Commentary Strategic supplies Section 35: Provision of infrastructure
360.This section inserts a new Part 2A into the Water Industry Act 1991 (“the Act”) under the title of “Regulation of Provision of Infrastructure”.
361.New section 36A in the Act allows the “Secretary of State or Welsh Ministers” (“the Minister” (defined in new section 36E)) to introduce regulations to regulate the provision of infrastructure by a third party for the eventual use by water undertakers or sewerage undertakers. The regulations may in particular:
	confer regulatory functions on the Authority (Ofwat) to enable it to regulate the provision of infrastructure;
	apply the same or similar provisions contained in Part 2 of the Act with or without modification. These provisions include such matters as appointment of water and sewerage undertakers, enforcement orders, special administration orders and restrictions on voluntary winding up and insolvency proceedings.
362.The new section also provides that the regulations must specify the activities to which they apply which may include the designing, constructing, owning and operating of infrastructure to be used by undertakers (for example, it could include complex, novel or exceptionally large-scale construction projects that may expose customers to new financial risks) and allows them to define the term “infrastructure”, which may include parts of a project or a project in its entirety. However, the regulations must only make provision or confer functions in relation to projects or works that are of a size or complexity that threatens an undertaker’s ability to provide services for its customers (e.g. if there is a possibility that customers could be exposed to risks connected with the delivery of the projects that may result in the undertaker not being able to carry out its statutory functions or meet other obligations).
363.A new section 36B in the Act provides that the regulations under section 36A may allow the Ministers or the Authority (if the role has been delegated to it by the Minister) to specify one or more infrastructure projects which must be put out to tender. The regulations must also prohibit water and sewerage undertakers from carrying out infrastructure projects if they have been identified as the type of projects which have to be put out to competitive tender. However, the regulations may permit or require undertakers to carry out certain preparatory work associated with an infrastructure project and must also include provisions outlining which of the undertakers’ associate companies (e.g. parent or sister companies) may participate in tender processes. In addition the regulations must specify the procedures to be followed in a tender exercise. These provisions may specify factors that need to be taken into account by undertakers when considering bids (if any) and must enable an undertaker to determine which bid to accept.
364.This section also introduces a new section 36C in the Act which requires that the regulations must specify the criteria to be used in determining whether an infrastructure project must be put out to competitive tendering. The regulations may also require the Authority to seek the consent of the relevant Minister before exercising its delegated powers under new section 36B and to publish guidance on how it will determine which infrastructure projects will be subject to tendering.
365.New section 36D provides that the regulations may enable the Authority to designate a successful bidder as an “infrastructure provider”. The regulations may:
	confer full or limited powers and duties consistent with, or similar to, those in the Act upon infrastructure providers, the Authority, the Ministers and other public bodies (e.g. the Drinking Water Inspectorate or the Environment Agency);
	relieve water and sewerage undertakers from certain duties in relation to the infrastructure project; and
	vary, revoke or provide conditions of appointment on the designation and provide enforcement provisions.
366.New section 36E in the Act, defines “the Minister”. It provides that the Secretary of State is the Minister in relation to any infrastructure project that is provided or to be provided for the use of any English undertakers and that the Welsh Ministers are the Minister for any infrastructure project that is provided or to be provided for the use of any Welsh undertakers. Where the infrastructure project that is provided or to be provided is for the use of one or more English undertakers and one or more Welsh undertakers the Minister is the Secretary of State and the Welsh Ministers acting jointly.
367.New section 36F provides that in relation to infrastructure in Wales (for the use of undertakers wholly or mainly in England), regulations made by the Secretary of State must require the Secretary of State or Ofwat to consult the Welsh Ministers before specifying projects which must be put out to tender.
368.In relation to infrastructure in England (for the use of undertakers wholly or mainly in Wales), regulations made by the Welsh Ministers must require the Welsh Ministers or Ofwat to consult the Secretary of State before specifying projects which must be put out to tender.
369.New section 36G provides that regulations cannot be made unless a draft has been laid before, and approved by resolution of both Houses of Parliament in relation to regulations made by the Secretary of State, the National Assembly for Wales in relation to regulations made by the Welsh Ministers, and both Houses of Parliament and the National Assembly for Wales in relation to regulations made by the Secretary of State and the Welsh Ministers acting jointly. Ministers must also consult with persons likely to be affected by the regulations before the draft is laid before Parliament or the Assembly.