Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


Memorandum by The Public Utilities Access Forum (DWB 34)

  Founded in 1989, the Public Utilities Access Forum (PUAF) is an informal association of organisations which helps to develop policy on the regulation of the public utilities providing electricity, gas, telecommunications and water services in England and Wales, and facilitates the exchange of information and opinions between bodies concerned with the provision of those utilities to consumers with low incomes or special service needs, such as the elderly and people with mental and physical disabilities. It draws the particular problems of such consumers to the attention of the industries, the regulators and other relevant bodies, promoting the adoption of policies and practices which cater for their needs, exchanging information about service provision and promoting research. This response is made on behalf of PUAF's non-regulator members. By the nature of the Forum, it represents a consensual, but not necessarily unanimous, position.

WATER BILL—CONSULTATION ON DRAFT LEGISLATION

1.  SUMMARY

  1.1  PUAF welcomes this opportunity to comment on the draft Bill which it broadly supports. Its members appreciate the need to manage water resources better, especially when and where supplies are under stress, they wholeheartedly support the principle of a stronger, more independent consumer role in regulation as a way of scrutinising decisions and indirectly of improving services and they note how competition in the other public utilities has encouraged greater responsiveness to customers and contributed to lower prices. Its support is not, however, without serious reservations.

2.  ENCOURAGING CONSERVATION

  2.1  PUAF's members have supported various conservation initiatives in the past despite that they have often appeared to be driven principally by environmental, rather than consumer, concerns. To paraphrase Agenda 21, however, it is man's well-being which is at the centre of concern for the environment and we are glad this time to see the aim of improving conservation qualified in the consultation paper by reference to public health.

  2.2  That qualification is not repeated in the Bill itself, however; we strongly believe it should be and given the omission, members remain wary of the government's perspective on conservation—while reforms to the current framework for abstraction licensing are no doubt needed, and consolidating the Environment Agency's role in resource management in the process is arguably no bad thing, on their own the Bill's proposals still appear more to do with restricting the development of resources (with the corollary of increasing their cost) than meeting the imperative to ensure that people's reasonable domestic needs can continue to be met at prices they can afford. Conservation, of which better control over abstractions is a part, is an aid to that but will be insufficient in the long and even medium run and PUAF's members believe the Bill should place more emphasis on water resource management, ie by encouraging greater storage in times of plenty, together with the development of a more strategic pipeline network to facilitate the bulk transfers it refers to. On a smaller scale, it could give the undertakers responsibility for/ownership of individual customers supply pipes (ie up to the first practical point of use) in order to reduce leakage there.

  2.3  As far as the details of the proposals to do with abstraction licensing go nevertheless, we support them in the name of sustainability while emphasising the social component of that; it is a question of balance between people and the environment but fundamentally, the undertakers must be guaranteed access to sufficient resources adequately to supply their populations, and for long enough periods to plan those supplies. Where there is insufficient water and new resources cannot be developed, full recognition of that needs to be given in the development planning process.

  2.4  In this respect (the "Kent problem"), while a power on the part of the Environment Agency to propose bulk transfers is a step forward, we think it is likely to be of limited effect, in the first place in the absence of something more closely approaching a national grid (since adjoining companies are not likely to be able to spare much), or, in the second place, while it remains just a power to "propose" (though we recognise that anything more would sit uneasily with competition proposals). We wonder in any event what the economic impact on both donor and receiver customers of a bulk transfer might be while we are clear that the financial terms of any transfers should be set by OFWAT, not the Environment Agency.

  2.5  At the same time, while they believe that help for poorer households is inadequate and OFWAT persists in setting price limits only for a basket of tariffs, members are concerned at the role individual tariffs might come to play in drought plans and, in particular, how the social impact of those will be represented. We believe that local authorities should have a right to be consulted on them.

3.  BETTER REGULATION

  3.1  PUAF's members have had deep reservations about the degree of independence of water regulation during its first 11 years and, not least, about the personal influence wielded by a largely unaccountable Director-General. Change is overdue to temper and balance that influence but while members are puzzled by the close similarity of the current proposals with those removed from last year's Utilities Bill (the ostensible reason for which, we understood, was to make changes), their opinions are divided about whether the proposal, ie for a single DG to be complemented by a Water Advisory Panel, is better than the establishment of a regulatory authority. If the proposal for an Advisory Panel is to go ahead, they nevertheless feel strongly that the stated aim of putting consumers at the heart of regulation requires that it should include a member with an explicit consumer remit and appropriate experience. They welcome a power on the part of the Secretary of State to direct the DG on what matters to refer to the Panel but would like to see those categorised on the face of the Bill.

  3.2  The proposals for establishing a new Consumer Council are, likewise, much better than the current system controlled by OFWAT but contrary to the example in the energy field, we believe the main influence should be at regional, not national, level. That is to say, that consumer representation should not be through a central top-down body with regional subsidiaries but be bottom-up, ie through regional councils, tied together with a co-ordinating committee, probably of chairmen, but unlike the current ONCC, entirely independent of OFWAT and the DG. That would be more in tune with the government's overall regional policy and reflect the fact that water resources and supply are regional (or even more local), not national. Of course, if this approach were taken, there would be no need to provide a power for the Secretary of State to direct the Consumer Council to set up regional committees.

