Part 1

Water industry
CHAPTER 2

Water and sewerage undertakers

Agreements to adopt infrastructure

Agreements by water undertakers to adopt infrastructure
10
1
The Water Industry Act 1991 is amended as follows.
2
In section 51A (agreements to adopt a water main or service pipe at a future date)—
a
in subsection (3) (application to make an agreement under section 51A), for the words from “make an application” to the end there is substituted “ request a water undertaker to make an agreement under this section. ”;
b
subsections (4) to (8) are repealed;
c
after subsection (9) there is inserted—
9A
The reference in subsection (9) to an agreement made under this section includes a reference to—
a
an order under section 51B which is deemed to be an agreement by virtue of section 51B(5), and
b
an agreement which has been varied by order under section 51C(1).
3
For section 51B (appeals with respect to adoption) and section 51C (financial conditions of compliance) there is substituted—

Adoption at a future date: orders by Authority
51B
1
This section applies where a person constructing or proposing to construct a water main or service pipe makes a request to a water undertaker under section 51A(3).
2
The person or the water undertaker may apply to the Authority for an order under subsection (4) if the person and the water undertaker have not made such agreement as was requested by the person.
3
The Authority may, on the application of the person or the water undertaker, make an order under subsection (4) if the Authority is satisfied that—
a
it is appropriate for work proposed to be done by a person other than the water undertaker to be so done, and
b
the person and the water undertaker cannot reach agreement within a reasonable time.
4
The Authority may by order—
a
require the water undertaker to give such undertakings as to the vesting of the water main or service pipe in the undertaker as the Authority may specify, and
b
impose such terms and conditions as regards taking the benefit of the undertakings as the Authority may specify.
5
An order under subsection (4) has effect as an agreement under section 51A between the person and the water undertaker.
6
The Authority may not, by order under subsection (4), require a water undertaker to vest in itself a water main or service pipe as regards which there is a contravention of any of the requirements of section 74 that are prescribed for the purposes of this subsection.
7
The Authority may not make an order under subsection (4) with respect to a water main or service pipe that is situated within the area of another water undertaker, until either—
a
that other undertaker has consented in writing to the making of the order, or
b
the Minister, on an application made to the Minister, has disapplied paragraph (a), either unconditionally or subject to such conditions as the Minister thinks fit.
8
“The Minister” means—
a
the Secretary of State, as regards the consent of a water undertaker whose area is wholly or mainly in England;
b
the Welsh Ministers, as regards the consent of a water undertaker whose area is wholly or mainly in Wales.
9
Neither the CMA nor the Authority may exercise, in respect of an agreement for the vesting of a water main or service pipe in a water undertaker at a future date, the powers conferred by—
a
section 32 of the Competition Act 1998 (directions in relation to agreements);
b
section 35(2) of that Act (interim directions).
10
Subsection (9)(b) does not apply to the exercise of powers in respect of conduct—
a
which is connected with an agreement for the vesting of a water main or service pipe at a future date, and
b
in respect of which section 35(1) of the Competition Act 1998 applies because of an investigation under section 25 of that Act relating to a suspected infringement of the Chapter 2 prohibition imposed by section 18(1) of that Act.
11
In exercising its functions under this section, the Authority must have regard to the desirability of—
a
facilitating effective competition within the water supply industry;
b
the recovery by the water undertaker of the expenses of complying with its obligations by virtue of this section and securing a reasonable return on its capital;
c
the ability of the water undertaker to meet its existing obligations, and likely future obligations, to supply water without having to incur unreasonable expenditure in carrying out works;
d
not putting at risk the ability of the water undertaker to meet its existing obligations, or likely future obligations, to supply water.

