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Clause 26 extends the time limit for imposing financial penalties from 12 months to five years. It also introduces a time limit for imposing financial penalties where a licensee has failed to achieve a standard of performance. That will apply after the Secretary of State has issued regulations to set standards of performance for water supply and sewage licensees under clauses 29 and 30.
Currently, the Secretary of State, Welsh Ministers or Ofwat have the power to impose a civil financial penalty on an incumbent water company, an inset appointee or a licensee in three cases. First, they can impose a financial penalty on an incumbent water company or an inset appointee for a historic breach of an appointment condition. They can also impose a financial penalty on a licensee for a historic breach of a licence condition. Secondly, they can impose a financial penalty on any of those parties for a historic breach of a relevant statutory obligation. Thirdly, they can impose a financial penalty on an incumbent water company or an inset appointee for failing to achieve a standard of performance. The time limit for imposing a penalty does not apply if a formal notice has been served before the end of the limitation period.
Clause 26 implements a commitment in the water White Paper to extend the time limit for imposing financial penalties. That will remove the incentive for incumbent water companies to delay reporting infringements. Extension of the time limit was also endorsed in David Gray’s review of Ofwat and of consumer representation in the water sector, because it will,
“fully reflect the duration of the contravention and the full extent of any detriment to customers that has occurred across a price review period”.
Clause 26 also ensures that the extended time limit does not apply to contraventions that occurred before the clause comes into force, provided that the contravention is not continuing.