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Water Bill [HL]







     1.     These explanatory notes refer to the Water Bill as brought from the House of Lords on 11th July 2003. They have been prepared by the Department for Environment, Food and Rural Affairs (Defra) in order to assist the reader in understanding the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.

2.     These notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So, where a clause or part of a clause does not seem to require any explanation or comment, none is given.


3.     With certain exceptions, the Bill extends only to England and Wales.

4.     The Bill is divided into 4 parts and has 106 clauses and 9 Schedules.

5.     Part 1 and elements of Part 3: provide the Environment Agency with additional tools for managing water resources and stronger powers to take action against abstractions causing environmental damage. They introduce provisions to increase the scope and public availability of information on water resources, intended to enable abstractors to plan ahead in an environmentally responsible manner. They also make provision to increase the flexibility, accountability and administrative efficiency of the abstraction and impounding licensing system, with the intended result of increasing the ease of access to sustainable water resources. Part 1 also imposes a duty on the Secretary of State to develop measures to ensure water users do not waste water and to ensure the timely establishment of a working framework to further establish practices required by the Water Framework Directive (2000/60/EC) and places. [Bill 149-EN]     53/2

6.     Part 2: establishes a regulatory Board to replace the existing individual Director General of Water Services along with a new independent Consumer Council for Water to replace the Customer Service Committees. It also introduces other provisions intended to improve the regulatory regime and to extend the opportunities for competition in the water industry, by allowing new entrants to supply non-household customers who use large volumes of water.

7.     Part 3: see above, with Part 1. This Part also introduces a range of miscellaneous provisions.

8.     Part 4: contains a number of supplementary provisions, such as commencement, short title and territorial extent.


9.     When considering the functions of water and sewerage undertakers, the jurisdiction of the Secretary of State and the National Assembly for Wales is generally determined by the undertakers' areas of appointment, rather than the national boundary. Functions in respect of undertakers whose area lies wholly or mainly in Wales will generally fall to the National Assembly. Similarly, the National Assembly for Wales will have jurisdiction in respect of the activities of licensed water suppliers which supply premises with water using the supply system of a water undertaker whose area is wholly or mainly in Wales.

10.     Where appropriate, powers have been fully extended to the Assembly. The Welsh Assembly Government is a compulsory consultee on powers exercised by the Secretary of State. A list of all clauses and Schedules that affect the powers of the Assembly is at Annex A.


11.     The Government's initiative to promote sustainable use of water resources was launched by the Deputy Prime Minister at the Water Summit in May 1997 with a 10 point action plan. That plan included a review of the abstraction licensing system. Following consultation, the Government's decisions on abstraction licensing were published in Taking Water Responsibly in March 1999. This Bill implements those changes to the current regime for water resources management that require legislative change. The need for the Better Regulation measures was also indicated before publication of the Bill in the White Paper A Fair Deal for Consumers - Modernising the Framework for Utility Regulation, published in July 1998. The Government announced in March 2001 that it would increase opportunities for competition in water services, and this Bill implements changes to achieve that.

12.     In November 2000, the Government consulted on the draft Water Bill, publishing its response in July 2002. A three-month consultation was undertaken on the competition aspects of the Bill in summer 2002. Copies of these documents are available on the DEFRA website (

13.     The main provisions of the Bill are set out below.

     Abstraction and Impounding

14.     The Water Resources Act 1991, which prescribes the operation of a system for the licensing of abstractions of water and impeding of water (by dams, weirs etc), is amended such that:

  • two new forms of abstraction licence are created - the transfer licence and the temporary licence. These complement the existing form of licence, which will become the "full licence";

  • control over impoundments through licences is widened so that licences are required for the duration of impoundments. Provision is made for succession and revocation becoming dependent on removal of works or satisfactory restoration of the site. The Environment Agency is empowered to issue works notices requiring repairs to be made to existing unlicensed impounding works;

  • most licensing exemptions currently given on the basis of use are removed, but a new threshold of 20 cubic metres per day is established, above which an abstractor needs a licence. The Secretary of State or the National Assembly for Wales ("the Assembly" is able to vary that threshold in relation to a defined area or particular inland waters;

  • the circumstances in which navigation, harbour and conservancy authorities may empty dry docks and transfer water with or without abstraction licences are defined;

  • the current exemption of irrigation (other than spray irrigation) and dewatering from the abstraction licensing regime is largely ended;

