Code for Adoption Agreements

The Water Act 2014 introduced changes to the Water Industry Act 1991 (WIA91) requiring Ofwat to issue statutory codes for adoption agreements. These are the agreements that developers or self-lay providers (SLPs) enter into when they want an appointed water or sewerage company to take over responsibility for infrastructure they have constructed. They are the agreements entered into under section 51A WIA91 for water infrastructure, and under section 104 WIA91 for sewerage infrastructure. The new duty for Ofwat to issue a code came into effect for companies operating wholly or mainly in England in October 2017.

On 13 November 2017, we published our Code for Adoption Agreements. This followed our engagement with the sector and its customers through a discussion paper we published in September 2016, a stakeholder workshop in January 2017 and our statutory consultation on the draft code in summer 2017.

The Water Act 2014 also introduced changes to the WIA91 requiring Ofwat to issue statutory codes for adoption agreements for companies operating wholly or mainly in Wales. The Welsh Government, however, repealed these changes in March 2019 because it does not want these changes to come into effect before the changes to the governance of the water sector resulting from the Wales Act 2017, which are currently expected to take place in April 2022. We will work with the Welsh Government to keep this under review.

What is the Code for Adoption Agreements?

It is a single code that covers the adoption of water infrastructure and sewerage infrastructure. It applies to companies wholly or partly in England.

Why have we introduced the Code for Adoption Agreements?

It is crucial that developers, new appointees and SLPs have confidence they can receive the services they want from companies to enable their own business in providing contestable services. End-user customers must also have trust and confidence that their company will only adopt quality, resilient infrastructure.

We expect that in bringing in a Code for Adoption Agreements we can ensure there is a consistent approach to adoption agreements in the sector with consistent information being provided to those parties that need that information.

Furthermore, in introducing the Code we expect the sector to demonstrate its commitment to providing a good customer experience for its customers, which in turn will support the Government’s objective of housing growth and a level playing field for customers who wish to apply for and enter into adoption agreements.

What are the expectations on companies?

The Code sets a framework of overarching principles within which companies must deliver adoption agreements and places obligations on companies to work with their customers to develop, agree and maintain sector guidance (setting out the processes by which parties can enter into adoption agreements) and model adoption agreements.

There is already guidance for the adoption of water and sewerage infrastructure, which will provide a useful starting point for companies, but the guidance companies are expected to produce will be expected to comply with the requirements in the Code.

Our Code sets out the minimum requirements for these documents, including information and publication requirements; when deviations from them may be permitted; and governance arrangements, which include the sector convening panels to deal with changes to the codes.

Companies need to submit the water sector guidance and model water adoption agreement to us for approval.

What timetable is the sector working to?

Water sector documents

On 7 January 2019, companies submitted to us, for our approval, draft water sector guidance and draft model water adoption agreement. The original deadline for the submission of these documents was 1 October 2018, however, this was moved to 7 January 2019 at the request of companies to allow them to undertake further engagement and consultation on the documents, in order to ensure that as much as possible the documents reflected a broad consensus of opinion between customers and companies.

We have now reviewed the draft water sector guidance and draft model water adoption agreement. We consider that companies have produced a set of documents that broadly include the required content but there are some issues that need resolving before we can considering approving them, in particular, with regards to the draft model water adoption agreement.

We are, therefore, providing companies with additional time to rectify the issues we have identified and re-engage further with stakeholders with a view to providing us with a revised recommendation regarding the water sector guidance and model water adoption agreement.

We are currently agreeing the time frame for this further work and our review with companies. We will provide a further update in April 2019.

Sewerage sector documents

The deadline for companies to submit the draft sewerage sector guidance and draft model sewerage adoption agreement was 1 April 2019 and, on 26 March 2019, companies submitted those document to us for our approval.

Subject to the quality of the documents submitted to us by companies, we anticipate approving the sewerage sector guidance and model sewerage adoption agreement by 31 July 2019, with them coming into effect from 1 October 2019.

Further information