The water and sewerage sectors in England and Wales have to comply with several different Acts of Parliament and European Directives. The legislation covers the following broad areas:

  • economic regulation of the sector
  • water supply
  • sewerage services
  • drinking water quality
  • environmental standards
  • customer service
  • flood and drought protection and adaptation

National legislation

The Water Act 1989 provided for the privatisation of the former water authorities.

Water related legislation (including the Water Act 1989) was subsequently consolidated into new Acts of Parliament. These included:

  • The Water Industry Act 1991, which sets out the main powers and duties of the water and sewerage companies, thus replacing those set out in the Water Act 1989, and defined the powers of the Director General of Water Services (now the Water Services Regulation Authority (Ofwat)).
  • The Water Resources Act 1991, which set out the functions of the National Rivers Authority (now the Environment Agency) and introduced water quality classifications and objectives for the first time.

Subsequent legislation

Subsequent Acts have modified the framework. These include the following:

  • The Competition and Service (Utilities) Act 1992 increased Ofwat’s powers to determine disputes and increased the limited opportunities for competition in the industry.
  • The Environment Act 1995 led to restructuring of environmental regulation and placed a duty on the companies to promote the efficient use of water by customers. It created a new body, the Environment Agency, which took over the functions of the National Rivers Authority, Her Majesty’s Inspectorate of Pollution, the waste regulation functions of local authorities and certain elements of the Department of the Environment. Natural Resources Wales now exercises the functions of the Environment Agency in Wales.
  • The Competition Act 1998 prohibits any agreements between businesses that prevent, restrict or distort competition. It also prohibits any abuse of a dominant market position. Ofwat shares enforcement powers in relation to the water and sewerage sectors with the Competition and Markets Authority (CMA).
  • The Water Industry Act 1999 made several important amendments to the Water Industry Act 1991. These included:
  • removing a company’s right to disconnect domestic customers for non-payment of bills,
  • limiting the circumstances in which companies can starting charging domestic customers on a metered basis,
  • securing that companies could continue to charge customers on the basis of rateable value.
  • The Water Act 2003 amended the framework for abstraction licensing, made changes to the corporate structure of economic regulation, and extended the scope for competition in the industry to large users.
  • The Enterprise Act 2002 amended the Water Industry Act 1991 to update the regime for the compulsory reference of certain mergers between water companies to the Competition Commission (now the CMA).
  • The Flood and Water Management Act 2010 encouraged the use of sustainable urban drainage systems (SUDs), amended the Water Industry Act to modernise the list of activities that can be restricted by water companies in a drought, and made it easier for water companies to offer lower tariffs to certain groups.
  • The Water Act 2014 enables greater competition for non-household customers (expected to be limited to customers of English water companies) and gives Ofwat new powers to make rules about charges and charges schemes, as well as making provisions for flood insurance and drainage boards.

European legislation

Most of the UK’s recent environmental legislation originates in the European Union (EU). This legislation also applies to all other EU member states.

As environmental problems differ between countries, European environmental legislation usually takes the form of a ‘directive’. A directive allows the EU to set the outcomes that member states have to achieve, but leaves implementation to each individual country. This allows each country to take into account their own legal systems and existing laws. Every member state must comply with European directives which take precedence over national legislation.

Some of the most important directives for the water and sewerage sectors are listed below.

  • The Water Framework Directive creates a single system of water management, based around a natural river basin – which may form part of two or more member states, or local government areas. The directive sets objectives and deadlines for improving water quality. It looks overall at both the ecology of the water and its chemical characteristics.
  • The Urban Wastewater Treatment Directive aims to protect the water environment from being damaged by urban waste water and certain industrial discharges.
  • The Marine Strategy Framework Directive establishes marine regions on the basis of geographical and environmental criteria. Member states – cooperating with other member states and non-EU countries within a marine region – are required to develop strategies to protect their marine waters.
  • The Floods Directive requires member states to carry out flood risk assessments, create maps of flood risk and develop flood risk management plans.
  • The Drinking Water Directive sets quality standards for drinking water and requires drinking water quality to be monitored and reported.
  • The Bathing Water Directive aims to protect public health and the environment by keeping coastal and inland bathing waters free from pollution.
  • The Sewage Sludge Directive aims to encourage the use of sewage sludge in agriculture and to regulate its use in in such a way as to prevent harmful effects on soil, vegetation, animals and man.