9. Further Controls to Secure Efficient Use of Abstracted Water

Enforceable water management agreements

9.1 The Government proposed to give the Environment Agency powers:

• to require any authorised water abstractor to enter into a publicly-available water resources management arrangement, whose provisions would be enforceable though the Courts. Failure on the part of the abstractor to enter into an appropriate arrangement would itself become an authorisation breach which would be enforceable and which may lead to suspension or revocation of the authorisation(s) in question (9.5); and

• to recover its reasonable costs in operating a water resources management arrangement from the abstractor involved (9.7).

9.2 Only a few respondents addressed these proposals. Of those, some expressed unqualified support. But one water company considered the proposals to be excessively rigorous and another took the view that such powers would go beyond the Environment Agency's environmental remit. Another respondent expressed concern that there would be no guarantee of a reasonable approach to the use of these powers by the Agency.

9.3 The reasons for this proposal were set out in paragraph 9.1 and following of the consultation paper. The Government remains of the view that these powers should be available in what it would expect to be the exceptional circumstance of a failure of an abstractor to enter into an agreement voluntarily. The Government sees the proposed additional powers as entirely consistent with the existing duties of the Environment Agency in respect of water resources management. But there should be a right of appeal over the costs which the Agency would propose to recover for its part in the operation of any water resources management arrangement, whether the arrangement has been entered into voluntarily or by compulsion.

9.4 Therefore, the Government intends to bring forward legislation, when Parliamentary time allows, which will enable the Environment Agency to make an enforcement order requiring an abstractor to enter into a water resources management arrangement. The abstractor will be able to contest the validity of the enforcement order in the Courts. The Government will also bring forward legislation, when Parliamentary time allows, which will enable the Environment Agency to recover, subject to appeal, its reasonable costs in operating any water resources management arrangement.

Transfers of water between water companies

9.5 The Director General currently has the power, upon application by a company seeking bulk supply, to require one company to provide a bulk supply of treated or untreated water to another. The terms of the transfer are specified by the Director General. The consultation paper invited comments on whether the Environment Agency, the Director General of Water Services, or the two regulators acting together, should be given further powers to require :

• one water company to seek a bulk supply from another (9.10); or

• one water company to surrender abstraction licences in favour of another, on financial and contractual terms between the two to be determined by the Director General of Water Services (9.12).

9.6 Roughly equal numbers of respondents supported and opposed these proposed powers. Several water companies felt that the decision to seek bulk supply should continue to be a matter for individual companies, in the context of their existing statutory duties. Other respondents supported the proposal, on the grounds that it would help to rationalise the distribution of water resources between water companies, and could therefore help to minimise the environmental costs of a secure public water supply. There was less opposition to the proposal to give the Environment Agency or the Director General the power to compel one water company to surrender a licence in favour of another.

9.7 The Government is firmly of the view that water companies' existing duty to maintain and develop water supplies ought to provide sufficient incentive for voluntary application for bulk supply. Draft water resource plans recently submitted to the Environment Agency by water companies operating in the south east of England tend to bear this out. Nevertheless, some reluctance has been detectable, and the Government therefore considers that the proposed power should be available, even though there should seldom be a need to invoke it.

9.8 There is clearly rather less incentive for one water company to relinquish water abstraction licences to another. Had the origins of the present distribution of abstractions between water companies been entirely uniform, there would also be little justification for the proposed power. But in fact the distribution has come about over many years in which large numbers of smaller undertakings in both private and public ownership have become progressively reduced, through successive re-organisations, to the current shape. The present allocation of resources is therefore not necessarily a full reflection of present real need or past commercial acumen, and even the provision of bulk supplies is not necessarily an adequate long term corrective. However, the Government would expect the proposed power to be invoked only in exceptional circumstances and only after strenuous attempts to reach a mutually-agreed reallocation between two companies.

9.9 No strong views were expressed on which regulator should have these powers. The Government's final view is that, since they are clearly directed at water resource management, the Environment Agency should be the instigator of the process in each case. Once a bulk supply application has been produced through the proposed power, the process would thereafter be that already prescribed in the legislation, in which the Director General of Water Services may determine the financial arrangements.

9.10 There may be a range of complexities in the transfer of abstraction licences, depending on whether a change of ownership or right of access to existing abstraction infrastructure is involved. There would also need to be consideration of whether an existing licence should simply be transferred or whether it should be revoked and issued afresh, perhaps for abstraction from a different location. These would need to be resolved before the power to instigate the appropriate process is invoked. In any case, the Director General of Water Services would need to determine the financial and contractual arrangements between the companies. The key feature of this proposal is that, even if licence revocation is involved, there should be no question of compensation by the Environment Agency, since that would be provided by the recipient company. But there should clearly be rights of appeal against both the licensing and the contractual steps which are determined by the respective regulators.

