My Lords, I was not expecting a resounding round of applause from the Minister for these proposals, which are fairly fundamental in tackling the whole concept. Nevertheless, the Committee should look seriously at precedents, such as Shotton, which, the Minister assures me can be ignored because it is almost irrelevant. When we have an example of a court case which has determined that the price of the local supply of water should prevail, there is, I suggest, quite a threat that this could be rolled out on a larger scale. I think we should take note of that.
We are effectively being assured that Ofwat will have the ability to regulate contracts made between the wholesaler and the retailer. We will come later in other amendments to test the extent to which Ofwat has sufficient powers and codes to ensure that these contracts do not ultimately work to the disadvantage of, for example, rural communities and others. I am not entirely clear why my noble friend is so certain that this puts the incumbent in a stronger position than he might otherwise be, because you are effectively getting back to the same position, which is that Ofwat, under the Bill, has to determine any contract.
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I note that if you allow contracts to be made directly between the wholesaler and the retailer, one of the inevitable elements which will determine that is price—that will clearly be part of the equation. How on earth does Ofwat say you must pay more, if that is the price between two willing parties, only if the undertaker can demonstrate that it will strand some of his assets, so that overheads impact unfavourably on other people served in that area? That is why you cannot allow cherry picking of this sort on a sufficient
scale to run the threat of de-averaging and why it is probably essential to have the incumbent as part of the contract.
I recognise that we are going to talk about the threat of de-averaging on a number of other occasions, not least in the next group of amendments. Although I suspect we will return to this concern—I would be particularly concerned that Ofwat does indeed have sufficient powers—I beg leave to withdraw the amendment.