WATER SECTOR REGULATION LAW (2019 Revision)

CAYMAN ISLANDS WATER SECTOR REGULATION LAW (2019 Revision) Supplement No. 13 published with Legislation Gazette No. 4 of 21st February, 2019. PUBLISHING DETAILS Law 16 of 2017 consolidated with Laws 13 of 2018. Revised under the authority of the Law Revision Law (1999 Revision). Originally enacted — Law 16 of 2017-27th March, 2017 Law 13 of 2018-29th June, 2018. Consolidated and revised this 1st day of January, 2019. Page 2 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Arrangement of Sections CAYMAN ISLANDS WATER SECTOR REGULATION LAW (2019 Revision) Arrangement of Sections Section Page PART 1 - PRELIMINARY 1. Short title ...................................................................................................................................5 2. Interpretation .............................................................................................................................5 PART 2 - POWERS, DUTIES AND RESPONSIBILITIES OF THE UTILITY REGULATION AND COMPETITION OFFICE 3. Functions of the Office ...............................................................................................................8 PART 3 - PROVISION OF WATER SUPPLY OR WASTE WATER SERVICES TO THIRD PARTIES 4. Licence required for provision of water supply or wastewater services ..................................... 10 5. Operator licences .................................................................................................................... 11 6. Grant of service provider licence .............................................................................................. 11 7. Assignment or transfer of service provider licence ................................................................... 12 8. Renewal of service provider licence ......................................................................................... 12 9. Modification of service provider licence .................................................................................... 14 10. Regulatory fees and financial reporting .................................................................................... 14 11. Power to take possession of water or wastewater infrastructure in certain cases ..................... 15 12. Register of applications and licences ....................................................................................... 17 c Revised as at 1st January, 2019 Page 3 Arrangement of Sections Water Sector Regulation Law (2019 Revision) PART 4- INTERCONNECTION OF WATER SUPPLY OR WASTEWATER SYSTEMS 13. Interconnection agreements .................................................................................................... 17 PART 5 - CONSUMER PROTECTION 14. Required standards of performance ......................................................................................... 18 15. Confidentiality .......................................................................................................................... 19 PART 6 - MISCELLANEOUS PROVISIONS 16. Malicious damage to property .................................................................................................. 20 17. Order for payment of compensation ......................................................................................... 21 18. Central Planning Authority to consult ....................................................................................... 21 19. Duty of service providers to keep maps showing their sewers and supply lines ....................... 21 20. Power to make regulations ...................................................................................................... 22 21. Transitional arrangements ....................................................................................................... 22 SCHEDULE 25 GENERAL REGULATORY PRINCIPLES 25 Definitions ......................................................................................................................................... 25 Use of regulatory framework ............................................................................................................. 25 Promotion of sustainability ................................................................................................................ 25 Promotion of stability ......................................................................................................................... 26 Promotion of transparency ................................................................................................................ 26 Promotion of predictability ................................................................................................................. 27 Promotion of cost effectiveness ......................................................................................................... 27 ENDNOTES 29 Table of Legislation History: .............................................................................................................. 29 Page 4 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Section 1 CAYMAN ISLANDS WATER SECTOR REGULATION LAW (2019 Revision) PART 1 - PRELIMINARY 1. Short title 1. This Law may be cited as the Water Sector Regulation Law (2019 Revision). 2. Interpretation 2. In this Law — “administrative determination” has the meaning assigned to that expression by section 2(1) of the Utility Regulation and Competition Law (2019 Revision); “appointed operator” means a person appointed by the Office under section 11(4) to take possession of and operate a concession in place of any operator licensee or service provider licensee; “assets” mean the material assets and facilities owned, operated or leased by an operator licensee or a service provider licensee required to operate the relevant concession; “Authority” means the Water Authority established under section 3 of the Water Authority Law (2018 Revision); “building” includes any structure or erection of a permanent or semi- permanent nature and any part of a building as so defined, but does not include plant or machinery comprised in a building; c Revised as at 1st January, 2019 Page 5 Section 2 Water Sector Regulation Law (2019 Revision) “capital investment plan” means those additions to its assets that a service provider intends to make, that, when added, will form part of its rate base as approved by the Office; “concession” means an instrument by which the Cabinet grants a right or privilege enabling a person — (a) to produce or supply water, or both, under the Water (Production and Supply) Law (2018 Revision); or (b) to collect, convey and treat wastewater under the Wastewater Collection and Treatment Law(2019 Revision); “concessionaire” means a person to whom a concession has been granted; “consumer” means a person who is a customer of a service provider; “consumer