2003 Chapter 37

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THESE NOTES REFER TO THE WATER ACT 2003 (C.37) WHICH RECEIVED ROYAL ASSENT ON 20TH NOVEMBER 2003

WATER ACT 2003

     EXPLANATORY NOTES

INTRODUCTION

1.     These explanatory notes refer to the Water Act, which received Royal Assent on 20^th November 2003. They have been prepared by the Department for Environment, Food and Rural Affairs in order to assist the reader of the Act. They do not form part of the Act and have not been endorsed by Parliament.

2.     These notes need to be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of the Act. So, where a section or part of a section does not seem to require any explanation or comment, none is given.

3.     With certain exceptions, the Act extends only to England and Wales.

4.     The Act relates to matters within the responsibilities of both the Secretary of State for Environment, Food and Rural Affairs and the Secretary of State for Health, and where functions have been devolved, the National Assembly for Wales. In practice, the functions conferred on the Secretary of State (other than where devolved) will be exercised by the Secretary of State for Environment, Food and Rural Affairs or the Secretary of State for Health to reflect their respective ministerial portfolios.

TERRITORIAL APPLICATION: WALES

5.     Various functions of the Secretary of State introduced or amended by the Act are devolved to be exercised by the National Assembly for Wales. This is achieved by section 100 of the Act amending the National Assembly for Wales (Transfer of Functions) Order 1999 ("The Transfer of Functions Order") to take into account the new provisions introduced by the Act.

6.     If a function is devolved by the way of the Transfer of Functions Order, the section of the Act only makes reference to the Secretary of State, and the section is to be interpreted as referring to the National Assembly for Wales in the manner or circumstances set out in the Transfer of Functions Order. Most of the provisions of the Act amend other legislation, such as the Reservoirs Act 1975, the Water Industry Act 1991 or the Water Resources Act 1991, and the Transfer of Functions Order makes the division of functions in different ways for different Acts. The relevant provision for devolution purposes will be the amended section of the relevant Act.

7.     One of the reasons for devolution being put into effect in different ways depending in different Acts is that the areas of appointment of water and sewerage undertakers do not follow the geographical boundary of England and Wales. Accordingly, when considering the functions of water and sewerage undertakers, the jurisdiction of the Secretary of State and the National Assembly for Wales is generally determined by the undertakers' areas of appointment, rather than the national boundary.

8.     The Act has been drafted in consultation and agreement with the Welsh Assembly Government and the Wales Office so that it applies to both England and Wales.

SUMMARY

9.     The four broad aims of the Act are:

• the sustainable use of water resources;

• strengthening the voice of consumers;

• a measured increase in competition; and

• the promotion of water conservation.

10.     The Government's initiative to promote sustainable use of water resources was launched by the Deputy Prime Minister at the Water Summit in May 1997 with a 10 point action plan. That plan included a review of the abstraction licensing system. Following consultation, the Government's decisions on abstraction licensing were published in Taking Water Responsibly in March 1999. This Act implements those changes to the current regime for water resources management that require legislative change. The need for the Better Regulation measures was also indicated before publication of the Act in the White Paper A Fair Deal for Consumers - Modernising the Framework for Utility Regulation, published in July 1998. The Government announced in March 2001 that it would increase opportunities for competition in water services, and this Act implements changes to achieve that.

11.     In November 2000, the Government consulted on the draft Water Bill, publishing its response in July 2002. A three-month consultation was undertaken on the competition aspects of the Bill in summer 2002. Copies of these documents are available on the DEFRA website (www.defra.gov.uk/environment/water/legislation).

12.     The main provisions of the Act are set out below.

13.     The Act amends the Water Resources Act 1991 to improve long-term water resource management by:

• creating two new forms of abstraction licence - the transfer licence and the temporary licence;

• widening the control over impoundments so that licences are required for the whole duration of impoundment works;

• replacing licensing exemptions based on water use with a new exemption threshold of less than 20 cubic metres of water per day;

• ending the current exemption for irrigation (other than spray irrigation) and dewatering from the abstraction licensing regime;

• requiring all new abstraction licences to be time-limited;

• empowering the Environment Agency to revoke or vary an abstraction licence without compensation if it has not been used for four years; and

• removing the entitlement to compensation if the Secretary of State (or the Assembly) directs that a licence without a time limit should be curtailed, on or after 15 July 2012, on the grounds of serious environmental damage.

14.     It also amends the Water Industry Act 1991 so that water companies:

• are given a duty to prepare and publicise drought plans;

• are placed under a duty to agree and publicise water resource management plans; and

• are placed under an enforceable duty to further water conservation.

