Memorandum submitted by Water UK (DFWMB
17)
SUMMARY OF
WATER UK EVIDENCE
TO EFRA
COMMITTEE ON
DRAFT FLOOD
AND WATER
MANAGEMENT BILL
1. Water UK welcomes the opportunity to
give its comments on the draft Flood and Water Management Bill
to the Efra Committee.
2. Water UK urges the Government to involve
the water industry closely as the detail of proposals in the draft
Bill is developed in the coming months.
3. Water UK would like clarity on how the
recommendations of the Walker Review on charging and metering
for water and sewerage services, the Cave Review on competition
and innovation and the Environment Agency consultation on abstraction
licensing will be fed into the Bill and how the water industry
will have an opportunity to comment on these proposals.
4. Regarding important omissions from the
draft Bill,Water UK suggests that the Bill should include proposals—such
as the hierarchy of liable persons—to enable water companies
to tackle the growing problem of water debt.
5. Water UK is concerned about the financial
impact on companies—and hence on customers—of the
obligations proposed in the draft Bill and is concerned that the
costs of the draft Bill have not been adequately assessed. Water
UK asks for further work to be done on this.
6. Water UK broadly supports the draft Bill's
approach to flood management which is based on the recommendations
of Sir Michael Pitt. However, Water UK is concerned that the proposed
arrangements are not sufficiently streamlined.
7. Water UK supports the proposed duty on
water companies to co-operate and share information with local
authorities and the Environment Agency (clauses 24-30) although
we have concerns about what information would be requested, how
much and by whom.
8. Water UK welcomes the proposals on reservoir
safety (clauses 98-192) which introduce a more risk-based approach
to reservoir safety and looks forward to working closely with
officials on the detail of these proposals.
9. Water UK notes that both the industry
and its investors will wish to have clarity on how the proposed
Water Administration Regime (clauses 193-216) would interact with
current regulatory mechanisms such as the substantial effects
clause.
10. In principle, Water UK supports the
proposals on Sustainable Drainage Systems (clauses 217-233) but
has concerns about the approving arrangements. Water UK is also
concerned that there are no provisions in the draft Bill on the
funding of the operation and maintaining of SUDS.
11. Water UK believes that changes to water
companies' conditions should be agreed with Ofwat, rather than
being imposed, and that an effective mechanism for appeals should
be set up (clauses 234-5 on enforcement).
12. Water UK accepts the proposal that the
Drinking Water Inspectorate should recover its costs by charging
water companies (clause 237) but seeks an assurance that there
will be a process for agreeing these costs.
13. Water UK notes that the proposals for
financing large infrastructure projects (clauses 239-241) are
at an early stage of development and that there are a number of
important questions that need to be investigated further.
14. Water UK supports the introduction of
a mandatory build standard for sewers (clause 252) and the adoption
of all sewers and lateral drains built to these standards but
seeks clarification on what recourse the sewerage undertaker has
if these are not met. In addition, Water UK is concerned about
additional burdens that would be placed on sewerage undertakers.
15. Water UK supports the proposal on misconnections
(clause 253) which gives sewerage companies powers to rectify
misconnections.
16. Water UK welcomes the inclusion of hosepipe
bans (clause 254) but is concerned that an enabling power, as
given in the draft Bill, may not result in the changes that are
needed.
WATER UK EVIDENCE
TO EFRA
COMMITTEE ON
THE DRAFT
FLOOD AND
WATER MANAGEMENT
BILL
1. Water UK welcomes the opportunity to
give its initial comments on the draft Flood and Water Management
Bill to the Efra Committee. We have highlighted those issues that
are of particular interest to the water industry and would be
happy to elaborate further on these points if it would be helpful
to the Committee.
GENERAL ISSUES
2. Water UK urges the Government to involve
the industry closely as the detail of proposals in the draft Bill
is developed in the coming months.
3. Water UK would like clarity on how the
recommendations of the various related Reviews will feed into
the Bill. The Walker Review on charging and metering for water
and sewerage services is due to be published in early June 2009,
and a consultation will follow. We also understand that any recommendations
from this Review that require legislation will then be taken into
the Bill. The Cave Review on competition and innovation was published
on 22 April 2009—further consultations on related issues
will be published by 21 July. An Environment Agency consultation
on the time limiting of abstraction licensing is expected in June
2009. Again, any recommendations that require legislation should
be fed into the Bill.
4. Water UK believes that there should be
an opportunity for the industry to comment on these proposals
based on Walker and Cave recommendations before the Bill is published.
5. The Committee asks if there are any important
omissions from the Bill. Water UK would be keen to see proposals
that we have recommended to the Walker Review to enable companies
to deal with the growing problem of water debt—such as the
introduction of a "hierarchy of liable persons"—taken
forward in the final Bill.
