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".
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".
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. The
Minister referred to it as "statutory guidance"
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
Ev 96 Back
Draft Water Bill, Clause 15 Back
Q 278 Back