Water Bill

Written evidence submitted by the RSPB (WB 03)

 

Summary

 

1. The Bill introduced to parliament differs significantly from the draft. Amendments have been made to provisions around upstream competition and the range of issues tackled has been broadened.

2. The RSPB and other NGOS have welcomed:

· Ending of compensation to water companies for changes to their abstraction licenses (clause 41);

· Provision to enable water companies to construct and maintain sustainable drainage systems (clause 21);

· A statutory underpinning for the Strategic Policy Statement to Ofwat (clause 24);

· The introduction of retail competition - a move that could support greater water efficiency in the non-domestic sector (clause 1);

3. There remain significant environmental risks from:

· Upstream competition leading to more unsustainable abstraction;

· A narrowly framed primary Resilience duty on Ofwat (clause 22) without the balance of a primary Sustainability duty;

· New powers that allow the SoS to introduce abstraction trading without addressing historic over-allocation of water resources (Schedule 8, Clause 3).

4. The Bill is a missed opportunity to:

· Lay foundation for abstraction reform upon which environmental protection and sustainability of water industry and other users rests,

· Ensure Shale Gas operators can be held liable for damages by securing a financial bond before permits are issued.

5. A summary of our view on key provisions is provided in Annex 1

The Environmental Risk of Upstream Reform

 

6. The Government appear to have taken some of the criticism of draft Bill provisions on upstream reform on board. As a result the Bill introduced to parliament no longer contains provisions that would have allowed competition in network infrastructure - the largest element of a company’s asset base. This change, combined with a long time-table for introduction (not before 2020s) seems to have mitigated fears about impacts on cost of capital amongst companies and investors.

7. However, nothing in the Bill, as introduced addresses the residual environmental risk of upstream competition activating unused or part-used Public Water Supply abstraction licences. In our discussions with Defra we were told that this will not be a problem because upstream competition would not happen until the early/mid 2020’s by which time abstraction reform will have been introduced.

8. We have remained sceptical about the ability of this Government to commit a future administration to new legislation. This concern has been given further weight by increasingly vague statements from Defra on the timetable for abstraction reform as typified by its response to the Efra committee inquiry into the draft Bill

9. We have also started to scope out a path to implementation, although this will depend on space being found in the legislative programme. If we are able to legislate early in the next Parliament, we agree that implementation should be in progress by 2022. However, we cannot set a firm timetable until decisions have been taken on the shape of the future regime and we fully understand the scale and complexity of the implementation challenge and the legislative timetable. The time taken to deliver reform will also depend on a range of other factors, such as requirements for new systems, for piloting change and for providing reasonable notice for abstractors.

10. More recently the Government appear to have conceded there is a risk and committed to amend the Bill to ensure Ofwat consult the Environment Agency before issuing a Water Supply License [1] . This is welcome however assurances that current arrangements will prevent Bulk Supply agreements causing damage are less convincing not least because the Environment Agency’s powers to intervene under water resource legislation rely on damage having occurred before action is taken.

11. The RSPB would like to see de-facto water trades encouraged by Bulk Supply agreements only happening after abstraction reforms have ensured the overall allocation of water is sound. This could be achieved by introducing abstraction reforms in this Bill or dropping current upstream competition, reintroducing them alongside abstraction reforms as a coherent package in any future Bill.

12. Failing that we believe the Environment Agency should be given powers to intervene in Bulk Supply arrangements to ensure damage is prevented. Such an approach would be environmentally beneficial and could reduce risk of counterclaim for compensation by acting before a Bulk Supply Agreement becomes operational.

Giving Ofwat a Resilience and Sustainable Development duty

 

13. The Water Bill includes a clause that is intended to have the effect of giving Ofwat a primary duty to promote resilience in the water industry. Like sustainability, resilience risks meaning all things to all people but as a concept does have some merit. That said, the definition given in the Bill is at best, limited and at worst damaging because it frames resilience exclusively in terms of a company’s ability to provide service to customers. In doing so it identifies the environment as a "risk" and so fails to reflect the industry’s role in securing resilience of the water environment.

14. This is particularly worrying given Ofwat’s duty to sustainability is a secondary one – leading to the inevitable question as to what would happen if Ofwat were to consider potential trade-off between environmental impact and level of service.

15. We believe that placing sustainability and resilience on equal footing as primary duties would mean that Ofwat would be required to consider and mitigate the risk of such trade-offs.

