ABSTRACT
Clause 6 of the Bill (which became the Water Act 1989) imposes the duty to ‘secure that undertakings can carry out their functions properly’ and to finance the carrying out of these functions ‘in particular by securing reasonable returns on their capital’. When water plc’s shares are traded on the market, the market will determine what that ‘reasonable’ return is. In setting the k 1 now and to help form a view of how valuable the authorities’ water assets will be when sold, we need to judge the likely rate. When the Director-General takes his or her view of the requirement, in future dealings with utilities, he or she will have the evidence of the market itself. In so far as we can now make an accurate estimate we can help to smooth the transition to the new status.
