Scotland the Hydro Nation: prospectus and proposals for legislation consultation

SECTION 2

Hydro Nation and the Water Resources Bill

The First Minister announced the Bill in his Programme for Government in September 2011:
http://www.scotland.gov.uk/About/programme-for-government/2011-2012/WaterBill

The previous public consultation in this area, "Building a Hydro Nation" ran from December 2010 until March 2011. Over 70 responses were received during that exercise and they have helped to shape the current legislative proposals. That consultation, the published responses and the analysis of those responses are available at:
http://www.scotland.gov.uk/Topics/Business-Industry/waterindustryscot/publications/Consultations

This consultation sets out the provisions the Government intends to bring forward in the Water Resources Bill, covering the following three areas:

• Hydro Nation Duty
• Scottish Water
• Modernising the Legislative Framework

-Managing Temporary Water Shortages in the Public Supply
-Protecting Drinking Water Sources in the Catchment
-Prescribed Substances
-Septic tanks
-Non-domestic Customers

Legislation will not by itself deliver the vision - but these proposals offer a starting point for greater strategic development.

You are invited to comment on the new proposals for the Water Resources Bill by email or in writing by midnight on 12 March 2012 to:

By email: waterresourcesbill@scotland.gsi.gov.uk

Hydro Nation Duty

Scottish Ministers have set out their ambitions with regard to making Scotland a Hydro Nation. In order to formalise and support this ambition, the Bill will place a duty on Ministers to take all reasonable steps to develop the value of Scotland's water resources.

In doing this, they will take account of sustainability and relevant environmental legislation including the Water Environment and Water Services (Scotland) Act 2003 and the Climate Change (Scotland) Act 2009.

Water resources in this context relate to inland water, wetlands and transitional waters, not to coastal waters or the marine environment. The value of water resources relates not only to the water itself, but also to services, industries and other economic activities such as academic research and hydro-power generation.

In undertaking this duty, Scottish Ministers will take account of and work with relevant experts and public bodies, facilitating a collaborative approach.

The Bill will require Ministers to report on the implementation of this duty within three years of the Act coming into force.

We would welcome comments on the draft legislative provisions set out below:

Scottish Water has a particular role to play in supporting this agenda.

Scottish Water

Background

Scottish Water is a public sector success story.

It serves almost every household and business in Scotland, providing 1.3 billion litres of high quality drinking water through 47,000 km of pipes every day, and collects and treats nearly one billion litres of wastewater prior to returning it to our rivers and seas.

Expert management and significant investment since 2002 have driven dramatic improvements in efficiency and the services Scottish Water provides. By 2015 Scottish Water should match the best performing water companies in England and Wales while having domestic charges which are on average 15% lower.

Scottish Water is one of the largest publicly owned water and sewerage enterprises in the world and, with a turnover of £1.1 billion, it is one of Scotland's largest businesses. It has an experienced, business focused Board, a large asset base and a committed and skilled workforce which has extensive expertise in asset management, procurement, project management and perhaps unrivalled experience in managing regulatory processes. In short, it is a tremendous asset for Scotland.

Scottish Water's function is to provide high quality water and sewerage services to the households and businesses of Scotland. This must remain its focus. In addition, the Scottish Government considers that Scottish Water can and should play an important role in the development of Scotland as a Hydro Nation. It should evolve into a dynamic organisation, maximising the benefit from its expertise, assets and the water resources it has influence over for the continuing benefit of water customers, the environment and the wider Scottish economy.

Principles to Guide Scottish Water's Development

In its 'Building a Hydro Nation' consultation the Scottish Government set out key principles that would guide Scottish Water's development while protecting its water and sewerage services. These principles received strong support in consultation responses and suggestions were made as to how they could be further strengthened - in particular:

• An over-arching principle that the essential water and sewerage services provided by Scottish Water should not be compromised. It was also suggested by several respondents that this principle should also refer to quality regulation as well as economic regulation; and
• The word 'exploitation' should not be used in the final principle.

The Government has incorporated these suggestions (see below) and will use these principles to guide Scottish Water's forward development.

Overarching Principle

The essential services provided by Scottish Water in the delivery of clean fresh drinking water and the collection and treatment of sewage must not be compromised. Scottish Ministers will expect Scottish Water to deliver its core functions with increasing efficiency and at a standard comparable to the best providers elsewhere. Independent quality and economic regulation will continue to be essential to achieving this.

