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Baroness Byford: The amendment—

Baroness Farrington of Ribbleton: My noble friend Lord Whitty has to speak now.

Lord Whitty: My noble friend is exaggerating slightly, but the amendments raise some serious issues

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that the Government ought to consider. Amendment No. 162A in particular raises the question of whether it is sensible to continue to give no discretion to the competition authority as to where it allocates the costs. Some of the arguments in support of that by my noble friend are correct. Although Amendment No. 162 goes somewhat wider and I would not accept going quite so wide as it, I agree to take the amendments away together and I hope to come back on Report with a proposition from the Government.

Baroness Farrington of Ribbleton: May I apologise to the noble Baroness, Lady Byford. I failed to note that her name had been added to the amendment. I was speaking to save her time.

Baroness Byford: I stagger to my feet. My name is attached to Amendment No. 162. When we tabled the amendment, the noble Lord, Lord Borrie, had obviously not tabled Amendment No. 162A. I was interested to read that his amendment particularly tried to give discretion to the Competition Commission.

I should say straight away that I am very grateful for the Minister's indication that he will look at the two amendments, and I do not want to prolong the Committee. The only point that I want to make is particularly in relation to Amendment No. 162. Others speak with great authority because they are on water authorities, but I am not. I speak with a consumer's hat on, as the customer. As an outsider, it is a concern that the costs as the Bill stands will—I hope that the Minister will correct me if I am wrong—be handed directly to individual customers. That is bad enough in a big water company, but in a small water company the costs will be proportionately much higher.

That is the additional point that I wanted to underline. If the Minister is kindly to take the amendment away and consider it, I would hate him to come back on Report only for us to jump up again and say, "But, my Lord, you have not considered the matter fully". I am sure that the Government would not want that to be a result of the present drafting of the Bill.

With those few words, I express my grateful thanks to the Minister, although my noble friend will do so formally for us. I also wanted simply to highlight the whole question of costs and the effect that they have on smaller companies.

7.15 p.m.

Baroness O'Cathain: I am very grateful to the Minister for his reply, and to the noble Lord, Lord Borrie. Discretion is the big issue, and the one word that we both mentioned. It is a very adult way of behaving. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 162A not moved.]

Clause 54 agreed to.

Schedule 4 [Licensing of water suppliers]:

Baroness Byford moved Amendment No. 162B:

    Page 132, leave out lines 4 to 6.

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The noble Baroness said: The amendment is probing. We are concerned that it would appear that, if a licensed water supplier had an authorisation to introduce water into the supply system of a water undertaker, he may not use the water supplied by another licensed water supplier. I find that extraordinary. Is that correct? If so, why the prohibition? I beg to move.

Lord Whitty: There is indeed a prohibition in the Bill as it stands. The provisions require licensed water suppliers who want to introduce water into the supply system to either obtain a source of water or buy water from an undertaker. I am prepared to have a look at whether that prohibition would be sensible in all circumstances. I am not sure that the amendment as it stands makes the right circumvention, but it clearly raises an issue at which we would like to look.

Baroness Miller of Chilthorne Domer: When the Minister looks at that issue—I am grateful to the noble Baroness for raising it through the amendment—will he also confirm whether it will be in line with the Water Framework Directive's requirement, which I think is for water to be treated as a tradeable commodity?

Lord Whitty: It is probably better that I look into that and come back to it on Report.

Baroness Byford: I am very grateful to the Minister. As I said, the amendment was probing. Sometimes one merely has to do something extraordinary to bring forward a chance to debate what we thought was a gap or slight concern in the Bill. I thank him for agreeing to take the amendment away and, at this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Byford moved Amendment No. 162C:

    Page 132, leave out lines 36 to 40.

The noble Baroness said: The amendment is another probing amendment. It is a primary condition of a licensed water supplier's licence that the company may not supply domestic premises. During presentations on the Bill from various bodies, it was made clear to us that very large customers often do not require water of the same domestic standard. I underline the domestic angle.

Proposed new Section 17B(5)(a) states that the pipes involved will be used to send water from an undertaker's treatment works to the premises of its customers. It does not specify that none of those customers shall be requiring water of domestic quality. Therefore, it is surely wrong for those pipes to be used to carry water from another source to a non-domestic customer of a company that is not a part of the water undertaker.

Proposed new Section 17B(6), (7) and (8) on page 133 refers to treatment works being designated by the Secretary of State as treatment works for the purposes of proposed new Section 17B(5). There is no reference, however, to the treatment works being—I use the word

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carefully—exclusively for the use of a licensed water supplier. Will the Minister explain the intention? I beg to move.

Baroness Farrington of Ribbleton: Amendment No. 162C proposes the deletion of the definition of the undertakers' drinking water supply system in the competition provisions. That would reduce competition to the undertakers' non-potable system. That is only a small part of the pipe network owned by the undertakers. The restriction would rule out effective competition. Licensees—I hope that this answers the noble Baroness's concern—will be able, through the competition framework, to require access to water mains from the undertakers' treatment works to the customers' premises. If that is not sufficient to answer the range of concerns, I shall be happy to write to the noble Baroness.

Baroness Byford: I am grateful to the Minister for saying that she will do that. The reason for the amendment is that a different quality of water can be expected for domestic premises from that for premises that do not require such a high standard. From examining the provision I could not discover how water of different standards could be piped down one system. The Minister may be able to inform the Committee on that point; but I shall accept what the noble Baroness has said: that she will take the matter away and consider it. I am an amateur in these matters, but on looking at this I wondered how it was to be achieved.

Baroness Farrington of Ribbleton: I can assure the noble Baroness that she has raised a question that came into my mind. As a plumber's daughter, I do not understand how that will work. Together, we shall find out before Report stage.

Baroness Byford: It is good that the Committee includes such a variety of people. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 163 to 166 not moved.]

The Duke of Montrose moved Amendment No. 166A:

    Page 141, line 43, at end insert "; and

(d) the modifications are such that no holder of a water supply licence will cause, by virtue of those modifications, any disadvantage to any water undertaker"

The noble Duke said: We return to the modification of the standard conditions of water supply licences. The amendment is occasioned by the realisation that the Bill sets up competition in the water industry by laying out a new and level playing field for licensed water suppliers. It is fashioned from part of the pitch used by water undertakers but is not level with it. The water suppliers will operate by removing from the water undertakers up to 2,000 of their biggest customers. The undertakers will receive a copy of each licence granted to a water supplier, but the Bill does not give them the right to appeal against such a licence.

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Modifications of licences must either involve only standard clauses or only change particular clauses in circumstances that do not disadvantage the relevant licence holder in relation to other holders. If any licence holder objects to a change in a standard clause, he has a vehicle for doing so. In all this, the water undertaker has no rights. I beg to move.

Lord Whitty: I understand the concern, but I do not believe that the amendment is necessary. When the regulator proposes modifications to the standard licence conditions for water suppliers, he will be bound by the duties under Section 2 of the Water Industry Act to promote effective competition in the interests of customers. That means that he could not promote a modification that would put an undertaker under unwarranted disadvantage. Nor could he, for example, amend an undertaker's condition of appointment so that licensees cannot compete effectively, as neither of those would be in the interests of competition or in the interests of the customer. I believe that the concern is unnecessary; therefore the amendment is not necessary.

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