information” means any data that relate to a customer’s (or any group of customers’) identity, billing address, service address, consumption of water, patterns of water consumption, credit history, payment history, references, applications or other service related forms completed by or on behalf of a consumer and information contained therein; “critical national infrastructure” means systems and assets, whether physical or virtual, so vital to the Islands that the incapacity or destruction of the systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters; “domestic use” means the use of water for washing, drinking, flushing closets, private gardening and the other usual household purposes, on any premises which are used solely for private residential purposes; “domestic wastewater” means any waste substance, liquid or solid, associated with human habitation, or which contains or may be contaminated with human or animal excrete or offal; “freshwater” means water with a total dissolved solid content of five thousand parts per million or less; “functions” includes responsibilities, powers and duties; “Government’s Policy” means the policy to be followed by the Office pursuant to directions given by the Cabinet under section 12(1) of the Utility Regulation and Competition Law (2019 Revision); “licence” means a licence granted by the Office pursuant to its functions under this Law; “licensee” means a person to whom a licence is granted; “non-potable water” means water which may or may not be potable water but can be beneficially used, and does not include process water, wastewater or trade effluent; Page 6 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Section 2 “Office” means the Utility Regulation and Competition Office established under section 4 of the Utility Regulation and Competition Law (2019 Revision); “operator licence” means a licence granted by the Office under section 5(2); “potable water” means water which is intended for consumption by humans, that is, water which has no impurities present in amounts sufficient to cause disease or harmful physiological effects, and the bacteriological and chemical and aesthetic quality parameters of which comply with values established under section 4 of the Public Health Law (2002 Revision) or, if none have been established, standards established by the Authority; “premises” means messuages, buildings, land, easements or hereditaments of any tenure, whether open or enclosed, whether built on or not, whether public or private and whether maintained or not under statutory authority, and includes any place or structure, or any part thereof, used or intended to be used for human habitation, or for employment or any other purpose whatsoever; “public wastewater system” refers to the conveyance of sewage and trade effluents away from premises via a system owned or operated by a service provider; “public water supply system” refers to the conveyance of water into premises via a system owned and operated by a service provider; “RCAM” means the mechanism for determining and modifying prices for services rendered by the Authority or a concessionaire to consumers, as approved by the Office and specified by the Office in administrative determinations issued by the Office in respect of the Authority or in a licence issued by the Office to a concessionaire; “sectoral utility” means a utility market or sector for which the Office has specific responsibility under this Law or the Water Laws; “service provider” means the Authority or any concessionaire that has been issued with a licence by the Office to provide water or wastewater services; “service provider licence” means a licence granted by the Office under section 6(2); “statutory fee” means the portion of the cost of the various statutory functions exercised by the Authority under the Water Authority Law (2018 Revision) to be paid by concessionaires to the Authority; “territorial waters” means the waters of the sea within the limits of territorial jurisdiction of the Islands; “trade effluent” means any liquid either with or without particles or matter in suspension therein, which is wholly or in part produced in the course of any trade or industry carried on at trade premises and includes a reference to all c Revised as at 1st January, 2019 Page 7 Section 3 Water Sector Regulation Law (2019 Revision) waste in a liquid, solid or gaseous state but does not include domestic wastewater; “utility services” means networks operated or services provided by a sectoral provider; “wastewater” means domestic wastewater or trade effluent, or both, from residences, commercial buildings, industrial plants and institutions, together with any groundwater, surface runoff or leachate that may be present; “water” means potable water and non-potable water; “Water Laws” means the Water (Production and Supply) Law (2018 Revision) and the Wastewater Collection and Treatment Law (2019 Revision); and “water resources” means canals, ground water, groundwater lenses, ponds, territorial waters and underground water. PART 2 - POWERS, DUTIES AND RESPONSIBILITIES OF THE UTILITY REGULATION AND COMPETITION OFFICE 3. Functions of the Office 3. (1) Subject to this Law and any other Law, the Office has power to do all things necessary or convenient to be done for or in connection with the performance of its functions under this Law. (2) Without prejudice to subsection (1), the principal functions of the Office include doing all things necessary or convenient to be done for or in connection with regulating service providers, including — (a) setting, monitoring and regulating the tariffs, rate structures, and terms and conditions for water and wastewater services charged to consumers by service providers in accordance with the respective RCAM set out in administrative determinations or licences; (b) reviewing and approving other rates offered by service providers outside of the respective RCAM set out in administrative determinations or licences or available at the option of the consumer; (c) establishing, monitoring, reviewing or amending service standards provided for under this Law or in any licence granted or administrative determination issued by the Office under this Law; (d) granting, modifying, renewing, suspending or revoking licences issued under this Law or the Water Laws; (e) monitoring and regulating service providers in a manner that provides an opportunity for a fair and reasonable return to service providers, and protects the economic interests and wellbeing of consumers by Page 8 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Section 3 facilitating an environment that mimics as far as is possible competitive behaviour; (f) carrying out the functions and duties prescribed having regard to the need to regulate and supervise service providers in such a manner as to ensure that all reasonable demands by consumers