Principle One

Scottish Water's commercial activities should support the Scottish Government's overall purpose to increase sustainable economic growth and in particular support the strategic objectives to make Scotland Greener and Wealthier and Fairer.

Principle Two

Scottish Water should develop new activities and take on new functions where these are aligned to its existing activities or where Scottish Water demonstrably has the expertise and resources to do so.

Principle Three

Scottish Water should seek to utilise its assets and expertise to develop Scotland's water resources as fully as possible. Scottish Water should develop new activities and take on new functions where there is a robust business case that they will deliver strong commercial returns or other social benefits. Scottish Water should avoid business and technical risks that are inappropriate for an essential infrastructure provider.

Scottish Water - New Duties

The 'Building a Hydro Nation' consultation set out the potential for Scottish Water to develop commercially, to use its assets to promote renewable generation and to generally support the Hydro Nation agenda. These proposals received strong support in the consultation responses. The Government considers that Scottish Water's considerable potential in these areas should be encouraged and recognised in legislation and so the Bill will contain provisions to give Scottish Water new functions. These will be designed to promote the full utilisation of its assets, to plan and promote renewable generation and thus more broadly supporting the duty on Ministers set out in Part 1 of the Bill.

In line with the overarching principle, and acknowledging the concerns raised in the previous consultation, the provisions will make the pursuit of these functions conditional on them not being inconsistent with the economic, efficient and effective exercise of the water and sewerage functions.

The present statutory framework was designed for Scottish Water being almost wholly focused on the delivery of its core water and sewerage services. It does not envisage Scottish Water undertaking significant activities beyond these services. A consequence of the current framework is that all of the functions of Scottish Water under any enactment, other than the exercise of its general powers under Section 25 of the Water Industry (Scotland) Act 2002 are defined as "core functions".

The Scottish Government considers that the additional functions the Bill will bestow on Scottish Water should not be classified as "core functions". The Bill will therefore include provisions to distinguish between Scottish Water's water and sewerage functions and the additional functions set out above.

Scottish Water - Clarifying commercial powers

To be able to develop Scotland's water resources and its own assets fully, Scottish Water requires clarity and certainty over the powers it has to operate beyond its core functions. The 'Building a Hydro Nation' consultation proposed an amendment to section 25 of the Water Industry (Scotland) 2002 Act to provide this. Consultation responses supported the proposed amendment with some respondents suggesting that the word 'exploitation' should not be used due to its perceived connotations. The Scottish Government agrees with this and therefore proposes that the Bill contains the following provisions.

Scottish Water - Powers for Scottish Ministers to Lend to Subsidiaries

The Water Industry (Scotland) Act 2002 provides for Scottish Ministers to lend to Scottish Water. The Water Services etc. (Scotland) Act 2005 provides for Scottish Ministers to lend to Scottish Water's non-domestic retail business undertaking, Business Stream. Scottish Water set up Business Stream as a wholly owned subsidiary but there are no powers for Scottish Ministers to lend to any other subsidiary of Scottish Water. If Ministers wished to make such lending available, for instance to support investment in waste facilities or renewable energy infrastructure on a commercial basis, that lending would have to be routed through Scottish Water. This is administratively inefficient and even more undesirably it potentially exposes water and sewerage customers to commercial risk, a concept which was not supported by responses to the consultation. The Bill will therefore include provisions to enable Scottish Ministers to lend directly to a Scottish Water subsidiary.

MODERNISING THE LEGISLATIVE FRAMEWORK

The previous consultation exercise asked respondents about existing areas of the law that could usefully be modernised. There was support for modernising the legislative framework in relation to management of drought situations and also in the control of prescribed substances.

Managing Temporary Water Shortages in the Public Supply

Any responsible Hydro Nation seeks to optimise usage of water resources and this must include arrangements for the times when water resources are diminished. Within Scotland, occasions when water resources are reduced are rare events. However, having a modern system in place that allows droughts to be properly managed ( i.e. drinking water supplies maintained, industrial usage subject to minimal disruption and the environment protected) is a key element of the Hydro Nation agenda.

Provision of a supply of wholesome drinking water for domestic purposes is a vital public service. In Scotland this duty falls to Scottish Water. Currently, there are extensive and well established arrangements in place to manage abstraction and treatment of water for public supply during normal conditions. Additionally, there are provisions to manage emergencies that disrupt supplies. The public water supply can be subject, on occasion, to shortages that result from lack of rainfall, known as drought.

