Clause 40 - Conditions relating to costs
Water Bill [Lords]
7:00 pm
Mr Elliot Morley (Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs; Scunthorpe, Labour)
I understand that the intention behind new clause 5 is to give companies greater certainty by placing a duty on the authority to produce and consult on a statement of policy before the periodic review. To that extent, it is good practice and we do not disagree with that. Ofwat already produces a detailed methodology for the periodic review, which is open for consultation. However, the new clause goes beyond that and tries to set in concrete a process that the regulator must follow. It sets a rigid timetable for consulting on, and publishing the statement of policy before, the periodic review.
Other deadlines in the new clause greatly restrict the flexibility of the review procedure and its ability to develop over time. At some point, it may be desirable to change the process. The chief executive of Water UK said to the Institute of Water Officers in April that
''the Periodic Review is no longer fit for purpose and should be reformed or replaced with something more suited to modern needs.''
There is an argument about whether that is the right way forward. However, if we wanted to change the periodic review process, the new clause would prevent that because it puts in place a rigid structure. The new clause would also lengthen the recently shortened review process against the recommendations of the Environmental Audit Committee.
Although the change would provide extra powers for the water industry, it would do nothing for the consumer. Measures are already in place for the industry to appeal against price determinations through the Competition Commission. Any increase in the powers would risk shifting the delicate balance of interests against consumers. We must balance the interests of the industry and consumers.
We agree on the importance of best practice, but the new clause is an example of how writing it down in statute can work against those laudable aims. Amendments Nos. 103 and 104 are intended to tie the fees paid by each undertaker to each year's price limit as set by Ofwat in its periodic review. I understand the concern that regulatory bodies should not become a financial burden on the regulated companies, but safeguards to prevent that are already in place. The conditions of appointment already contain a cap on the level of fees payable to Ofwat and the regulator levies less than it is entitled to.
Paragraph 10 of schedule 2 gives the Secretary of State and the National Assembly the power to control the consumer council's budget. I can assure the hon. Gentleman that the Government are determined that
the CCW will be an efficient organisation—I know that will be its objective as well—and it will not be allowed to become a financial burden on the industry. We have recently let a consultancy contract to examine the internal and regional structure of the proposed new consumer council and that will help to ensure that the CCW combines effective use of its powers with an efficient operation. I hope that that deals with the hon. Gentleman's points.