for water or wastewater service, or both, are satisfied; (g) reviewing and approving annual, medium and long term investment plans accordingly submitted by service providers; (h) recommending to the Minister charged with responsibility for water, the making of regulations under this Law and the Water laws; (i) establishing and enforcing administrative determinations, including administrative determinations prescribing the regulatory framework for the Authority and any other service provider; (j) establishing and enforcing regulations, as well as the processes regarding the granting of licences under the Water Laws; (k) reviewing and advising the Minister charged with responsibility for water on national development plans for water and wastewater services that are prepared by the Authority pursuant to its functions under the Water Authority Law (2018 Revision); (l) promoting the development and deployment of new technologies in water and wastewater services where such technologies will in the long term bring economic benefits to the economy of the Islands and financial advantages to consumers; (m) facilitating access to potable water supply for rural customers; (n) protecting the disadvantaged and the elderly in the provision of water and wastewater services; (o) promoting the use of renewable energy and energy efficiency in the provision of water and wastewater services including initiatives at the customer level; (p) promoting, through public education, research, and other initiatives sustainable development of the natural resources; and (q) promoting the proper functioning of the critical national infrastructure. (3) In respect of the grant of concessions pursuant to the Water Laws, the Office — (a) may advise the Cabinet on the granting of concessions; (b) shall issue licences to concessionaires; and (c) in carrying out the functions and duties imposed, and exercising the powers conferred, by paragraphs (a) and (b), shall have regard to — c Revised as at 1st January, 2019 Page 9 Section 4 Water Sector Regulation Law (2019 Revision) (i) the need to ensure that applicants and concessionaires are capable of financing the activities they are, or seek to be, licensed to undertake; (ii) whether concessionaires have promoted or will promote safety, sound environmental practices, technical proficiency and efficiency in the areas of water supply or wastewater services, or both; (iii) whether concessionaires have ensured or will ensure the continuity, security and qualities of water supply or wastewater services, or both, within the Islands; (iv) whether the persons directly associated with the application are fit and proper persons to be granted a licence; (v) whether concessionaires have promoted or will promote the efficient consumption or use of water by consumers; and (vi) the needs of rural customers, the disadvantaged and the elderly. (4) The Office shall carry out the functions and exercise the powers conferred upon it under this Law in a manner which — (a) is reasonable; (b) does not discriminate unfairly between applicants for licences or service providers; (c) protects the interests of consumers; (d) protects the security and public interests of the Islands; and (e) is consistent with the General Regulatory Principles set out in the Schedule. PART 3 - PROVISION OF WATER SUPPLY OR WASTE WATER SERVICES TO THIRD PARTIES 4. Licence required for provision of water supply or wastewater services 4. (1) A person shall not provide water supply or wastewater services to third parties unless that person has been issued with a licence by the Office. (2) A person who performs an activity that requires a licence, without being in possession of a licence issued by the Office to do so, commits an offence and is liable — (a) on summary conviction to a fine of ten thousand dollars; or (b) on conviction on indictment to a fine of twenty thousand dollars, and, if the offence is a continuing one, to a fine of one thousand dollars for every day or part of a day during which the offence has continued. Page 10 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Section 5 5. Operator licences 5. (1) A person who is the holder of a permit issued by the Authority under the Water Authority Law (2018 Revision) to supply water or provide wastewater services to a defined development shall apply to the Office for the grant of an operator licence. (2) Where the Office is satisfied that the applicant is the holder of such a permit issued by the Authority, the Office shall grant an operator licence to the applicant. (3) An operator licence shall be valid for the duration specified in the permit issued. (4) An operator licence is not subject to assignment, modification or renewal unless triggered by a modification in the terms of or on the renewal of the permit issued by the Authority. 6. Grant of service provider licence 6. (1) A person who has been granted a concession by Cabinet under the Water Laws in respect of a defined geographic area as a sectoral utility shall apply to the Office for the grant of a service provider licence. (2) Where the Office is satisfied that the Cabinet has granted the concession to the applicant and that the applicant — (a) has met all preconditions established in the concession required for the grant of the service provider licence; (b) possesses the financial capacity, industry experience and technical qualifications necessary to perform fully the obligations attached to the licence; and (c) intends to commence performance of those obligations within a reasonable period of time or consistent with the concession, the Office shall grant a service provider licence to the applicant. (3) The Office shall take into account the following matters, when considering an application under subsection (2) — (a) whether, during the term of any current or prior licence or authorization granted in respect of the Islands or any other jurisdiction, the applicant has complied with all terms, conditions, specifications and requirements of any licence or authorization, order, directive, rule or regulation pertaining to such licence or authorization; (b) the protection of the environment generally, including plans for the limitation of emissions and discharges into the atmosphere, water or land; c Revised as at 1st January, 2019 Page 11 Section 7 Water Sector Regulation Law (2019 Revision) (c) whether any site proposed for the water production and supply or wastewater collection and treatment system and any associated land use is appropriate in all the circumstances; (d) the efficiency of the proposed systems; (e) whether the best interests of consumers will be promoted or enhanced; and (f) whether the security and public interest of the Islands will be preserved and protected. (4) A service provider licence granted by the Office shall contain such minimum safety, technical and environmental standards as may be established by the Authority under the Water Authority Law (2018 Revision) and such further conditions as the Office considers to be consistent with Government’s Policy and best calculated to protect the interests of consumers. 