Variation and termination of section 51A agreements
51C
1
On the application of a party to a section 51A agreement to vary (or terminate) the agreement, the Authority may—
a
if it appears to the Authority that it is necessary or expedient that the section 51A agreement should be varied (or terminated),
b
if the Authority is satisfied, in the case of an application to vary the agreement, that it is appropriate for work proposed to be done by a person other than the water undertaker to be so done, and
c
if the Authority is satisfied that variation (or termination) cannot be achieved by agreement within a reasonable time,
by order vary (or terminate) the section 51A agreement.
2
If an order under subsection (1) is made in relation to a section 51A agreement, the agreement—
a
has effect subject to the provision made by the order, or
b
ceases to have effect, as the case may be.
3
An order under subsection (1) may require any party to the agreement to pay compensation to any other party.
4
Neither the CMA nor the Authority may exercise, in respect of an agreement to vary or terminate a section 51A agreement, the powers conferred by—
a
section 32 of the Competition Act 1998 (directions in relation to agreements);
b
section 35(2) of that Act (interim directions).
5
Subsection (4)(b) does not apply to the exercise of powers in respect of conduct—
a
which is connected with an agreement to vary or terminate a section 51A agreement, and
b
in respect of which section 35(1) of the Competition Act 1998 applies because of an investigation under section 25 of that Act relating to a suspected infringement of the Chapter 2 prohibition imposed by section 18(1) of that Act.
6
In exercising its functions under this section, the Authority must have regard to the expenses incurred by the water undertaker in complying with its obligations under the section 51A agreement in question and to the desirability of—
a
facilitating effective competition within the water supply industry;
b
the recovery by the water undertaker of the expenses of complying with its obligations by virtue of this section and securing a reasonable return on its capital;
c
the ability of the water undertaker to meet its existing obligations, and likely future obligations, to supply water without having to incur unreasonable expenditure in carrying out works;
d
not putting at risk the ability of the water undertaker to meet its existing obligations, or likely future obligations, to supply water.
7
In this section and sections 51CA to 51CG “section 51A agreement” means an agreement with a water undertaker for the vesting of a water main or service pipe in a water undertaker at a future date and includes—
a
an order under section 51B which is deemed to be an agreement by virtue of section 51B(5), and
b
any agreement which has been varied by order under subsection (1).

Codes in respect of section 51A agreements
51CA
1
The Authority must issue a code in respect of section 51A agreements.
2
The code may make provision about—
a
procedures in connection with making an agreement under section 51A;
b
procedures in connection with varying or terminating a section 51A agreement;
c
procedures to be followed by the Authority in determining whether to make an order under section 51B(4) or 51C(1);
d
the circumstances in which it is, or is not, appropriate for work to be done by a person other than a water undertaker;
e
the terms and conditions of a section 51A agreement;
f
principles for determining the terms and conditions that should or should not be incorporated into a section 51A agreement;
g
the steps to be taken by the Authority in determining whether a person is complying with the code.
3
Provision under subsection (2)(c) may in particular require the Authority to consult—
a
the Chief Inspector of Drinking Water;
b
the Chief Inspector of Drinking Water for Wales if there is one.
4
Provision under subsection (2)(d) may include in particular provision about circumstances relating to—
a
the nature of the work;
b
the kind of premises supplied or to be supplied.
5
Provision under subsection (2)(e) may include in particular provision about terms and conditions as regards—
a
constructing associated infrastructure;
b
vesting associated infrastructure in a water undertaker;
c
constructing water mains so as to meet additional supply requirements;
d
connecting new water mains or service pipes to the existing supply system of a water undertaker;
e
complying with requirements of the kind referred to in section 47(2);
f
the duration of a section 51A agreement.
6
If the Authority considers that a water undertaker is not acting as required by the code, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction.
7
The Authority may not give a direction under subsection (6) requiring a person to enter into, vary or terminate an agreement.
8
It is the duty of a water undertaker to comply with a direction under subsection (6), and this duty is enforceable by the Authority under section 18.
9
The code may make different provision for different persons or descriptions of person.
10
The Authority must from time to time review the code and, if appropriate, issue a revised code.
11
A revised code may include provision for applying any of its revisions to section 51A agreements made before the revised code comes into force.

