Water (Special Measures) Act 2025 — Delegated Powers Memorandum: Supplementary Memorandum from the Department for Environment, Food and Rural Affairs to the Delegated Powers and Regulatory Reform Committee

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WATER (SPECIAL MEASURES) BILL
Supplementary Memorandum from the Department for Environment, Food
and Rural Affairs to the Delegated Powers and Regulatory Reform
Committee
A. INTRODUCTION

1. This memorandum has been prepared for the Delegated Powers and
Regulatory Reform Committee to assist with its scrutiny of the Water (Special
Measures) Bill (“the Bill”). This memorandum describes provisions in the Bill
conferring power to make delegated legislation and other delegated powers
which have been tabled for consideration at Commons Report stage. It
explains why the powers have been taken and explains the nature of, and the
reason for, the procedure selected. The memorandum supplements the
Delegated Powers Memorandum on the Bill as introduced in the House of
Lords on 4 September 2024.

B. DELEGATED POWERS
New Clause xx – Special provision under charges schemes
Power conferred on: Secretary of State
Power exercised by: Regulations
Parliamentary Procedure: Negative resolution procedure
Context and Purpose
2. Section 143 of the Water Industry Act 1991 (“ WIA 91 ”) allows relevant
undertakers to create charges schemes to fix the charges to be paid for their
services (“charges scheme s”). There is an existing power in section 143A (1)
of WIA 91 allowing the Secretary of State to make regulations prescribing
requirements with which such charges schemes must comply. Should a water
company have provisions in its charges scheme that are inconsistent with such
regulations, this can ultimately be enforced by Ofwat.

3. Section 143A(2)(d) WIA 91 (without prejudice to the generality of the section
143A(1) power described above) allows for regulations to require special
provision, including exemption from specified charges, to be made for certain
eligible customers (with eligibility set out in those regulations by reference to
matters such as the individuals’ age, ill-health, disability, or the age, ill-health
or disability of any of their dependants or others who have their homes in the
premises, or their financial circumstances (section 143A(3)(a)).

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4. Bringing the above together, there is already a power for the Secretary of State
to make regulations to prescribe provisions that must be included in charges
schemes. New clause xx makes two changes.

5. Firstly, it secures that all or part of the costs of complying with requirements to
provide special provision pursuant to regulations under section 143A(2)(d) may
be shared between undertakers (new section 143AA). This is for the purpose
of ensuring a more equitable sharing of costs, if those costs are passed on to
customers. Using current powers, the costs could not be shared between
undertakers, meaning that the costs of providing the special provision would
result in more significant impacts on some water companies (and potentially
their customers) than others, depending on the number of people who were
eligible for support in their area. This would see the costs of the special
provision resulting in customer bills in less affluent areas go ing up more than
bills in more affluent areas, should costs be passed on to customers (since
more people will meet the criteria for section 143A(2)(d) WIA 1991 support in
less affluent areas).

6. Secondly, it more clearly allows for companies to be required to auto -enrol
eligible customers (amendment to existing section 143A(3)(b), which currently
potentially requires people to establish their eligibility themselves ). The
purpose of this is to increase the uptake of support (as there are currently
people who are eligible but who do not apply, possibly because they are simply
unaware of their eligibility).

Justification for taking the power
7. The power in subsection (2) of new section 143AA will permit the establishment
of a cost-sharing scheme. The Department considers a delegated power to be
justified on the basis that, if primary legislation were required on each occasion
that a minor change to the administrative arrangements for cost -sharing were
needed, this would be unduly onerous, and there is a risk that the purpose of
the provisions would be defeated and eligible persons would not get the
support they needed.

8. Subsection (3) contains two options for the mechanics of this scheme, namely,
direct payments between undertakers , or payments into and out of a fund
established and maintained under the regulations.

9. The powers in subsection (6)(a) and (b) of new section 143AA aim to ensure
that undertakers can recoup their relevant net costs, without this putting them
in breach of their other obligations (for example, their licence conditions and
cost controls). The Department considers these powers to be justified on the

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basis that the extent of any incompatibility cannot be known at this stage: this
will, for example, depend on what special provision is provided for in
regulations under section 143A(2)(d), and on what price control provision is in
place at the relevant time.

10. We thus consider that the regulation-making powers under new section 143AA
relate to technical/administrative matters which are required to give effect to
the policy, the main aspects of which are set out on the face of the provision
(namely, that a scheme can be established to distribute costs between
undertakers, and price control provision must not prevent the passing -on of
relevant costs).

Justification for the procedure
11. Regulations made under new section 143AA WIA 91 will be subject to the
negative procedure. The Department considers that the exercise of powers to
set out the detail of company cost -sharing does not warrant close
Parliamentary scrutiny. This is consistent with the pr ocedure applied to
precedent powers, for example regulations to establish a reconciliation
mechanism for schemes for reducing fuel poverty under section 11 of the
Energy Act 2010.

12. Before making regulations under either section 143A (2)(d) or new section
143AA, as an additional safeguard, new section 143AB provides that the
Department must consult relevant persons set out in new section 143AB(2) ,
unless the regulations only amend earlier regulations, and the Secretary of
State considers that the amendments are sufficiently minor to mean that such
consultation is unnecessary.

Department for Environment, Food and Rural Affairs
21 January 2025