7. Assignment or transfer of service provider licence 7. (1) A licensee shall not assign a service provider licence granted under this Law, or any rights thereunder without the prior written consent of the Office. (2) The Office may consent to an application for the assignment of a service provider licence under subsection (1) where the Office is satisfied that all related conditions in the concession have been met and the proposed assignee meets the criteria for the grant of a service provider licence set out in section 6(2) taking into account the matters set out in section 6(3). (3) A licensee who may wish to assign or transfer a licence as provided in subsection (1) shall request in writing the consent of the Office and the Office shall reply in writing within twenty-eight days of the receipt of such request. (4) The Office shall, before consenting to the assignment of a licence, publish the particulars of the proposed assignment. (5) Where the Office refuses to give its consent, it shall give reasons in writing for such refusal to the licensee that requested the consent. 8. Renewal of service provider licence 8. (1) A service provider licence shall be granted for such term as may be specified in the service provider licence, but the term of the service provider licence shall not exceed the term of the concession pursuant to which it was granted. (2) The Office may consent to an application for the renewal of a service provider licence subject to the terms set out in the concession. (3) Where the service provider licensee applies for renewal of a service provider licence under subsection (2), the Office may, in writing, refuse to renew that service provider licence for reasonable cause including whether the service provider licensee is or has engaged in conduct that contravenes this Law or Page 12 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Section 8 any other relevant Law, or is or has been otherwise in fundamental or persistent breach of that service provider licence. (4) The service provider licensee referred to under subsection (3) shall have three months, from the date of receipt of the said notice, to make written submissions to the Office in respect of the refusal and showing cause why it ought to have its service provider licence renewed. (5) The Office shall consider any written submissions made under subsection (4), and shall inform the service provider licensee of its decision on the matter and provide written reasons for its decision within two months of the receipt of the said submissions. (6) Where the Office refuses to give its consent, it shall give reasons in writing for such refusal to the service provider licensee that requested the consent. (7) Unless otherwise provided for in a concession, before renewing a service provider licence, the Office shall be guided by — (a) any negotiated modifications; (b) whether the service provider licence has not been abandoned or surrendered by the service provider licensee; or (c) whether written notice of non-renewal for reasonable cause is given by the Office under subsection (3) at least four years prior to the expiry of the service provider licence and whether, within two years of service of the said notice given by the Office or the date provided in the service provider licence for the service provider licensee to give notice for renewal of the service provider licence, whichever is later, reasonable cause has not been shown to the Office’s satisfaction that the licence should be renewed. (8) Upon the expiry or revocation of a service provider licence wherein all rights of appeal of the service provider licensee have been exhausted or forfeited, the Cabinet, on the advice of the Office, may compel compulsory divestiture of the assets of the service provider licensee at a value equal to the average of the values determined by a valuation panel. (9) The valuation panel shall be comprised of three qualified valuators with experience in valuing water and wastewater assets, of whom — (a) one member shall be chosen by the Office; (b) one member shall be chosen by the service provider licensee; and (c) one member (who shall be chairman of the panel) shall be chosen by the other two members. (10) The valuation panel shall value the assets of the licensee at the fair market value. c Revised as at 1st January, 2019 Page 13 Section 9 Water Sector Regulation Law (2019 Revision) (11) Explicit provisions for the mechanism for, and the associated terms where, compulsory divestment of assets is to be instituted shall be provided in regulations made under this Law. 9. Modification of service provider licence 9. (1) A service provider licence may be modified where the Office and the service provider licensee each consent in writing to modify the service provider licence subject to any special conditions concerning modification in the relevant licence. (2) Notwithstanding subsection (1), the Office shall immediately, on the direction of the Cabinet, modify a service provider licence for reasons of the security or public interest or health of the general population of the Islands with or without the agreement of the licensee. (3) Where the Office considers on its own volition or after consultation with the Cabinet that a service provider licence should be modified, the Office shall give to the service provider licensee a written notice that — (a) sets out the proposed modification; (b) states the reasons for the proposed modification; and (c) invites the service provider licensee to file submissions within a minimum period of thirty days to show cause why the service provider licence should not be so modified. (4) The Office may modify the service provider licence if, after considering and having regard to all representations made within the period of not less than thirty days, the Office considers the service provider licence should be modified — (a) in the manner set out in the notice; or (b) in some other manner consistent with the said representations. (5) If the Office decides to modify the service provider licence, the Office shall give to the service provider licensee a written notice stating how the service provider licence has been modified and its reasons, following the consultation, for doing so. 10. Regulatory fees and financial reporting 10. (1) A service provider shall pay all charges and licence, regulatory and statutory fees as may be prescribed by this Law, the Water Laws or any other Laws relating to water or wastewater, or any regulations made thereunder, or as set out in any concession or licence, in the amount, time and manner stated therein, and the obligation to pay