The Water Bill – what next for the water sector?

The Water Bill is expected to complete its passage through Parliament this week after a remarkably smooth journey. Despite constituting the single biggest reform of the water industry since privatisation 25 years ago, the only strong point of contention has been the absence of a clause allowing existing companies to exit the new retail market. Now, following the Government’s decision at Report Stage to include retail exit, even this potential hurdle has fallen.

However, whilst the Bill itself has passed with relative ease, what follows may be a bumpier road. Two big issues still need to be resolved: the design and implementation of the new retail market and the future of the UK’s water abstraction regime.

Responsibility for overseeing the implementation of the new retail market lies with the Open Water Programme. Open Water, set up by Defra, brings together people from across industry and government to oversee the transition to retail competition. However, with little resource provided by Defra and the water companies themselves focused on the ongoing Price Review and their own business plans, the programme is currently under-resourced and struggling to make much progress. Concerns have also been raised that by relying on staff seconded from the major water companies rather than its own independent staff, the Open Water programme may put new, smaller companies looking to enter the retail market at a disadvantage. With a target of implementing retail competition by April 2017 there is still plenty of time for these issues to be resolved, particularly with the current Price Review nearing completion. However, there is also a potential for delay and confusion and a future government may well find that implementing retail competition proves more problematic than passing the initial legislation.

The UK’s outdated and inadequate abstraction regime also needs reform. Through Connect’s work in the sector, particularly through the All Party Parliamentary Water Group, we have found widespread agreement around the need for reform. Speaking to water companies ahead of the Bill’s publication, there was also clearly a good deal of hope that reform would be included in the Bill. At the very least, it was hoped that the government would set out a timetable for reform. However, with neither reform nor a timetable forthcoming, it has been left for the next government to deal with. If anything the Bill’s changes to upstream competition make the need for reform even more pressing and whatever their other priorities, abstraction reform will be top of the to-do list for whoever takes on the water brief in the next government.

Overall, the government can be pleased with how smoothly the Bill has passed through Parliament with relatively little amendment. However, far from finishing the debate about reform of the sector, the Bill has now opened up new issues that the next government will need to address.

Lora Shopova