Schedule 4 - Licensing of water suppliers
Water Bill [Lords]
3:15 pm
Mr Elliot Morley (Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs; Scunthorpe, Labour)
That was an interesting contribution about how the cost principle is applied and I accept that there is a debate about how it should be done. The Bill's approach is that the cost principle is just that; it will be for Ofwat to sort out the detail, although as the hon. Gentleman rightly stated, a clear structure is laid out. It is to everyone's benefit that they understand what is involved.
There is justification for the retail-minus approach, because water has been in regulatory control since 1989. It is not the same for the postal service; the hon. Gentleman accepted that there were differences between water and post, and that is a key difference. It is important to recognise, too, that assets still have to be paid for in the water industry and the undertakers have to recover costs. Our approach is a means to achieve a balance in the unique situation that applies to water, which has universal service obligations. I shall expand on the issue of assets and the impact on other customers in a moment.