Part 1

Water industry
CHAPTER 2

Water and sewerage undertakers

Agreements to adopt infrastructure

Agreements by sewerage undertakers to adopt infrastructure
11
1
The Water Industry Act 1991 is amended as follows.
2
In section 104 (agreements to adopt a sewer, drain or sewage disposal works at a future date)—
a
in subsection (2) (application to make an agreement under section 104), for the words from “make an application” to the end there is substituted “ request a sewerage undertaker to make an agreement under this section. ”;
b
subsections (3), (4) and (6A) are repealed;
c
after subsection (5) there is inserted—
5A
The reference in subsection (5) to an agreement made under this section includes a reference to—
a
an order under section 105ZA which is deemed to be an agreement by virtue of section 105ZA(5), and
b
any agreement which has been varied by order under section 105ZB(1).
3
After section 105 there is inserted—

Adoption at a future date: orders by Authority
105ZA
1
This section applies where a person mentioned in section 104(1)(a) or (b) makes a request to a sewerage undertaker under section 104(2).
2
The person or the sewerage undertaker may apply to the Authority for an order under subsection (4) if the person and the sewerage undertaker have not made such agreement as was requested by the person.
3
The Authority may, on the application of the person or the sewerage undertaker, make an order under subsection (4) if the Authority is satisfied that—
a
where the person is such person as is mentioned in section 104(1)(a), it is appropriate for work proposed to be done by a person other than the sewerage undertaker to be so done, and
b
the person and the sewerage undertaker cannot reach agreement within a reasonable time.
4
The Authority may by order—
a
require the sewerage undertaker to give such undertakings as to the vesting of the sewer, such part of the drain as constitutes the lateral drain or the works 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 104 between the person and the sewerage undertaker.
6
The Authority may not make an order under subsection (4) with respect to—
a
a sewer, drain or sewage disposal works situated in the area of another undertaker, or
b
a drain which is intended to communicate with a sewer which—
i
is so situated, or
ii
is vested in another sewerage undertaker,
until one of the conditions mentioned in subsection (7) is satisfied.
7
The conditions are that—
a
the other sewerage 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 sewerage undertaker whose area is wholly or mainly in England;
b
the Welsh Ministers, as regards the consent of a sewerage 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 sewer, drain or sewage disposal works in a sewerage undertaker at a future date or on a future event, 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 sewer, drain or sewage disposal works in a sewerage undertaker at a future date or on a future event, 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 sewerage services industry;
b
the recovery by the sewerage 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 sewerage undertaker to meet its existing obligations, and likely future obligations, to provide sewerage services without having to incur unreasonable expenditure in carrying out works;
d
not putting at risk the ability of the sewerage undertaker to meet its existing obligations, or likely future obligations, to provide sewerage services.

Variation and termination of section 104 agreements
105ZB
1
On the application of a party to a section 104 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 104 agreement should be varied (or terminated),
b
if the Authority is satisfied, in the case of an application to vary the agreement involving such person as is mentioned in section 104(1)(a), that it is appropriate for work proposed to be done by a person other than the sewerage 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 104 agreement.
2
If an order under subsection (1) is made in relation to a section 104 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 104 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 104 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 sewerage undertaker in complying with its obligations under the section 104 agreement in question and to the desirability of—
a
facilitating effective competition within the sewerage services industry;
b
the recovery by the sewerage 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 sewerage undertaker to meet its existing obligations, and likely future obligations, to provide sewerage services without having to incur unreasonable expenditure in carrying out works;
d
not putting at risk the ability of the sewerage undertaker to meet its existing obligations, or likely future obligations, to provide sewerage services.
7
In this section and sections 105ZC to 105ZI “section 104 agreement” means an agreement with a sewerage undertaker for the vesting of a sewer, drain or sewage disposal works in a sewerage undertaker at a future date or on a future event and includes—
a
an order under section 105ZA which is deemed to be an agreement by virtue of section 105ZA(5), and
b
any agreement which has been varied by order under subsection (1).