  • the Secretary of State (or the Assembly) is empowered to make orders to exempt from licensing certain abstractions or impoundings for particular purposes, or within particular areas;

  • the Secretary of State (or the Assembly) is empowered to selectively bring under abstraction licence control areas that are currently exempted by order, and simultaneously introduce an exemption threshold suited to that area;

  • the process of licence application and modification is modified;

  • abstraction licence application requirements are amended so that the only precondition to making an application is a right of access to the proposed point of abstraction;

  • the rights of existing licence holders falling out of licence control by virtue of being beneath the new threshold are protected; and

  • all new abstraction licences are required to be time-limited;

  • licence transfer and succession arrangements are amended;

  • a new civil action for losses incurred as a result of water abstraction is created, and the existing statutory defence for licensed abstractions is largely removed;

  • the Environment Agency is empowered to revoke or vary an abstraction licence without compensation if it has not been used for four years;

  • the Environment Agency is empowered to recover compensation costs from a water undertaker who is granted an abstraction licence if another water undertaker's abstraction licence was revoked at the direction of the Secretary of State (or the Assembly) in favour of the first;

  • entitlement to compensation is removed, if the Secretary of State (or the Assembly) directs that a licence without a time limit should be curtailed on or after 15 July 2012 on the grounds that the abstraction causes serious environmental damage;

  • the Environment Agency is given powers to require abstractors to enter into water management arrangements with abstractors;

  • the Environment Agency is given extra enforcement powers to deal with breaches of restrictions on abstraction and of impounding and licence conditions;

  • the Environment Agency is given the power to propose that one water company seeks a bulk supply from another and to take a failure to do so into account in making licensing decisions;

  • the penalties for abstraction and impounding offences are increased;

  • the powers of the Environment Agency to require abstractors to provide information in relation to how they use abstracted water are strengthened;

  • the Environment Agency's powers of entry are harmonized with those that apply in other areas;

  • the Environment Agency's regulatory controls are extended to rivers and tributaries on the English side of the border with Scotland; and

15.     The Water Industry Act 1991, which regulates the water and sewerage supply industry is amended such that water companies:

  • are given a duty to prepare drought plans, to agree them with the Secretary of State (or the NAW) and to make them publicly available;

  • are placed under a duty to agree water resource management plans with the Secretary of State (or the Assembly) and to make them publicly available; and

  • are placed under an enforceable duty to further water conservation.

16.     The Reservoirs Act 1975, which provides a regulatory framework to ensure the safety of reservoirs, is amended such that:

  • local authority enforcement powers in relation to the Act are transferred to the Environment Agency in England and Wales;

  • enforcement authorities reserve powers under the Act are extended;

  • the Secretary of State (or Assembly) is empowered to direct owners of large raised reservoirs to prepare and maintain flood plans; and

  • the Act is applied to the Crown.

     Regulatory Reform

17.     The current regulatory framework is set out in the Water Industry Act 1991. This provides for the Director General of Water Services, heading the Office of Water Services, to be responsible for economic regulation and customer interests for the Water Industry in England and Wales. Customer interests are represented through the regional Customer Service Committees. This regulatory structure is amended so that:

  • a Regulatory Authority to replace the existing individual Director General (which is intended to strengthen regulatory certainty) is established;

  • a new independent Consumer Council for Water with the job of providing information of use to consumers and promoting the interests of all water consumers is set up, this replaces the Customer Service Committees and the Ofwat National Customer Council (known as WaterVoice);

  • the Authority and the Council are required to consult on and publish forward work programmes;

  • the Authority is given a new duty in relation to sustainable development;

  • the Authority is to exercise its functions to further the consumer objective, including promoting competition, where appropriate;

  • the Authority is to take account of guidance from the Secretary of State or Assembly on social and environmental matters;

  • the Authority, Secretary of State and Assembly are empowered to impose penalties on an undertaker or a licensed water supplier up to 10% of its turnover, if it fails to meet appointment conditions, standards of performance or other obligations; and

  • companies are required to disclose any links between directors' pay and company performance.

  • The grounds for appeal against enforcement orders issued by the Authority are widened and the High Court is given powers to vary enforcement orders.


18.     The Bill includes provisions which aim to increase the opportunities for competition in the supply of water services. Under these clauses:

  • a licensing system to license new entrants is set up;

  • the Authority is provided with new regulatory powers to administer the competition framework;

  • the premises which licensees are eligible to supply is limited by means of an eligibility threshold (the level of which is subject to amendment) and

  • new powers are given to the Drinking Water Inspectorate, Secretary of State and Assembly in relation to licensees.

