Public Utilities (Amendment) Bill

Order for Second Reading read.

3.28 pm

The Minister for the Environment and Water Resources (Mr Masagos Zulkifli B M M): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The Public Utilities Act was last amended in February 2018. Since then, the work of PUB has continued to evolve.

First, as I had announced during my COS speech a few days ago, PUB will be given an expanded mandate to defend our coasts against rising sea levels.

Second, as PUB continues to diversify Singapore’s water sources, the number of desalination and NEWater plants has increased. There will be 10 such plants by the end of the year, up from seven in February 2018.

Third, PUB continues to leverage technology to improve service quality. As announced in January this year, PUB will roll out some 300,000 smart water meters in homes and commercial and industrial buildings by 2023.

Lastly, to complement PUB's efforts in ensuring the security of our water supply, we will also need building owners and managers to do their part to keep our water supply system secure, by protecting their water tanks against unauthorised access.

Against the backdrop of these developments, it is necessary to update the Public Utilities Act in four key areas to ensure that it remains effective and relevant. Let me go through each group of amendments in turn.

The first group of amendments will expressly confer new coastal protection functions on PUB and legislate the new Coastal and Flood Protection Fund.

PUB is currently the national authority for drainage and inland flood protection. Given the synergy in tackling inland flooding and coastal inundation risks together in a holistic manner, the Government has tasked PUB to be the national Coastal Protection Agency. PUB will work with agencies and other stakeholders to enhance our coastline defences and coordinate policies to facilitate decisions on land use, development and activities to safeguard Singapore against rising sea levels.

To provide for the substantial capital outlay and implement coastal and flood protection in a fiscally sustainable manner, Deputy Prime Minister announced in his Budget speech that a Coastal and Flood Protection Fund will be set up within PUB, with an initial injection of $5 billion from the Government's FY2020 Budget.

We will use this fund prudently to implement coastal protection measures, which could include sea walls, tidal gates and pumping stations. These are all being studied, and may need to be deployed together to prevent flooding. The Fund will also be used to help PUB expand Singapore’s drainage infrastructure to cope with more intense rainfall arising from climate change.

The Coastal and Flood Protection Fund signals the Government’s resolve in tackling long-term existential challenges such as climate change. Prime Minister mentioned at the National Day Rally last year that climate change adaptation might cost $100 billion or more over the next 100 years. Given the significant outlay, we will need a combination of funding methods to finance our adaptation measures.

The Coastal and Flood Protection Fund will be just one source of funding. We will study this closely and assess what other appropriate funding sources should be used. These sources may include budgets of Ministries, borrowing and tapping on Past Reserves where land reclamation is involved.

Climate change defence is existential for Singapore. The Prime Minister also said in his National Day Rally speech, that everything else must bend at the knees to safeguard the existence of our island nation. Planning and investing long-term for coastal defences and national flood protection will be critical to ensure that Singapore has adequate resources to meet this challenge.

The second group of amendments will provide for legislative safeguards over our water infrastructure, especially water supply plants. As the House is aware, we have been diversifying our water sources by building up four national taps over the decades. The intent is to safeguard our water security.

As we build up our desalination and NEWater capacity, PUB has partnered the private sector to design, build, own and operate our DBOO, some of our desalination and NEWater plants. This DBOO model allows PUB to tap on the expertise and resources of the private sector to deliver water solutions most cost-effectively.

By the end of this year, PUB will have six out of 10 desalination and NEWater plants under the DBOO model. The remaining four plants are owned and operated by PUB.

For the DBOO plants, PUB has put in place robust contractual safeguards to ensure water security. For example, concession companies that own and operate DBOO plants are obliged to seek PUB’s approval when there is a change in control. Under the contractual terms, PUB can terminate the contracts and buy over the plants, or in some cases, step in to operate the plants, should the need arise. We have successfully executed some of these contractual remedies in the past to ensure our water security.

Water security is critical to Singapore’s national security. While we have already strong contractual safeguards, given that water security is an existential issue to Singapore, we need to always look for ways to strengthen safeguards over our water infrastructure. We have reviewed the regulatory regimes of other critical infrastructure, such as electricity and telecommunications, and concluded that it would be prudent to adopt similar legislative safeguards that are already in place in these sectors.

Taking reference from these other legislation, the Bill will strengthen PUB's oversight of the concession companies. These concession companies, as well as any underlying trusts or business trusts that may be set up to hold the plant assets, will be designated by PUB and be subject to additional oversight mechanisms under the Bill.

Broadly, under clause 8, all designated parties will be subject to three types of oversight controls.

