My Lords, these draft amendment regulations before the Committee today will amend the Water Industry (Specified Infrastructure Projects) (English Undertakers) Regulations 2013. The SIP regulations, as they are known, concern the provision of large or complex infrastructure for the use of water or sewerage undertakers.
The main purpose behind these amendments is to give Ofwat the power to include conditions in an infrastructure provider’s project licence that allow for matters or questions to be referred to the Competition and Markets Authority for determination. This will give infrastructure providers the same right as water and sewerage undertakers to require Ofwat to refer its price control decisions to the CMA.
Extending Ofwat’s power to include such conditions will ensure that any potential future disputes between the Water Services Regulation Authority—Ofwat—and an infrastructure provider are resolved promptly. That should minimise the time-related costs of such disputes, which are ultimately met by customers, and will help to keep water and sewerage bills as low as possible.
The SIP regulations came into force in June last year and implement Part 2A of the Water Industry Act 1991. They give the Secretary of State and Ofwat the power to specify, by notice, large or complex water or sewerage infrastructure projects in certain circumstances: in particular, where the specification of the project is considered likely to deliver better value for money for taxpayers and customers.
Once specified, the relevant undertaker has to procure competitively a separate infrastructure provider to finance and deliver the project. After the successful bidder is designated as “the infrastructure provider”, Ofwat may then grant it a project licence, regulating it under a bespoke regime set out in the SIP regulations. A separate Ofwat-regulated infrastructure provider provides an objective means of testing whether the financing costs of a project are appropriate and reasonable, and allows the Government to target any financial support more effectively.
Following public consultation, the Secretary of State specified the Thames tideway tunnel project as an infrastructure project on 4 June this year. Thames Water Utilities Limited, as the incumbent undertaker, subsequently put the delivery and financing of the bulk of the tunnel works out to tender on 10 June. The tendering process is under way and expected to conclude in the summer of next year. This is the first and currently the only infrastructure project to be specified under the SIP regulations.
The proposed amendments would bring Ofwat’s powers relating to licensed infrastructure providers into line with those which already apply under the Water Industry Act 1991 as regard English water and sewerage undertakers. They would allow Ofwat to include certain conditions in an infrastructure provider’s project licence, giving the infrastructure provider the right to ask Ofwat to refer certain questions relating to its project licence to the CMA for determination. The proposed amendments would give an infrastructure provider the same right that water and sewerage companies already have to require Ofwat to refer its price control decisions, such as on interim determination of price limits or an increase in allowed revenue, to the CMA.
Without the proposed amendments, the only way for an infrastructure provider to challenge Ofwat price control decisions would be to seek judicial review on a point of law before the High Court. This is a time-consuming and expensive process, the costs of which are ultimately met by customers.
The statutory consultation on the draft regulations ran for six weeks, between 28 July and 8 September 2014. Its purpose was to inform those who represent interests likely to be affected by the regulations. The consultation was based on the GOV.UK website, and it was open to members of the public to submit their comments. Invitations for comments were also issued by e-mail to 324 interested organisations and individuals, including the CMA, Ofwat, the English water and sewerage undertakers, the Consumer Council for Water, Members of Parliament in London and the Thames Water region, members of the Greater London Assembly, and the Mayor of London. Five responses were received and a summary was published on the GOV.UK website last month.
We have noted the range of views and comments received on the proposed amending regulations and those relating more generally to the Thames tideway tunnel project. As a result, we have adopted some drafting points raised during that consultation in the amending regulations and are proceeding with the draft regulations. I commend them to the Committee.