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Lord Whitty: We have proposed a change to the existing enforcement provisions so that the enforcement authorities—the Secretary of State, the Assembly and the authority—are able to take action before something goes wrong. This proposal would be reversed by Amendment No. 161B.

It is important to distinguish between the order and the penalty. It is important to bear in mind that although there are penalties for breaching an enforcement order, the order itself is first and foremost to tell the recipient what action they must take to rectify a situation that has gone wrong.

If it is apparent that a contravention is about to happen, the regulator or the Secretary of State should be able to take steps to prevent it via an enforcement order. One of the safeguards in the enforcement order procedure is that the enforcement authority must notify the proposed recipient before making an order. The proposed recipient can then make objections. In those circumstances it is sensible and desirable to make an order.

Amendment No. 161C would remove the proposal in the Bill to speed up the enforcement process by reducing from 28 days to 21 days the minimum time that can be allowed for objecting to a notice informing someone that an order is being considered. The reason for this change in the Bill is to reduce the time in which further harm can occur. Therefore, the reduction in the number of days is sensible. If an enforcement order is being considered, the matter is usually already serious and it is important that the action that the order will require should be taken as rapidly as possible. In more complex cases, the notice can specify a longer time that would be more appropriate to those circumstances but in many cases 21 days should be the appropriate minimum time.

7 p.m.

The Duke of Montrose: I thank the Minister for his reply. We asked him to describe some scenarios. Are there frequent examples about which he knows in which the question of 21 or 28 days would have been vital? Did the things that went wrong go that seriously wrong that they required the reduction in the amount of time for which the people accused could appeal? Foreseeing the damage and accusing people before it happens is a very difficult concept. In terms of water regulation, we are in a fast-moving situation. Could

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the Minister tell us at some point what situations he foresees in which that shortening in time would be important?

Lord Whitty: I am reluctant to give hypothetical examples because one then has an example that every case is judged against. Clearly, as the noble Duke said, if, in a fast-moving situation involving water—literally—damage is being done and is likely to get worse, the damage done over 28 days is clearly greater than that done over 21 days. Any reduction is beneficial. It is reasonable to give a certain amount of time in which to comply but there can be significant benefits in making the period a week shorter. If problems are considerably more complex, it is reasonable that the timescale should be longer than 21 days. Twenty-eight days—effectively, a full month—appears to be too long for dealing with serious damage situations.

Baroness Byford: I wonder whether I may press the Minister further. Presumably, if there are emergencies—I do not believe that this falls into that category—there are facilities in the Bill by which everything gets overridden and emergencies are dealt with. My noble friend did not ask the Minister to give an example of a particular case; he asked the Minister more generally how many times in the past—let us say, the past two years—the regulators have found themselves at difficulty when working with the 28-day system. In other words, what pressure has been brought to bear to change the period from 28 to 21 days? That was the question; my noble friend did not ask for an example of a particular company or occurrence. Will the Minister clarify that?

Lord Whitty: No, I cannot clarify that because records will not be kept in that form. That is for the reasons that I have expounded. If we bring the period down to the minimum reasonable level of three weeks, we would be dealing with more situations more effectively than we might otherwise have done. Giving people three weeks in which to comply is not unreasonable; giving them 28 days—another week—if one is at the other end of the damage threatened is not justifiable.

Baroness Byford: I hear what the Minister said but it does not quite answer our discussion. Presumably somewhere in the Bill is the ability to make emergency provisions, but that is not what we are discussing; we are discussing asking for some damage to be put right. I ask the Minister what facts have brought the Government to wish to reduce the timescale from 28 to 21 days? In fairness, he has not answered that point.

Lord Whitty: All I can say is that 21 days is the equivalent period in the other utility provisions.

Baroness Byford: I thank the Minister for that answer; we had not had it previously.

The Duke of Montrose: The question raised was: what is an emergency? If something is causing great damage, it will do so during the first seven days. I

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cannot see that the period between 21 and 28 days will make a great deal of difference, although it might make a difference to the people making the appeal. Given what the Minister said, we will take the matter away. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 161C not moved.]

