Member Article

The Bill inserts provisions into the Water Industry Act 1991 to enable Ofwat to make rules about pay and governance in the water industry. Ofwat must issue rules on the following three topics:

1. Performance-related pay – water and sewerage companies will be prohibited from paying senior management (chief executives and directors) performance-related pay in a particular financial year if their company fails to meet specified standards relating to consumer matters, the environment, the company's financial resilience and the company’s criminal liability.
2. The fitness and propriety of individuals in senior roles – water and sewerage companies will be prohibited from appointing or keeping in post chief executives and directors who do not meet specified standards of fitness and propriety.
3. Consumer involvement – water and sewerage companies will be required to put in place arrangements for involving consumers in decisions that have a material effect on consumer matters.

Pollution incident reduction plans

The Bill inserts provisions into the Water Industry Act 1991 requiring sewerage undertakers in England to publish an annual pollution incident reduction plan. Plans must address the frequency, seriousness and causes of pollution incidents and the measures that sewerage undertakers intend to take to reduce their occurrence. The EA will produce guidance in consultation with the Secretary of State and Ofwat which sewerage undertakers must have regard to when preparing their plans. Failure to prepare and publish a plan will be an offence.

Reporting sewage discharges

The Bill also introduces a requirement for sewerage undertakers to report emergency overflow discharges. Undertakers must report such discharges within one hour of their commencement and ending, together with their location.

New penalties

The Bill introduces new penalties for offences of obstructing an investigation by the EA or NRW, including potential imprisonment. It also introduces a corporate liability provision whereby if an obstruction offence is committed with the consent or connivance of, or is attributable to the neglect of, senior management, they will also be liable.

The Bill also lowers the standard of proof for imposing civil penalties for abstraction, impounding, drought and pollution control offences from ‘beyond reasonable doubt’ to ‘on the balance of probabilities’. This is intended to enable civil penalties to be imposed without undertaking a full criminal investigation.

Automatic penalties for certain offences

The Bill requires the EA and NRW to impose penalties for specified offences unless they believe there are exceptional circumstances that mitigate the culpability of the company, or alternative enforcement action is already in contemplation or in progress. The specified offences will be set out in secondary legislation, but could include abstraction, impounding, drought and pollution control offences.

The Bill will also introduce a new power for the EA and NRW to recover costs from water and sewerage companies for enforcement activities and allow for improved cost recovery for the Drinking Water Inspectorate.

What are the implications?

The Bill is no doubt driven by the new government’s wish to be seen to address public concerns about water pollution from sewage discharges. Given the size of the government’s majority in the House of Commons, it is unlikely to face much opposition.

There is much controversial in the Bill, such as the proposals regarding performance-related pay for senior management, the reduction of the standard of proof for issuing civil penalties and the requirement for regulators to impose automatic penalties for certain offences. Whether these will result in any meaningful changes in practice remains to be seen, but there is a risk that they may set a precedent for further legislation aimed at other industries whose environmental performance is perceived to be sub-standard.