U.K. Plans Water Law to Spur Competition, Investment

Prime Minister David Cameron’s administration promised draft legislation this year that would spur competition in the water industry and encourage investment needed to keep supplies flowing as the U.K. climate becomes drier.

The rules would give the country’s water regulator Ofwat new powers over the industry and make it easier for businesses and public sector bodies to switch water and sewer suppliers, according to documents released by the government today. It would also increase opportunities for companies to invest in the industry and unlock supplies for periods of drought.

Britain’s water utilities, which were sold to investors 23 years ago, are struggling to boost investments needed to prevent leaks and clean up the environment as demand for water increases. The Institution of Civil Engineers, which advises companies about the industry, said the government is moving too slowly.

“We urgently need to address the growing gap between our water supply and demand, as highlighted by the current droughts, and it cannot be done without firm action and commitment from government,” Nick Baveystock, director general of the organization, said in an e-mailed statement today.

Today’s plan, confirmed by Queen Elizabeth II as she read out the government’s legislative agenda for the year ahead, affirmed proposals published in a government consultation paper issued in December.

That document put forward an “evolutionary approach” for reforming the industry, including another consultation in 2013 and legislation after the next election, which must be held by 2015. Full reforms would be in place “by the mid to late 2020s,” according to the December document.

Legislation Plan

Today, the government said the draft legislation would outline measures to improve environmental permitting regulations, extending them from pollution prevention toward the ability of companies and individuals to draw water from lakes and rivers, which is known as “abstraction” rights.

The current system governing abstraction was set up in the 1960s to balance competing human needs rather than to protect the environment.

The government expects droughts to become more frequent in the coming decades and has imposed a ban on watering with hoses in parts of the southeast after two dry winters prevented underground aquifers from refilling.

The bill is aimed at allowing businesses to get more competitive prices for water and sewer services and to improve the industry’s efficiency. The government estimates 90 billion pounds ($145 billion) has been invested in the water industry since it was privatized, creating companies such as Thames Water Ltd., Severn Trent Plc, and United Utilities Plc. (UU/)

To contact the reporter on this story: Reed Landberg in London at landberg@bloomberg.net.

To contact the editor responsible for this story: James Hertling in Paris at jhertling@bloomberg.net.