Water Bill

Baroness D'Souza Excerpts

Tuesday 25th March 2014 Lords Chamber

[The Earl of Selborne]

My Lords, here we come to two much more specific and modest proposals to address the potential threat of de-averaging.

In Schedule 2 on page 141, in proposed new Section 66EA of the Water Industry Act 1991, there are rules set out which make provision about the reduction of charges. These provide for the circumstances in which discounts can be allowed. Amendment 30 would additionally allow a discount only where overall costs to the network are reduced. This should prevent a discount in price which discriminates against other participants on the network. Highly desirable discounts—for example, for direct debit, for advance payments or paperless billing—which are available to everyone would in no way be precluded. If, however, a discount is offered to a customer which effectively loads costs on to other users, then this must be unacceptable. The thrust of the amendment is an attempt to ensure that the charges are not slanted in favour of one customer at the expense of another. Likewise, Amendment 37 makes the same provision for discounts on sewerage services. The sewerage undertaker must be able to offer discounts to all on the network who are sharing the facility, or to none.

Amendments 59 and 60 propose a change to the proposed rules about charges schemes. As drafted at present, subsection (6) of proposed Section 143B of the 1991 Act says:

“The rules may make different provision for different cases, including different provision in relation to different, or different descriptions of, persons, circumstances or localities”.

I accept the case for different rules for persons and circumstances. However, I am very concerned that localities should also be a reason for different rules. That seems to be a hostage to fortune. It will hamper the ability of Ofwat to prevent geographic difference in charges, which could lead once more to charges for rural customers being higher than for urban ones. Amendments 59 and 60 would therefore explicitly rule out different rules for different localities. I beg to move.

[The Lord Speaker (Baroness D'Souza)]

Page 141, line 32, at the end insert the words as printed on the Marshalled List, with the proviso that the last word in that amendment is “reduced” rather than “recorded”.

[Lord Cameron of Dillington (CB)]

My Lords, I declare an interest for the purposes of Report, in that I am a farmer with abstraction licences on my farm. I support Amendments 59 and 60, which ensure that de-averaging on the basis of geographic location is outlawed in the Bill.

The delivery of water in a civilised, developed country should be a universal right. That is not to say that it comes free for anyone, but that all the costs of the necessary infrastructure, such as large pipes running across farms and small pipes running to farms, should be shared between all the parties. In the same way as Royal Mail has a universal service obligation, so should water.

The Minister said in Committee that Ofwat has the powers to prevent this sort of de-averaging, and he repeated that in response to the previous group of amendments. However, he also said that the Government’s charging guidance will say that any de-averaging must occur only where it is in the best interests of customers; but which customers—urban or rural? It is important to set out firm rules here against de-averaging on the grounds of location in the Bill. That is because there is no doubt in my mind that the Bill is merely the first step in a more comprehensive reform of the water industry, which will happen in due course. Like John the Baptist, the Bill is not the light but the precursor of the light to come.

The next Bill will undoubtedly bring in a comprehensive and sustainable abstraction reform—we know that that has been virtually admitted by Defra—while at the same time it will herald a sustainable consumption reform in the form of introduction of universal metering. I know we are coming to that; everybody knows that that is essential and only political games seem to be preventing it happening this time around. Moreover, as a result of these reforms at either end of the supply chain, I envisage a gradual move to the introduction of competition in the water industry in both the commercial and domestic water supply marketplace. At this stage the important principle of preventing de-averaging for different locations, which these amendments achieve, is absolutely paramount.

I am slightly suspicious of the Government’s reluctance to endorse these amendments in Committee, but I get a hint that they might move a bit further at this stage. If they do not, frankly, the writing will be on the wall for remote rural customers. To use the Minister’s words, it will undoubtedly be in the interests of customers —that is, urban customers, who are in the majority—if the minority of remote customers can be charged more. If that were to happen, it would be a major betrayal of the rural consumer. I say that as the person who has been asked by Defra itself to rural-proof government policies.