Water Bill

Debate between Baroness Neville-Rolfe and Lord De Mauley

Tuesday 8th April 2014 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I would briefly like to intervene, first to thank the Minister for the efforts that he has made to address concerns and to make these amendments this afternoon. The Bill is hugely complex and the amendments are extensive, as my noble friend Lord Moynihan put it so succinctly. However, I feel that these provisions will add more complexity. So it is all the more important that the Minister confirms the plans that I know that Open Water has to summarise all the many regulatory provisions on water in the Bill and elsewhere, in order that customers, entrants, companies and investors can understand the complex web of rules and subordinate legislation that is planned, providing a force for simplicity. I believe that the good sense of our administrators is the key thing here and that is actually more important than to bring in a special new procedure. I support the amendments that the Government have made.

[Lord De Mauley]

My Lords, I thank all noble Lords for their contribution to this debate. I have listened to them extremely carefully. I thank my noble friend Lord Moynihan for welcoming the changes that we are making to the Bill to enable incumbent water companies to exit the non-household market for retail services. I thank the noble Lord, Lord Whitty, as well, for his comments in that regard.

I thank, too, the noble Lord, Lord Haskel, for his intervention, and I hope that he understands that I thought it best to allow my noble friend Lady Parminter to explain her amendment before I addressed the question that he raised. Before I get into that question, I address the question raised by my noble friend Lady Neville-Rolfe. She raised a very valid point about the additional levels of complexity added by the retail exit provisions. The noble Baroness also raised the issue of bureaucracy. Indeed, she has done so throughout the course of the Bill and has worked tirelessly on the subject. I strongly agree with her on that matter. In that regard, I highlight the work that Open Water is doing in presenting water regulation in guidance and online. It is presenting the information in a way that helps customers, entrance companies and investors to understand the sector, and which meets their particular information requirements.

These proposed new clauses set out, in as much detail as possible, the basis on which we will establish regulations to enable exits. We will now need to move from the high-level, in-principle statements regarding the case for exits to tackle the detailed, practical implications for companies and their customers. In doing this, we will need to consult widely. We will also provide further opportunity for parliamentary scrutiny through the draft affirmative procedure.

I think that all noble Lords who have spoken in this short debate have commented on the breadth of these powers. On Report, I put on record our view that the only practical way of responding to the will of the House on this matter would be to take a very wide-ranging power.

The question of whether to allow exits has been discussed at all stages during the passage of the Bill in both Houses. The overall policy of retail exits has been discussed at length. Powerful speeches from my noble friends Lord Moynihan and Lord Selborne, the noble Lord, Lord Whitty, and others demonstrated the strength of feeling in this House about the matter. I have tabled the amendments before us today in response to that pressure.

Throughout our debates on this subject there has been a broad consensus that we should allow for retail exits in such a way as to meet three important criteria: they must be for non-household customers; they must be undertaken voluntarily; and they must ensure the ongoing protection of customers. This is what the amendments do. The breadth of these powers is, unfortunately, unavoidable in this case. The debates in your Lordships’ House have ably set out the high-level principles in support of the case for retail exit. Nevertheless, further detailed work is required to address the practical implications of this change.

A number of changes will be required to the Water Industry Act 1991 and the detailed thinking has yet to be done by any of the interested parties on what these might be, what would be involved, how the implications for customers would be managed and the type of safeguards that would be required to avoid any risk of forced exit or separation. None of these is an inconsequential issue and it is clear that substantial further consultation and engagement will be required. We will consult widely on these matters. Following this there will be a further opportunity for parliamentary scrutiny under the draft affirmative procedure.

Noble Lords have highlighted that the Delegated Powers and Regulatory Reform Committee met yesterday to consider the new retail exit powers. I apologise to the committee for the inconvenience caused to it. We are very grateful to the committee for its report. I particularly appreciate its meeting at such short notice and I welcome the important contribution that it has made to this debate. I welcome the fact that the committee does not consider the powers conferred by the proposed new clauses to be inappropriate. The focus of the committee’s concerns has been on the relatively late stage in the passage of the Bill at which these proposed new clauses have been tabled rather than on their content. The committee did, however, recommend a strengthened affirmative resolution procedure for the exit regulations on their first use.

I fully understand and sympathise with concerns that the new provisions have not received detailed scrutiny as they have been tabled at this late stage. I agree with the committee’s view that, given the permissive nature of these powers and the need for further work on the detail, extensive further engagement is required with both parliamentarians and other interested parties. Our amendments already include a consultation requirement before any regulations may be made.