6. The Committee asks about the resource
implications of the Bill. Water UK is concerned about the financial
impact on companies—and hence on their customers—of
obligations proposed in the draft Bill. Water UK is concerned
that the cost of the draft Bill has not been adequately assessed
and asks for further work to be done on this. For example reservoir
safety improvement is estimated to have a one off cost of £21.60 million,
with an annual cost of £19.90 million. Given the numbers
of reservoirs that will fall under the new regime and the significant
high cost of reservoir construction and improvement, the current
estimate appears too low and should be investigated. We also note
the compliance with EU Floods Directive is estimated as £1.2 million
(significant one-off cost) and £0.95 million annual
cost. Again this appears significantly low. Water UK believes
that a rigorous regulatory impact assessment should be carried
out, and consulted on, before the publication of the Bill.
7. Water UK very much welcomes one of the
underlying purposes of the draft Bill for the improved integration
of the functions of the various bodies with responsibilities relating
to flooding and surface water drainage. However, we are very concerned
by the failure of the draft Bill to simplify the existing statutory
regimes in any way, reduce the number of responsible bodies, or
clarify to any great extent their respective roles.
8. Relevant legislation is currently contained
in the Water Resources Act 1991, the Land Drainage Act 1991, the
Water Industry Act 1991, the Highways Act 1980, the Coast Protection
Act 1949, the Agriculture Act 1947and the Building Act 1984, all
as much amended. Further modifications are of course now to be
added by a proposed Flood and Water Management Act.
9. The number of bodies already with responsibilities
relating to flooding and surface water drainage is also correspondingly
large. These include DEFRA, the Environment Agency, its regional
flood defence committees (to be continued in a modified form),
internal drainage boards, local authorities, highway authorities,
water and sewerage companies, agricultural land tribunals, riparian
and property owners. To these bodies, there are now proposed to
be added "lead local flood authorities"—either
the unitary local authority or county council for the relevant
area.
10. Between these bodies, there will remain
divisions of responsibilities for coastal defences, main rivers,
ordinary rivers, surface water drainage, sewers, drains and ditches.
In addition, unitary authorities and county councils will become
responsible for Sustainable Urban Drainage Systems as the SUDS
Advisory Bodies. Further, under the town and country planning
legislation, there are responsibilities for flooding and drainage
divided between the DCLG, regional planning boards and local planning
authorities.
11. Our concern, therefore, is that this
diffusion of responsibilities will not be conducive to the efficient
resolution of flooding and surface water drainage issues. We therefore
believe that (as recommended by Sir Michael Pitt) Government and
Parliament should take the opportunity provided by this proposed
legislation to simplify, clarify and consolidate the law relating
to responsibilities for flooding and surface water drainage, including
a reduction in the number of bodies with executive responsibilities.
SPECIFIC POINTS
Duty to cooperate and share information (Clauses
24-30)
12. Water UK supports the proposed duty
on water companies to co-operate and share information with local
authorities and the Environment Agency (EA) although we have concerns
about what information would be requested, how much and by whom.
13. However, water companies are typically
not established to provide data to third parties on a large scale.
Some companies may have difficulties if data requests are large,
complex or untimely. Software development may also be required
to obtain information from corporate GIS systems or models as
needed.
14. To this end Water UK has been working
with the Environment Agency (EA) to develop a protocol on the
principles for data sharing in order to support the production
of Surface Water Management Plans. Water UK believes that this
protocol should be further explored with local authorities. The
issue of three-way data sharing will therefore be considered with
the Local Government Association when the Water UK/EA protocol
is approved (May 2009).
15. It is often felt that third parties
have unrealistic expectations or requirements when it comes to
data held by water companies. Part of the experience of the developing
protocol with the EA is that the two parties are encouraged to
discuss their needs at an early stage so that the appropriate
data can be provided at the correct time scale and to consistent
and agreed formats.
16. There are also concerns that many companies
have regarding the security of data provided. Information may
be either commercially sensitive or of interest from a national
security viewpoint. Proper two way discussions with those requiring
data will help reduce these risks as will properly formulated
agreements.
17. In this connection, we suggest that
the requirement for arrangements between regulators contained
in section 52 of the Water Act 2003 should be extended
to the proposed legislation and in particular to lead local flood
authorities.
Reservoir Safety (Clauses 98-192)
18. Water UK welcomes the proposals on reservoir
safety which introduce a more risk-based approach to reservoir
safety and looks forward to working closely with officials on
the detail of these proposals.
Water Administration Regime (Clauses 193-216)
19. It will be important for the Government
to be clear about how the changes may (or may not) alter the role
of Special Administration in the structure of investor and customer
protections (eg including the Substantial Effects Clause)—currently
afforded by the present regulatory regime. It will be important
for Government to be appraised of investor perceptions of any
possible impact on the effectiveness of those protections.
Sustainable Drainage Systems (Clause 217-233)
20. In principle, Water UK supports the
ownership and responsibility arrangements set out in the draft
Bill and the requirement for surface water and highway drainage
to discharge to SUDS systems rather than directly to public sewers.
21. However Water UK has concerns about
the approving arrangements. Local Authorities as the SAB (SUDS
Approving Body) are required to consult the sewerage authority.
