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Utility Regulators (Price Reviews)

Volume 402: debated on Thursday 3 April 2003

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What steps (a) Ofgem, (b) Oftel and (c) Ofwat are taking following the 50th Report by the Committee of Public Accounts in Session 2001–02 on Pipes and Wires to simplify the information requirements they place on companies and to change the period over which price reviews are conducted. [106693]

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs
(Mr. Elliot Morley)

Neither energy nor telecommunications policy is the responsibility of my Department. The Office of Water Services advises me that it has taken account of the Committee's recommendations in its approach to the next periodic review of water price limits. Ofwat has streamlined the information required from companies into two main submissions and has shortened the length of the period over which the review is conducted from three to two years.

I am pleased to hear that reply. The Minister will he aware that regulated water companies complain that much of the information that they give Ofwat is not used. Is he keeping up the pressure on Ofwat to ensure that all the information that it requires from the companies is proper and valid, so that we avoid useless paper chases in Whitehall?

I accept that, while regulation is important, as we are dealing with monopoly companies that must be regulated, bureaucracy should be kept to a minimum. As a matter of coincidence, I met Philip Fletcher, the regulator, yesterday in one of our regular meetings to discuss water issues. I know that his work and the information that he collects, some of which we discussed yesterday, are essential in the very complex task of price fixing and taking into account the needs of consumer protection, the environment and companies themselves. I believe that he is taking steps to be as efficient as possible and that the information that is collected is put to good use.

Paragraph 4.4 of the report describes the often perverse effects that the regulator's pricing policies can have on water and sewerage companies. As a result, I believe that a problem has been created in my constituency, as Yorkshire Water tells me that an over-prescriptive policy regarding the capital programme is preventing it from replacing inadequate sewerage, which is causing sewage to spill into the houses of local residents. Can my hon. Friend offer me any help in this matter? Will he meet me and one or two others to discuss the problem?

I am very happy to meet to discuss individual constituency cases and problems, so I offer my hon. Friend that assurance. I am not all together convinced about the claim to which he refers. I do not know all the details involved, but I can say that price fixing has an element relating to capital investment that is essential to meet the environmental and quality standards that consumers and the public want, many of which are important commitments in legislation and directives. Within that, there is provision for the sort of maintenance that we would expect from any water or sewerage company. I know that sewage flooding is an issue and that it is under discussion in relation to the next price-fixing round, but without knowing all the details, I am a bit sceptical about the suggestion that the capital programme is preventing action on such flooding.

In the context of the next round of discussions on water charges, one of the factors in which the Minister's Department will be closely involved is helping to quantify the costs of implementing the water framework directive. Will he tell the House what progress he is making to assist water companies in coming to conclusions on the costs of implementing that very important directive?

It is an important directive and the biggest ever to have come out of the EU. It provides some major benefits, and we should not forget that. It is true that there are potential costs. Part of the problem is that some of those costs will be met by work that is currently under way, including, for example, on the waste water directive and work that we are implementing in nitrate vulnerable zones relating to diffuse pollution. I think that our figures on cost implications will become more accurate as time progresses. The implementation date is 2015, but I think that we will have a clearer idea of the costs and commitments in about 2005.