1999 Chapter 9

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These notes refer to the Water Industry Act 1999
which received Royal Assent on 30 June 1999 (c.9)

Water Industry Act 1999

EXPLANATORY NOTES

1.     These explanatory notes relate to the Water Industry Act 1999, which received Royal Assent on 30 June 1999. They have been prepared by the Department of the Environment, Transport and the Regions and the Scottish Office in order to assist the reader in understanding the Act. They do not form part of the Act and have not been endorsed by Parliament.

2.     The Notes need to be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of the Act. So where a section or part of a section does not seem to require any explanation or comment, none is given.

SUMMARY

3.     For England and Wales, the Act provides new entitlements for water consumers, particularly household customers. It prohibits the disconnection of the water supply to homes for reasons of non-payment. It gives many water consumers new rights to choose the basis on which they are charged for water and sewerage services. It allows for rateable value to continue to be used as a basis of unmeasured charging after 31 March 2000. It also allows for the Secretary of State to make regulations concerning particular charges to be applied to particular groups.

4.     For Scotland, the Act gives effect to the recommendations of the review of the water industry in Scotland carried out in 1997. It amends the Local Government etc. (Scotland) Act 1994, dissolving the Scottish Water and Sewerage Customers Council and establishing the Water Industry Commissioner for Scotland to promote the interests of customers of the water and sewerage authorities. The Commissioner will assume most of the existing duties of the Council and will have new advisory functions in relation to the fixing of water and sewerage charges. The provisions also establish Water Industry Consultative Committees for each of the water and sewerage authorities. The Consultative Committees will advise the Commissioner on the promotion of the interests of customers of the authority in question.

BACKGROUND

English and Welsh Provisions

5.     The provisions in Part I of this Act are based on a Government consultation document, 'Water Charging in England and Wales: A New Approach', published in April 1998. A response by the Government to the consultation exercise, 'Water Charging in England and Wales: Government Decisions following Consultation', was published on 18 November 1998.

Water Charging in England and Wales

6.     There are two principal ways in which water consumers are charged by water companies. Most are charged on the basis of an unmeasured charge, which is usually based on the rateable value of the property. Others are charged by reference to volume, as measured by a water meter. Different water companies have different policies relating to water metering (e.g. whether they offered meter installation free of charge). The charges made by a water company for water and sewerage are set out in the company's charging scheme, and most domestic customers are charged on this basis. Some people are charged on the basis of an agreement with the water company.

Disconnection

7.     Until now, if consumers did not pay their water and sewerage bills, water companies had the power to disconnect the supply. Water companies also argued that they were not prohibited from restricting the amount of water available for a consumer's use if they did not pay their bill. The Act removes the power to disconnect water supply for non-payment, or to limit the supply with the intention of enforcing payment, from a list of different premises. These premises are private dwelling houses, caravans, houseboats, houses in multiple occupation and sheltered accommodation (where these are someone's main home) and children's homes, residential care homes, prisons and detention centres, schools, premises used for children's daycare, institutions of further and higher education, hospitals, nursing homes, GPs' and dentists' surgeries (including surgeries set up as primary care pilot schemes) and premises occupied by the emergency services.

Basis of water charging - unmeasured charges

8.     For properties built before 1990, where consumers pay on an unmeasured basis for water and sewerage services, their charges are usually calculated by reference to the rateable value of the property. Under section 145 of the Water Industry Act 1991, companies were prevented from continuing to base charges for water and sewerage services on rateable value after 31 March 2000.

Charging by reference to volume

9.     The main alternative basis of charging for domestic customers for water and sewerage services is by reference to the volume of water used, as measured by a water meter. The present situation, which will continue until the relevant provisions of this Act come into force and charges schemes become subject to them, is as follows. Water companies are able, at their discretion, to require customers to move to a charge based on the volume of water supplied. Customers do not have a statutory right either to move to a measured charge or to remain on an unmeasured charge. Where water meters are fitted at the company's request, they have to be installed free of charge. Where a company agrees to install a meter at a customer's request, the company is not obliged to do that free of charge. Some water companies offer customers the option of a free meter. Other companies do not.