  3.3  Adequate resourcing of the regional committees will be key—it is imperative that they have sufficient people and expertise to perform their scrutinising and representative roles robustly. It will nevertheless assist the role of consumer representatives (and others) that the Secretary of State and the DG will be required to give reasons for their key decisions, at least if that term is construed widely enough. The reasons nonetheless will need to be adequate, in particular in expressing the impact of those decisions on consumers and how they sit with the guidance on social and environmental obligations, and timely.

  3.4  We support, of course, the proposal for a new "consumer objective" to balance the currently overly commercial duties of the DG but members are concerned about how all the various duties on the DG and the interests he has to weigh are actually to be reconciled while minimising the kind of scarcely disguised disagreement we have seen between OFWAT and the Environment Agency in the course of past periodic reviews. That has not been constructive. Clearly, government has a role here through the issuing of guidance on social and environmental obligations but in tune with the new objective, we would like to see a requirement on OFWAT to consult with consumer bodies (in addition to the Consumer Council). All that said, we cannot support the rider about competition in this context; in our view it is unnecessary and could actually be constraining. It is enough to specify the goal here—we strongly believe the means should be left out of it.

  3.5  Complementing the proposed guidance on social and environmental obligations, we support the proposal that the Secretary of State should have the power to set standards of performance—wider than hitherto—without prior application by the DG; that is only consistent with the government's promise to take overt responsibility for decisions of a political nature and having a significant impact on prices. We support too the proposal to empower fines on companies in breach of such standards or licence conditions; enforcement options have to date been few and we disagree with views that this necessarily adds to the burden of regulatory uncertainty since compliance will result in no penalty.

  3.6  Members are uncertain about the proposal to replace the Competition Commission's water panel with a single cross-utility group. While on the one hand they acknowledge the trend towards multi-utilities, for regulatory purposes the operations of those companies are kept separate and it remains a truism that water is different—the disposal side (rainwater, highway drainage and sewage) has no parallel in the energy field, water is more regional and the competition issues consequently are different.

4.  INCREASED COMPETITION

  4.1  We note that detailed proposals on increasing competition are still to come. We regret that they could not have been brought forward with the rest of the Bill but we are concerned that when they are included, the benefits of competition should neither be over-sold, nor taken for granted. The pursuit of private profit is not always the best motivator and there have been clear examples recently of how commercial approaches have failed to deliver safe or economic or efficient public services, indeed, it was the dilution of its public service ethic which led to the furore over domestic disconnections in this industry just a few years ago. Competition can, moreover, actually add to costs, both monetary and environmental and distract managers from more important matters.

  4.2  Arguably, such competition as there has yet been for water services, eg for large users, has disadvantaged domestic consumers and it is the case moreover that poorer consumers have not benefited equally from competition in the other utilities. Containing prices—one of the principal social aims of competition—is also at odds with the environmental aim of containing demand. In addition, there are practical limits for competition in water anyway, even if concerns about quality regulation are overcome. In this respect, PUAF agrees that DWI's powers need extending to bring new entrants within the same framework as licensed undertakers; contractual relationships between them, especially against the background of the Competition Act cannot be relied on to give the public the same protection.

  4.3  Overall, we doubt that the benefits are worth it but if it is to come about, much greater public access to reliable, comparable information on the companies' performance will be a necessary precursor. PUAF's members support greater openness in any event and believe that there should be a presumption in favour of disclosing to the public any information a company is required to provide to a regulator.

5.  OTHER MATTERS

  5.1  PUAF's members are not experts in the field but they wonder if the Bill might present an opportunity to mitigate the effects of flooding, eg to set up a developers' und to compensate householders where insurance is no longer available or to encourage soak-aways to slow down discharge rates to water courses and assist the recharging of groundwater stores.

  5.2  In addition, it might require WASCs to take on unadopted sewers, subject to current condition, require all new private sewers to be constructed to adoptable standards and, as PUAF has called for many times, to provide for the costs of highway drainage to be met from the Road Fund instead of from householders on the basis of the Polluter (ie motorists) Pays Principle. There is also a case for requiring local authorities and sewerage undertakers to come together to draw up joint annual rodent control plans.

  5.3  We also point out that the government has yet to propose a long-term basis for the setting of unmeasured charges; rateable values are increasingly obsolete and PUAF has argued the case for the use of Council Tax data, as in Scotland.

  5.4  Finally, PUAF supports current proposals by Ofwat to make a resale price order for water. Though for that to have any effect, purchasers must, as the Bill now proposes, have a right of information on water charges, consumer protection would be enhanced if overcharging, ie in breach of a resale order, was deterred by being made a summary offence, probably enforced by housing authorities. This is particularly so since many purchasers, because of their relationships with sellers, will be in a weak position to enforce their rights.

February 2001


 
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