Examination of Witnesses (Questions 238
- 239)
WEDNESDAY 17 JUNE 2009
HUW IRRANCA-DAVIES
MP AND MR
MARTIN HURST
Q238 Chairman: May I welcome you,
with I am sure a sigh of relief, to the final evidence session
of the committee's inquiry in to the Ofwat Price Review 2009 and
the Draft Flood and Water Management Bill pre-legislative scrutiny.
Just so that the Minister knows, we have been working very hard
on this. We have been having meetings on Mondays and Wednesdays
for the last few weeks so that we can get through this inquiry
in a timely fashion and hopefully before the end of term to ensure
that Defra have the fruits of our labours as a contribution to
their consultation exercise on the Bill. Before I formally introduce
the Minister and his supporting colleagues, may I remind everybody
that during the course of the afternoon the division bell will
sound; we will adjourn the committee straight away and hopefully
we can be back in session with an appropriate quorum within 10
minutes of the division being called. May I welcome for the first
time Huw Irranca-Davies, the Minister for the Natural and Marine
Environment, Wildlife and Rural Affairs in Defra. You are very
welcome indeed. Thank you for being here with us this afternoon
and also for the written information that your department has
been kind enough to send. I would also like to welcome Martin
Hurst, who is the Director of Water. I think King Canute tried
that, not with a great deal of success but you are welcome to
have another go and to direct water in whatever direction. Martin
has been before the committee informally and his assistance in
helping us to understand the scope of the Bill was much appreciated.
For part two of our questions today we will have Simon Hewitt,
the Divisional Manager who deals with flood management in Defra.
Gentlemen, you are all very welcome. We are going to start off
our questioning by looking at PR09, the price determination that
Ofwat are currently carrying out. Obviously this is a very important
time for the water industry in setting its future pricing regime
and there are a number of unknowns which will potentially impact,
although it is difficult to take into account in this price review,
namely the work of Anna Walker on metering and water pricing and
Professor Cave who has done some exploratory work on the subject
of competition in the water industry. It is said that the so-called
Change Protocol, which Defra has advocated in this context, would
enable the process, if you like, to take into account, perhaps
in some anticipatory form, the outcome of Walker and Cave. I wondered
whether, Minister, you really did feel that this was a sufficient
mechanism to enable that rather prospective piece of work to be
done realistically in the context of this price review.
Huw Irranca-Davies: Thank you,
Mr Jack, and thank you for the welcome as well. I am appreciative
of the work that the committee has done quite exhaustively on
this. In respect of PRO9 and how the timescale ties into Anna
Walker's review and the Cave review and other aspects, including
the Floods and Water Management Bill as well and what might come
down the track with that, it is undoubtedly the case that, as
per normal, we are at a very busy time, probably the busiest ever
in terms of this particular sphere I would suggest, but also that
the timing of this means that things do not neatly dovetail. However,
it is not out of the realms of possibility that some aspects of
both the consultations going on or the Cave review or Anna Walkers
review could feed into what we are doing legislatively. It is
not out of the realms of possibility. I have to say that we do
not rule that out. The Change Protocol is an interesting way forward
and certainly I have had numerous discussions with the regulator,
and with water companies as well, about how useful that would
be as a way forward. It is a useful mechanism; it is not the be
all and end all on its own. It is probably worth flagging up that
there are aspects of some of the things we might discuss today
that would not necessarily be the right things to do through a
Change Protocol; they may feed in later, perhaps in PR14 as well.
There is a long gain to this as well, and that is not least as
we look at the long gain where we are planning now right up to
2030. I think the Change Protocol does have a usefulness, it really
does.
Q239 Chairman: Can you just explain
for our benefit how you think it would actually work if, for example,
Anna Walker were to report some time after the determination had
been made by Ofwat which gave a very clear steer on water metering,
because obviously that has some investment implications for the
water industry; it also has some pricing implications for consumers.
How would the mechanism work? A report is produced; recommendations
are made. What happens next?
Huw Irranca-Davies: That is a
very good question. It is not entirely for us to determine what
would actually kick off the Change Protocol. It is really an issue
for the regulator. It is worth pointing out that some aspects
would not need to be regulated for or dealt with by legislation.
|