10.      A relatively small but growing number of households in England and Wales (an expected average of 18% across the country by the end of the 1999-2000 charging year) pay on the basis of a measured charge, some through choice, some where a water company has required it (for example, where a household uses a garden sprinkler) or because the household has moved into a house with a meter. Since no property built since 1990 will have a rateable value, most new houses have meters. Some people's water bills will be lower if they pay on a measured basis, but some people will have higher bills than if they were paying on an unmeasured basis. Concern has been expressed that this could bring hardship to those with high water use who cannot reduce their demand, or who can do so only at the expense of health or hygiene. Two examples of these groups, mentioned in the Government's consultation document on water charging, are those with medical conditions requiring higher than usual water use and large families on low incomes.

Rights for tenants to choose the basis of water charging

11.     In general, tenants have the same rights as any other consumers to choose the basis on which they are charged for water and sewerage services. However, some tenants need their landlords' consent for the alteration or improvement of their properties either under the statutory provisions of the Housing Acts 1980 and 1985 or under their agreements with their landlords.

Scottish Provisions

12.     Part II of the Local Government etc. (Scotland) Act 1994 established three water and sewerage authorities for Scotland and the Scottish Water and Sewerage Customers Council.

13.     The Customers Council is responsible for representing the interests of the water industry customers in Scotland, approving the water and sewerage authorities' customer codes of practice, and investigating any customer complaints not resolved between the complainant and the relevant water and sewerage authority. It also has primary responsibility for approving charges schemes proposed by the water and sewerage authorities. Responsibility for economic and efficiency regulation of the water and sewerage authorities is a function of the Secretary of State transferred to the Scottish Ministers under the Scotland Act 1998.

14.     In June 1997, the Secretary of State for Scotland announced a review of the Scottish water industry, including consideration of the role and functions of the Customers Council in relation to the regulation of the industry. The review identified a consensus that the current division between price regulation by the Customers Council and efficiency regulation by the Secretary of State had proved untenable. It recommended creating a new statutory, professional regulator responsible for economic regulation in all its aspects, and for promoting the customer interest. The Secretary of State endorsed the recommendation in the statement about the review that he made to the House of Commons on 16 December 1997.

15.     The Scottish provisions in the Act give effect to this recommendation. They dissolve the Customers Council and establish the Water Industry Commissioner for Scotland. The Commissioner will assume most of the existing duties of the Council and will have new advisory functions in relation to the fixing of water and sewerage charges. The provisions also establish Water Industry Consultative Committees for each of the water and sewerage authorities. The Consultative Committees will advise the Commissioner on the promotion of the interests of customers of the authority in question.

OVERVIEW OF THE ACT

16.     The Act is in three parts. Part I relates to water charging in England and Wales. Part II relates to the water industry in Scotland. Part III contains supplemental provisions.

COMMENTARY ON SECTIONS

17.     Part I of the Act replaces and amends certain sections of the Water Industry Act 1991 (the 1991 Act). Relevant extracts from the 1991 Act are given towards the end of this note, in Annex A. Part II of the Act replaces and amends certain sections of the Local Government etc. (Scotland) Act 1994. Relevant extracts from this Act are given at the end of this note, in Annex B.

Sections 1 & 2 and Schedule 1: Disconnection and restriction of supply

18.     Section 1 of the Act amends section 61 of the 1991 Act. It removes water companies' powers to disconnect for non-payment of bills the supply of water to those premises set out in a new Schedule to the Water Industry Act 1991. (Schedule 1 to this Act inserts a new Schedule 4A into the 1991 Act.) These are premises are private dwelling houses, caravans, houseboats, houses in multiple occupation and sheltered accommodation (where these are someone's main home) and children's homes, residential care homes, prisons and detention centres, schools, premises used for children's daycare, institutions of further and higher education, hospitals, nursing homes, GPs' and dentists' surgeries (including surgeries set up as primary care pilot schemes) and premises occupied by the emergency services (that is, police, fire and ambulance).

19.     Section 2 adds a new section to the 1991 Act (section 63A). It prohibits water companies from using devices designed to reduce the amount of water available for use (for instance, by using trickle valves) to enforce bill payment for those premises referred to in Schedule 4A.