9.11 So the Government intends to bring forward, when Parliamentary time allows, legislation which would enable the Environment Agency to compel (i) one water company to seek a bulk supply from another; and (ii) the abstraction licensing changes which would be appropriate to effect a transfer of existing abstractions from one water company to another. In both cases, the compelled donor company would have a right of appeal to the Secretary of State, who would need to be satisfied that the compulsion was essential to the conduct of the Environment Agency's water resources management duties. The proposed legislation will provide for determination of financial and contractual arrangements between the two companies by the Director General of Water Services.

Information on water use

9.12 The Government proposed to:

• give the Agency a specific power to require all abstractors to provide it with information which will help it discharge its duty to secure the proper use of water resources. (9.16).

9.13 Some respondents felt the proposed power would assist proper water resource management. However, several abstractors were concerned that providing information under this provision might put unnecessary burdens on their businesses.

9.14 The Government considers that this power will meet a serious deficiency in the current legislation. The Environment Agency already has the power to require information on water flow, level and volume from water companies. However, the Environment Agency needs access to a wide variety of other information in order to carry out its duty to secure the proper use of water resources, including information on present performance and forward planning. Water companies generally co-operate with the Environment Agency to provide it with this information. The present process of each company drawing up and seeking to agree its 25-year Water Resources Plan is a fine example of this.

9.15 However, the Government nevertheless believes that the Environment Agency should have the power to require information from all abstractors. The Government now considers that an enforcement process is the appropriate remedy. That process would also provide a means of appeal if the abstractor considered the requirement unreasonable.

9.16 The Government will therefore bring forward, when Parliamentary time allows, legislation to give the Environment Agency the power to make an enforcement order requiring an abstractor to provide information which will help the Agency discharge its duty to secure the proper use of water resources. The abstractor will be able to contest the validity of the enforcement order in the Courts.

Drought contingency plans

9.17 The Government proposed:

• to place water companies under an enforceable duty to agree with the Environment Agency a publicly-available drought contingency plan. The Agency will have the power to instruct the companies on the amount and level of detail to be included in the plans, and on the way in which they are to be made publicly available (9.18)

9.18 Somewhat surprisingly, less than 10% of respondents addressed this proposal. Of those, nearly all supported it, generally without further qualification. But one local authority emphasised the need for full public consultation over the plans and called for local authorities and health authorities to have the power to require amendments.

9.19 The Government recognises that local authorities and health authorities have particular duties and concerns which would arise in the event of an extreme drought leading to disruption of public water supplies. However, the intention for the proposed drought contingency plans is that they should set out the steps water companies would take to avoid such circumstances arising. That is to say, they are essentially a particular form of a water resources management plan, rather than a full emergency plan. That is why the Government does not propose to give local authorities and health authorities the role which this respondent called for.

9.20 But, just as the Government wishes these drought contingency plans to be publicly available, so it considers that there should be provision for the public to comment on them in draft. It will therefore be important that the plans are prepared and disseminated by each company to a broadly comparable standard.

9.21 Another local authority expressed the view that the Environment Agency should be able to waive the requirement for a plan for those companies whose resource position makes it unlikely that they would face difficulties in drought. But the Government's view is that resource availability should not be taken absolutely for granted, and that all water companies should prepare plans to the common standard. However, the standard approach will necessarily take into account the resource position of the company, and the level of detail required may be less for those which enjoy greater security.

9.22 Therefore, the Government intends to bring forward legislation, when Parliamentary time allows, which will make the preparation by water companies of agreed and publicly-available drought plans a statutory requirement. The legislation to be proposed will also enable the Secretary of State to prescribe in Regulations the form, content and dissemination of draft and agreed plans.

Promotion of efficient use

9.23 The Government proposed:

• placing water companies under an enforceable duty to conserve water in carrying out their functions (9.19); and

• placing all other abstractors under an enforceable duty to use water abstracted under authorisations in an efficient and effective manner (9.21).

9.24 There was support for these two proposals from a wide range of groups. Some industrial and agricultural respondents emphasised the need to develop efficiency guidelines and benchmarks in consultation with abstractors and their representatives. Water companies who commented on the proposed new duty to conserve water accepted that enforcement would be appropriate in some situations. They were concerned, however, that action should only be taken in cases where the efficiency benefits justified the costs.

9.25 As the consultation paper made clear, the Government will ask the Environment Agency to promote water efficiency best practice further where direct abstraction for industry and agriculture is concerned. The cost and benefit of efficiency measures and other existing regulatory requirements will be taken into account. The details of enforcement policy will be determined by the Environment Agency. However, the Government would expect that, where an abstractor was demonstrably falling short of accepted good water efficiency practice, appropriate improvements could usually be secured by co-operation, without recourse to the formal enforcement process.

9.26 Arrangements for the enforcement of the proposed duty upon water companies to conserve water when carrying out their functions will take account of the arrangements already in place for the enforcement by the Director General of Water Services of the companies' duty to promote efficient use of water by their customers, and their general duty to maintain an efficient system of water supply.

9.27 The Government will bring forward legislation, when Parliamentary time allows, to place water companies under an enforceable duty to conserve water in carrying out their functions. It will also bring forward legislation, when Parliamentary time allows, to place all other abstractors under an enforceable duty to use water abstracted under authorisations in an efficient and effective manner.