The previous consultation asked for views on modernising existing legislation to bring it in line with best practice. Responses indicated support for updating the drought provisions of the Natural Heritage (Scotland) Act 1991 and the Water (Scotland) Act 1980 which deal with drought orders and hosepipe bans respectively. We welcome comments on the proposals outlined below.

Current situation

Powers to enable Scottish Water to provide drinking water are principally contained within the Water (Scotland) Act 1980 (as amended). Authorisation to abstract water is granted by SEPA in accordance with the Water Environment (Controlled Activities) (Scotland) Regulations 2011 ( CAR).

From April 2011, emergency arrangements for abstraction of water and compensation flows were incorporated into CAR Regulation 18 to ensure that the Water Framework Directive was fully implemented.

Pre-existing primary legislation for drought management sits within the Natural Heritage (Scotland) Act 1991 (NHSA91), with a mechanism known as "drought orders" which allows Scottish Water to manage drought situations. Both CAR and NHSA91 regimes are current, but are not well aligned.

Modernising the Natural Heritage Scotland Act 1991 - proposals for change

It is proposed that the term "drought order" will be substituted with "Temporary Water Management Order" ( TWMO). The test for applicability of a TWMO will remain "exceptional shortage of rain" in accordance with the existing legislation. This definition will be extended to incorporate "insufficient recharge of water resource systems" into the definition. This is to cover situations where drought is caused not by a lack of rain but by the failure of a reservoir to fill, during periods of heavy snow for example.

It is proposed that the term "emergency drought order" will be substituted with the term "Emergency Water Management Order" ( EWMO). The separation between the TWMO and EWMO will be largely unchanged from the NHSA91.

To achieve better alignment with the CAR arrangements there will be some modification to NHSA91 relating to: notice arrangements, consultation requirements and administrative procedures. Other significant changes are laid out below.

Proposals for managing customer demand when active water saving is required

To ensure droughts can be well managed and water resources are equitably shared, it may become necessary to manage customer demand for water. To date, Scotland has not had detailed proposals in this area. Given that climate change may affect rainfall patterns, it seems prudent to expect that managing customer demand may be needed more frequently in future. Active water saving will help to ensure that the balance of interests between: maintaining drinking water supplies; industrial / commercial uses of water and protection of the environment, can be achieved in a drought event.

A flexible approach is proposed, that begins with raising public awareness of a water shortage and can be escalated if the situation requires. Steps a) - d) below lay out the proposals and comments are welcomed.

a) Introduce new measures termed "Temporary Water Saving Measures" which are available to Scottish Water and can be implemented at its discretion, subject to appropriate notice arrangements, for domestic customers. The obligation will be on Scottish Water to make domestic customers, in affected localities, aware of the need for water saving. This obligation set out within the Bill will not be accompanied by any enforcement powers.

With the explicit intention of saving water, Scottish Water may advertise all or any of the following Temporary Water Saving Measures and seek customer cooperation to:

a) avoid watering a garden using a hosepipe or sprinkler
b) avoid cleaning a private motor-vehicle using a hosepipe or pressure washer
c) avoid watering plants on domestic or other non-commercial premises using a hosepipe or sprinkler
d) avoid cleaning a private leisure boat using a hosepipe or pressure washer
e) avoid filling or maintaining a domestic swimming pool or paddling pool
f) avoid drawing water, using a hosepipe, for domestic recreational use
g) avoid filling or maintaining a domestic pond using a hosepipe
h) avoid filling or maintaining an ornamental fountain
i) avoid cleaning walls or windows of domestic premises using a hosepipe
j) avoid cleaning paths or patios using a hosepipe or pressure washer
k) avoid cleaning other artificial outdoor surfaces using a hosepipe or pressure washer
l) undertake other water saving measures as may be appropriate to the locality

Scottish Water would need to ensure that awareness raising activities and water saving advice was suitable to customers' needs in the location affected.

b) It is proposed that the request to cooperate with temporary water saving measures would be converted into a requirement, backed by enforcement powers, where Scottish Water seeks them under a TWMO from Scottish Ministers. Scottish Water would have discretion concerning whether to apply for this power. For instance, where a drought is escalating in severity or extent, there may be a need to take this step. Scottish Ministers would need to grant enforcement powers for temporary water saving measures against domestic customers within the TWMO.

c) If the above steps prove insufficient to manage the water shortage, Scottish Water could apply to Scottish Ministers for the power to advertise and request temporary water saving measures by commercial and industrial sectors. It would be for Scottish Ministers to grant or refuse the TWMO application.

