Retail exit shows the government listened
The Water Bill received Royal Assent this month. As part of our scrutiny, the Environment, Food and Rural Affairs Select Committee had strongly recommended that the Bill should include provisions to enable incumbent companies to exit the retail market voluntarily.
Powerful arguments were made in favour of retail exit: it would allow the market to function as a normal competitive market; a company should be able to organise its business as it considers best; and an exit clause facilitates entry by new entrants, particularly larger ones, because they would not have to win one contract at a time.
I am delighted therefore that the government’s amendment was carried, which ensures that economies of scale will not work against new entrants. The government amendments further helped to resolve issues with the drafting of the Bill and addressed concerns expressed during the Lords stages. I particularly welcome the role that will be played by the Consumer Council for Water, because it has a positive role to play.
Over the past three years, events in Yorkshire have shown the unpredictability of the weather, which can swing from a real flood to a virtual drought within weeks. Therefore I welcome the fact that the government has also committed to abstraction reform. Within five years of the Bill coming into effect, the committee made clear, not dealing with abstraction reform is not an option. The current system of managing abstraction was introduced in the 1960s and is woefully out of date.
As the Water Bill cleared its final stages, I was able to record the committee’s concerns about leasehold properties and flood reinsurance.
I have been contacted by constituents asking me to consider the implications for an owner who buys a leasehold property, as some of my constituents did in their block of flats. Apparently, the cost under flood reinsurance will run to thousands of pounds, which they cannot afford and which they believe will affect their ability to resell those properties.
In summing up the debate, the minister Dan Rogerson promised that the EFRA committee would be asked to do pre-legislative scrutiny on the regulations implementing the Water Act. This we stand ready and prepared to do, and the sooner we have the draft regulations, the sooner we can start.
As we all know, the devil is in the detail and while the detail was not on the face of the Bill, it will be in these regulations.
Anne McIntosh MP, and chair of the Environment, Food and Rural Affairs Select CommitteeWater Bill? What Water Bill?
The 14th May 2014 will go down in history as a day that changed water for ever. The Water Bill got Royal Assent and ushered in a new golden age of water management… If only!
At a time when the impacts of climate change mean floods and droughts will increase in frequency we needed a Bill that addressed the issues. We also needed a Bill that looked at prices and affordability. Above all we needed a Bill that developed a strategy for water. Sadly we got none of this. In fact, some may say it was worse than no Bill at all because now we will have to wait years before we can have another one.
However, it did introduce competition, meaning that customers can choose their supplier, driving innovation and customer service, but limited to business customers. Many large companies have that choice already and haven’t bothered to switch.
It’s going to take until 2017 to develop the mechanism for trading, which means we will be almost a decade behind Scotland. And in reality will competition offer anything other than a “cuddly otter and a pen for each new customer”?
Perhaps I am being slightly facetious, but there are questions to ask about why this is all taking so long and why upstream competition and abstraction reform is taking even longer, and also about why there was nothing on metering or water efficiency in the Bill (except the extra duties we managed to force in alongside resilience).
There are also more fundamental concerns that, in the absence of a government strategy for water, competition may actually be the enemy of innovation. Not everyone will behave like Business Stream and deliver added value services. Why should existing firms bother with stuff like catchment management, which is at last starting to flourish, when new entrants can just go for the lowest common denominator of cheap prices and leave incumbents with all the messy stuff?
It’s time we saw some direction from Defra on what it wants the water sector to look like. There is a policy vacuum and its being filled by Ofwat’s mantra of free markets and strong regulation – I am not criticising this: it’s not my cup of tea but at least it’s a coherent position. However, it is designed for the “water industry” not the “water sector”. It is very unclear who has responsibility for the wider water sector, which includes the industry and customers but also the environment and extreme events and landscape and land use and a whole load of other stuff that is going to become increasingly important. I think what we need is a Water Bill.
Jacob Tompkins, managing director of Waterwise, writing in a personal capacity