UK: Draft Water Bill published

On 10 July 2012, Caroline Spelman, the Secretary of State for Environment, Food and Rural Affairs, published a draft Water Bill for parliamentary scrutiny. The draft Bill takes forward legislative proposals set out in the Water White Paper published in December 2011. The Government aims to introduce the proposed market reforms by 2017.

Key proposals in the draft Water Bill are as follows:

Expansion of the current water supply licensing regime and introduction of sewerage licences

The Water Bill amends the Water Industry Act 1991 to expand the current water supply licensing regime and unbundles the combined water supply licence into several different types that would allow for specific services to be authorised. This is intended to encourage new entrants to apply for particular services e.g. a "wholesale authorisation" would allow a new entrant to input water into an undertaker's water supply system. The new licensing regime would also allow for services to be offered under a national licence rather than on a site by site basis.

Similar types of authorisations have been introduced for sewerage services under a new sewerage licence. The new sewerage licences consist of the following types of authorisation: (a) retail; (b) wholesale; (c) retail infrastructure; (d) wholesale infrastructure; and (e) disposal.

The Welsh Ministers are given separate powers in relation to the areas of water in Wales and for sewerage undertakers wholly or mainly in Wales. For licensees using the supply system of an undertaker wholly or mainly in Wales, the existing retail and supplementary authorisations are retained as: "a restricted retail authorisation" and "a supplementary authorisation" respectively.

Removes threshold for switching water suppliers

The Bill removes the threshold at which businesses and public sector bodies in England can switch suppliers (currently five million litres a year). The Government has said that this is intended to allow all businesses and public sector bodies in England to be able obtain more competitive prices, improve their efficiency and tender for services tailored for their individual needs.

The licensed water supply threshold is to be retained at 50 million litres a year for water companies that operate wholly or mainly in Wales. This may be changed by the Welsh Ministers in due course.

A joint retail market with Scotland

Further to the proposals set out in the Water White Paper, the Bill introduces the ability for English (and in certain cases, Welsh) companies to make applications for retail services to the Water Industry Commission for Scotland. This is intended to allow water supply licensees and sewerage licensees to supply customers in both England and Scotland (and eligible water supply customers in Wales). The Bill also sets out provisions for cooperation between Ofwat and the Water Industry Commission for Scotland in relation to the retail market for water. Further changes to Scots law are needed to implement similar changes in Scotland.

Changes to the special merger regime for the water sector

The Bill reforms the special merger regime to exclude more mergers from automatically being referred to the Competition Commission. It introduces a two-tier referral system allowing some water companies seeking to take over another water company to avoid a referral by making undertakings in lieu  to compensate for the loss of a comparator (e.g. by continuing with separate reporting or divesting parts of the business) .

Currently, a merger proposal has to be referred to the Competition Commission if the turnover of the buying or target company is 10 million pounds a year or more.  Under the changes, the Office of Fair Trading and Ofwat would first consider whether a merger would be likely to prejudice Ofwat's ability to make comparisons between water companies to an extent not outweighed by relevant customer benefits. In the affirmative case, there would be a referral to the Competition Commission.

Code based regulation

The Bill changes the regulations that apply for an entity wishing to access the water and sewerage market. Instead of the current requirement of "negotiated access" where a licensed water supplier enters into agreements with existing undertakers in the areas in which they wish to operate, the Bill proposes the introduction of "market codes" to set out standard terms and conditions. The Government has stated that these market codes would similar in approach to that adopted in the energy sector and in the Scottish water market and would be developed by Ofwat in consultation with current water companies, licensees, other regulators and the Consumer Council for Water.

The Bill also removes the "costs principle" on the basis of which wholesale prices in the water supply licensing regime is currently calculated. Instead, the Government intends to introduce a "flexible wholesale access pricing regime".

Changes to Ofwat

The Bill gives Ofwat greater information gathering powers and allows it to impose financial penalties for certain infringements for up to five years after the infringement occurred. This is an extension to the current position where the penalty must be imposed within one year of the infringement.

The Government has also stated that the approach Ofwat takes to regulating the sector will need to reflect the Government's objectives for increasing competition and reflect the Government's objective of having a "proportionate, risk-based approach to regulation." These changes are to be reflected in the new strategic policy statement to Ofwat which is to be published later this year. This will set out the Government's objectives on "competition, and how these should be balanced against the priorities of maintaining a stable regulatory environment, attractive to investors."

Drought Plans to be produced every 5 years

The Bill amends the requirement to review Drought Plans to a five yearly maximum cycle (instead of current 3 year cycle). This brings it inline with the Water Resources Management Plans.

Proposed extension to the environmental permitting regime

The Bill proposed to extend the scope of the environmental permitting regime for England and Wales to include water abstraction and impounding licences, flood defence consents and fish pass approvals. 

The Bill also repeals an obligation on the Environment Agency to keep separate records of maps showing its resource mains and waterworks.

The Government has published the draft Water Bill for pre-legislative scrutiny lead by House of Commons' Environment, Food and Rural Affairs Select Committee. DEFRA has indicated that while it is not formally consulting on the proposals within the draft Water Bill, comments may be sent to the Bill team at

Following the period of pre-legislative scrutiny, the Government intends to introduce the Water Bill as soon as Parliamentary time allows. 

Please click here for the full text of the draft Water Bill

Please click here for a copy of the Water White Paper

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 12/07/2012.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.