19.     The Bill contains a number of other provisions. These are summarised below.

The Drinking Water Inspectorate

20.     The powers for the Drinking Water Inspectorate to institute proceedings, and penalties for supplying unfit water or failing to provide information are increased.

Water Resale

21.     The Authority is given the power to offer greater financial protection to persons paying for water or sewerage services provided with the help of (but not by) a water or sewerage undertaker.

Flood Defence

22.     Various amendments are made including measures to facilitate streamlined arrangements for flood defence organization and funding. In particular the Bill:

  • provides for changes to regional flood defence committees (RFDCs), including allowing additional RFDCs to be created. The number of RFDCs is currently limited to the existing number of ten.

  • corrects the wording of section 16 of the Land Drainage Act 1991.

  • re-instates the power of internal drainage boards to borrow to fund contributions payable to the Environment Agency. This power was inadvertently lost when water legislation was consolidated in 1991.

  • enables the National Assembly for Wales to make provisions regarding the membership of Welsh regional flood defence committees.

  • repeals sections 147 to 149 of the Water Resources Act 1991, which require individual approval of grants paid to the Environment Agency for the construction or improvement of drainage works (which includes flood defence) and flood warning schemes (the power of Ministers to make block grants under the general powers in section 47 of the Environment Act 1995 remains).

Fire Hydrants

23.     Sections 57 and 58 of the Water Industry Act 1991 require Fire Authorities or owners of commercial or industrial premises to pay water companies for the installation and maintenance of fire hydrants even when hydrants that are in good working order are replaced as part of a water undertaker's refurbishment programme for a water supply system.

24.     The Bill amends the situation so that water companies are required to pay for replacement hydrants that they remove during mains renewal or refurbishment work.

Coal mine water pollution

25.     The Bill provides new powers under the Coal Industry Act 1994 for the Coal Authority to take action to prevent and clean up mine water pollution from abandoned coal mines.

Contaminated Land

26.     There are changes to the definition of contaminated land, in relation to water pollution, to ensure that minor cases are not subject to inappropriate requirements.

Transfer of discharge consents

27.     Under the Water Resources Act 1991, the Environment Agency issues consents for the discharge of domestic and trade effluent to controlled waters. Discharge consents can be transferred from the consent holder to another holder who proposes to carry on the discharge.

28.     The Bill amends the Water Resources Act 1991 to change the process of transferring a discharge consent from the existing consent holder to a new holder.

Trade Effluent Consents

29.     Under the Water Industry Act 1991, water and sewerage companies operate the trade effluent consenting regime which permits discharges to be made to sewers. There is currently some uncertainty as to whether particular kinds of discharges from different types of activity need to be regulated by the sewerage companies.

30.     The Bill creates a new power under the Water Industry Act 1991 for the Secretary of State to make orders which apply or disapply the trade effluent consenting regime in certain cases.

Self Lay of Water Mains and other pipes

31.     The Water Industry Act 1991 only provides for new domestic water mains to be requisitioned and built by the relevant water undertaker. It also provides for the cost to be spread over 12 years. The Bill provides that:

  • Self Lay Organizations (essentially developers) can enter into an agreement with the water undertaker to lay water mains and communication pipes in accordance with the standards set by the undertaker;

  • the cost can be offset by a payment from the undertaker equivalent to the expected charges from new customers using the main for the first 12 years of its life; and

  • where mains are requisitioned, the requisitioner will have the choice of paying a lump sum instead of instalments over 12 years.


32.     Section 101A of the Water Industry Act 1991 places a duty on the sewerage undertaker to provide a public sewer where the existing non-mains drainage arrangement is causing environmental or amenity problems. Certain conditions apply. The duty applies only to properties that were substantially completed by 20 June 1995 (the date the amendment was introduced into the Environment Bill). It was intended that planning guidance would be introduced after that date to prevent such environmental or amenity problems occurring in the future but this was not published until 1 April 1999. There is therefore a gap of some three years in which houses were being constructed and to which neither the duty or guidance apply.

