Water Act 1945
This brought together previous water legislation and introduced a waterworks code. It encouraged amalgamations of water companies and boards. A government survey 30 years earlier identified 2,160 water undertakings including 786 local authorities.

By 1963 the numbers had reduced to:

• 100 water boards (each comprising two or more local authorities)
• 50 local authorities; and
• 29 privately owned statutory water companies.

Water Act 1973
The Act created the ten water authorities that were later privatised. They took over from the local authorities and water boards and their role was "to plan and control all users of water in each river catchment area". They had responsibilities for:

• water conservation;
• controlling pollution of inland and tidal waters;
• land drainage and flood control;
• fisheries; and
• supply of water and sewerage services.

Water Act 1983
This changed the organisational structure of the water authorities. Local authorities lost some rights of representation and meetings were closed to the press and public. To compensate for the reduction in public involvement consumer consultative committees (CCC) were set up in each authority with limited powers. The water authorities appointed CCC members from organisations invited to put names forward. A representative of the water authority also sat on each committee.

Department of the Environment (DOE) White Paper - February 1986
A discussion paper was published on the possible privatisation of the water industry. It proposed privatising the ten water authorities in their existing form. This included responsibility for providing water and sewerage services, and responsibility for river water quality and the control of abstractions.

The paper stated "Privatisation itself will encourage the water services plcs to compete effectively in fields where they can do so. Where this is not practical the Government's aim is to introduce a system of regulation which will stimulate a competitive approach. Profit is a more effective incentive than Government controls".

DOE Consultation Paper - July 1987
In response to the White Paper, many organisations expressed concern about privatising the regulatory aspects of the water authorities. In response the DOE proposed privatising the water and sewerage provision aspects of the boards and setting up the National Rivers Authority (now the Environment Agency) to take responsibility for water quality in rivers, lakes and bathing waters.

Water Act 1989 – Privatisation
The Director General of Water Services (the Director) was appointed to be the economic regulator of the industry. His duties include setting price limits to control the revenue companies can collect from their customers in bills, and protecting customers. He set up ten regional Customer Service Committees (called WaterVoice committees since April 2002), which are completely independent of the water industry, to represent customers. The water only companies were brought under the same regulatory control.

To meet European water quality and environmental standards the Government wrote off £5 billion of the industry's debts and gave them a £1.6 billion cash injection, known as the "green dowry".

Shares in the holding companies of the ten water and sewerage companies were offered for sale in November 1989 at £1.00 on application with two further payments of 70p in July 1990 and July 1991. The offer was oversubscribed.

Water Industry Act 1991
This brought together sewerage legislation and consolidated the 1989 Act.

Has there been any additional legislation since privatisation?

Competition and Service (Utilities) Act 1992
The Act applies to the regulatory bodies dealing with privatised utilities. It gave Ofwat increased powers to determine disputes and to increase competition in the industry.

Environment Act 1995
This placed a duty on the companies to promote the efficient use of water by customers.

Competition Act 1998
The Director General of Fair Trading has the main responsibility for administering this Act. The regulators for each of the utilities share this responsibility for the sectors they regulate. The Act outlaws any agreements that have a damaging effect on competition. It prohibits agreements between businesses that, or are intended to, prevent, restrict or distort competition. And conduct that amounts to the abuse of a dominant position in a market that may affect trade in the UK.

Water Industry Act 1999
The Act made several important amendments to the Water Industry Act 1991. It removed the companies' ability to disconnect household customers for non-payment of charges. It also outlawed the use of budget payment units that cut off customers' water supplies where customers had insufficient credit on their payment cards. It also limited the circumstances in which companies can compulsorily meter customers.

It gives the Director the task of approving companies' charges schemes. It also allows the Secretary of State to issue regulations setting out requirements that should be included in companies' charges schemes. This legislation also secured that companies were able to continue to charge customers on the basis of rateable value.

It also allows the Secretary of State to provide guidance to Ofwat on the treatment of vulnerable customers. This is set out in 'Water Industry Act 1999 – Delivering the Government's objectives'.

Utilities Act 2000
In 1998 the Government issued 'A fair deal for consumers – Modernising the framework for utility regulation' for consultation, followed by a White Paper. This proposed a number of legislative changes for each of the utilities. The Utilities Bill applied to gas, electricity, water and telecommunications but during the course of its passage through parliament, due to insufficient parliamentary time, the clauses relating to the water and telecoms industries were dropped.

Will there be any more legislation?

Draft Water Bill – November 2000
The Department of the Environment, Transport and the Regions (now Department for Environment, Food and Rural Affairs – DEFRA) issued a draft Water Bill for consultation.

This includes clauses dropped from the Utilities Bill. The draft Bill sets out to:

• secure the independence of consumer representatives by setting up an independent Consumer Council for Water;
• make the protection of customers one of Ofwat's primary duties;
• give Ofwat a duty to promote, rather than facilitate, competition; and
• reform abstraction licensing and promote water conservation.

DEFRA will be consulting on legislation to promote competition in the water industry.

For further information
Contact our library.
Telephone: 0121 625 1373;
E-mail address: enquiries@ofwat.gsi.gov.uk

Information Note No 18 February 1993
(Revised May 2002)