Memorandum by Sir Ian Byatt, Former Director
General of Water Services
This evidence is submitted as a result of my
experience as Director General of Water Services (DWGS) from August
1989 to July 2000. It follows, broadly, the questions set out
by the Committee in their Call for Evidence.
1. I acted under clear legal duties set
out in legislation:
my primary duty was to secure that
water companies properly carried out their functions and could
my secondary duties were to protect
customers, promote efficiency and facilitate competition.
My duties could be changed by legislation as,
for example, in the Competition and Services (Utilities) Act 1992
and the Competition Act 1998.
2. My office was financed from fees levied
on water companies. These fees were limited in the licences granted
to the water companies and subject to approval by the Treasury.
3. The need for regulation of the water
companiesand its natureis decided by the Crown acting
in Parliament, i.e. by primary legislation.
4. I was appointed by the Secretary of State.
I appointed Chairmen of Customer Service Committees (CSCs), in
consultation with ministers, and members of Customer Service Committees.
In making appointments I sought to achieve a balance of capabilities
5. I was appointed to carry out statutory
duties. The successes of water regulation are set out in various
OFWAT publications. They are summarised in the attached OFWAT
6. My price determinations were subject
to appeal to the Competition (earlier the Monopolies and Mergers)
Commission. Two companies appealed against my Determinations at
the 1994 Periodic Review and two (different) companies at the
1999 Periodic Review. My actions (or inactions) were subject to
Judicial Review; one case was heard against me.
7. The DGWS is required to send an annual
report to the relevant Secretaries of State (then, for the Environment
and for Wales) and it was presented to Parliament in pursuance
of Section 193 of the Water Industry Act 1991. I appeared on a
number of occasions before parliamentary Committees.
8. I made myself accountable to the companies
I regulated by providing them with the evidence on which I made
decisions, and by explaining the reasons for such decisions. I
always listened carefully to their representations and made myself
personally accessible to them on all major matters. I consulted
with companiesand more widelyon all major aspects
of methodology and process, including timetables. All price sensitive
announcements were made through a process agreed with the Stock
Exchange. I consulted publicly on all mergers before advising
the Director General of Fair Trading. I gave evidence to the Monopolies
and Mergers Commission on larger water/water mergers.
9. I believed that I should be accountable
to water customers and the public generally. I consulted publicly
on major issues and provided regular background information through
a series of publications. We encouraged companies and others to
conduct market research to establish their customers and did some
10. I worked particularly closely with the
CSCs. I visited them regularly, both to brief them and to listen
to their views in order to devise complementary strategies. I
paid particular attention to their views on determining prices
at both the 1994 and 1999 Periodic Reviews. I worked closely with
the Chairman of the CSCs, first in the Chairman's Group and then
in the OFWAT National Customers Council (now Water Voice). I encouraged
ONCC to develop its independence without prejudicing the advantage
of close working between the CSCs and the Regulator.
11. The results of public consultation had
a material effect on my decisionssubject to complying with
statutory duties. The views of the public influenced the balance
between water quality and environmental obligations and prices
paid. But the public's view had little effect (as far as I can
judge) on important decisions made in the EU.
12. Regulators, who are part of government,
are given statutory duties. They must discharge them independently
of ministers. But they need to work closely with ministers, for
example, in defining the water quality and environmental obligations
to be placed on water companies. They need, also, to advise ministers
on matters such as charging policies and metering.
13. Their independence could be compromised
if ministers were to try to make improper (ie extra-legal) use
of their political strength.
21 January 2003