33.     The Bill removes the qualifying date of 20 June 1995.

Lateral Drains

34.     The Water Industry Act 1991 provides for sewers to be requisitioned from the sewerage undertaker or constructed to a standard that will enable them to be adopted by the undertaker on completion. However, this duty does not extend to "laterals", which are those parts of drains which run from the curtilage of premises to connect them to the public sewer. Where repairs being required to the laterals, the owners of the premises concerned are responsible for arranging for the road to be dug up and must pay all the costs, even where laterals run under a road. The Bill provides that:

  • New laterals may not be connected to a public sewer unless they are built to an adoptable standard; and

  • Adoption agreements may require inspection chambers to be constructed to an adoptable standard close to the curtilage of the property to act as demarcation point between the drain from the property (which remains the householder's responsibility) and the lateral (which becomes the sewerage undertaker's responsibility).


35.     The commentary on clauses is set out by Part, with the commentary on each Schedule included alongside the Part to which it relates.

36.     In these Notes, the following abbreviations are used:

     Water Services Regulation Authority : the Authority

     Consumer Council for Water : Council or the CCW

     Department of Trade and Industry : DTI

     Director General of Water Services : Director

     Drinking Water Inspectorate : DWI

     Environment Agency : EA or the Agency

     National Assembly for Wales : NAW or the Assembly

     Water Industry Act 1991 : WIA

     Water Resources Act 1991 : WRA


Clauses 1 to 12 Restrictions on abstraction and impounding

37.     Clause 1: Water conservation. This clause places a duty on the Secretary of State to devise and implement measures to ensure that those who use water do so without wasting it.

38.     Clause 2: Protection of Inland surface waters, transitional waters, coastal waters and groundwater.

39.     This clause relates to the Water Framework Directive (2000/60/EC). Subsection (1) places a duty on the Secretary of State, by regulations, to ensure the timely establishment of a working framework that furthers the establishment of practices required by the Directive.

40.     Subsection (2) specifies the matters that the regulations under subsection 1 must in particular cover.

41.     Subsection (3) places a duty on the Secretary of State or the Assembly to set targets for the achievement of measures set out in subsection (2). The first set of targets must be introduced in December 2004 and be reviewed every six years thereafter.

42.     Clause 3: Licences to abstract water. This provides that abstraction licences will be of one of three types: a "full licence", a "transfer licence" or a "temporary licence".

43.     One of these three forms of licence is required in order for a person to abstract any quantity of water which is above the licensing threshold (see clause 8) and which is not otherwise exempt.

44.     A "temporary licence" is required for any abstraction from a source of supply lasting less than 28 days.

45.     A "transfer licence" is available for abstraction of water for 28 days or more for transfer from one source of supply to another without intervening use - for example, transferring water from an excavation to a watercourse, or from one watercourse to another for the purposes of navigation. But it is possible to apply for a full licence if the applicant wants full protection from derogation for his transfer abstraction (see Clause 18).

46.     A "full licence" is required for any other abstraction for 28 days or more. All current abstraction licences are of this type, by virtue of the provisions of Clause 99(1), even though some relate to abstractions that would require only a "transfer licence". There is no need for existing licences to be converted unless the holder wishes to do it.

47.     Clause 4: Restrictions on impounding. The current restriction on impounding of water makes it an offence to begin to construct or alter an impounding works unless an impounding licence has been obtained. This clause amends the current restriction on impounding in order to impose controls throughout the lifetime of new impounding works. Impounding licences (whether issued before or after the coming into force of this clause) will remain in force for the lifetime of the works, allowing the Agency to attach or modify conditions to the licence to ensure that impounding works do not cause damage to the environment.

     48.     Clauses 5 and 6: Existing impounding works. The new restriction on impounding introduced by Clause 4 does not apply retrospectively. However, there are impounding works that are unlicensed, either because their construction pre-dated the licensing regime or a licence has been revoked and some of these works are, or in the future may, cause environmental problems that cannot be addressed by the Agency under its current powers. Clause 5 provides the EA with a new power to serve notice to require that an impounding licence is obtained and failure to comply with such a notice would be an offence. Clause 6 provides the EA with a power to serve a works notice on the relevant person (normally the owner) to carry out remedial works on an existing impoundment that is causing environmental damage. Failure to comply with the notice is an offence.

