THE DOMESTIC SUPPLY DUTY (Hansard, 16 January 1992)

§ Mr. Redwood
I beg to move, That the clause be read a Second time.

§ Mr. Deputy Speaker
With this it will be convenient to take the following: Government new clause 22—
Transitional provision with respect to replacement appointments.—
Government amendments Nos. 24, 47, 25, 26, 30, 33, and 41 to 45.

§ Mr. Redwood
The clauses dealing with competition in water services were the subject of a public consultation undertaken by the Department of the Environment and the Welsh Office just before the Bill's publication last November. Those who commented during the consultation generally welcomed the increased scope for competition but many considered that the proposals were still too restrictive and suggested modifications. As a result, we have now brought forward—as I said we would in Committee—amendments to give still greater encouragement to competition. Those amendments are along the lines that I outlined to the Committee.
Part of this group of amendments—new clause 13 and amendments Nos. 25, 26, 43 and 45—will ensure that water and sewerage undertakers must allow any prospective customers to connect a service pipe to their water mains or a drain to their public sewers, whether or not those customers are in the area for which the undertaker is appointed.
Initially at least, the new right is likely to be used mainly by prospective customers close to the border of their appointed undertaker, who may he nearer to the neighbouring undertaker's mains or sewers than to those of the local company. As inset appointments are made, the practical opportunities for connecting to another undertaker are likely to increase, giving more choice to more customers.
The customer will continue to be responsible for providing the service pipe or drain from his premises and meeting the cost of making the connection to the undertaker's main or sewer. Commercial agreements could vary that practice
Amendments Nos. 24, 30, 33 and 44 will replace the arrangements at present in clauses 38 and 39 with provision for companies to be given an inset appointment to serve a single large customer. A large customer is defined as one using more than 250 megalitres of water a year. There is provision for the Secretary of State to reduce that threshold, after consulting the director. Applications for inset appointments are subject to procedures laid down under section 8 of the Water Industry Act. They require applications to be published within 14 days of being made and will thus adopt the suggestion of the right hon. Member for Swansea, West (Mr. Williams) for meeting the concerns raised by some hon. Members in Committee about the length of the consultation period on proposed appointments to serve large customers.
There are also necessary consequential amendments. Those include transitional provisions in new clause 22 to 1136 cover the period between an appointment being made and its coming into force; provisions in amendment No. 47 to ensure that the necessary pipe-laying powers are available where an inset appointment is to serve a single large customer; and requirements for the NRA, which is responsible for water resources, to be kept informed of applications for inset appointments.

§ Mr. Win Griffiths (Bridgend)
As the Minister rightly points out, he gave undertakings in Committee that the Government would attempt to widen competition possibilities. The amendments certainly do that, but only in theory. Practice will show that the amount of competition will be at the margins of the existing water company areas because of the infrastructure costs of moving a great distance into another water company area, and even the need to create extra water capacity that does not exist in many areas. About three water companies have enough spare capacity to consider competing with other water undertakers, and it is highly unlikely that anything will happen in practice. The proposals to extend competition are simply a fig leaf for the privatised monopoly that will still exist in the form of the water companies.
We shall not vote against the amendments because, if we find that they come to something, all well and good, but the public should not be fooled by the idea that competition in the supply of water or sewerage services will be significantly increased. The existing companies simply do not have the capacity to become involved in a big way.
I raised the following question in Committee and was not absolutely satisfied by the Minister's answer. In a period of drought, with the water company having made commitments outside its area, will the companies within its area take precedence in terms of supply or will they suffer because of contractual commitments made by the water company outside its area?

§ Mr. Redwood
I am grateful for the hon. Gentleman's grudging assent to the proposals. We must wait and see what develops. They are methods by which competition can develop and spread in the industry, and we welcome them for that reason. Fig leaves can be becoming and may turn out to be rather larger and more becoming than the hon. Gentleman suggested. The proposals also include ways in which competition could be further strengthened as in the case of the 250-megalitre limit which can be reviewed when we have seen how it develops. That will provide a way to vary the current practice under the proposed legislation when the Government and the director general think it right to do so.
I have nothing to add to the reply that I gave the hon. Gentleman in Committee about what happens when there is a scarcity of water. other than to remind him that the legislation requires the water companies to maintain supplies. Of course, there are ways in which water rationing can be introduced for non-essential uses in good time so that fundamental supply is not interrupted.