Where such temporary water saving measures are required, then Scottish Water could then advertise and seek co-operation with any or all of the following:

a) avoiding watering outdoor plants on commercial premises
b) avoiding watering fairways on golf courses (municipal or private clubs)
c) avoiding filling or maintaining non-domestic swimming or paddling pools
d) avoiding filling or maintaining a pond
e) avoiding operating mechanical vehicle washers
f) avoiding cleaning any vehicle, boat, aircraft or railway rolling stock
g) avoiding cleaning non-domestic premises
h) avoiding cleaning a window of a non-domestic building
i) avoiding cleaning industrial plant
j) avoid suppression of dust
k) avoiding operating cisterns in unoccupied or closed buildings
l) undertaking other actions that can be clearly identified that are relevant to the locality

Additionally, there would be an obligation on Scottish Water to make Licensed Providers aware of any temporary water shortage in the locality of their customers. This information can then be passed on by LPs to their customers.

d) In the highly unusual circumstances where a drought situation continues to develop, it is proposed that Scottish Water will be able to apply to Scottish Ministers for an Emergency Water Management Order ( EWMO) to convert the request for cooperation into a requirement for commercial and industrial users to avoid some or all of the above activities. This would be backed by enforcement powers. It will be for Scottish Ministers to grant such powers. Additionally, as already laid down in NHSA91, Scottish Ministers will be able to introduce any other temporary water saving measures deemed necessary in the circumstances.

It is intended that this package of new measures will encourage responsible management and usage of water when resources are diminished.

Responsible Management of Water Resources

It is vital that we take our responsibility towards the environment seriously and this includes proactively managing water supplies. Our aim should be to limit or prevent harmful substances getting into the water supply, where this is possible, and having chemical treatment in place where it is not.

Protecting Drinking Water Sources in the Catchment

Drinking water in Scotland is of excellent quality:
http://www.dwqr.org.uk/technical/annual-report

Scottish Water, in the course of its duty to provide wholesome drinking water, may become aware that a particular chemical or other substance is present in the drinking water from a particular catchment. At the present time, treatment of water is the main method for removing undesirable constituents in the raw water.

Present Situation

At present, Scottish Water uses its powers under the Water (Scotland) Act 1980 to manage catchments and to proactively manage the quality of raw waters used for drinking water supplies. The existing legislation is general and makes no specific provision for using catchment management techniques to protect sources of drinking water.

Proposed Way Forward

In this Bill, we are proposing that Scottish Water should have powers to access the land that forms part of the water catchment and to test the raw water to ascertain the source of the problem. Once identified, Scottish Water could work with the landowner or tenant to implement solutions to limit the substance reaching the raw water source.

A pro-active approach to catchment management to reduce sources of diffuse pollution that affect the quality of drinking water is consistent with the requirements of more recent legislation such as the Water Framework Directive. Additionally, managing diffuse pollution at, or near, the source is advantageous as it allows more sustainable solutions to be implemented. Costs of capital expenditure and operational expenditure for drinking water treatment may be managed more effectively where catchment management approaches are implemented. Combining catchment management for the protection of drinking waters with treatment may result in improved compliance with drinking water standards, where treatment alone will not achieve the required standards.

Prescribed Substances

Responses to the previous consultation indicated support for modernising provisions relating to Prescribed Substances.

" Prescribed Substances" is a general term relating to a range of substances that have been identified as harmful to the water environment. In particular, prescribed substances include Priority Substances ( PS) and Priority Hazardous Substances ( PHS) identified under the Priority Substances Directive 2008/105/EC and substances identified within the Water Framework Directive 2000/60/EC.

Current Situation

Scottish Water has a duty to drain under the Sewerage (Scotland) Act 1968 (as amended) and makes discharges from the public sewerage system to the water environment. Discharges are subject to control through discharge permits issued by SEPA under the Water Environment (Controlled Activities) (Scotland) Regulations 2011. However, the drainage system is essentially an open system, and although Scottish Water has some powers to control inputs of trade effluent into the sewer, it has no direct control over the constituents that enter the drainage system from domestic sewage, commercial premises or from surface water. Essentially, what enters the drainage system may ultimately enter the water environment as sewers provide a pathway to rivers and the sea.