     49.     Clause 7: Rights of navigation, harbour and conservancy authorities. Under the current regime, all transfers of water from one area of inland water to another by navigation, harbour and conservancy authorities in the exercise of their functions as such are exempt from licence control. The effect of this clause, taken with Clause 3, is to limit that exemption and to require the licensing of transfers of water from any source of supply to a water system operated by these authorities. While a transfer licence will suffice, those authorities may also apply for a full licence if they wish (see Clause 18). Transfers wholly within water systems operated by those authorities (for example, transfers from canal pounds to canal locks) do not require a licence. Neither do transfers between any such system and other inland waters which are connected only to that system (for example, ditches draining only to canals, or reservoirs capable of discharging only to canals). Where a transfer is made to another source of supply from which it is subsequently abstracted, the transfer will be licensable. Construction or alteration of impounding works by those authorities will remain exempt from licensing if the works does not have any effect beyond the authority's water system.

50.     Clause 8: Right to abstract small quantities. This clause sets a quantity of 20 cubic metres in any period of 24 hours as the normal threshold above which an abstraction licence is required, irrespective of the source of supply or the purpose of the abstraction (unless it is otherwise exempt). This replaces the present, more complex exemptions framework for small abstractions, under which some 20,000 abstractions of less than that quantity require licences. The clause also provides that where a licence exists, the small quantity exemption does not apply in addition to the licensed quantity for abstractions for the same purpose, but it can be used in addition to a licensed abstraction for a different purpose.

51.     The Agency may apply (or can be directed to apply) to the Secretary of State for an Order setting a different threshold, which may be greater or less than the normal figure in specified areas, inland waters or underground strata. If the threshold is reduced and a previously exempt abstractor is unable to obtain a licence to abstract the volume he had previously abstracted, then compensation may become payable for loss or damage caused to that abstractor.

52.     Clause 9: Rights to abstract for drainage purposes etc. Abstractions for dewatering mines, quarries or engineering excavations will generally require a licence (usually a temporary or transfer licence - see Clause 3). But it also recognises that such abstractions may be required as an emergency measure and therefore allows them to take place without a licence provided that the EA is notified within five days of their commencement. The Agency may determine that the abstraction is not necessary for emergency reasons and is able to require a licence application to be made in the normal way. The Agency may also serve notice on the operator that it considers that what started out as an emergency abstraction has ceased to be one.

53.     This clause also removes two activities from the definition of "land drainage", and thus from the exemption from licensing. These activities become subject to licensing control. They are: warping (which is the abstraction of water which contains silt onto agricultural land so that the silt can deposit and act as a fertiliser) and irrigation. At present, of those abstractions made for irrigation it is only those that are made for spray irrigation that require abstraction licensing. The growing use of trickle irrigation and the use of land drainage systems in reverse to maintain field water levels and for warping prompts the proposed change. Land drainage i.e. removal of flood water, remains exempt from abstraction licensing. The many minor transfers of water within an Internal Drainage Board district are exempt from licence control, but initial transfers into a Board's district will be licensable.

54.     Clause 10: Amendments relating to section 9. The amendments provided by this clause are consequential on clause 9. They move to sections 199 and 199A the provisions of sections 30 and 31 of the WRA, which require an operator to give prior notice to the EA of mining operations affecting water resources. The clause provides that the Secretary of State may delegate decisions on appeals against notices to a third party. The clause also brings the definition of flood defence for the purposes of defining minimum river flows in section 21 of the WRA into line with that used for flood defence purposes in section 113 of the Act.

     55.     Clause 11: Power to provide for further exemptions. This clause provides the Secretary of State with the power to make regulations so that the restriction on abstraction and impounding works shall not apply in certain cases. Such cases are referred to as "exemptions". Regulations ensure that an exemption must satisfy any prescribed conditions that may be attached to it, and provide the Agency with the power to determine whether any exemption should apply. Any exemption may apply generally or relate to a geographical area or particular source of supply. Again, this is intended to enable the Agency to exercise levels of control of water resources appropriate to the environmental impact of an abstraction in relation to local conditions.

56.     Clause 12: Orders under section 33 of the WRA, etc Existing legislation provides that a navigation, harbour or conservancy authority or the Agency may apply to the Secretary of State to remove the restriction on abstraction from any source of supply. This new provision provides for the Secretary of State to make regulations to revoke any such order. That revocation can include a similar order made under any local or private Act. In addition, the orders under this clause can also repeal the provision in any local or private Act containing the power to make such an exception order in future, once all orders under that power have been revoked. The clause also allows an order to make provision for the continuation of existing rights to abstract without a licence and for compensation where these are curtailed and result in loss or damages.

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