about charges that may be
imposed under water supply agreements, including—

(a) provision for the making of rules about the amount or
maximum amount of a charge;

(b) provision for the Authority to direct water undertakers to
comply with the rules;

(c) provision for such directions to be enforceable by the Authority
under section 18;

(d) 5provision for the Minister to issue guidance as to the content of
the rules (but see subsection (4));

(e) provision for the Minister to prevent rules being issued (but see
subsection (4)).

(3) Regulations conferring a power on the Minister as described in
10subsection (1)(f) must provide that—

(a) if the power is exercised to impose a requirement in respect of
agreements for such supplies of water as are referred to in
paragraph (a) or (b) of the definition of “the Minister” in section
66M(3), it may not be exercised again in respect of such supplies
15of water as are referred to in that paragraph, and

(b) if the power to impose a requirement in respect of agreements
for such supplies of water as are referred to in paragraph (a) or
(b) of the definition of “the Minister” in section 66M(3) is not
exercised on the first occasion on which it may be so exercised,
20it may not be exercised in respect of such agreements as are
referred to in that paragraph on a later occasion.

(4) Functions conferred by provision described in subsection (1)(f) or (2)(d)
or (e) must be conferred on the Secretary of State and the Welsh
Ministers acting jointly so far as the code, guidance or rules relate to—

(a) 25a supply of water to a water undertaker whose area is wholly or
mainly in England by means of the supply system of a water
undertaker whose area is wholly or mainly in Wales;

(b) a supply of water to a water undertaker whose area is wholly or
mainly in Wales by means of the supply system of a water
30undertaker whose area is wholly or mainly in England.

(5) References in this section to a water undertaker’s supply system are to
be construed in accordance with section 17B.

66P Procedure etc

(1) A statutory instrument containing regulations under section 66M may
35not be made unless a draft of the instrument has been laid before and
approved by a resolution of—

(a) each House of Parliament, in the case of regulations made by
the Secretary of State, or

(b) the Assembly, in the case of regulations made by the Welsh
40Ministers.

(2) Before laying a draft of an instrument in accordance with subsection
(1), the Minister must consult—

(a) the Authority,

(b) water undertakers,

(c) 45water supply licensees,

(d) the Chief Inspector of Drinking Water,

(e) the Chief Inspector of Drinking Water for Wales if there is one,

(f) the Environment Agency,

(g) the NRBW,

(h) the Council, and

(i) such other persons as the Minister considers appropriate.

(3) The supplemental and consequential provision that regulations under
5section 66M may include by virtue of section 213(2)(f) includes
provision amending, repealing or revoking provision made by or
under an enactment.

(4) Section 213(2) to (2B) applies to regulations made by the Welsh
Ministers under section 66M as it applies to regulations made by the
10Secretary of State.

(5) If a draft of an instrument containing regulations under section 66M
would, apart from this subsection, be treated for the purposes of the
Standing Orders of either House of Parliament as a hybrid instrument,
it is to proceed in that House as if it were not a hybrid instrument.

(6) 15In this section “enactment” includes a Measure or Act of the National
Assembly for Wales.”

Appointments and variations

13 Procedure with respect to appointments and variations

(1) Section 8 of the Water Industry Act 1991 (procedure with respect to
20appointments and variations replacing relevant undertakers) is amended as
follows.

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

“(i) 25the existing appointee,

(ii) if the application relates to the replacement of a water
undertaker whose area is wholly or mainly in England,
the Chief Inspector of Drinking Water,

(iii) if the application relates to the replacement of a water
30undertaker whose area is wholly or mainly in Wales, the
Chief Inspector of Drinking Water for Wales if there is
one, or the Chief Inspector of Drinking Water if section
86(1B)(b) applies,

(iv) the appropriate agency, and

(v) 35every”.

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

“(i) the existing appointee,

(ii) 40if the proposed appointment or variation would replace
a water undertaker whose area is wholly or mainly in
England, the Chief Inspector of Drinking Water,

(iii) if the proposed appointment or variation would replace
a water undertaker whose area is wholly or mainly in
45Wales, the Chief Inspector of Drinking Water for Wales