the said charges and fees is a financial commitment of a licensee and shall be recoverable as a debt due to the Office, the Authority or any other person to whom such charges and fees are stated to be payable. Page 14 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Section 11 (2) A service provider shall submit to the Office — (a) on an annual basis within four months of its financial year end, audited financial statements prepared in accordance with appropriate generally accepted accounting principles or otherwise as prescribed by regulations made under this Law; and (b) within thirty days of each quarter end, unaudited detailed management financial accounts and operating statistics as may be prescribed by the Office. (3) An operator licensee shall pay an annual licence fee to the Office and all charges and licence, regulatory and statutory fees as may be prescribed by this Law, the Water Laws or any Laws relating to water or wastewater, or any regulations made thereunder, or as set out in any concession, licence or permit, in the amount, time and manner stated therein, and the obligation to pay the said charges and fees is a financial commitment of a licensee and shall be recoverable as a debt due to the Office, the Authority or any other person to whom such charges and fees are stated to be payable. (4) An operator licensee shall, on a quarterly basis or such shorter intervals as the Office may direct, provide the Office with reports on — (a) in the case of water delivered, the water quality as evidenced by laboratory analysis done by an accredited laboratory; and (b) in the case of wastewater, the quality of effluent discharged, as evidenced by laboratory analysis done by an accredited laboratory. 11. Power to take possession of water or wastewater infrastructure in certain cases 11. (1) Unless otherwise provided for in a licence, the Office may in circumstances where any operator licensee or service provider licensee — (a) is in fundamental breach of the licence; (b) persistently breaches any condition attached to the licence or repeatedly contravenes this Law; (c) is dissolved; (d) is wound up or declared bankrupt; (e) is convicted of an offence under this Law and punished by a fine in excess of one hundred thousand dollars; (f) fails to pay any licence fee, regulatory fee or financial commitment under this Law for a continuous period in excess of three months; (g) is to be struck or is struck from the register of companies; (h) compounds with its creditors to the detriment of the public interest; or c Revised as at 1st January, 2019 Page 15 Section 11 Water Sector Regulation Law (2019 Revision) (i) obtained the licence by a fraudulent, false or misleading representation or in some other illegal manner; after consultation with the Cabinet, initiate proceedings to retain a competent operator to take possession of and operate the concession. (2) The Office shall, before acting under subsection (1), give twenty-one days’ written notice to the operator licensee or service provider licensee, in which notice the Office shall — (a) draw to the attention of the licensee the grounds on which the Office intends to take over the operations of the concession; and (b) give an opportunity to the licensee, to submit before the expiration of the twenty-one day period of notice, a time bound plan to remedy the breach for the Office’s consideration. (3) If, in the opinion of the Office the public interest or security of the Islands is not harmed in so doing, the Office may approve the plan. (4) If the Office does not approve the plan under subsection (2)(b), the Office may appoint a competent operator to take possession of and operate the concession in place of the operator licensee or service provider licensee, under the terms and conditions of the licence issued to the operator licensee or service provider licensee. (5) The appointed operator shall be given full access to take possession of and operate the concession by the licensee, but — (a) shall not assume any debt that may be owed by the licensee; and (b) shall be entitled to recover operational costs and a fair and reasonable profit, as determined by the Office, from the operation of the concession. (6) During the period the appointed operator is operating the concession — (a) the Office shall make every reasonable effort to ensure that the concession is operated efficiently; (b) the concession shall remain the property of the licensee; and (c) the licensee shall have the right, after giving reasonable notice, for its agent or representative to access and monitor the works at any reasonable time; and the appointed operator shall only be liable for damage occasioned to the assets of the licensee during that period insofar as it arises from or is occasioned by the appointed operator’s gross negligence, wilful neglect, wilful default or wilful acts. (7) The licensee shall be entitled to apply to the Office for the reinstatement of its concession and the Office may — Page 16 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Section 12 (a) reinstate the concession and, in doing so, release the appointed operator; and (b) require the appointed operator to return the operation of the concession to the licensee within a period of fourteen days after being so ordered in writing. (8) Any costs which the appointed operator has incurred as a direct consequence of operating the concession and which the appointed operator has not recovered by way of revenue derived from the operation shall become a debt due from the licensee. (9) If, upon a reasonable amount of time to be determined by the Cabinet and upon the advice of the Office, the concession is not reinstated in accordance with the provisions of this section, the Cabinet may compel divestiture of the assets required to operate the concession in accordance with regulations made under this Law. (10) During the period of transition to the appointed operator, the licensee shall operate the facilities in accordance with prudent practice and shall cooperate fully with the appointed operator until the takeover is completed. (11) The Cabinet, acting in consultation with the Office, may designate the Authority to operate the concession on terms to be agreed with the Authority having regard to the public interest. 