RD 03/01

TO THE REGULATORY DIRECTORS OF ALL
WATER AND SEWERAGE COMPANIES AND
WATER ONLY COMPANIES

4 April 2001

Dear Regulatory Director

WATER INGRESS INTO GAS MAINS

There have been a number of incidents in which water has escaped from pipes vested in water companies and entered pipes operated by public gas transporters. From there, water has then sometimes penetrated into domestic premises, causing damage to the customers' gas appliances. Other gas customers, although not directly affected, have had their gas supplies interrupted for lengthy periods. These incidents have raised questions about the respective responsibilities of water companies, gas transporters and gas suppliers towards the customers concerned. We have discussed these matters with Ofgem and the purpose of this letter is to set out Ofwat's views on the responsibilities of water companies.

Compensation for loss or damage

Section 209 of the Water Industry Act 1991 provides a strict liability on the water company (that is liability irrespective of any fault) for loss or damage caused by an escape of water from a main. Section 209(3)(b) exempts the water company from liability for loss or damage sustained by a public gas supplier. Advice obtained by Ofgem concludes that this exemption does not extend to liability to gas customers. Ofwat's view is that while there may not be complete certainty about that liability and only the courts can decide, there is a strong case both in law and in practice for water companies meeting the costs for loss or damage incurred by gas customers and/or gas transporters.

It would seem that most of the water companies involved in incidents have accepted responsibility for loss or damage and we would urge all companies to do so. Companies do have recourse to negligent third parties.

Responsibility for recommissioning gas equipment

Companies have, however, expressed concern about being expected to manage repairs to customers' equipment and checking for safety because they do not have the necessary expertise. Ofgem has told both Transco and the HSE that it considers that it should be Transco's duty to oversee the purging, relighting and recommissioning of gas equipment following an interruption. It considers this to be the case even if it involves bringing in registered CORGI engineers when water has passed the gas meter. Forthcoming amendments to the Gas Safety (Management) Regulations should set this requirement out clearly. Transco which is a gas transporter, not a gas supplier, should be able to recover these costs from the water company.

Compensation payments for gas supply interruption

As regards compensation solely for interruption to gas supplies Transco is liable for compensation (under its Network Code) for interruptions to gas supplies, but not where the interruption is caused by a third party. In contrast, water companies are required to pay compensation (under the Guaranteed Standards Scheme) for interruptions to water supplies regardless of the cause of that interruption, if the supply is not restored within prescribed time limits. Ofgem is proposing that, from 1 April 2002, Transco should be subject to Guaranteed and Overall Standards of Performance, and one of these would cover interruptions to the gas supply. Ofgem is discussing with Transco whether interim arrangements to cover the period until 1 April 2002 can be agreed.

Although water companies do not seem to be legally bound to make compensation payments for interruptions to gas supplies caused by water ingress, I understand that some companies have made ex gratia payments. It would seem desirable that all companies should consider doing so until the arrangements outlined above come into effect.

All this should ensure that in the future gas customers receive appropriate service and compensation without any of the difficulties that some have experienced in the past.

Yours sincerely

Michael Saunders

Director of Consumer Affairs