Codes in respect of section 104 agreements
105ZC
1
The Authority must issue a code in respect of section 104 agreements.
2
The code may make provision about—
a
procedures in connection with making an agreement under section 104;
b
procedures in connection with varying or terminating a section 104 agreement;
c
procedures to be followed by the Authority in determining whether to make an order under section 105ZA(4) or 105ZB(1);
d
the circumstances in which it is, or is not, appropriate for work to be done by a person other than a sewerage undertaker;
e
the terms and conditions of a section 104 agreement;
f
principles for determining the terms and conditions that should or should not be incorporated into a section 104 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)(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.
4
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 sewerage undertaker;
c
making a communication with public sewers.
5
If the Authority considers that a sewerage 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.
6
The Authority may not give a direction under subsection (5) requiring a person to enter into, vary or terminate an agreement.
7
It is the duty of a sewerage undertaker to comply with a direction under subsection (5), and this duty is enforceable by the Authority under section 18.
8
The code may make different provision for different persons or descriptions of person.
9
The Authority must from time to time review the code and, if appropriate, issue a revised code.
10
A revised code may include provision for applying any of its revisions to section 104 agreements made before the revised code comes into force.

Codes under section 105ZC: procedure
105ZD
1
Before issuing a code under section 105ZC, the Authority must—
a
prepare a draft of the proposed code under section 105ZC, and
b
consult such persons about the proposed code as it considers appropriate.
2
The Authority must specify the period (“the consultation period”) within which a person may make representations about the proposed code.
3
Before a code under section 105ZC 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.
4
Subsection (3) is subject to subsections (6) and (7).
5
In this section “the Minister” means—
a
the Secretary of State, so far as the code relates to section 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage undertakers whose areas are wholly or mainly in England;
b
the Welsh Ministers, so far as the code relates to section 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage undertakers whose areas are wholly or mainly in Wales.
6
The power under subsection (3) may not be exercised more than once by the Secretary of State or the Welsh Ministers.
7
If the power under subsection (3) 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.
8
A direction under subsection (3) 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.
9
This section is subject to section 105ZE.

Codes under section 105ZC: minor or urgent revisions
105ZE
1
This section applies if the Authority proposes to issue a revised code under section 105ZC 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 105ZD 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 104 agreement
105ZF
1
The Authority may issue rules about charges that may be imposed by a sewerage undertaker under a section 104 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 sewerage undertaker, upon declaring a sewer, drain or sewage disposal works to be vested in the undertaker in accordance with a section 104 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 sewer, drain or sewage disposal works in question;
b
costs that might have been incurred in providing such a sewer, drain or sewage disposal works.
5
The rules may also make provision as to—
a
the amount of security that may be required by a sewerage undertaker for the purposes of any charges imposed by the sewerage undertaker under a section 104 agreement;
b
the type of security that may be required;
c
the payment of interest on a sum deposited with a sewerage undertaker by way of security.
6
If the Authority considers that a sewerage 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 sewerage 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 sewerage 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 105ZI, 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 104 agreements made before the revised rules come into effect.

Rules under section 105ZF: procedure
105ZG
1
Before issuing rules under section 105ZF, 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 sewerage 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 105ZI in making rules under section 105ZF.
5
Before rules under section 105ZF 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 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage undertakers whose areas are wholly or mainly in England;
b
the Welsh Ministers, so far as the rules relate to section 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage 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 105ZH.

Rules under section 105ZF: minor or urgent revisions
105ZH
1
This section applies if the Authority proposes to issue revised rules under section 105ZF 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 105ZG 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 105ZG.

Rules under section 105ZF: guidance
105ZI
1
The Minister may issue guidance as to the content of rules under section 105ZF.
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 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage 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 104 agreements for the vesting of sewers, drains or sewage disposal works in sewerage undertakers whose areas are wholly or mainly in Wales.
4
In section 107 (right of sewerage undertaker to undertake the making of communications with public sewers), after subsection (1) there is inserted—
1A
A sewerage undertaker may not give notice to a person under subsection (1) if—
a
the undertaker and the person entered into an agreement under section 104, and
b
the agreement provides for the communication to which the person's proposal relates to be made by the person.
5
In section 108 (communication works by person entitled to communication), in subsection (1), after “section 106 above” there is inserted “ or may not make such an election because of section 107(1A) ”.
S. 11(1) in force at 18.12.2015 for specified purposes by S.I. 2015/1938, art. 2(c)(i)
S. 11(3) in force at 18.12.2015 for specified purposes by S.I. 2015/1938, art. 2(c)(ii)
S. 11(1) in force at 1.4.2017 for E. for specified purposes by S.I. 2017/462, art. 3(e)(i)
S. 11(3) in force at 1.4.2017 for E. for specified purposes by S.I. 2017/462, art. 3(e)(ii)
S. 11(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(b)
S. 11(2)(4) in force at 1.10.2017 for E. by S.I. 2017/462, art. 4(b)