Government heads off most Special Measures amendments at Report Stage

Government amendments to the Water (Special Measures) Bill were agreed at Report Stage in the Lords last week. Moved by Baroness Hayman of Ullock, these concerned:

• Ensuring that water companies develop robust and comprehensive pollution incident reduction plans, and holding companies accountable for delivering the measures outlined in the plans (Amendment 12).

• Requiring water company Drainage and Wastewater Management Plans to explain the intended contribution of nature-based solutions, technologies and facilities (Amendment 42).

• Requiring Ofwat to have regard to the need to contribute to the achievement of national targets on climate change and other environmental matters where relevant to its functions (Amendment 48).

• A group of amendments extending the relevant clauses to cover the water supply network as well as the sewerage network, and to Wales. 

Only two other amendments were successful on division: 

• Amendment 2, moved by cross bencher Lord Cromwell, requiring water companies to report annually on their financial structuring, debt levels and any associated risks. 

• Amendment 11, moved by shadow EFRA minister Lord Roborough, ensuring Ofwat’s new rules on remuneration and governance are rapidly implemented via statutory instrument. 

Most other amendments discussed were either withdrawn or not moved, with a couple disagreed on division. Some key proposals were: 

• Giving a specific role to environmentalists alongside consumers in decision making.

• Requiring Ofwat to interact with ‘civil society’.

• Enabling employees and customers to elect members of the Ofwat board, and giving them powers to vote on the remuneration of Ofwat directors. 

• Removing the extension of the performance-related pay restrictions to roles beyond chief executives and directors (Amendment 4).

• Preserving flexibility for water companies to decide how consumer views are taken into account (for instance, via board membership, committee or panel) rather than allowing prescription from Ofwat.

• Removing the retrospective application of performance related pay rules to the 2024-25 year, commencing this instead for 2025-26.

• Limiting water company flexibility to pay returns to shareholders when leverage becomes excessive (Amendment 58).

Baroness Ullock argued most of these ideas were either already catered for, in progress through Government actions, or would be considered by the independent Water Commission.

She offered specific reassurance on Amendment 4: “Ofwat has no intention to extend the rules on remuneration and governance beyond board level at this time. The Government support this position. However, we are clear that Ofwat’s powers must remain future-proofed to ensure that the application of the rules can be adapted in line with changes in the structure and performance of water companies.”

Regarding Amendment 58, she referenced the scale of the PR24 investment requirement and shared: "The Government take this issue very seriously… introducing further rules on borrowing through this Bill is not appropriate for the water industry at this time. That is what I want to stress—‘at this time’.”