Full Assessment - Water Companies are not PA's subject to EIR

As previously stated in our letter dated , after careful consideration, the Commissioner's view is that water and sewerage companies (WASCs) and water only companies (WOCs) are not public authorities for the purposes of the EIR. The Commissioner's full assessment is provided below.

The term `public authority' is defined at regulation 2(2) of the EIR:

Regulation 2(2) provides that -

`Subject to paragraph (3), "public authority" means -

(a) government departments;

(b) any other public authority as defined in section 3(1) of the Act, disregarding for this purpose the Regulations in paragraph 6 of Schedule 1 to the Act, but excluding -

(i) any body or office-holder listed in Schedule 1 to the Act only in relation to information of a specified description; or

(ii) any person designated by Order under section 5 of the Act;

(c) any other body or other person, that carries out functions of public administration; or

(d) any other body or other person, that is under the control of a person falling within sub-paragraphs (a), (b) or (c) and -

(i) has public responsibilities relating to the environment;

(ii) exercises functions of a public nature relating to the environment; or

(iii) provides public services relating to the environment.'

It is generally accepted that WASCs and WOCs are not public authorities under regulation 2(2)(a) or 2(2)(b) and the Commissioner has confined his consideration to arguments in relation to regulations 2(2)(c) and 2(2)(d).

Regulation 2(2)(c): any other body or other person, that carries out functions of public administration

The EIR were made in response to an EC Directive, 2003/4/EC, which uses the term `performing public administrative functions' in its definition of a public authority. The Aarhus Convention 1998, from which 2003/4/EC derives, makes reference to public authorities and the Aarhus Implementation Guide 2000 addresses definitions, including the definition of `public authority' and `public administrative function' at page 32:

` “Public authority” also includes natural or legal persons that perform any public administrative function, that is, a function normally performed by governmental authorities as determined according to national law. What is considered a public function under national law may differ from country to country.'

In the case of Network Rail, the Information Tribunal considered the description `functions of public administration' at paragraphs 24-33 of its decision and concluded that `public administration' is a more restrictive term than `public function'. In consequence, while Network Rail might perform a public function (the Commissioner observes that this may also be extended to other public utility companies, including WOCs and WASCs), that public function is not such that it can be classed as `public administration'. In reaching this view, the Tribunal was assisted by the judgment of Blackburne J. in Griffin v South West Water Services Limited [1995] IRLR 15 [paragraphs 122-123] which stated, at paragraph 123:

“ SWW is no more an `administrative body' because it `administers' a service (the supply of water and sewerage services) than is a company carrying on business, manufacturing and distributing sweets because such a company `administers' that enterprise or is a firm of solicitors because it administers a service of supplying legal advice. I agree … that SWW's primary function, as a supplier of water and provider of a sewerage service, is to be contrasted with administrative functions such as town planning, court administration and any of the myriad administrative functions of the civil service”.

The Commissioner also considered the judgment in AB V South West Water Services Limited [1993] QB 507 (CA) in which the Court of Appeal found that South West Water had not been exercising functions of an executive or governmental character when supplying water, but it had been carrying out a commercial operation.

The Commissioner is satisfied that the Information Tribunal ruling in Network Rail is applicable in the circumstances, particularly in light of the judgment of Blackburne J. in Griffin v South West Water Services Limited, and that, accordingly, WOCs and WASCs are not public authorities as defined by EIR 2(2)(c).

Regulation 2(2)(d): any other body or other person, that is under the control of a person falling within sub-paragraphs (a), (b) or (c) and -

(i) has public responsibilities relating to the environment;

(ii) exercises functions of a public nature relating to the environment; or

(iii) provides public services relating to the environment.'

The key issue here is one of `control' and what can be said to constitute `control' in the context of the EIR.

It has been argued that WOCs and WASCs operations are controlled by means of close regulation. The water and sewerage industry has a number of different regulators, for example, in England and Wales Ofwat is the commercial regulator. The Drinking Water Inspectorate regulates water quality and The Environment Agency regulates water abstraction and pollution. The actual level of regulation has, however, also been described as `arms length supervision'.

The guidance provided by DEFRA indicates that in order for regulation 2(2)(d) to apply, the level of control needs to be sufficient to exert a “decisive influence”. The Commissioner would agree with that interpretation.

Having considered the regulatory responsibilities of the various bodies referred to above (and their Scottish and Northern Irish equivalents),the Commissioner accepts that the statutory regulation imposed does not constitute control of the utility company, but provides a supervisory framework in which it can be ensured that governmental objectives are met, for example in terms of the provision of quality services and protection against the possible abuse of a monopoly position. The Commissioner notes, for example, that Ofwat, has only limited powers to intervene and direct the operation of the water utility company, or require it to undertake certain actions, and that these exist only in circumstances where the company is judged to have breached its licence, or controlling legislation.

Although these various regulators set out frameworks within which the water companies must operate, including pricing restraints, the companies remain commercial, profit making organisations operating in a competitive market. .

There is no suggestion that the companies are not free to make their own commercial and management decisions, without interference or participation by the regulatory bodies. The companies are privately-owned, with shareholders, directors and run on commercial principles in order to make a profit. They are free to make their own financing, borrowing and investment decisions. The analogy is drawn with any other commercial business within the UK, which may also be subject to various statutory and regulatory constraints, for example by Companies House, or various professional licensing bodies, but would not be considered to be subject to `control' as a result.

Subject to minor provisions relating to the appointment of non-executive directors, no public body has the right to appoint, or veto the appointment of, a director or representative to the board of a water utility company and directors are obliged to act in conformity with the company's Memorandum of Association, in the best interests of the business. There is therefore no suggestion that a public authority may exert a controlling influence on a water company through majority representation on its board.

For these reasons, the Commissioner is satisfied that WOCs and WASCs enjoy a high level of commercial freedom, and independence from decisive regulatory interference, such that they should not be considered to be under the control of any licensing or regulatory body. As these are the possible routes to `control of a [public authority]' for the purposes of regulation 2(2)(d) the Commissioner also finds that the water utility companies are not public authorities as defined by EIR 2(2)(d).

I hope this information is helpful and clarifies the Information Commissioner's position. If we can be of any further assistance please contact our Helpline on 0303 123 1113 if you would prefer to call a national rate number, quoting your case reference number. You may also find some useful information on our website at www.ico.gov.uk.

Yours sincerely,

FoI Case Reception Unit

The Information Commissioner's Office