Sections 3 & 4: Charges schemes and agreements

20.     Section 3 amends section 142 of the 1991 Act, so that charges for water and sewerage services for dwellings must be fixed on the basis set out in water companies' charges schemes rather than by agreement. An exception is made to allow agreements which have been entered into before this provision is brought into force to continue. Section 4 amends section 143 of the 1991 Act, so that charges schemes must be approved by the Director General of Water Services (the Director) each year. The Director's power to approve charges schemes under section 143 (and the Secretary of State's power to make regulations under section 143A as inserted by section 5 of this Act) cannot be used to limit the total revenues available to water and sewerage undertakers from their charges schemes. Section 143 as amended also provides for the Secretary of State to give the Director guidance to take into account when approving schemes, and for the guidance to be published.

Section 5: Regulations concerning charges schemes

22.     For those requiring special provision, the Secretary of State's regulations are intended to set out which groups of people are to be given special protection, and how eligibility for this protection should be demonstrated. These groups may include those who need special protection because of their age, health or financial circumstances, or due to disability. As well as prescribing those who should receive special treatment, the regulations will outline the nature of the assistance to be offered.

Section 6: rights of consumers to elect for charging by reference to volume

23.     Section 6 adds a new section (section 144A) to the 1991 Act. It covers homes which currently pay their water and sewerage bills on an unmeasured basis under a charges scheme. It gives these consumers a new right to require their water company to charge them by reference to volume (by sending their water company a 'measured charges notice'). Water companies would not have to install a meter where it would not be practicable or would be unreasonably expensive. Any dispute between the water company and the customer over whether installation of a meter would be impracticable or unreasonably expensive should be submitted to the Director General of Water Services. A company's charges scheme will set out the time within which the company will fit a meter and start charging the consumer by reference to volume. Tenants, other than those in fixed term tenancies of less than six months, will be able to exercise these rights irrespective of any term of their tenancy agreement which restricts or prohibits the exercise of these rights.

24.     Section 144A enables consumers to revert to paying for their water on an unmeasured basis provided that they have not reverted previously, and that they, or a member of their household, were living in the property when the measured charges notice was issued. The request for reversion must be made within 12 months of the first day on which a measured basis of charging applied. If a consumer requests reversion to an unmeasured basis of charging, water companies must start charging on that basis 12 months after the consumer was first charged on a measured basis, or as soon as possible thereafter. Finally, where a consumer is paying for water on a measured basis, the section provides that the foul water drainage element of the sewerage services must be charged on the same basis.

Section 7: restrictions on water companies' power to charge by reference to volume

25.     Section 7 adds another new section (section 144B) to the 1991 Act. It will allow consumers to stay on an unmeasured charge unless certain conditions are met. It does this by prohibiting water companies from beginning to charge domestic customers on a measured basis unless:

• a consumer has requested or agreed to be charged on that basis (either by sending the water company a measured charges notice under section 144A, or agreeing to a suggestion from the company that charges be on a measured basis); or

• the consumer has recently moved into the premises and has not yet received a water bill based on an unmeasured charge.

Section 8: charging by reference to rateable value

26.     Section 145 of the 1991 Act contained a deadline of 31 March 2000 after which rateable value could no longer be used as a basis for water charges. Section 8 repeals section 145 which means that rateable value will still be one possible method of charging for water.

Sections 9 & 10: metering

27.     Section 9 amends section 148 of the 1991 Act so that consumers in private dwelling houses, who exercise their right to pay on the basis of volume, cannot be required to pay the water companies for installing water meters in their premises. Section 10 amends section 162 of the 1991 Act. It ensures that water companies have the power to carry out works connected with meter installation (such as the installation of pipes), where they are needed to give effect to the provisions of the Act including cases where there is no immediate intention of using the meter as a basis of charging.

Section 11: rights of tenants in relation to metering

28.     Section 11 relates to the rights given by section 6 in relation to metering. This section helps certain tenants, who might otherwise be prevented from exercising their entitlement to pay by reference to volume by conditions in their tenancy agreements. Section 11 provides that no terms of any tenancy agreement of the types specified shall be regarded as restricting the tenant's rights (to give a measured charges notice and to consent to charges being fixed on a measured basis), preventing the consequent installation or connection of a meter or requiring consent to be obtained in relation to such installation or connection. The tenancies specified are those which are not fixed term tenancies for a term of less than six months.

