Water Bill

Lord Hope of Craighead Excerpts

Tuesday 25th March 2014 Lords Chamber

[Lord Whitty (Lab)]

My Lords, I, too, have an amendment in this group which argues for retail exit, but adds a few provisos. The noble Lord, Lord Moynihan, has once again made a tremendous speech in favour of his amendment, which I would certainly support. I will not repeat the full range of his arguments. If he has not convinced all noble Lords, I am sure that I will not manage it, but it sounded pretty convincing to me. It boils down to the fact that if this Bill provides for orderly entrance to the market it needs to provide for orderly exit as well for a proper market to function.

In a sense it is pretty straightforward, and I find it difficult to understand why the Government have hitherto been resistant to this. In Committee the Minister’s objections were largely about investors’ uncertainty, which I never really bought. I felt that most investors in these fields would be more inclined to support a system of regulation which allowed them to exit from failing parts of the business rather than be put off by it. Indeed, that has been borne out by a number of potential investors writing to us since the Committee stage, including the one to which the noble Lord, Lord Moynihan, referred.

Since Committee, the Minister seems to have shifted to a concern for consumers, both business and domestic, who might be left stranded in certain circumstances. Indeed, as has been said, the Consumer Council for Water has expressed concern on that front. Amendment 54 attempts to meet those objections by making explicit some of the matters to which the noble Lord, Lord Moynihan, referred and puts a proviso and a brake on the implementation of those before they have been thoroughly examined. Of course, Ofwat already has the duty to ensure continuity of supply, so the likelihood of anyone being left stranded is remote. The requirement in my amendment is that the regulations should provide safeguards for all classes of consumers. It also provides a brake in the sense that the Secretary of State would have to approve any specific withdrawal. If the amendment of the noble Lord, Lord Moynihan, were to be accepted by the Government and the regulations drafted under it, we would certainly support that.

The Government have to think carefully now. In Committee there was a fair degree of support for the principles of these amendments. Given that widespread support, the support of the regulators, the support of many of the companies within the industry and the support of potential investors in the industry, the Government need to think where they are going to take it from here. Basically, they have three choices. They can accept the amendment of the noble Lord, Lord Moynihan, and promise to tidy it up a bit—and I hope incorporate parts of my amendment—for Third Reading; they can resist the amendment but promise to come back with something on Third Reading, which may be a more attractive proposition; or they can resist the amendment outright, in which case the noble Lord, Lord Moynihan, would have the support of these Benches if he decided to press it.

The ball is well and truly in the Minister’s court and I hope that he makes the right decision.

[Lord Hope of Craighead (CB)]

My Lords, perhaps I might intervene.

[Lord De Mauley]

I think I might be able to help the House. When it is my turn to speak, I will explain that the Government have recognised the strength of feeling in the House and are carefully considering the difficult issue of retail exits. I plan, as the noble Lord, Lord Whitty, suggested, to return to this issue at Third Reading. I will expand on that in a moment.

[Lord Hope of Craighead]

I am grateful. I intervene as a domestic consumer of the services of Scottish Water in Scotland merely to confirm that the passage the noble Lord, Lord Moynihan, read out at the end of his speech—from, I think, Scottish Water—conforms entirely to my own experience. Scottish Water has become much more visible in the past two or three years and, in my experience, provides an interesting and active service, not only in supplying water but in considering ways in which householders might be benefited by the services it can offer in support of that supply. I merely wish to make it clear that it is not only Scottish Water which says these things. Some of its consumers are very satisfied with its performance as well.

[Lord De Mauley]

My Lords, that is a helpful intervention.

I thank my noble friend Lord Moynihan and the noble Lord, Lord Whitty, for their amendments. We once again have two amendments seeking to allow retail exits but with slightly different approaches. Both amendments would allow the Secretary of State to make regulations that would allow an incumbent water company to transfer its customers to a person holding a licence. Amendment 40, tabled by my noble friend Lord Moynihan, would allow for transfers to a licensed associate of the incumbent, while Amendment 54, tabled by the noble Lord, Lord Whitty, would allow for transfers to any company that holds a water supply licence. Amendment 54 does not allow for the exit of the retail sewerage market but I assume that the intention is to allow incumbent companies that provide both water and sewerage retail services to exit those markets. As with other amendments we have seen, both these amendments allow for non-household customers to be transferred through powers laid out in regulations, but do not allow us to fill in any gaps relating to who will provide retail services to new customers following a transfer or how we would treat transferred customers, including those who wish to return to the incumbent.

Allowing customers to be transferred does not mean that the incumbent has completely exited the retail market. The incumbent will still have certain responsibilities to non-household customers in its area of appointment and will therefore remain very much within that market unless certain duties are removed from it or transferred to the licensee which takes over the customers. It is a halfway house that does not benefit anyone, least of all the incumbent which wants to avoid dealing with non-household customers completely. The value of exits to incumbents would be limited unless the ultimate duty of supply is also removed. Household customers who remain with the incumbent may even end up funding this residual capacity of the incumbent to serve the remaining non-household customers.

But, as I hinted earlier, I have listened carefully to the thoughtful and well informed contributions to the debate on retail exits both today and in Committee. It is clearly an issue on which many noble Lords hold strong views. There is widespread support for enabling voluntary exit from the non-household market, subject to the approval of the Secretary of State. We remain convinced that such approval would be critical to avoid any perception that this will permit forced separation, given the impact that that could have on investment in the sector. I therefore propose to take this issue away and consider it very carefully before Third Reading. I will aim to table an amendment that will build on the objectives of Amendments 40 and 54 in the names of my noble friend Lord Moynihan and the noble Lord, Lord Whitty, respectively, which seek to provide a means for voluntary non-household exit.

I should like to put on the record now that the only practical way of delivering what the noble Lords are seeking would be to take a very wide-ranging power. Extensive changes to the Water Industry Act 1991 would be needed, not least to address issues relating to the incumbent’s duties to supply and its other statutory obligations to customers. Given this commitment to respond to the mood of the House on this important matter, I ask my noble friend to withdraw his amendment.