Codes under section 51CA: procedure
51CB
1
Before issuing a code under section 51CA, the Authority must—
a
prepare a draft of the proposed code under section 51CA, and
b
consult the relevant persons about the proposed code.
2
The relevant persons are—
a
the Chief Inspector of Drinking Water;
b
the Chief Inspector of Drinking Water for Wales if there is one;
c
such other persons as the Authority considers appropriate.
3
The Authority must specify the period (“the consultation period”) within which a person may make representations about the proposed code.
4
Before a code under section 51CA prepared by the Authority is issued, the Minister may direct the Authority—
a
not to issue the code, or
b
to issue the code with specified modifications.
5
Subsection (4) is subject to subsections (7) and (8).
6
In subsection (4) “the Minister” means—
a
the Secretary of State, so far as the code relates to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in England;
b
the Welsh Ministers, so far as the code relates to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in Wales.
7
The power under subsection (4) may not be exercised more than once by the Secretary of State or the Welsh Ministers.
8
If the power under subsection (4) is not exercised by the Secretary of State or the Welsh Ministers on the first occasion on which it may be exercised by the Secretary of State or (as the case may be) the Welsh Ministers, it may not be exercised by the Secretary of State or (as the case may be) the Welsh Ministers on a later occasion.
9
A direction under subsection (4) must be given within the period of 28 days beginning with the day after the end of the consultation period, and a code in relation to which a direction may be given may not be issued before that period of 28 days has expired.
10
This section is subject to section 51CC.

Codes under section 51CA: minor or urgent revisions
51CC
1
This section applies if the Authority proposes to issue a revised code under section 51CA and, in the view of the Authority, the revision or each of the revisions proposed to be made is—
a
a revision for which consultation is unnecessary, or
b
a revision that it is necessary or desirable to make without delay.
2
Section 51CB does not apply to the proposed revised code.
3
Once the Authority has issued the revised code, it must give notice as soon as reasonably practicable of—
a
the issuing of the revised code, and
b
as regards each revision contained in it, whether in the view of the Authority the revision falls within paragraph (a) or (b) of subsection (1).
4
Notice under subsection (3) is to be given to such persons as the Authority considers appropriate.
5
Unless the Authority gives notice that a revision in a revised code is in the view of the Authority a revision falling within subsection (1)(a), the revision ceases to have effect at the end of the period of six months beginning with the day after that on which the revised code is issued.

Rules about charges in connection with a section 51A agreement
51CD
1
The Authority may issue rules about charges that may be imposed by a water undertaker under a section 51A agreement.
2
The rules may in particular make provision about—
a
what types of charge may be imposed;
b
the amount or the maximum amount, or a method for determining the amount or maximum amount, of any type of charge;
c
principles for determining what types of charge may or may not be imposed;
d
principles for determining the amount of any charge that may be imposed;
e
publication of the charges that may be imposed.
3
The rules may require a water undertaker, upon declaring a water main or service pipe to be vested in the undertaker in accordance with a section 51A agreement, to pay to the other party to the agreement an amount (which may be nil) determined in accordance with the rules.
4
Rules made by virtue of subsection (3) may, in particular, provide for the determination to take into account—
a
revenue that might be derived from the water main or service pipe in question;
b
costs that might have been incurred in providing such a water main or service pipe.
5
The rules may also make provision as to—
a
the amount of security that may be required by a water undertaker for the purposes of any charges imposed by the water undertaker under a section 51A agreement;
b
the type of security that may be required;
c
the payment of interest on a sum deposited with a water undertaker by way of security.
6
If the Authority considers that a water undertaker is not acting as required by rules under this section, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction.
7
It is the duty of a water undertaker to comply with a direction under subsection (6), and this duty is enforceable by the Authority under section 18.
8
The rules may make different provision for different water undertakers or descriptions of undertaker.
9
The Authority may from time to time revise rules issued under this section and issue revised rules.
10
The Authority must issue revised rules if—
a
guidance is issued under section 51CG, and
b
the Authority, having regard to that guidance, considers that it is appropriate to revise the rules.
11
Revised rules may include provision for applying any of their revisions to section 51A agreements made before the revised rules come into effect.