Section 12 and Schedule 2: Water Industry Commissioner For Scotland

29.     Section 12 amends the Local Government etc. (Scotland) Act 1994 to establish the Commissioner and the three Consultative Committees. It dissolves the Customers Council and provides for the Transfer of Undertakings (Protection of Employment) Regulations 1981 to apply in relation to the staff of the Customers Council who transfer to work for the Commissioner.

30.     Schedule 2 sets out a new Schedule 9A to the 1994 Act. Part I of Schedule 9A provides for the appointment of the Commissioner and his staff and allows normal public sector pension arrangements to be made for them. The office of Commissioner will not have Crown status. Part II of Schedule 9A provides the broad framework within which the Consultative Committees will operate.

Section 13 and Schedule 3, Part II: Commissioner's advice on charges

31.     Section 13 amends the 1994 Act to give the Commissioner the function of advising Ministers about water and sewerage charges. He is to offer advice on the fixing of charges over a period of years to be specified in advance by Ministers. In preparing his advice he must take into account information relevant to the performance and service standards which the water and sewerage authorities have to meet in consequence of statutory requirements and government policies, the investment programmes necessary to deliver those standards and the scope for the authorities to secure efficiency savings. Ministers can accept or modify the Commissioner's advice, or substitute their own advice. This process will be transparent to the general public through provision requiring the Commissioner to publish his advice as accepted by ministers and any substituted advice.

32.     The published advice will provide the framework within which the Commissioner will agree annual charges schemes with the water and sewerage authorities. In effect, the result of the process will be to establish limits for annual price increases over the period of years in question. Within this longer term framework approved by Ministers, the Commissioner will agree annual charges schemes with the water and sewerage authorities in the same way as the Customers Council does at present under section 76 of the 1994 Act.

33.     These new arrangements will differ from the current system in two respects. First, in preparing his advice the Commissioner will be required to consider charge levels over a number of years instead of one year at a time, as happens with the Customers Council at present. Secondly, the matters to be taken into account by the Commissioner in framing his advice, including matters of efficiency, will be specified (which they are not in respect of the Customers Council at present). The purpose of these changes is to assist the water and sewerage authorities to meet the needs of their customers as efficiently as possible by providing a stable business framework within which to make plans for future delivery of service.

34.     Schedule 3, Part II, amends existing legislation in consequence of the creation of the Commissioner and the dissolution of the Customers Council. It applies mainly to the 1994 Act where the Commissioner will take over the role of the Council in connection with codes of practice, customer complaints and annual charges schemes. It also amends the Water (Fluoridation) Act 1985 to require the Commissioner, rather than the Council, to be consulted about proposals to introduce fluoride into water supplies in Scotland.

Section 14: application to Wales and Scotland

35.     Section 14 provides that if an Order in Council is made under section 22 of the Government of Wales Act 1998 transferring functions of the Secretary of State set out in this Act to the National Assembly for Wales, the order will be subject to negative, rather than affirmative, resolution procedure. The section also provides that this Act is a 'pre-commencement enactment' for the purposes of the Scotland Act 1998 and so ministerial functions under this Act transfer to the Scottish Ministers by virtue of the provisions of the Scotland Act 1998.

COMMENCEMENT

English and Welsh Provisions

36.     The sections relating to disconnection, the use of limiting devices and removal of the restriction on charging with reference to rateable value take effect on Royal Assent. The provisions in the Act that provide for regulations to be made will also come into force on Royal Assent. The other provisions will come into force on a day or days determined by the Secretary of State.

Scottish Provisions

37.     No date for commencement is included on the face of the Act. The intention is that Scottish Ministers should determine a commencement date in exercise of the functions transferred to them under the Scotland Act 1998.

HANSARD REFERENCES

38.     The following table sets out the dates and Hansard references for each stage of this Act's passage through Parliament.