15.     The Act introduces provisions for the better operation and regulation of the water industry by amending the Water Industry Act 1991 to:

• replace the Director General of Water Services with a Regulatory Authority;

• set up a new independent Consumer Council for Water to replace the Customer Service Committees and the Ofwat National Consumer Council (known as WaterVoice);

• require the Authority and the Council to consult on and publish forward work programmes and annual reports;

• give both the Authority and Council a new duty to contribute to sustainable development; and

• give the Authority a duty to further the consumer objective wherever appropriate, through promoting effective competition.

16.     The Act includes provisions which aim to increase the opportunities for competition in the supply of water services, by:

• setting up a system to license new entrants to supply water to large commercial and industrial customers based on a water consumption threshold; and

• providing the Authority with new regulatory powers to administer the competition framework.

17.     The Act also amends the Water Industry Act 1991 to include a new statutory obligation for water companies to accede to requests from Strategic Health Authorities (in relation to England) and the Assembly (in relation to Wales) to enter into arrangements to fluoridate water supplies. This transfers responsibility for the decision to fluoridate from the undertaker to the Strategic Health Authority and the Assembly, in consultation with local communities.

18.     To further the principles of sustainable use of water resources, better regulation of the water industry, competition and water conservation, the Act contains a number of miscellaneous provisions.

     19.     To further water conservation the Act contains new provisions to:

• place a duty on the Secretary of State and the National Assembly of Wales to take appropriate steps to encourage water conservation; and

• place a duty on public authorities to take into account the desirability of conserving water supplies to premises.

20.     The Act amends the Water Industry Act 1991 to:

• give the Secretary of State or the Assembly powers to develop schemes requiring the adoption of private sewers by sewerage undertakers;

• require Fire Authorities or owners of commercial or industrial premises to pay for replacement fire hydrants removed during water mains renewal or refurbishment work;

• allow developers to enter into an agreement with water undertakers to lay water mains and communication pipes in accordance with standards set by the undertaker;

• extend existing provisions to enable undertakers to adopt new lateral drains upon construction; and

• give the Secretary of State or the Assembly the power to make orders to apply or disapply the trade effluent consenting regime in certain cases.

21.     It enhances reservoir safety by amending the Reservoirs Act 1975 to:

• transfer enforcement powers from local authorities to the Environment Agency in England and Wales; and

• empower the Secretary of State or the Assembly to direct owners of large raised reservoirs to prepare and maintain flood plans.

22.     The Act includes various amendments to facilitate streamline arrangements for flood defence organisation and funding by:

• including powers to revoke local flood defence schemes and allow the creation of additional regional flood defence committees;

• repealing section 147 to 149 of the Water Resources Act to enable Ministers to make block grants to the Environment Agency for flood defence works and flood warning schemes;

• reinstating the power of the internal drainage boards to borrow to fund contributions to the Environment Agency; and

• enabling the National Assembly for Wales to make provisions regarding the membership of Welsh regional flood defence committees.

23.     The Act provides new powers under the Coal Industry Act 1994 for the Coal Authority to take action to prevent and clean up mine water pollution from abandoned coal mines.

OVERVIEW OF THE ACT

24.     With certain exceptions the Act extends only to England and Wales.

25.     The Act is divided into 4 parts and has 105 sections and 9 schedules.

26.     Part 1 and elements of Part 3: provide the Environment Agency with additional tools for managing water resources and stronger powers to take action against abstractions causing environmental damage. They introduce provisions to increase the scope and public availability of information on water resources which are intended to enable abstractors to plan ahead in an environmentally responsible manner. They also make provision to increase the flexibility, accountability and administrative efficiency of the abstraction and impounding licensing system, with the intended result of increasing the ease of access to sustainable water resources.

27.     Part 2: establishes a regulatory Board to replace the existing individual Director General of Water Services along with a new independent Consumer Council for Water to replace the Customer Service Committees. It also introduces other provisions intended to improve the regulatory regime and to extend the opportunities for competition in the water industry, by allowing new entrants to supply non-household customers who use large volumes of water.

28.     Part 3: see above, with Part 1. This Part introduces a range of miscellaneous provisions including a duty on the Secretary of State and the National Assembly for Wales to encourage water conservation. Part 3 also includes powers for the Secretary of State to require sewerage undertakers to adopt private sewers.

29.     Part 4: contains a number of supplementary provisions, such as commencement, short title and territorial extent.

COMMENTARY ON SECTIONS

30.     The commentary on sections is set out by Part and, where appropriate, with the Schedule commentary alongside the section to which it relates.

