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Baroness Byford: My Lords, our argument is not that the courts should be able to decide differently and impose different penalties. The argument is that they should not be deciding on different interest rates. I do not think the Minister has addressed that point, although it is clear in our amendment.

Lord Whitty: My Lords, I thought I was addressing it. We start with a situation where the court varies the

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penalty, and it is a question of whether there is interest for one or other of the parties involved. As with other cases where the courts have the ability to apply interest, discretion should be left to the court as to the appropriate level of interest taking into account everything in the case. I believe I am right that there is not normally a formula laid down and that the courts' discretion applies.

Baroness Byford: My Lords, I am greatly puzzled. I heard what the Minister had to say and at this stage I shall not pursue it further. But I need to read Hansard carefully. Perhaps between now and Third Reading we can have a conversation to clarify the matter.

On Question, amendment agreed to.

[Amendments Nos. 103 to 106 not moved.]

Clause 48 [Enforcement of certain provisions]:

Baroness Byford moved Amendment No. 107:

    Page 63, line 10, leave out subsection (2).

The noble Baroness said: My Lords, our argument for the amendment is based on our belief that it is not possible to be consistent, fair and right in assessing the likelihood of future transgression with no past wrongdoing to point the way.

In Grand Committee the Minister made our point for us in his reply on 8th April. I quote from four sentences taken in sequence from an uninterrupted response:

    "so that the enforcement authorities . . . are able to take action before something goes wrong . . . the order itself is first and foremost to tell the recipient what action they must take to rectify a situation that has gone wrong.

    "If it is apparent that a contravention is about to happen . . . The reason for this change in the Bill is to reduce the time in which further harm can occur".—[Official Report, 8/4/03; col. GC 56.]

If the clause causes that much confusion in the place of its birth, I imagine that it will become a lawyer's meal ticket for the courts. I beg to move.

Lord Whitty: My Lords, the noble Baroness is picking me up on my tenses and syntax. The point is that Clause 48 enables the enforcement authority to take precautionary action and reduces the timescale of its notice. The amendment would remove from the regulator the ability to take action before a contravention occurred. An enforcement order in that context would require a company to alter its operations to address a potential contravention. The enforcement authority would need to see clear evidence of circumstances where a contravention was likely to occur. The decision to impose an enforcement order in those circumstances would not be taken lightly, but it would be taken ahead of any damage being done to a third party.

It would be the judgment of the regulator that the contravention would take place unless the undertaker altered its behaviour. One could think of several circumstances where that might happen. In all circumstances, we need to provide a precautionary power for the regulator to instruct a company to alter its operations in advance of a formal contravention having taken place. We should not have to wait for

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something to go wrong before the regulator acts. I hope that, after that explanation, the noble Baroness will not pursue the matter.

Baroness Byford: My Lords, the noble Baroness struggles to thank the Minister for his response, as she is not at all happy with it. The measure makes someone guilty before they have committed an offence, which is not desirable in law. It seems to prejudge them to have done something that they have not done—unless I have totally misread the clause and misunderstood the arguments we had in Committee. I am unhappy with the Minister's response. I shall certainly return to the issue at Third Reading, and I hope that between now and then we can come to a greater understanding on the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 52 [Determination references under section 12 of the WIA]:

Baroness O'Cathain moved Amendment No. 108:

    Page 66, line 39, at end insert—

"(3C) For the purposes of subsection (3)(b)(ii) the principles there referred to shall permit, but not require, the Competition Commission, in re-determining any disputed price limit which a relevant undertaker had required the Director to refer to it, to include in that re-determination any allowance for all or part of that relevant undertaker's costs.
(3D) In subsection (3C) above "relevant undertaker's costs" means—
(a) the costs which it incurred in preparing for and pursuing its case before the Commission; and
(b) any costs (whether of the Director or the Commission) which are to be recovered from that relevant undertaker under, or by virtue of, any condition of its appointment.""

The noble Baroness said: My Lords, the amendment deals with the issue of who pays for the costs of a re-determination of price limits by the Competition Commission where a company has appealed to the commission against the decision of the authority on its price limits. The amendment would give powers to the commission to allocate costs fairly between the company's customers, its shareholders and the customers of other regulated companies and taxpayers.

Under existing law, when a company appeals to the Competition Commission and the commission re-determines price limits the costs of the appeal are included in the new price limits. The costs therefore fall on the customers of the company that appealed. In the two price limit inquiries held by the commission in 2000, for Mid Kent Water and Sutton and East Surrey Water, the commission followed the current law but questioned the desirability of invariably having to permit costs in such inquiries to be recovered from customers. In part that was because the costs appeared to be particularly onerous for the customers of the two relatively small companies involved.

The amendment would therefore permit the commission to allocate costs fairly. We have tabled the amendment proposed by the noble Lord, Lord Borrie,

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in Committee. It is supported by Ofwat, Water Voice and Water UK. In Grand Committee, on 8th April, the Minister agreed to take away the two amendments proposed there on the matter and said that he hoped to return on Report with a government proposal. I tabled the amendment because no such proposal has yet appeared. I beg to move.

Lord Whitty: My Lords, the noble Baroness referred to my commitment in Committee to introduce an amendment to the same effect as hers on Report. It has proved difficult to draft that amendment, but with respect I cannot accept her drafting. However, it remains my intention to table an amendment at Third Reading.

Baroness Byford: My Lords, I fully support the amendment. The Government suggested that they would introduce an amendment, and this amendment was tabled to ensure that happened. The Minister has kindly indicated that the Government will do that, for which I thank him very much.

Baroness O'Cathain: My Lords, I echo what my noble friend said. I thank the Minister very much. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 4 [Licensing of water suppliers]:

Lord Dixon-Smith moved Amendment No. 109:

    Page 131, line 5, at end insert—

"In section 3(1)(d) after "undertaker" there shall be inserted "or licensed water supplier"."

The noble Lord said: My Lords, Amendments Nos. 109 to 113 relate to an exchange in Grand Committee at col. 72 on 10th April. The noble Baroness, Lady Farrington, assured my noble friend Lady Byford:

    "In supplying the water to licensed water suppliers, undertakers will remain under their existing duty under Section 3 of the Water Industry Act to further environmental objectives".—[Official Report, 10/4/03; col. GC 72.]

In response to a query as to whether licensed water suppliers would be equally affected by that clause, the Minister's reply was, "Yes, I believe so". We felt that the matter should be definite and not a matter of belief. That is no disrespect to the Minister who may tell us that it is definite in which case we should be happy to withdraw the amendment. We felt obliged to table the amendments for the sake of certainty.

Amendments Nos. 133 and 134 have been grouped with the first set of amendments, although they do not sit particularly easily with them. The Government stated that they did not want a removal of requirements on water undertakers to lay pipes to connect licensees to the system. All sorts of people have to lay pipes, cables, drains and heaven knows what else, with good will, gusto and great abandon and, of course, driven by absolute necessity. However, wherever it is practical to do so, those people should

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have particular regard to green belt land or property dedicated under a conservation notice as an area of outstanding natural beauty. I beg to move.

Baroness Miller of Chilthorne Domer: My Lords, I am grateful to the noble Lord for introducing the first group of amendments for the sake of clarification, as the issue is important.

Under Amendments Nos. 133 and 134, I agree that we need to know about land that is under a special conservation notice. Indeed, that may be more crucial than the general blanket green belt land designation. I should like to hear from the Minister on the subject of land under a conservation notice for environmental reasons.

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