Water trading – right idea, wrong time

 

16. One of the less scrutinised elements of the Bill gives the Secretary of State powers to bring Abstraction Licensing under the Environmental Permitting Regime (EPR). The details are tucked away in Schedule 8 although the scope of those powers and the regime it could introduce are very loosely defined. As a result they could be good, bad or indifferent for abstractors, and the environment depending on how they are implemented. The one clear risk lies in the provisions that give the SoS powers to introduce a scheme for the trading or transfer of water rights.

17. The concept of water trading is not without merit and already occurs within a tight regulatory regime. This approach has been criticised as stifling the market but does protect the environment. It can only be assumed that the provisions in the Bill would be used to liberalise the market.

18. However introducing trading ahead of abstraction reform risks seeing significant uptake of currently unused licenses, something the Environment Agency estimate could place 18% of rivers at risk of over-abstraction. Moreover, if trading of "sleeper licences" becomes possible they will become increasingly valuable assets making abstraction reforms that seek to reduce overall license allocation to a sustainable level contentious and costly for Government.

19. It would appear that the inclusion of this provision of the Bill could be the unintended consequence of lifting drafting from Schedule 1 of the Pollution Prevention and Control Act 1999.

20. We would ask the committee consider an amendment to strike this provision, allowing Government to reintroduce trading if and when it moves to wholesale reform of the abstraction licensing system.

Fracking – Making sure the polluter pays.

 

21. Fracking for shale gas poses significant risks for our rivers and groundwater, including the serious hazard of water pollution and the increased pressure the industry will place on water resources.

22. If properly implemented and enforced, the current regulatory regime will mitigate some of these issues. However, fracking is a new technology in the UK, and inevitably there are residual risks that cannot be fully addressed. Technical failure leading to groundwater pollution is one such risk that could have devastating impacts on the supply of water and the natural environment, Groundwater remediation is an expensive and take years to complete.

23. While it might be possible to identify who is liable for any clean up the question still remains about whether or not operators will have the financial reserves to pay over years or even decades required.

24. The Water Bill is an opportunity to address this by putting in place provisions to ensure that a financial guarantee is in place before authorisations are granted under the Environmental Permitting Regime.

Annex 1 – Key provisions of interest to RSPB

Clause

Change from Draft?

Comments

1

Proposals for retail competition for business customer’s remains largely unchanged from the draft Bill

N

Experience from Scotland suggests such competition can bring significant efficiency savings and are supported by most NGOs. However the model envisaged is different to that in Scotland leading to questions as to whether it will work.

1

Proposals for Upstream competition

Amended

Provisions that would have allowed for new entrants to provide alternative networks have been removed –reducing impacts on finance cost but environmental risks remain.

12

Arrangements for water undertakes to take water form other persons, most notably farmers

Y

This provision appears to be based on an idea that farmers could help water companies by placing their water into reservoirs. We (and many water companies) are sceptical whether this could bring any real positive effect and appears to be politically motivated rather than evidence based.

There is a risk that we could see farmers using thise to access large sums of Rural Development Payment to create reservoirs for little or no real benefit other than private profitability.

21

Provision to enable water companies to construct and maintain SuDS.

Y

This removes an age old ambiguity and should be welcomed. The impact on new house build will be slight where the key issue remains lack of statutory guidance to enable SuDS parts of 2010 Act.

22

A primary duty for Ofwat to promote resilience in the exercise of its functions.

Y

The term Resilience is open to wide interpretation. The form of words used in the Bill is particularly unhelpful – focussing entirely on the working of the industry and casting the environment as a threat.

Clause

Change from Draft?

Comments

27

Powers to allow the SoS to specify planning assumptions and levels of service in Water Resource Management plans.

Y

This has historically been set by water companies in consultation with customers and could risk balance between environmental quality and service becoming a political football.

41

A provision to remove water company rights to compensation where an abstraction is modified or revoked

Y

This has the effect of forcing Ofwat to fund changes to damaging licences through the Periodic Review – a process which the industry and NGOS see as a quicker and cheaper way to deliver environmental improvements

44 -46

& Schedule 8

Powers to introduce regulations to bring abstraction, fish passage, flood defence and land drainage under the Environmental Permitting Regime

N

These proposals offer the route by which amendments could bring abstraction reform into the Bill.

The expansion of EPR to cover flood defence regime might be increasingly contentious given EA/Defra attempt to deregulate existing channel maintenance rules. The Bill simply provides for regulations to be made so the outcome could be good, bad or indifferent for the environment.

The inclusion of provisions allowing the SoS to introduce a scheme for water trading is a significant

December 2013

Prepared 4th December 2013