12. Register of applications and licences 12. (1) The Office shall cause to be kept a register of all concessions and licences granted and the register may be kept in electronic form. (2) The Office — (a) shall make available for public inspection during its business hours, the licences granted; and (b) shall permit any person to make copies of any entry in the said register and may charge such fees as it considers reasonable for such copies. PART 4- INTERCONNECTION OF WATER SUPPLY OR WASTEWATER SYSTEMS 13. Interconnection agreements 13. (1) Subject to this Part, service providers may on their own initiative, enter into interconnection agreements to facilitate continuity of supply or services as they may determine to be best suited for their operations or the Office may of its own volition direct the parties to enter into interconnection agreements on terms which the Office may determine. c Revised as at 1st January, 2019 Page 17 Section 14 Water Sector Regulation Law (2019 Revision) (2) Where interconnection is agreed, the parties shall be subject to section 44 of the Utility Regulation and Competition Law (2019 Revision) and the Office may impose specific conditions on the parties pursuant to section 45 of that Law. (3) Where a service provider receives confidential information from another service provider for the purpose of interconnection of their respective water supply or wastewater systems and the information is declared by the latter service provider to be confidential in that the information relates to matters including — (a) consumer information or statistics; (b) market forecasts; (c) plans for the development of new services or capacity; (d) requests for proposals, or bids of a commercial nature; or (e) current or proposed business plans, the recipient service provider shall treat such information in confidence and may only share it among such of its employees who need the information in order to provide services to the service provider providing the information. PART 5 - CONSUMER PROTECTION 14. Required standards of performance 14. (1) Service providers shall use their best endeavours to ensure that their services are — (a) reliable and safe; (b) efficient, (c) provided with due care and skill; and (d) rendered in accordance with this or any other Law, concessions and licences and to the standards reasonably expected of a competent provider of those services. (2) The Office may prescribe standards of performance in connection with the provision of water supply and wastewater services to customers, after consultation with service providers and persons who are likely to be affected, which may include incentive based performance mechanisms. (3) The Office may, having regard to Government’s social policy objectives as set out in writing, require service providers to make special provisions to meet the needs of the disadvantaged and elderly. Page 18 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Section 15 (4) A person may make a written complaint to the Office in respect of any service provided by a service provider, or if the person claims to be adversely affected by the actions or omissions of a service provider. (5) In the event of a written complaint being made under subsection (4), the Office shall invite written submissions from both the complainant and the service provider within twenty-one days of the complaint being received and within twenty-one days of receiving the submissions shall notify the complainant and the service provider of its decision in respect of the complaint which shall be final and binding on both parties. (6) The Office may prescribe technical and equipment standards for the provision of service for and by service providers. (7) The Office shall review and may approve codes and procedures to be established by service providers relating to the provision, refusal, disconnection or interruption of service. (8) Service providers may, subject to the rules and procedures established under subsection (6) — (a) refuse to provide service to a consumer; or (b) discontinue or interrupt the provision of such service to a consumer, pursuant to an agreement with that consumer, or where the consumer has illegally connected itself to the service provider’s system, or the legitimate connection to the consumer creates a hazard to health or property, only on grounds which are reasonable and non-discriminatory; and where any such action is taken, the service provider shall have the right to immediately disconnect the service or, in the service providers discretion, to give reasonable notice prior to the intended service interruption and in such cases to provide the said notice in writing to the consumer specifying the reasons therefor and permit the consumer to remedy or cure any defect on the consumer’s part insofar as the defect may be capable of remedy. 15. Confidentiality 15. (1) Subject to subsection (2), a service provider who intentionally discloses any consumer information commits an offence and is liable — (a) on summary conviction to a fine of ten thousand dollars; or (b) on conviction on indictment to a fine of twenty thousand dollars or to imprisonment for a term of two years, or to both. (2) Subsection (1) does not apply to a disclosure — (a) which is made to a constable for the prevention or detection of crime or for the purposes of criminal proceedings; (b) under any Law which requires the disclosure; c Revised as at 1st January, 2019 Page 19 Section 16 Water Sector Regulation Law (2019 Revision) (c) which is made with the written consent of the consumer; (d) which is made under a court order; (e) which is made in obedience to a warrant or order issued by the Cabinet; or (f) which is made to the Office for purposes connected with the execution of its functions under this Law. (3) A service provider is not liable for any action or suit for any injury, loss or damage resulting from disclosure of consumer information made under subsection (2). PART 6 - MISCELLANEOUS PROVISIONS 16. Malicious damage to property 16. (1) No person shall with intent — (a) perform an act; (b) fail or omit to perform an act; or (c) cause malicious damage to apparatus, in relation to the production or supply of water or the collection and treatment of wastewater, where such performance or failure of performance or damage is dangerous to the security or public health of the population of the Islands or contrary to the public interest or public order. (2) A person who contravenes subsection (1) commits an offence and is liable — (a) on summary conviction to a fine of one hundred thousand dollars; or (b) on conviction on indictment to a fine of two hundred thousand dollars or to imprisonment for a term of ten years, or to both. (3) In addition to any other penalty provided by this section, equipment used to commit an offence under this section may by order of the court be forfeited to the Government on conviction of the owner or other person having control of the equipment or apparatus. (4) A person who interferes with a water supply or wastewater collection system with a view to illegally obtaining or utilizing the services of a service provider commits an offence and is liable — (a) on summary conviction to a fine of five thousand dollars; or (b) on conviction on indictment to a fine of twenty thousand dollars or imprisonment for a term of one year, or to both; Page 20 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Section 17 and the Court may, on the representation of the service provider, order that the offender pays compensation or makes restitution for any damage to the service provider’s installation or for loss of revenue incurred by the service provider. 