Stage	Date	Hansard reference
House of Commons
Introduction	25 November 1998	Vol 321 Col 208
Second Reading	7 December 1998	Vol 322 Cols 40-114
Committee	15 December 1998 12 January 1999 14 January 1999	Hansard Standing Committee A
Report and Third Reading	10 February 1999	Vol 325 Cols 384-436
House of Lords
Introduction	11 February 1999	Vol 597 Col 329
Second Reading	4 March 1999	Vol 597 Cols 1856-1878
Committee	22 April 1999	Vol 599 Cols 1242-1295
Report	8 June 1999	Vol 601 Cols 1368-1401
Third reading	24 June 1999	Vol 602 Cols 1067-1075

Royal assent - 30 June 1999	House of Lords Hansard Vol 603 Col 271
	House of Commons Hansard Vol 334 Col 361

ANNEX A

Extracts from the Water Industry Act 1991, referred to in paragraph 17 of the Notes. The amendments made by the Water Industry Act 1999 are shown in bold. These extracts have no authoritative status.

Water Industry Act 1991

Disconnections for non-payment of charges.

     61.-(1) Subject to the following provisions of this section, a water undertaker may disconnect a service pipe which for the purposes of providing a supply of water to any premises is connected with any water main of that undertaker, or may otherwise cut off a supply of water to any premises, if the occupier of the premises-

a) is liable (whether in his capacity as occupier or under any agreement with the undertaker) to pay charges due to the undertaker in respect of the supply of water to those premises; and

b)     has failed to do so before the end of the period of seven days beginning with the day after he is served with notice requiring him to do so.

(1A) The power conferred by subsection (1) above is not exercisable in relation to premises specified in Schedule 4A.

(2) Where-

a)     a water undertaker has served a notice for the purposes of paragraph (b) of subsection (1) above on a person; and

b)     within the period of seven days mentioned in that paragraph, that person serves a counter-notice on the undertaker stating that he disputes his liability to pay the charges in question,

the undertaker shall not in respect of that notice exercise his power by virtue of that subsection in relation to any premises except at a time when that person is the occupier of the premises and those charges are enforceable against that person in a manner specified in subsection (3) below.

(3) For the purposes of subsection (2) above charges are enforceable in a manner specified in this subsection against a person if-

a)     the undertaker is able to enforce a judgement against that person for the payment of the charges; or

b)     that person is in breach of an agreement entered into, since the service of his counter-notice, for the purpose of avoiding or settling proceedings by the undertaker for the recovery of the charges.

(4) A water undertaker which exercises its power under this section to disconnect any pipe or otherwise to cut off any supply of water may recover, from the person in respect of whose liability the power is exercised, any expenses reasonably incurred by the undertaker in making the disconnection or in otherwise cutting off the supply.

(5) Where-

a)     a water undertaker has power under this section to disconnect any pipe to any premises, or otherwise to cut off any supply to any premises; and

b)     a supply of water is provided to those premises and to other premises wholly or partly by the same service pipe,

the undertaker may exercise that power so as to cut off the supply to those other premises if and only if the same person is the occupier of the premises in relation to which the charges are due and of the other premises.

.......

Manner of fixing charges

Powers of undertakers to charge.

     142.-(1) Subject to the following provisions of this Chapter, the powers of every relevant undertaker shall include power-

a)     to fix charges for any services provided in the course of carrying out its functions and, in the case of a sewerage undertaker, charges to be paid in connection with the carrying out of its trade effluent functions; and

b)     to demand and recover charges fixed under this section from any persons to whom the undertaker provides services or in relation to whom it carries out trade effluent functions.

(2) Subject to subsections (2A), (3) and (3A) below, the powers conferred by subsection (1) above shall be exercisable-

a)     by or in accordance with a charges scheme under section 143 below; or

b) by or in accordance with agreements with the persons to be charged.

(2A) Paragraph (b) of subsection (2) above shall not have effect in relation to-

a)     charges for the supply of water to a dwelling, or

b) charges for the provision of sewerage services in respect of a dwelling,

but this subsection does not affect any agreement made before the commencement of section 3 of the Water Industry Act 1999.

(2B) In subsection (2A) above, "dwelling" has the meaning given by paragraph 1(2) of Schedule 4A to this Act.