There is no definition of "consult". The draft Bill
states "approval of the plans will confer the right to connect
any residual flows from the approved SUDS as designed to the public
sewer". Developers will be able to discharge via the SUDS
to the public sewer, provided the SUDS is constructed in line
with national standards. Sewerage Undertakers will therefore have
no control over the quantity or quality of flows discharged to
the public sewer.
22. Whilst the change to the automatic right
of connection (section 106) is welcomed, the proposal still leaves
the potential for overloading of the public foul sewer network
and foul flooding of downstream properties
23. Water UK is also concerned that there
are no provisions in the draft Bill relating to the funding of
the costs of operating and maintaining SUDS. We believe that SUDS-related
costs should not fall on water industry customers but should be
recoverable by local authorities, as the bodies responsible for
adopting SUDS, through Council Tax.
Modifying conditions of appointment and penalties
(enforcement) (Clauses 234-5)
24. Each water and sewerage company has
conditions of appointment that set out their obligations and responsibilities,
providing clarity to companies, investors and other stakeholders.
These conditions have evolved over time, and there are currently
different conditions in place for different companies in the sector.
The proposals in the draft Bill to give Ofwat powers in some circumstances
to impose on companies changes to their conditions therefore require
careful consideration to avoid undermining confidence in the sector.
Standardisation of conditions should be by agreement, rather than
by imposition as proposed in the Bill.
25. The draft Bill proposes to enhance Ofwat's
enforcement powers, in particular by extending the time period
for which Ofwat can impose a penalty. Given the potential financial
impact of this change, it should be accompanied by a change in
the appeals mechanism for Ofwat decisions, to ensure that there
is an effective mechanism for appeals on the merits of the case,
such as an appeal to the Competition Appeals Tribunal.
Charges for inspections (DWI regulatory activity)
(Clause 237)
26. Water UK accepts in principle the argument
for this change. The proposal will bring the Drinking Water Inspectorate
into line with the practice for Ofwat, EA and CCWater. The costs
will be funded through the Price Review and will therefore add
to water customers' bills.
27. The Secretary of State is required to
make an order setting out the activities that can be charged for.
Water UK would expect the industry to be consulted by DEFRA on
the identification of the regulatory activities to be charged
for and the development of the charging scheme, to ensure there
is clarity, proportionality and transparency on individual company
charges
Provision of infrastructure (financing large projects)
(Clauses 239-241)
28. Water UK notes the objective to address
potentially unique financing circumstances that may arise with
large projects which demonstrate a very different risk profile
and span a number of price review periods. We recognise that the
Government's proposals are at an early stage of development, and
agree that there are a number of important questions that need
to be further investigated, including the assertions made about
the potential financing and cost benefits and the manner in which
risks would be allocated. Parallels with, and lessons from the
PFI experience will be relevant.
Construction standards for sewers (introduction
of a mandatory build standard for sewers) (Clause 252)
29. Water UK supports the introduction of
mandatory build standards for sewers and the adoption of all sewers
and lateral drains built to those standards. Water UK has been
working with DEFRA to develop these.
30. However, there is a need to clarify
what recourse the sewerage undertaker has where design and/or
construction by the developer does not meet those standards.
31. Water UK believes a similar "non-performance
bond" arrangement as proposed in the draft Bill for SUDS
(Clauses 229-232), such that the SUDS Approving Body can complete
the SUDS to the required standard before adoption, should the
developer fail to do so is also required for the construction
and adoption of sewers and lateral drains.
32. The proposed substitute Clause s 106 (4)
places powers and responsibilities on sewerage undertaker beyond
that preferred by most sewerage undertakers. The new clause states
that "sewerage undertakers must not permit a communication
to be made of any drain or sewer that is not constructed in accordance
with standards...." This will extend the sewerage undertaker
role into the area of building control—eg any new drainage
work associated with extensions in rear gardens. This is an additional
obligation and will increase workload considerably. There is no
indication how this would be funded.
33. The text in the consultation document
uses different terminology —"all new sewers and lateral
drains connecting to the public sewerage system... ". This
is a subtle but important difference to the legal text in the
draft Bill and would not increase sewerage undertakers' responsibilities
so widely.
Unlawful communications (Misconnections) (Clause
253)
34. Water UK supports the proposed changes
in legislation to address the problem of misconnections from properties.
35. The industry is already working with
the Environment Agency on a campaign to tackle misconnections
and has recently launched the joint Good Practice Document on
the "Investigation and rectification of drainage misconnections".
36. We agree the proposals will enable sewerage
undertakers to deliver quicker and more cost effective solutions
to misconnections
Temporary bans (hosepipe bans) (Clause 254)
37. Water UK welcomes the inclusion of hosepipe
bans in the draft Bill and has argued for some time that the legislation
in this area needs to be updated.
38. Water UK notes that the draft Bill includes
an enabling power, which will allow the Secretary of State to
extend water company powers to ban discretionary uses of water
during a drought but is concerned that this may not result in
the changes needed.
May 2009
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