Rules under section 51CD: procedure
51CE
1
Before issuing rules under section 51CD, the Authority must—
a
prepare a draft of the proposed rules, and
b
consult the relevant persons about the draft.
2
The relevant persons are—
a
the Secretary of State;
b
the Welsh Ministers;
c
the Council;
d
any water undertakers or other persons likely to be affected by the rules;
e
such other persons as the Authority thinks appropriate.
3
The Authority must specify the period (“the consultation period”) within which the relevant persons may make representations about the proposed rules.
4
The Authority must have regard to guidance issued under section 51CG in making rules under section 51CD.
5
Before rules under section 51CD prepared by the Authority are issued, the Minister may direct the Authority not to issue the rules.
6
In subsection (5) “the Minister” means—
a
the Secretary of State, so far as the rules relate to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in England;
b
the Welsh Ministers, so far as the rules relate to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in Wales.
7
A direction under subsection (5) must be given within the period of 28 days beginning with the day after the end of the consultation period, and rules may not be issued before that period of 28 days has expired.
8
This section is subject to section 51CF.

Rules under section 51CD: minor or urgent revisions
51CF
1
This section applies if the Authority proposes to issue revised rules under section 51CD and, in the view of the Authority, the revision or each of the revisions proposed to be made is—
a
a revision for which consultation is unnecessary, or
b
a revision that it is necessary or desirable to make without delay.
2
Section 51CE does not apply to the proposed revised rules.
3
Before issuing the revised rules, the Authority must give notice to the Minister of its intention to issue revised rules.
4
Before the revised rules are issued, the Minister may direct the Authority not to issue the revised rules.
5
A direction under subsection (4) must be given within the period of 14 days beginning with the day after the day on which notice is given under subsection (3), and the Authority may not issue the revised rules in question before—
a
that period of 14 days expires, or
b
the Minister notifies the Authority that no direction under subsection (4) will be given in relation to the revised rules,
whichever is the sooner.
6
Once the Authority has issued the revised rules, it must give notice as soon as reasonably practicable of—
a
the issuing of the revised rules, and
b
as regards each revision contained in them, whether in the view of the Authority the revision falls within paragraph (a) or (b) of subsection (1).
7
Notice under subsection (6) is to be given to such persons as the Authority considers appropriate.
8
Unless the Authority gives notice that a revision in revised rules is in the view of the Authority a revision falling within subsection (1)(a), the revision ceases to have effect at the end of the period of six months beginning with the day after that on which the revised rules are issued.
9
In this section “the Minister” has the meaning given by section 51CE.

Rules under section 51CD: guidance
51CG
1
The Minister may issue guidance as to the content of rules under section 51CD.
2
Before issuing the guidance, the Minister must—
a
prepare a draft of the proposed guidance;
b
consult the relevant persons about the draft.
3
The relevant persons are—
a
the Secretary of State;
b
the Welsh Ministers;
c
such other persons as the Minister thinks appropriate.
4
The Minister may from time to time revise the guidance and issue revised guidance.
5
Subsections (2) and (3) apply to revised guidance as they apply to the original guidance.
6
The Minister must arrange for the publication of guidance issued under this section.
7
In this section “the Minister” means—
a
the Secretary of State, so far as the guidance is as to the content of rules relating to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in England;
b
the Welsh Ministers, so far as the guidance is as to the content of rules relating to section 51A agreements for the vesting of water mains or service pipes in water undertakers whose areas are wholly or mainly in Wales.
4
In section 51E (sections 51A to 51D: supplementary), in subsection (2), for “In sections 51A to 51C above” there is substituted “ In section 51A ”.
S. 10(1) in force at 18.12.2015 for specified purposes by S.I. 2015/1938, art. 2(b)(i)
S. 10(3) in force at 18.12.2015 for specified purposes by S.I. 2015/1938, art. 2(b)(ii)
S. 10(1) in force at 1.4.2017 for E. for specified purposes by S.I. 2017/462, art. 3(d)(i)
S. 10(3) in force at 1.4.2017 for E. for specified purposes by S.I. 2017/462, art. 3(d)(ii)
S. 10(1)(3) in force at 1.10.2017 for E. in so far as not already in force by S.I. 2017/462, art. 4(a) (with art. 15)
S. 10(2)(4) in force at 1.10.2017 for E. by S.I. 2017/462, art. 4(a)