31.     In these Notes, the following abbreviations are used:

     Water Services Regulation Authority : the Authority

     Consumer Council for Water : Council or the CCW

     Department of Trade and Industry : DTI

     Director General of Water Services : Director

     Drinking Water Inspectorate : DWI

     Environment Agency : EA or the Agency

     National Assembly for Wales : the Assembly

     Water Industry Act 1991 : WIA

     Water Resources Act 1991 : WRA

PART 1: ABSTRACTION AND IMPOUNDING

Sections 1 to 10 Restrictions on abstraction and impounding

32.     Section 1: Licences to abstract water.

This provides that abstraction licences will be of one of three types: a "full licence", a "transfer licence" or a "temporary licence".

33.     One of these three forms of licence is required in order for a person to abstract any quantity of water which is above the licensing threshold (see section 6) and which is not otherwise exempt.

34.     A "temporary licence" is required for any abstraction from a source of supply lasting less than 28 days.

35.     A "transfer licence" is available for abstraction of water for 28 days or more for transfer from one source of supply to another without intervening use - for example, from one watercourse to another for the purposes of navigation. A transfer licence is also available for transfers between two points in the same source of supply where the abstraction is related to dewatering of works such as within a quarry. But it is possible to apply for a full licence if the applicant wants full protection from derogation for his transfer abstraction (see section 16).

36.     A "full licence" is required for any other abstraction for 28 days or more. All current abstraction licences are of this type, by virtue of the provisions of section 102(1), even though some relate to abstractions that would require only a "transfer licence". There is no need for existing licences to be converted unless the holder wishes to do it.

37.     Provisions in this section are devolved to the Assembly.

38.     Section 2: Restrictions on impounding.

The current restriction on impounding of water makes it an offence to begin to construct or alter an impounding works unless an impounding licence has been obtained. This section amends the current restriction on impounding in order to impose controls throughout the lifetime of new impounding works. Impounding licences (whether issued before or after the coming into force of this section) will remain in force for the lifetime of the works, allowing the Agency to attach or modify conditions to the licence to ensure that impounding works do not cause damage to the environment.

39.     Provisions in this section are devolved to the Assembly.

40.     Sections 3 and 4: Existing impounding works.

     The new restriction on impounding introduced by section 2 does not apply retrospectively. However, there are impounding works that are unlicensed, either because their construction pre-dated the licensing regime or a licence has been revoked and some of these works are, or in the future may, cause environmental problems that cannot be addressed by the Agency under its current powers. Section 3 provides the EA with a new power to serve notice to require that an impounding licence is obtained and failure to comply with such a notice would be an offence. Section 4 provides the EA with a power to serve a works notice on the relevant person (normally the owner) to carry out remedial works on an existing impoundment that is causing environmental damage. Failure to comply with the notice is an offence.

41.     Provisions in these sections are devolved to the Assembly.

42.     Section 5: Rights of navigation, harbour and conservancy authorities.

     Under the current regime, all transfers of water from one area of inland water to another by navigation, harbour and conservancy authorities in the exercise of their functions as such are exempt from licence control. The effect of this section, taken with section 1, is to limit that exemption and to require the licensing of transfers of water from any source of supply to a water system operated by these authorities. While a transfer licence will suffice, those authorities may also apply for a full licence if they wish (see section 16). Transfers wholly within water systems operated by those authorities (for example, transfers from canal pounds to canal locks) do not require a licence. Neither do transfers between any such system and other inland waters which are connected only to that system (for example, ditches draining only to canals, or reservoirs capable of discharging only to canals). Where a transfer is made to another source of supply from which it is subsequently abstracted, the transfer will be licensable. Construction or alteration of impounding works by those authorities will remain exempt from licensing if the works do not have any effect beyond the authority's water system.

43.     Provisions in this section are devolved to the Assembly.

44.     Section 6: Rights to abstract small quantities.

This section sets a quantity of 20 cubic metres in any period of 24 hours as the normal threshold above which an abstraction licence is required, irrespective of the source of supply or the purpose of the abstraction (unless it is otherwise exempt). This replaces the present, more complex exemptions framework for small abstractions, under which more than 20,000 abstractions of less than that quantity require licences. The section also provides that where a licence exists, the small quantity exemption does not apply in addition to the licensed quantity for abstractions for the same purpose, but it can be used in addition to a licensed abstraction for a different purpose.

45.     The Agency may apply (or can be directed to apply) to the Secretary of State for an Order setting a different threshold, which may be greater or less than the normal figure in specified areas, inland waters or underground strata. If the threshold is reduced and a previously exempt abstractor is unable to obtain a licence to abstract the volume he had previously abstracted, then compensation may become payable for loss or damage caused to that abstractor.

