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Baroness Byford: I am very grateful to the Minister. In a way, I am sorry that this is the opening amendment because it is very technical. Had I realised that the provision was taken from the Utilities Act verbatim, I might not have tabled the amendment. I shall reflect on what the Minister said.

On the amendment relating to licences of their own, if, on reconsidering my explanation in greater detail, the Minister wants to come back to me, I should be happy. I am still not clear what rights I, as a new licensed supplier, have over where that would be coming in. I had not anticipated that all licensed water suppliers would have their own treatment works; that came to me as quite a surprise. It is possible that they might have that but I had not foreseen that they would have that. On those two amendments, I am certainly happy.

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If I understood the Minister's response to Amendment No. 166G correctly, he said that the Competition Commission can overrule the authority: if the authority decides that work needs doing, the commission has the final say and the authority does not. I had not read the provision as having such clarity.

Lord Whitty: To clarify the position, the authority has the right to fulfil the intention of the commission's recommendations in a way that varies slightly from the wording of those recommendations. However, where it has to go outside the recommendations and make a modification contrary to or distinct from them, the commission would have a veto.

Baroness Byford: I am grateful for that clarification. I understand the point; but if the Secretary of State or the authority does not like what the commission intends to do, the body having the final say is presumably the Competition Commission. Based on the indications from officials sitting behind the Minister, I am assuming that to be correct.

I should like to read the other responses in greater detail. If the Minister wishes to come back to me on the particular issue that I mentioned, I should be happy, but at this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 166E to 168ZA not moved.]

Baroness Byford moved Amendment No. 168ZB:

    Page 156, leave out lines 9 to 11.

The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 168VA, which are grouped together. Both are probing amendments; they seek greater clarification.

As the Bill stands, it appears that licensed water suppliers will not be allowed to have treatment works—I raise this matter for the second time. Will the Minister expand on the subject of ownership by licensed water suppliers of buildings, pipes and land? Will they, for instance, be able to take over the existing water undertakers, sell off the water abstraction side of the business, but retain the treatment works and delivery system? If a water undertaker develops a delivery system for a licensed water supplier and charges for it, will the system then belong to the licensed water supplier?

As I said, Amendment No. 168VA is also a probing amendment. Section 158 of the WIA gives the undertaker powers to lay, maintain and alter any relevant pipe in a street. Paragraph 30 in Schedule 8 to the Bill denies that right for pipes that would be used for supplying non-domestic water under a water supply licence. Will the Minister confirm that that is the case and that I have not misunderstood the matter; and will he then explain what will happen if a licensed water supplier requests a supply in circumstances that would entail digging up a street? Will it become a matter for the planning authorities, or will it simply be impossible to go ahead? As I said, we merely seek clarification. I beg to move.

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12.15 p.m.

Baroness Farrington of Ribbleton: I accept that clarification is very important in these matters.

The effect of Amendment No. 168ZB would be to remove the new duty on undertakers to lay pipes to connect licensees to the supply systems. We do not wish to see that happen.

The effect of Amendment No. 168VA would be to extend that duty to cover both potable and non-potable connections. The use of the undertakers' pipe-laying powers is important in order to allow licensees to introduce water into the supply system. Undertakers will have to use the pipe-laying powers for connections only in relation to the potable system—the drinking water system. That will ensure that pipes are laid to a suitable standard and are owned by the undertakers, so that the drinking water supply system remains integrated under the responsibility of the undertaker.

We do not believe that the amendment is necessary for non-potable water supplies. I sent the noble Baroness a detailed letter on these issues the other day. The brief answer to the point she raised then is that the pipes are separate. Therefore, the undertaker is not required to lay pipes for this purpose.

Two further questions were raised in relation to other amendments. The first was: can the licensees have treatment works? Yes, they can construct their own treatment works or purchase access from undertakers. Regarding taking over the assets of existing undertakers, the answer is no: the provisions give no rights to acquire undertakers' treatment works or piped network. I hope that I have answered the points raised.

Regarding the power to lay pipes supplying non-domestic water, the power is not available for non-potable water networks. Without pipe-laying powers, pipes can be laid by applying to the local highways authority. So there is no automatic right of access.

I hope that with those reassurances the noble Baroness will not feel it necessary to press the amendment.

Baroness Byford: I am grateful to the Minister for that response, and I thank her for the letter that she sent to me in the interim. I shall not use the expression "a dry Bill", but the Bill is slightly technical in parts. It is a matter of seeking clarification. On re-reading the Bill, one begins to wonder whether one has got it right. At this stage, I thank the Minister and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Byford moved Amendment No. 168ZC:

    Page 158, line 26, leave out "or second" and inset ", second or third"

The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 168ZD, which seeks to insert a third condition regarding provision of the supply system entailing environmental damage to flora, fauna or geographical or physiological features.

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I believe that the amendment speaks for itself. But the undertaker must be able to refuse to dig up an SSSI or blast a new pipeline through the Downs or in the Lake District. The lack of an environmental, sufficient cause is a serious oversight, unless the Minister can point to its inclusion elsewhere in the Bill. In our view, it will not be sufficient to have that stated only in the WIA or the WRA. It should on the face of the Bill. I beg to move.

Baroness Farrington of Ribbleton: We agree with the aim of ensuring that the requirement on undertakers to make water available to licensees and for transfer from one undertaker's supply system to another should not result in damage to the environment, including flora, fauna and geographical features.

I can reassure the noble Baroness that there is no need for the additional condition proposed in the amendment. In supplying the water to licensed water suppliers, undertakers will remain under their existing duty under Section 3 of the Water Industry Act to further environmental objectives. Therefore, it is not necessary to repeat that commitment in this legislation.

Baroness Byford: I thank the Minister for her response. Presumably, this would affect new water suppliers too—they would fall within this restriction.

Baroness Farrington of Ribbleton: Yes, I believe so.

Baroness Byford: I am grateful to the Minister for that clarification. In that case, I shall happily withdraw the amendment. We are obviously very anxious to make sure that flora, fauna and geographical and physiological features are considered when these decisions are made. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 168ZD not moved.]

Lord Dixon-Smith moved Amendment No. 168ZE:

    Page 160, leave out lines 39 to 41.

The noble Lord said: This is another probing amendment. It deals with the question of the costs that a water undertaker may charge a water supplier for the use of its facilities in order to bring water from the supplier's source to its customers.

We are uncertain as to the meaning and effect of the words that we seek to delete. The cost principle referred to in the clause is that,

    "the charges payable . . . under the agreement or determination . . . shall enable the undertaker to recover from the supplier . . . any expenses reasonably incurred in performing any duty under sections 66A to 66C . . . in accordance with that agreement . . . and . . . the appropriate amount in respect of qualifying expenses and a reasonable return on that amount".

I presume that the final words refer to capital costs and that sort of thing. The clause goes on:

    "to the extent that those sums exceed any financial benefits which the undertaker receives as a result of the supplier supplying water to the premises of relevant customers".

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We are somewhat puzzled as to what precisely that means—if the water undertaker is no longer supplying the customer. It could conceivably be envisaged that if a customer is sufficiently big he might have some reduced costs. At the same time, he has presumably lost a great deal of income. We thought that the only thing to do was to table an amendment seeking to remove those last words, in an attempt to find out exactly what was intended. It looks as though the recovery of costs is not straightforward. If it is not straightforward, we are not sure what else this provision might mean.

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