Draft Water Bill - Environment, Food and Rural Affairs Committee Contents

2  Enabling legislation

7.  Increased competition is a central theme of the Water White Paper and the Draft Bill. The majority of Part 1 of the Draft Bill and five of the seven Schedules, relate to establishing the overarching framework under which the competitive market would operate. Many of our witnesses considered that there was insufficient detail in the draft provisions and that they were therefore limited in the extent to which they could comment on their likely effectiveness. For example, Southern Water Services Ltd commented that "many of the key proposals around market reform set out in the Draft Bill are in the form of 'enabling' legislation with detail to be developed subsequently [...] Until we see that detail it is impossible for us to know whether the end result will be workable, clear or efficient".[12] Similarly, Water UK said that it was "difficult to know at this stage whether the proposals will be workable and efficient, or whether they will have unintended consequences".[13]

8.  The detailed rules for the operation of the competitive market will be drafted by the water industry regulator, Ofwat. For example, Schedule 2 to the Draft Bill provides that Ofwat may publish rules about the charges that new entrants will pay to receive a wholesale supply of water from an incumbent. The same Schedule includes the provision that the Secretary of State and Welsh Ministers may issue guidance on the contents of those charging rules. According to our witnesses the substance of that guidance will be vital to determine with clarity and certainty the final shape of the competitive market, particularly in areas where a clear policy steer to the regulator would be required (such as the abolition of the costs principle and regional de-averaging of prices, both of which we discuss further below). At present, under Schedule 2 this guidance must be laid before both Houses of Parliament.[14] The Minister referred to it as "statutory guidance"[15] but as drafted, the Bill appears to provide no mechanism by which Parliament could formally accept or reject the contents of the guidance. We recommend that the Draft Bill be amended to make clear that guidance produced by the Secretary of State and Welsh Ministers on charging rules will be laid before Parliament for scrutiny and subject to the affirmative resolution procedure. We further recommend that this guidance should be published in draft alongside the Water Bill itself to maximise transparency and to inform debate on the Bill. In this report we have considered key issues for which witnesses considered the policy intention should be set out in the primary legislation, rather than in guidance.

12   Ev w42 Back

13   Ev 96 Back

14   Draft Water Bill, Clause 15 Back

15   Q 278 Back

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Prepared 1 February 2013