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‘For section 63AC of the Water Industry Act 1991 (interim duty of water undertaker: domestic and non-domestic supply) there is substituted—
“63AC Interim duty: domestic and non-domestic supply
(1) This section applies where—
(a) a water supply licensee (“the previous licensee”) ceases to supply any premises with water, and
(b) the owner or occupier of the premises has not notified the water undertaker in whose area the premises are that—
(i) he has made arrangements for the continuation of the supply of water to the premises, or
(ii) he intends any supply of water to the premises to cease.
(2) It is to be the duty of the water undertaker to continue the supply of water to the premises which was made by the previous licensee.
(3) But the Authority may give a direction to an eligible water supply licensee (“an interim licensee”) providing that it is to be the duty of that licensee to continue the supply instead.
(4) An “eligible water supply licensee” is a water supply licensee with a retail authorisation or a restricted retail authorisation who has elected to be an eligible water supply licensee for the purposes of this section in accordance with the code issued under section 63AF.
(5) If the Authority proposes to give a direction under subsection (3) to an eligible water supply licensee—
(a) the Authority must give notice of the proposed direction to the licensee, and
(b) the licensee may, in accordance with the code issued under section 63AF, temporarily suspend the election made by the licensee as mentioned in subsection (4), so that the proposed direction cannot be given to the licensee.
(6) Where a supply is made by an undertaker under subsection (2)—
(a) the charges payable in respect of the supply are to be fixed from time to time by a charges scheme under section 143, and
(b) subject to subsection (12), the supply is to be made until—
(i) a supply is made by an interim licensee by virtue of a direction under subsection (3),
(ii) a supply is made by a water supply licensee following the service of a notice under section 63AA or 63AB;
(iii) a supply is made under section 52 or 55, or
(iv) a notice is served by the undertaker on the owner or occupier of the premises stating that the supply is to be discontinued (subject to subsection (8)),
whichever is the earlier.
(7) Where a supply is made by an interim licensee by virtue of a direction given under subsection (3)—
(a) the supply by the interim licensee is to be treated as having begun on the date on which the previous licensee ceased to supply the premises,
(b) the terms and conditions in accordance with which the supply is to be made are to be—
(i) those provided for by a scheme made under section 63AE, or
(ii) such other terms and conditions as may be agreed between the interim licensee and the owner or occupier of the premises, and
(c) subject to subsection (12), the supply is to be made until it is discontinued in accordance with the terms and conditions mentioned in paragraph (b).
(8) A notice under subsection (6)(b)(iv) may not be served before the end of the period of three months beginning with the day on which the supply by the previous licensee ceased.
(9) Subsections (10) and (11) apply if, within a period of three months beginning with the date on which the previous licensee ceased to supply the premises with water, the owner or occupier of the premises serves notice—
(a) under section 63AA or 63AB, on the water undertaker continuing the supply under subsection (2), or
(b) in accordance with the terms and conditions mentioned in subsection (7)(b), on the interim licensee continuing the supply by virtue of a direction given under subsection (3),
that instead another water supply licensee (“the new licensee”) is to continue the supply of water to the premises which was made by the previous licensee.
(10) The notice must—
(a) specify the time from which the new licensee is to continue the supply in question, and
(b) be served in accordance with the code issued under section 63AF.
(11) In the case of a notice served as mentioned in subsection (9)(a), the supply by the new licensee is to be treated as having begun on the date on which the previous licensee ceased to supply the premises.
(12) Supplies of water under this section are subject to sections 60 to 63.
63AD Interim duty: supplementary
‘(1) A water undertaker is not required by virtue of section 63AC to provide a supply of water to any premises if the provision of the supply would—
(a) require the undertaker, in order to meet all its existing obligations to supply water for domestic or other purposes, together with its probable future obligations to supply buildings and parts of buildings with water for domestic purposes, to incur unreasonable expenditure in carrying out works, or
(b) otherwise put at risk its ability to meet any of the existing or probable future obligations mentioned in paragraph (a).
(2) The Authority may determine, in a case referred to it by the owner or occupier of the premises in question, whether the condition in subsection (1) is satisfied in relation to a water undertaker.
(3) Before the Authority determines whether that condition is satisfied, it must consult—
(a) the Secretary of State, in the case of a water undertaker whose area is wholly or mainly in England;
(b) the Welsh Ministers, in the case of a water undertaker whose area is wholly or mainly in Wales.
(4) The supply of water to any premises by a water undertaker under section 63AC does not prevent a proposed supply to those premises by that undertaker under section 55 from being regarded as a new supply for the purposes of that section.
(5) Where a duty is imposed by section 63AC(2), or by virtue of a direction given under section 63AC(3), in respect of any premises, any breach of the duty which causes the owner or occupier of the premises to sustain loss or damage is actionable at the suit of that owner or occupier.
(6) But in any proceedings brought against a water undertaker or water supply licensee in pursuance of subsection (5), it is a defence for the undertaker or licensee to show that the undertaker or, as the case may be, the licensee took all reasonable steps and exercised all due diligence to avoid the breach.
“63AE Interim licensees: schemes for terms and conditions
(1) A person who is an eligible water supply licensee for the purposes of section 63AC must make, and from time to time revise, a scheme containing the terms and conditions which, in the absence of agreed terms and conditions, are to apply to a supply of water made by the licensee by virtue of a direction given under section 63AC(3).
(2) A scheme under this section may make different provision for different purposes, or for different areas.
(3) As soon as practicable after a water supply licensee makes or revises a scheme under this section the licensee is to—
(a) publish the scheme, or revised scheme, on the licensee’s website, and
(b) send a copy of the scheme, or revised scheme, to the Authority.
(4) The Authority may give a direction that terms and conditions applying to a supply of water in accordance with a scheme under this section must be modified as specified in the direction.