Clause 48 agreed to.

Clauses 49 to 53 agreed to.

Baroness O'Cathain moved Amendment No. 162:

    After Clause 53, insert the following new clause—

After paragraph 7 of Schedule 7A to the Competition Act 1998 there is inserted— "8 Rules shall make provision in the case of references under the authority of section 12 of the WIA—
(a) for the award of costs or expenses, including any allowances payable to persons in connection with their attendance before the Competition Commission;
(b) for taxing or otherwise settling any costs or expenses directed to be paid by the Competition Commission and for the enforcement of any such direction.
9 In making provision for the matters in paragraph 8 the rules shall set out the principles to be followed for the award of costs or expenses and for taxing or otherwise settling such costs or expenses.""

The noble Baroness said: This amendment, which appears in my name and that of my noble friend Lady Byford, deals with a situation in which there have been appeals to the Competition Commission by individual water companies. If the appeal, or the costs of the appeal, go against the water companies, customers of that water company would be liable for the cost of that appeal. The consumer body, WaterVoice, is particularly angry about all of that. The subtext of what we would like in this regard is that the Competition Commission should be given discretion—that should not be automatic in the case of, for example, a nonsense appeal—to allocate the costs to Ofwat. The costs would therefore be spread over all the water companies if the issue was of national significance. Some water companies might appeal for something that was "piggybacked on" by other water companies, and the poor water company that had led the appeal and incurred all the costs found itself to be disadvantaged and the customers of that company would find themselves with higher prices.

The director general should be under a duty to implement the Competition Commission's decisions for all water companies. That is the point in essence. I am interested that this amendment is grouped with Amendment No. 162A, which stands in the name of the noble Lord, Lord Borrie. I beg to move.

Lord Borrie: I shall speak to Amendment No. 162A and comment on Amendment No. 162. When a company challenges Ofwat's determination as to the prices that the company may in future charge its customers, it does so by seeking a reference to the Competition Commission. When the Competition Commission redetermines the price limits set by Ofwat, the present law requires the Competition

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Commission to provide in those price limits for the company's costs in pursuing the case before the Competition Commission, Ofwat's costs and the Competition Commission's costs. Those costs therefore fall ultimately on the customers. The only ground on which the Competition Commission may currently decline to allow for such costs in the price limits that it determines is if it considers the company's request for a reference to the Competition Commission or the costs incurred to be unreasonable.

A company currently appears to have little or no incentive to refrain from testing Ofwat's new price limits by going to the Competition Commission. In reports from the Competition Commission in 2000 about price limits set for Mid Kent Water and for Sutton and East Surrey Water, the Competition Commission stated the present law and had to follow it but questioned the desirability of invariably having to permit costs in such inquiries to be recovered from customers.

The purpose of the amendment, on which I have been greatly assisted by Ofwat, ensures that the Competition Commission should first conclude what price limits it should determine on the normal principles of what is necessary to enable the company to perform its normal core functions and to enable it to get a reasonable return on its capital. Then it will separately decide the fair allocation of costs between the company's customers, its shareholders, the customers of other regulated companies, and taxpayers.

In my view, the commission should have statutory discretion to decide what is just in each case, and therefore to decide whether the company's case had any substance, whether it had convinced the Competition Commission on any of the points that it contended for, and whether the company's method of presenting its arguments and the costs incurred were appropriate and reasonable. If the Competition Commission decided that the company had acted properly in pursuing its case, it would in principle be expected to include the company's cost in the new price limits—and so too the costs of Ofwat and the Competition Commission.

I am not sure whether I am right or not, but Amendment No. 162 seems to concern all references to the Competition Commission, not only those relating to price determinations. It deals generally with the allocation and setting of all costs incurred in such references through the making of rules by the Competition Commission. Amendment No. 162A ensures a discretion to the Competition Commission to decide whether costs faced by the company should be included in the price limits determined by the commission.

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