New regulations to create increased competition between England and Wales and Scotland via cross border applications allowing for an application to one regulator (Ofwat or WICS) to be treated as if it had been made to the other will come into force in April 2016.
The regulations will be made under the Water Act 2014 – the fifth Commencement Order for the Act has been made by the UK and Welsh Governments and the measures come into force on 18 December 2015 and 1 January 2016.
The Act, through section 6 (in England) and section 7 (in Scotland), creates increased competition through cross border applications. The new application system will allow for an application to one regulator (Ofwat or WICS) to be treated as if it had been made to the other. This will be achieved through separate regulations, by the Secretary of State and Scottish Ministers. The Government is aiming to lay these in Parliament in January 2016 and they will come into force in April 2016.
The Water Act, which received Royal Assent on 14 May 2014, is intended to bring about significant reform to the water industry. It was also the legislative vehicle for addressing the availability and affordability of flood insurance for householders in areas of high flood risk.
The Water Act is intended to:
- Increase resilience by helping ensure water is always available to supply customers without damaging the environment
- Support growth by driving innovation and reducing burdens on developers, while continuing to attract global investment in the water industry
- Provide choice – giving business customers more choice and flexibility about their water and sewerage supplier, as well as encouraging new entrants with innovative ideas and approaches to help keep bills affordable
The fifth Commencement Order of the Act has been made jointly with the Welsh Government. The main aspects are:
Special Merger Regime: Section 14 of the Act inserts new provisions into the Water Industry Act 1991 in order to reform the special merger regime for water companies. This will remove the requirement of an automatic referral of all water mergers to an in-depth Phase 2 investigation by the CMA and instead allow some water mergers to proceed following a Phase 1 investigation by the CMA.
Regulations have also been made to bring the timescales for the assessment of water mergers in line with the statutory timescales for the general merger regime. The reforms will reduce bureaucracy and provide greater clarity for the companies.
Cross border applications: The Act, through section 6 (in England) and section 7 (in Scotland), creates increased competition through cross border applications between England and Wales and Scotland. The new application system will allow for an application to one regulator (Ofwat or WICS) to be treated as if it had been made to the other. This will be achieved through separate regulations, by the Secretary of State and Scottish Ministers. The Government is aiming to lay these in Parliament in January 2016 and they will come into force in April 2016.
Adoption of infrastructure: Section 10 (covering water mains and supply pipes) and section 11 (covering sewers and lateral drains) of the Act increase transparency around the adoption of infrastructure from developers to water companies. To support these arrangements Ministers may issue guidance to Ofwat, and Ofwat must issue codes and may issue rules. The Government is commencing the relevant aspects of each section to enable the guidance to be published and to provide Ofwat with flexibility on when they publish their rules.
Standard licence conditions: Ahead of the new market opening in 2017 Ofwat will begin to accept applications from potential new licensees and certain aspects of the Act will underpin this. These will enable Ofwat to issue new licences and also the Secretary of State to publish standard licence conditions.
Resilience duty: The Act, through section 22 places a new resilience duty on the Secretary of State, Welsh Ministers and Ofwat to further the resilience objective. This only covers Wales as the equivalent change in England was commenced automatically on 14 July 2014, two months after Royal Assent.
Ahead of retail market opening in April 2017, and beyond, the Government is anticipating making further Commencement Orders roughly every six months, usually April and October.
Click here to read the Commencement Order in full.
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