(5) A direction under subsection (4) may apply—
(a) generally to terms and conditions applying in accordance with a scheme under this section, or
(b) to terms and conditions so applying in any particular case.
(6) It is the duty of a water supply licensee to comply with a direction under subsection (4), and this duty is enforceable under section 18.
63AF Interim duty: code
‘(1) The Authority must issue a code in relation to—
(a) supplies of water under section 63AC, and
(b) its power of direction under section 63AC(3) (power to direct that eligible water supply licensee makes interim supply).
(2) The code may, in particular, make provision about—
(a) the procedure for electing to be an eligible water supply licensee for the purposes of section 63AC;
(b) the procedure for temporarily suspending such an election under section 63AC(5)(b);
(c) the circumstances in which the Authority’s power of direction under section 63AC(3) or 63AE(4) may or may not be exercised;
(d) how the Authority will determine the date on which a water supply licensee ceased to supply premises with water for the purposes of section 63AC;
(e) terms and conditions contained in schemes made under section 63AE;
(f) eligible water supply licensees informing owners or occupiers of premises of their schemes for terms and conditions made under section 63AE, before agreeing any terms and conditions as mentioned in section 63AC(7)(b)(ii);
(g) the giving of notices as mentioned in section 63AC(9) (that a new licensee is to continue the supply of water made by the previous licensee) including, in particular, provision about—
(i) the earliest time that a notice may specify as the time from which a new licensee is to continue the supply of water made by a previous licensee;
(ii) the procedure for serving a notice.
(3) If the Authority considers that a water supply licensee is not acting as required by provision contained in a code as mentioned in subsection (2)(e) or (f), the Authority may give the licensee a direction to do, or not to do, a particular thing specified in the direction.
(4) It is the duty of a water supply licensee to comply with a direction under subsection (3), and this duty is enforceable under section 18.
(5) The Authority must from time to time review the code and, if appropriate, issue a revised code.
(6) References in section 63AC to the code issued under this section are to the code issued under this section that has effect at the time in question.”’.—(Dan Rogerson.)
New clause 42 revises the so-called “supplier of last resort” provisions in the existing water supply licensing regime. This is also known as the “interim supply duty”. New clause 43 introduces the equivalent for sewerage licensing and what a customer must initially do to switch from an incumbent sewerage company to a sewerage licensee. Currently, if a licensee were to withdraw from the market, its customers would revert to the incumbent water company for their retail services, for example billing. The incumbent would be under an obligation to continue supplying retail services for at least three months, or until such time as the customer formalises the arrangement or switches to another licensee.
This ensures that the customer is not left without a retail supplier because its chosen licensee becomes insolvent or otherwise decides to leave the water supply market. As it stands, this might not be an ideal situation for multi-site customers that are located throughout England and Wales. The customer could be with a single supplier one day and find itself in arrangements with up to 21 incumbent water suppliers the next. While the customer could take steps to tender for a new licensee straight away, this may take some time and will put considerable burdens on both the customers and the incumbents.
While these new clauses retain the default of a customer returning to the incumbent water company, Ofwat will alternatively be able to direct other licensees to take over responsibility for the customers, so that there is only one supplier for the customer to deal with until it makes alternative arrangements. Licensees that feel they cannot cope with the additional supply will be able to opt out at that point. Ofwat will be required to publish a code on how it will use its powers of direction and how the regime will work in practice.
Where Ofwat directs that a supply will be made by a licensee, the terms and charges that apply shall be the default terms provided by the licensee, but regulated by Ofwat. In the alternative, customers can negotiate terms and conditions privately with the licensee, but Ofwat’s code should ensure that the licensee makes the customer aware of the default terms before this can happen. Both the customer and the licensee can walk away at any time provided for in the terms and conditions.
As is the case now, where the incumbent water company provides the interim supply, it will do so in accordance with its charges scheme. The incumbent will still be able to cancel the arrangement after three months so the customer should choose to formalise the supply from the incumbent, re-negotiate it, or arrange to be supplied by a new licensee. The customer, on the other hand, can cancel the arrangement or seek to renegotiate terms at any time. We have added a new provision enabling any supply by a new licensee in these circumstances to be backdated so that the customer does not have to pay several different bills for a short interim period.
As is the case now, if the incumbent considers that making the supply puts at risk its other supply obligations, it can refuse to provide the supply. We are adding a power for the customer to challenge that decision, if it wants to remain with the incumbent water company, by asking Ofwat for a determination. Incumbents providing sewerage services will not have an equivalent opt-out due to their wider obligations to provide sewerage services in their areas of appointment.
To ensure transparency, the licensee’s default terms and conditions will be published in a scheme that will determine how the default scheme terms and conditions will be set. Under clause 16, Ofwat’s rules may also require the undertaker’s charter scheme to be published. I commend the new clauses to the Committee.
On a point of order, Mr Gray. I understand that you will not be joining us this afternoon, so I thank you for your service to this Committee and wish you a very happy Christmas.
Further to that point of order, Mr Gray, I would hate to pass up the opportunity to add my best wishes for a happy and peaceful Christmas.
In answer to that entirely bogus ministerial point of order, may I say what a great pleasure it has been to chair this Committee? I have been amazed that you have all remained, remarkably, more or less in order throughout. There shall be no more bogus points of order.
Adjourned till this day at Two o’clock.
Written evidence reported to the House
WB 23 Bill Hollis
WB 24 Food and Drink Federation
WB 25 The Environment Agency
WB 26 Wessex Water
WB 27 Council of Mortgage Lenders
WB 28 Council and members of the British Automatic Fire Sprinkler Association
WB 29 Residential Landlords Association
WB 30 British Property Federation
WB 31 London Fire and Emergency Planning Authority