46.     Provisions in this section are devolved to the Assembly.

47.     Section 7: Rights to abstract for drainage purposes, etc.

     Abstractions for dewatering mines, quarries or engineering excavations will generally require a licence (usually a temporary or transfer licence - see section 1). But this section also recognises that such abstractions may be required as an emergency measure and it therefore allows them to take place without a licence provided that the EA is notified within five days of their commencement. The Agency may determine that the abstraction is not necessary by reason of an emergency and is able to require a licence application to be made in the normal way. The Agency may also serve notice on the operator that it considers that what started out as an emergency abstraction has ceased to be one.

48.     This section also removes two activities from the definition of "land drainage", and thus from the exemption from licensing. These activities become subject to licensing control. They are: warping (which is the abstraction of water which contains silt onto agricultural land so that the silt can deposit and act as a fertiliser) and irrigation. At present, of those abstractions made for irrigation it is only those that are made for spray irrigation that require abstraction licensing. The growing use of trickle irrigation and the use of land drainage systems in reverse to maintain field water levels and for warping prompts the proposed change. Land drainage i.e. removal of flood water, remains exempt from abstraction licensing. The many minor transfers of water within an Internal Drainage Board district are exempt from licence control, but initial transfers into a Board's district will be licensable.

49.     Provisions in this section are devolved to the Assembly.

50.     Section 8: Amendments relating to section 7.

The amendments provided by this section are consequential on section 7. They move to sections 199 and 199A the provisions of sections 30 and 31 of the WRA, which require an operator to give prior notice to the EA of mining operations affecting water resources. The section provides that the Secretary of State may delegate decisions on appeals against notices to a third party. The section also brings the definition of flood defence for the purposes of defining minimum river flows in section 21 of the WRA into line with that used for flood defence purposes in section 113 of the Act.

51.     Provisions in this section are devolved to the Assembly.

52.     Section 9: Power to provide for further exemptions.

     This section provides the Secretary of State with the power to make regulations so that the restriction on abstraction and impounding works shall not apply in certain cases. Such cases are referred to as "exemptions". Regulations ensure that an exemption must satisfy any prescribed conditions that may be attached to it, and provide the Agency with the power to determine whether any exemption should apply. Any exemption may apply generally or relate to a geographical area or particular source of supply. Again, this is intended to enable the Agency to exercise levels of control of water resources appropriate to the environmental impact of an abstraction in relation to local conditions.

53.     Provisions in this section are devolved to the Assembly.

54.     Section 10: Orders under section 33 of the WRA, etc.

Existing legislation provides that a navigation, harbour or conservancy authority or the Agency may apply to the Secretary of State to remove the restriction on abstraction from any source of supply. This new provision provides for the Secretary of State to make regulations to revoke any such order. That revocation can include a similar order made under any local or private Act. In addition, the orders under this section can also repeal the provision in any local or private Act containing the power to make such an exception order in future, once all orders under that power have been revoked. The section also allows an order to make provision for the continuation of existing rights to abstract without a licence and for compensation where these are curtailed and result in loss or damages.

55.     Provisions in this section are devolved to the Assembly.

Sections 11 to 14 Applications for a licence

56.     Provisions in sections 11 to 14 are devolved to the Assembly.

57.     Section 11: Who may apply for a licence.

This establishes the qualification necessary in order to apply for abstraction licences: a right of access to the land where the abstraction takes place. Occupation of land continues to serve as evidence of a right of access. Applicants have to demonstrate that they have the right of access for at least one year from the date on which the licence is to take effect, or for the intended duration of the licence if that is less than one year.

58.     Section 12: Abolition of combined licences.

Currently, the EA can issue a licence for both an impoundment and an abstraction as a 'combined licence', although only a small number of such licences exist. With the proposals to time limit all new abstraction licences and for an impoundment licence to remain in force until revoked, there are unlikely to be situations in future where a combined licence might be issued. This section therefore repeals section 36 of the WRA, thereby removing the Agency's power to issue a combined licence. Existing combined licences will be converted into separate abstraction and impounding licences.

59.     Section 13: Applications: types of abstraction licence.

Applicants have the initial choice of what type of abstraction licence to apply for. This section enables the EA to require an applicant for one type of abstraction licence to apply instead for another type, or to group several related applications together. The applicant can appeal to the Secretary of State against the Agency's decision.

60.     Section 14: Publication of application for licence.

Licence applications must be brought to the attention of those likely to be affected by them. This section enables the detailed publication requirements, including the circumstances in which they are dispensed with, to be prescribed in secondary legislation. Where necessary, publication requirements may be undertaken by the EA, whose costs are reimbursed as a separate element of the licence application fee.