17. Order for payment of compensation 17. (1) Where a person is convicted of an offence under this Law, the court may make an order for the payment of compensation to any person for damage caused by the offence. (2) A claim by a person for damages sustained by reason of the offence shall be deemed to have been satisfied to the extent of any amount which has been paid to that person under an order for compensation, but the order shall not prejudice any right to a civil remedy for the recovery of damages from the person convicted of the offence beyond the amount of compensation paid under the order. 18. Central Planning Authority to consult 18. (1) Where plans for the construction, reconstruction or extension of a building are deposited with the Central Planning Authority in accordance with the Development and Planning Law (2017 Revision), four copies of the plans shall be submitted to — (a) the service provider in whose service area the proposed construction, reconstruction or extension of the building is proposed; (b) the Water Authority in respect of all proposals for wastewater disposal; and (c) the Water Authority where planned developments are likely to affect ground water resources, for their recommendations, and the Central Planning Authority shall adopt the recommendations of the service provider or the Authority, as the case may be. (2) Before making any recommendations pursuant to subsection (1)(a) or (b), the service provider or the Water Authority shall consult with the Chief Environmental Health Officer appointed under the Public Health Law (2002 Revision). 19. Duty of service providers to keep maps showing their sewers and supply lines 19. Service providers shall keep deposited at their offices, for inspection by any person at any reasonable hours free of charge, maps showing and distinguishing all public water supply systems and public wastewater infrastructure owned or operated by the service providers and shall deposit the maps at the Office in a format agreed with the Office. c Revised as at 1st January, 2019 Page 21 Section 20 Water Sector Regulation Law (2019 Revision) 20. Power to make regulations 20. (1) The Cabinet may, on the recommendation of the Office, make regulations — (a) facilitating — (i) the investigation of; or (ii) the bringing of criminal proceedings in respect of, the operation of any part of the water supply or wastewater infrastructure of the Islands that may be, or is, an offence under this or any other Law; (b) regulating service providers’ rights to installations on the land or property of other persons or authorities and ancillary rights; (c) prescribing the explicit provisions for the mechanism for, and the associated terms where, compulsory divestment of assets is to be instituted; (d) prescribing matters for the better carrying out of the duties and powers of the Office; and (e) prescribing regulatory and licence fees and any other fees duly payable to the Office. (2) Regulations made under this section may provide that the contravention of any provision constitutes an offence and may prescribe penalties for any such offence not exceeding the maximum fine and term of imprisonment prescribed in this Law for any offence under this Law. (3) The Office may, in accordance with this Law, make rules — (a) relating to penalties payable under this Law; (b) relating to the operation of critical national infrastructure; (c) relating to service standards; and (d) prescribing criteria for charging for the collection, treatment and disposal of wastewater via a system other than the public wastewater system. 21. Transitional arrangements 21. (1) A licence or other enabling instrument issued to a person to provide any aspect of water supply or wastewater services, pursuant to the Water Laws, in the Islands and valid and in force immediately prior to the coming into force of this Law, shall continue valid and in force for the remainder of the term as if it were a licence granted under this Law and the licence shall continue to be subject to each and every one of the terms, conditions and exemptions attaching to the licence as if the terms, conditions and exemptions had been imposed or granted under this Law but shall otherwise be subject to the provisions of this Law. (2) Where a person who possesses a licence or enabling instrument as described in subsection (1) has entered into an agreement with the Authority, being an Page 22 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) Section 21 agreement to surrender and terminate the licence or enabling instrument and to replace the same with a new licence or licences, immediately upon the surrender and termination of the licence or enabling instrument, the Office shall grant to that person the new licences on such terms, conditions and exemptions as have been so agreed, but the licences shall otherwise be subject to this Law. (3) A licence or other enabling instrument issued to a person to provide any aspect of water supply or wastewater services, pursuant to the Water Laws, in the Islands and valid and in force immediately prior to the coming into force of this Law shall be subject to the provisions of this Law and the authority of the Office, as though the licence were issued by the Office under this Law. (4) All rates and charges, standards or any rules or regulatory policies that are in effect on the date of commencement of this Law shall remain in effect as though they were determined by the Office until otherwise modified, replaced or repealed by the Office. c Revised as at 1st January, 2019 Page 23 Water Sector Regulation Law (2019 Revision) SCHEDULE SCHEDULE (section 3(4)(e)) GENERAL REGULATORY PRINCIPLES Definitions 1. In this Schedule — “performance standards” means standards established by the Office under paragraph 3(3); “regulatory framework” means this Law and any administrative determinations, rules or regulations issued pursuant to this Law;

