Water and Sewerage Undertakers (Exit from Non-household Retail Market) (Consequential Provision) Regulations 2021

Baroness Bakewell of Hardington Mandeville Excerpts

Tuesday 19th October 2021 Grand Committee

[Baroness McIntosh of Pickering (Con)]

My Lords, I thank my noble friend for talking us through the regulations today. I remember that, when the original legislation went through—rather than the regulations themselves—concern was expressed about what would happen if a retail company were to fail. I do not know whether that has been resolved in the existing regulations; as my noble friend has explained, it seems that these regulations apply to that very narrow area of a retailer providing services to housebuilders.

I want to take this opportunity to ask a question in that regard. My noble friend is aware of my passion for SUDS—sustainable drains. Where housing developers build major new developments, is it envisaged within the original regulations that SUDS could be applied as a condition of planning permission for the work being agreed?

The Explanatory Memorandum says that the instrument—I believe it is the second regulation—will

“reinstate the … duty on undertakers to provide connection services, on request, in retail exit areas”.

Is that deemed to be an automatic right to connect? Is there any leeway to ensure that we can actually insert a condition that SUDS must at that stage be envisaged? That could save any contribution to flooding down the line.

The Explanatory Memorandum says at paragraph 7.3:

“The main retail services provided to non-household customers through the retail market”,


as my noble friend said,

“are billing and administration services. However, with the opening of the market, it was designed so that retailers could also provide new water and sewerage connections services to business customers.”

My noble friend said that this was limited. Has it been so limited as to have never actually happened, or has it happened in literally only one or two cases? Paragraph 7.3 goes on to say:

“These services primarily concern connections to water and sewerage services for new developments, involving predominantly housing developers.”


My noble friend is aware of my interest. I latched on to something he said during the passage of the Environment Bill before it went to the other place: the automatic right to connect no longer being automatic. Will that apply in these as well as other cases?

Paragraph 7.6 goes on to say: “We”—and I presume the “we” is the Government—

“consider that ‘non-household premises’ includes new housing developments which are under construction before anyone is using the premises as their home.”

Does that mean that existing housing developments do not fall into this category? Is there any chance that the regulations before us this afternoon will apply to those existing housing developments? It goes on to say that

“Until people move in, we consider that a development does not fit that definition”,


as given in that paragraph. On what basis has the department reached that conclusion? What background brought it to that position?

Paragraph 7.7 says that

“There are several unintended consequences”,


as my noble friend set out,

“of the 2016 Regulations’ amendments. These concern new connection services, the laying, inspecting, maintaining, adjusting, repairing”.

I still maintain, as I am sure my noble friend is aware, that, when making these new automatic connections automatic, we are dealing with Victorian, antiquated piping. Whether it is the retailer or the water company providing these services, the pipes are deemed to have to connect. At the moment, the water company is not a statutory consultee, whereas the Environment Agency, for example, is; I do not believe that the advice the water company is giving planning authorities has the same legal force as that from the Environment Agency.

I ask my noble friend whether the problems with the regulations set out in Paragraph 7.7 could be avoided by ending the automatic right to connect. It is unacceptable; we have an opportunity, at this stage in the regulations, for the water company or retailer to say that they cannot make physical connections when housing developments are being made and that there will be overflow into the storm drains and the possibility that sewage will come back into either the new developments or, worse, existing developments that have not been affected in the past.

I welcome this opportunity to ask questions on those points, with a special emphasis on whether sustainable drains can be part and parcel of this, and that the water company or retailer should say whether the existing infrastructure simply cannot take the amount of wastewater envisaged to come out of any new houses.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank the Minister for introducing this SI and for his comments. On the face of it, it seems like a straightforward change in the legislation to bring the retail sector into line with domestic housing arrangements following the changes made in the Water and Sewerage Undertakers (Exit from Non-household Retail Market) Regulations 2016. I note that this instrument relates only to England, but the extent of it is England and Wales where there are cross-border issues.

The water and sewerage industries were privatised in England and Wales in 1989. In 2014, reform of the Water Act enabled competition in the market. In 2016, the transfer of non-household retail business prevented the provision of retail service to new non-household customers that arose in its area. Given what we now know about the effects of supply and demand on water and sewerage systems, this would seem a sensible step.

Paragraph 7.4 of the Explanatory Memorandum enables

“developers to make new connection requests to their retailer.”

There is no mention in the Explanatory Memorandum, nor in the instrument itself, of whether there would be capacity for new development to be safely connected under the automatic right to connect, which the noble Baroness, Lady McIntosh of Pickering, has already mentioned.

The Minister will know that during the passage of the Environment Bill there were many debates about the effect of effluent being discharged into rivers, lakes and other watercourses and the extremely detrimental effect this has on both water quality and the wildlife that previously inhabited those areas. I ask the Minister whether the local relevant sewerage and water capacity will be part of the consideration when developers apply for connection for retail. The automatic right of developers to connect for housing developments has caused considerable problems, not only in effluent discharge, but has contributed to localised flooding during prolonged periods of rainfall.

This is a minimal change to the legislation, but the legislation relating to domestic properties is far from perfect. Once the drainage and sewerage management plans are in place, that should ensure better collaboration between developers and those dealing with the supply of water and disposal of sewage. But these are not yet in place. Duties in Section 41 and 45 no longer apply to premises in a retail exit area. To indicate that new households under construction are not classified as household premises until people move in is somewhat late in the day to deal with capacity issues and whether sewerage systems are able to cope with the additional demand.

A Section 98 duty to comply with sewer requisition is the duty to provide a public sewer or a lateral drain. This appears not to apply in relation to premises in the retail exit area that were not household premises. Just what is the legal obligation to ensure that there is sufficient capacity in the sewerage system for new connections from retailers? This might be a small retail outlet, or it might be retail premises relating to an already overlarge housing development, which would be a much larger connection.

I am sure the Minister can understand my concerns and I would be grateful for his reassurance that capacity will form part of the connection requirements. I note that a consultation period took place between 29 April and 25 May 2021. This period included a bank holiday. Seventeen responses were received but the EM does not say whether Water UK or the Consumer Council for Water were among those. However, I understand from officials that, since there were responses from some water providers if not from Water UK itself, there seems to have been a general positive agreement in the industry in response to this SI.

I would be grateful for the Minister’s clarification on the consultation exercise. I understand why Defra has introduced this new measure but remain extremely concerned about the effect on flooding of connecting retailers to the sewerage system without first checking that the system has the necessary capacity.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank the Minister for his introduction to this SI. I am sure he will be relieved to hear that we accept that it is broadly technical in nature and, as such, will not be opposing it. It deals with relatively small consequences of the reform of the water industry and the right of water companies to exit the non-household retail market in their sector. As the Minister has said, several unintended consequences have arisen from the new provisions and this SI deals with one such anomaly relating to new housing developments.

I have to say I was amused to read the Commons Minister Rebecca Pow stating when introducing this measure that it was underpinned by the Government’s commitment to

“strong, independent regulation that protects customers and the environment”—[Official Report, Commons, Delegated Legislation Committee, 22/9/21; col. 4.]

because, arguably, that is exactly what we do not have. This is why water companies such as Southern Water get away with regularly pouring sewage into our rivers and sea with no comeback from their customers or for their customers. But I accept that that is a slightly wider issue than the SI before us today.