I can confirm that before tabling the first exit regulations we will consult widely and that we will ensure that there are many further opportunities for all interested parties to comment, and I can be clear that the Government’s use of the powers will take account of issues raised during that consultation. I believe that this extensive and wide-ranging approach to consultation will provide the level of engagement envisaged by the committee. Consultation of this nature with industry experts is an important part of the policy development process and it reflects that used in Section 102 of the Local Transport Act 2008—the procedure to which the committee refers.

I fully accept that we need to ensure that parliamentarians are given adequate time to scrutinise the precise wording of the proposed regulations before the final draft is laid before Parliament. We will therefore commit to publishing a draft of the regulations well in advance of laying the final regulations before Parliament so that there is a real opportunity for changes to be made to address any concerns that parliamentarians may have. We will also send a copy of these indicative regulations to the Environment, Food and Rural Affairs Select Committee in the other place so that it has an opportunity to comment on our intentions.

I believe that these measures fulfil the spirit and practical implications of the enhanced affirmative processes detailed in Section 102 of the Local Transport Act. In addition to the detailed consultation, these powers will be subject to the draft affirmative resolution procedure, which means that there will be further opportunities for parliamentary scrutiny.

The use of strengthened affirmative procedures for delegated legislation is unusual, and rightly so. There must be a very strong case for the use of such a procedure. The Government have brought forward these retail exit amendments in response to the level of pressure across your Lordships’ House. The amendments seek to provide clarity as to what matters are to be within the scope of the regulations, while delivering precisely what your Lordships asked for. Exit regulations would be the subject of extensive consultation and of debate in both this House and the other place.

I agree with the committee that further scrutiny and debate on these matters are required and I am very grateful for its work in raising these important matters. Given the history of these changes and the recommendations that the committee has made with regard to future scrutiny and engagement, I should like to place on the record that my department will continue to keep all interested parties up to date with progress on this area. I have no doubt that the relevant Minister will be very happy to make themselves available to parliamentarians from both Houses for further discussions as we develop the detailed plans for use of the regulation-making powers.

As I said, I am very grateful for the work of the Delegated Powers and Regulatory Reform Committee. I will reflect on its other comments and will reply formally in due course. In particular, paragraph 6 of the committee’s most recent report, to which the noble Lord, Lord Marks, referred, focuses on the importance of protections for customers. I confirm that ensuring that the interests of all customers are fully protected will be the guiding principle that underpins this work. These protections will embrace both the household customers who will stay with the incumbent water company and the non-household customers who, in the event of an exit, will be transferred to a retail licensee.

Concern was expressed that some companies may be seeking exit as a route to short-term financial gain. During Committee, my noble friend Lord Moynihan highlighted a report published by Macquarie, a major investor in the water sector, arguing for exit. This report identifies long-term benefits for customers from greater consolidation and efficiency in the retail market. It also identifies potential financial benefits for those companies that transfer or “sell” their customers to a licensee.

The enabling powers that we have been discussing today would allow the Secretary of State to put in place a framework governing the process of transferring customers and to place appropriate boundaries on the value that may be extracted by the exiting companies and on the costs that may be passed on to customers. For example, these provisions will enable the Secretary of State to place conditions on consent to an exit application, such as profit sharing with affected customers and compliance with charging rules to ensure that transferred customers are no worse off.

Water Bill

Debate between Baroness Neville-Rolfe and Lord De Mauley

Thursday 6th February 2014 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, I am grateful for the trenchant support I have had from this side of the House for my efforts to reduce bureaucracy and promote clarity and transparency, especially from my noble friend Lord Crickhowell. My noble friend Lord Selborne talked about the possibility of the map I proposed being made on a catchment area basis. However, my experience of broadband, where there is a county-by-county map, is that it is not very effective. One of the things I was looking for was to have all the rules, regulations, agencies and requirements in one place on the one website. That can certainly be on the gov.uk website, as the Minister has kindly suggested, but they all need to come together so that a consumer, an investor, or a water undertaker who may be bringing in a new reservoir can see the whole piece. I would find that bottom-up approach hugely valuable. I feel that the documents that have already been made available are a start, but they do not—

[Lord De Mauley]

I thought I had said that they are on the website.

[Baroness Neville-Rolfe]

They are, but I was suggesting that we have a website that brought all the different things together in one place, not just the helpful notes that the Minister has put forward, and which takes people through the rules.

I am extremely grateful for the Minister’s support in reducing bureaucracy and in outlining the different things that have been done to achieve that end. However, it is all the more important to bring the various requirements together to make it clear what is happening. We could bring about a quiet revolution of clarity and transparency and make entry into the industry much less forbidding if we could bring what is being set out in these different laws and by these different agencies into one place. Of course I welcome the idea of putting those on to one website, but I will study what the Minister has said and consider whether further thought needs to be given to how that might be done, to find a way forward. Perhaps we can also do some policy formation in the Bishops’ Bar. I thank my noble friend, and I beg leave to withdraw the amendment.