and “stakeholders”, in relation to the water and wastewater services industry, means the Government, consumers, service providers and the general public. Use of regulatory framework 2. In regulating the provision of water or wastewater services, the regulatory framework shall be utilized in a way that can be characterised as sustainable, stable, transparent, predictable and cost-effective. Promotion of sustainability 3. (1) In return for efficiently providing services to an acceptable quality and at a fair price to customers, service providers shall receive the opportunity to recover appropriate costs and earn a fair and reasonable return for their investors. (2) The application of the regulatory framework shall promote sustainability, consistency and, as far as possible, certainty for all stakeholders, and shall ensure that service providers do not take unfair advantage of positions of monopoly or market dominance. (3) In consultation with the respective service providers, the Office shall establish performance standards, which may have incentives attached, in the water supply and wastewater services industry. (4) The performance standards shall be used to identify the Office’s expectations and provide a benchmark against which customers of the service providers can gauge their own expectations and, if actual performance is not within the range established, shall be a basis for consultation with the Office. (5) After consultation, the Office may establish a mechanism, specific to each service provider, of rewards and penalties for performance against the performance standards. c Revised as at 1st January, 2019 Page 25 SCHEDULE Water Sector Regulation Law (2019 Revision) (6) The level of service existing as at the date of the grant of the respective licence issued under this Law shall be used as the initial standard for service. (7) A service provider shall be entitled to recover all reasonable increases in costs that arise due to changes in the standard for service. (8) Service providers shall be financially sound and capable of financing their operations and any necessary capital expenditure, so that there is a reasonable expectation that they can continue to operate while meeting the needs of customers, the general public, the Government and other stakeholders. Promotion of stability 4. (1) To achieve stability, the Office shall balance the interests of all stakeholders in the water and wastewater industry in the Islands in discharging its functions under the Law. (2) The procedures and principles applied by the Office shall be sufficiently clear so as to lead to a high degree of confidence and encourage long-term investment and planning in the water and wastewater industry. (3) The Office shall employ or retain competent staff or consultants who are qualified and knowledgeable with respect to the functions they are required to perform. Promotion of transparency 5. (1) The actions of the Office shall be transparent and the Office shall both give to and receive from service providers and other stakeholders, all relevant and necessary information which is needed in order to perform its statutory functions. (2) The Office shall give adequate reasons for specific regulatory decisions and actions affecting stakeholders, which shall be published by the Office subject to the requirements of any other Law and to necessary confidentiality of Governmental, commercial or personal information of a sensitive nature. (3) The Office shall strive to make all procedures, notifications and relevant information made or given by the Office clear to the water and wastewater services industry and to provide them well in advance of any formal consideration of any issue on which a decision is required to be made. (4) The management and operations of service providers shall be subjected to financial and operational audit from time to time to ensure that the general public and the Office shall have confidence that service providers are complying with the performance standards, their respective licences and the regulatory framework. Page 26 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) SCHEDULE (5) Service providers shall be entitled to recover all regulatory fees and licence fees to consumers but shall not be entitled to pass on any fines or penalties imposed pursuant to this or any other Law, or any costs awarded against them by any court. (6) Subject to any provision in licences, the Office may determine that fees form part of the revenue requirements of service providers. (7) The decisions of the Office shall apply the principles of administrative law relevant to all administrative decision-makers, such as legality, adherence to the principles of due process and natural justice, fairness, proportionality and rationality; and such decisions shall be the subject of fair and speedy dispute resolution procedures. Promotion of predictability 6. (1) The Office shall strive to make rules, decisions and orders which are clear and unambiguous and predictable in the way they are applied in order to provide certainty and consistency for customers, the service providers and their shareholders as well as the public generally. (2) The formula for rate modifications shall be reviewed in accordance with the respective licence, and shall not be changed without the consent of the respective service provider. (3) The actions and decisions of the Office shall be even-handed and shall not unfairly discriminate among service providers and applicants for licences. (4) Subject to the terms of a concession and subject to a licensee’s past observance of and compliance with the terms of its concession, its licence, this Law, the Water Laws and all other Laws relating to water or wastewater, and any regulations made thereunder, there shall be a legitimate expectation that a licence will be renewed at the expiry of its term. (5) The Office may change its view on issues, or recommend changes to the regulatory framework as necessary and in response to unforeseen developments, if this is consistent with this Schedule; but the Office shall — (a) seek to avoid changes which apply retroactively; (b) take decisions following a due process of consultation and consideration of the relevant issues; and (c) provide adequate reasons for its decisions. Promotion of cost effectiveness 7. (1) The costs of monitoring (including the costs of data collection and analysis) and enforcing compliance with licences and codes shall be reasonable and sufficient to enable the Office to discharge its functions under this Law. c Revised as at 1st January, 2019 Page 27 SCHEDULE Water Sector Regulation Law (2019 Revision) (2) The Office shall discharge its responsibilities in an economically efficient manner. Publication in consolidated and revised form authorised by the Governor in Cabinet this 12th day of February, 2019. Kim Bullings Clerk of Cabinet Page 28 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) ENDNOTES ENDNOTES Table of Legislation History: SL # Law # Legislation Commencement Gazette 13/2018 Water Sector Regulation (Amendment) Law, 2018 13-Aug-18 G17/2018/s11 30/2017 Water Sector Regulation Law, 2017 (Commencement) Order, 2017 22-May-17 G11/2017/s2 16/2017 Water Sector Regulation Law, 2017 22-May-17 GE39/2017/s2 c Revised as at 1st January, 2019 Page 29 ENDNOTES Water Sector Regulation Law (2019 Revision) Page 30 Revised as at 1st January, 2019 c Water Sector Regulation Law (2019 Revision) ENDNOTES c Revised as at 1st January, 2019 Page 31 ENDNOTES Water Sector Regulation Law (2019 Revision) (Price: $6.40) Page 32 Revised as at 1st January, 2019 c