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

Conclusions and recommendations

1.  We find it frustrating that successive Governments have lacked the tenacity and resolution to implement important recommendations outstanding from the Pitt Review and provisions in the Flood and Water Management Act 2010. That frustration is made more acute as legislative time is a scarce resource. We recommend that Defra set out in its response a full list of the outstanding issues from the Pitt Review and Flood and Water Management Act together with a clear timetable for their full implementation. (Paragraph 6)

Enabling legislation

2.  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. (Paragraph 8)

Market reforms

3.  We believe that protecting householders from subsidising competition in the non-household sector is a fundamental principle that should be enshrined in primary legislation. We recommend that the Draft Bill be amended to reflect this. (Paragraph 17)

4.  We recommend that the Draft Bill be amended to include a requirement for the functional separation of incumbent companies' wholesale and retail arms. We further recommend that the principle of non-discrimination be included on the face of the Bill. (Paragraph 20)

5.  We recommend that the Bill include provisions to enable incumbent companies to voluntarily exit the retail market. (Paragraph 24)

6.  We are pleased that the Minister remains committed to opening the retail market in 2017. Business customers have been pressing for greater competition for some years and are understandably keen that the reforms retain momentum. We were therefore concerned by the suggestion that the progress of the High Level Group set up to drive the reforms may be hindered by the lack of a clear vision. We recommend that the Government set out what steps it is taking to provide the necessary direction and oversight of the High Level Group in its response to this report. (Paragraph 28)

7.  We recommended earlier in this report that the Government publish statutory guidance to the regulator in draft alongside the Water Bill. We note that by doing so it would provide a greater level of certainty for market regulators and participants which would greatly assist them in the operational development of the competitive retail market. (Paragraph 29)

8.  In order to improve certainty for all parties, including investors, we recommend that Defra make clear on the face of the Bill the key principles that will underpin the introduction of upstream reforms. This should include a clear commitment that the reforms will not lead to any further de-averaging of prices. (Paragraph 37)

9.  We are concerned by the levels of uncertainty in the proposals for reform of the upstream markets and we do not believe that the case for these reforms has yet been fully made out. Given the potentially serious implications of the reforms both for customer bills and for national resilience in the face of climate change and population growth, we believe that further work must be undertaken to establish how upstream reforms can be introduced in a way that will preserve investor confidence, ensure that customers do not face increased bills, and maintain resilience in the sector. We recommend that Defra revisit this issue, inviting evidence from water companies, consumer representatives and other interested parties both on the likely impact of the reforms and on the detail of their implementation. This work should be commenced immediately. (Paragraph 41)

10.  We recommend that the Bill set target dates for the final decision on the form and scope of upstream reforms, and the opening of the upstream market. (Paragraph 42)

11.  Given the UK-wide implications of the Draft Water Bill, it is essential that Defra takes a collaborative and consultative approach to engagement with the devolved administrations. In its response to this report we expect Defra to be able to confirm that there are no outstanding areas of dispute or concern with either the Welsh or Scottish administrations. (Paragraph 45)

Omissions from the Draft Bill

12.  We remain concerned that Defra appears to lack the necessary sense of urgency to press on with these reforms. The detail of a new abstraction regime will need to be developed following consultation. Following that consultation Defra will have to produce legislative proposals and secure space in the legislative programme before a new regime can be introduced. We urge the Department to redouble its efforts and to set out in response to this report how it will meet our target date for a new abstraction regime of 2022. (Paragraph 51)

13.  We have carefully considered the arguments for and against elevating Ofwat's duty to contribute to the achievement of sustainable development to primary status. We are persuaded that the increasing pressures on our water resources, highlighted in the Water White Paper, justify such a change. We therefore recommend that the Draft Bill be amended to include a clause giving effect to this change. (Paragraph 57)

The Wider Policy Agenda

14.  We are greatly concerned by the further postponement of the implementation of the Flood and Water Management Act's provisions on Sustainable Drainage Systems to April 2014. We expect the Department, in its response to this report, to set out which particular elements of the regulations have caused such difficulty to implement and to explain the steps it is taking to address those issues so that the regulations can come into force at the earliest possible opportunity. (Paragraph 61)

15.  We urge Defra to ensure that the revised Guide to the Reservoirs Act 1975 is published no later than April 2013. We are disappointed by the two-year target timescale for the review of Floods and Reservoirs Safety Guidance and recommend that Defra work with the Institution of Civil Engineers to bring publication forward to April 2013. (Paragraph 63)

16.  We remain of the view that it is unacceptable for honest customers to be forced to subsidise those who refuse to pay their water bills. We reiterate our previous recommendation that Defra should implement the provisions of the Flood and Water Management Act 2010 on bad debt without further delay. (Paragraph 65)

17.  Whilst we understand the Minister's reluctance to provide a running commentary on negotiations with the Association for British Insurers and the possible solutions that are being considered, we are conscious that the current Statement of Principles will expire in less than six months, well before Royal Assent to a Water Act can reasonably be expected. We therefore wish to establish more details of the legislative solution(s) that are being considered should it prove necessary to go down that route; and in particular what consideration has been given to the basis on which flood insurance would be provided during the period between the expiry of the Statement of Principles and Royal Assent to a Water Act. We expect the Department to provide these details in its response to this report. (Paragraph 68)

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Prepared 1 February 2013