Proposed Way Forward

In order to better manage prescribed substances and contribute to delivery of a good water environment, it is proposed that additional powers are laid out in the Bill to allow Scottish Water to undertake work in drainage catchments and take pro-active actions to identify pollution. This approach will only be used in instances where it is shown to i) be cost effective and ii) be in the interests of customers and iii) provide an environmental benefit.

Specifically, the Bill will introduce proposals to amend Part II of the Sewerage (Scotland) Act 1968 to clarify that trade effluent consents issued by Scottish Water can identify prescribed substances within them. This will ensure that traders who use and discharge any prescribed substance can expect to contain the substance within their site, such that it is not released to the sewer and hence will not reach the water environment. This approach is consistent with the Polluter Pays Principle and control of pollutants at source.

Additionally, the Bill will clarify that discharges of fats, oils and grease to the foul sewer is an offence and will establish powers to rectify blockages.

Finally, in order to ensure that pollution problems caused by cross-connections between the foul and surface water sewer may be actively addressed, the Bill will include provisions to clarify that cross-connection is a defect that can be rectified under the Sewerage (Scotland) Act 1968. This will be supported by arrangements to allow Scottish Water to remedy these defects and recover costs, where owners do not comply with a notice to conduct the works.

Septic Tanks

Current Position

Septic tanks are widely used across Scotland for the collection and treatment of household waste water in rural areas. Under the Water Environment (Controlled Activities) (Scotland) Regulations 2011 it is a requirement that the discharge from a septic tank is registered with SEPA. The registration conditions require that 'the effluent treatment system shall be maintained in accordance with the manufacturer's or designer's recommendations, and in any event, in good working order'.

Research suggests that the contribution from sewage discharges in rural areas to total pollutant loadings can be as much as 10%. It can be difficult to establish hard evidence that individual septic tanks are causing pollution as they rarely cause deterioration at a water body scale. However, cumulatively these can have an adverse impact on water quality i.e. private drinking water supplies and achievement of bathing water standards. Shellfish grown in waters that are adversely affected by septic tank discharges may not achieve food standards. Litter from sewage discharges, including septic tanks needs to be reduced in order to meet our Marine Strategy Framework obligations.

Proposed way forward

We want to emphasise prevention rather than remediation, and the challenge is to change our approach from one which is essentially enforcement-based to one which addresses pollution at source. As part of its RBMP delivery programme, the Scottish Government wishes to explore the potential for a more integrated approach to managing sewage discharges from septic tanks. This is likely to be the most cost-effective way of reducing pollution impacts; and an overall reduction in pollutant loadings may help reduce the need for carbon-costly solutions.

There are a number of ways to tackle problems relating to septic tank management, not all of which require legislation. We will therefore work with SEPA and Scottish Water to take a joined up approach, particularly around raising public awareness of the importance of maintaining a septic tank, how it can be emptied, and how to register a tank with SEPA.

In the case of community septic tanks, it can be difficult for the different owners to come to an agreement around sharing the cost of maintenance and emptying the tank. For SEPA, the lack of a single responsible person makes it difficult to pursue a case around the harmful impact on the environment. In the Bill, we will seek a legal mechanism to encourage regular maintenance and emptying of communal septic tanks.

Non-domestic Customers

Non-domestic customers receive water and sewerage services from their chosen Licensed Provider ( LP). There are a number of LPs who operate in a competitive market in Scotland and supply water and sewerage services to the commercial and industrial sectors. This market is comparatively new within Scotland and as it has matured a number of areas need to be addressed to ensure that the market is operating efficiently and that those receiving water and sewerage services are paying for their service.

LPs may inherit customers from another provider, either because a gap or vacant site has been identified and allocated to them or because another licensed provider has failed and its customers are reallocated amongst the remaining providers. The customers would be in receipt of water and sewerage services but would not have signed a contract with the new LP. However, as these customers are receiving a service, LPs should be able to demand and recover charges from these customers and we will clarify this in the Bill.

At present empty non-domestic properties are not charged for water and sewerage services. As these properties are still receiving drainage services, and have the availability of water supplies at any point there is an argument that these properties should be contributing to the maintenance of the system by paying fixed charges and for the drainage services they are utilising. The Scottish Government will engage with business organisations on introducing this change from 2015, with any additional income from charges being used to lower the charges of other non-domestic customers. The Bill will clarify the ability of LPs to demand and recover charges from landlords of empty properties so these are in place if required.