Government publishes draft Water Bill to open up market

The plans contained in the draft Water Bill (290-page / 4MB PDF), which has been made available for pre-legislative scrutiny, could deliver savings worth £2 billion over the next 30 years, according to Government figures. Similar reforms introduced in Scotland are set to save the public sector around £20 million, it said.

The Government suggested that a "realistic target" date for the changes to take effect would be April 2017, but that this would be confirmed following work with stakeholders.

"This draft Bill will create a modern customer-focussed water industry and for the first time all businesses and other organisations will be able to shop around for their water and sewerage suppliers," said Environment Secretary Caroline Spelman. "By slashing red tape we will also stimulate a market for new water resources and incentivise more water recycling. This will ensure that the water industry continues to provide an affordable and clean water supply which is essential for the nation's economic growth while at the same time protecting the environment for future generations."

Increasing pressure on suppliers by allowing customers to 'shop around' for the best deals, as well as introducing new players to the market, would create a "more vibrant and competitive market", according to the Government; improving customer service and reducing costs to the consumer.

However water industry expert Gordon McCreath of Pinsent Masons, the law firm behind Out-Law.com, questioned whether this would be enough to tackle climate change concerns.

"Industry will welcome the moves to increase competition and to deregulate the market," he said. "These are likely to result on more specialism at upstream, network and retail levels and, with moves to relax the merger regime, consolidation in the industry. More questionable, however, is whether they alone will be enough to prompt the much-needed innovation required to bring the industry into the age of low carbon and climate change."

Under current rules only the largest water users have any control over their supplier, while new entrants to the supplier market can only do so following negotiations with the existing 21 water companies. The draft Bill removes these restrictions, and will instead open up market entry to companies that follow a standard set of terms and conditions drawn up by regulator Ofwat. Existing suppliers will also be encouraged to offer alternative supplies and services, while changes to the merger regime will exclude some takeovers from automatic referral to the Competition Commission if the bidding company makes certain undertakings.

The draft is also intended to reduce the burdens for operators wishing to supply services both in Scotland and England, as well as to eligible customers in Wales. It will also allow businesses, charities and public organisations with multiple UK sites to receive a single combined water and sewerage bill for all their offices and buildings in England and Scotland.

In addition, the Bill extends the scope of the Environmental Permitting regime beyond pollution prevention to include flood defence, fish pass approvals and 'abstraction' rights, or the ability of companies and individuals to draw water from lakes and rivers.

Gordon McCreath said that the detail of the new abstraction licensing regime would be vital. "Key questions arise on just how the regime will find a true value of water and ensure maximum efficiency of its use as well as how the existing protected rights of abstractors will be affected," he said.

However Pamela Taylor, chief executive of industry body Water UK described the contents of the draft Bill as "the right reform at the right time".

"We already have experience of developing markets in Scotland and we are looking forward to applying this experience across England and Wales," she said. "Water is our most precious resource and we have a responsibility to manage and conserve it. By working together across the water sector, we can ensure that we can respond quickly and effectively to the challenges of greater consumer demand and climate change."