First, a person who becomes a substantial controller or indirect controller of the designated parties that own and operate the DBOO plants will need to notify or seek approval from PUB. This is to ensure that control of DBOO plants rests with individuals or groups whose interests are aligned with the long-term interests of Singapore’s water security and the public interest. For example, we may need to ensure that there is sufficient diversity in the ownership and operation of DBOO plants in Singapore. This will reduce the risk to Singapore’s water security from having mega conglomerates monopolising our critical infrastructure but then unexpectedly collapsing. Given the strategic role that DBOO plants play in Singapore’s water security, PUB must maintain oversight of controllers who directly or indirectly control substantial equity interest and/or voting power in these designated parties.

Second, these designated parties cannot be dissolved, terminated or wound up voluntarily without PUB’s consent. The dissolution, termination or winding up of these designated parties will adversely affect our water security. If there are court proceedings for the dissolution, termination or winding up of these designated parties, PUB will be a party to such proceedings, and the court must consider representations made by PUB in such proceedings.This ensures that the court does not make any decision without having considered water security considerations. In addition, the creditors of these designated parties cannot enforce security over the property of such parties, or enforce any court order against such parties, without giving prior notice to PUB.

Third, the Minister will be empowered to issue Special Administration Orders (SAOs). An SAO is an order of the Minister directing the takeover of control of the affairs, business and property of a designated party by another person, so as to ensure the continued operations of the DBOO plant for the public interest.

Mr Speaker, Sir, we are mindful that while such powers are similarly found in the other legislation I referenced earlier, concession companies may have some concerns over these powers. I would like to assure Members that these levers will not be exercised lightly and the Bill has limited their use to exceptional circumstances, such as when Singapore’s water security is under threat. As far as possible, PUB will continue to rely on existing contractual safeguards where appropriate, which have served PUB well thus far. But as I mentioned earlier, when it comes to water security, we take no chances.

The third group of amendments relate to smart water meters. Clauses 2, 5, 6, 7 and 11 will update the Public Utilities Act to extend existing powers of PUB in relation to water meter installation, maintenance and enforcement to cover smart water meters.

These powers will support PUB’s Smart Water Meter Programme, the first phase of which involves the deployment of some 300,000 meters, starting from next year, in new and existing residential, commercial and industrial premises. This will allow PUB to leverage digital technologies to encourage behavioural change towards water conservation, optimise water demand management, and achieve greater operational efficiencies.

The updated provisions would empower PUB to: first, install smart water meters, including ancillary equipment; second, enter premises at reasonable hours or at such other time as may be agreed with the owner or occupier of the premise to carry out inspection or works on smart water meters; third, direct the owner to remove any object that hinders or obstructs access to a smart water meter; and fourth, take action against any person who interferes, interrupts or obstructs with the operation of a smart water meter supplied by PUB. In addition, the amendments specify the circumstances under which a person would be presumed to have tampered with a smart water meter and thus committed an offence.

The last group of amendments relate to water tank security. While PUB had made great efforts to protect its water infrastructure and ensure that potable water supplied to consumers is safe and fit for drinking, building owners and managing agents also have a part to play in ensuring our water remains safe for drinking. For example, they need to take the necessary steps to prevent unauthorised access to the water tanks in their buildings, as these intrusions may disrupt or contaminate the water supply to consumers.

Currently, a lapse in water tank security, such as failing to lock the water tank access door, is already an offence under the Public Utilities (Water Supply) Regulations. The offence carries a maximum penalty of $10,000, or imprisonment of up to 12 months, or both. PUB can offer to compound the offence by collecting a sum not exceeding $3,000.

Clause 10 introduces a new section 45A to provide increased deterrence and enhance the security of water tanks by raising the maximum penalty amount for such offences to a fine of $50,000, or imprisonment of up to 12 months, or both. This is in line with the maximum penalty amount for causing contamination to the water supply by PUB, or interfering with or disrupting PUB’s water supply. In addition, the maximum composition sum for such offences will also be increased from $3,000 to $10,000.

The increased penalties will serve to remind building owners and management teams to take water tank security seriously. The vast majority of the building owners and management teams are diligent in ensuring water tank security and need not be concerned by the change.

Mr Speaker, in summary, PUB’s work continues to evolve. As PUB takes on a new role to defend our coasts, it also continues to diversify our water sources, digitalise its operations, and enhance water security. The proposed amendments to the Public Utilities Act that I have elaborated on in my speech are necessary to ensure that the Public Utilities Act remains effective and relevant. Ultimately, these proposed amendments will allow PUB to continue to fulfil its mission of safeguarding our water security, and ensuring a safe and reliable supply of water for all. Sir, I beg to move.

Question proposed.

3.42 pm

Er Dr Lee Bee Wah (Nee Soon): Mr Deputy Speaker, Sir, climate change and global warming have caused sea levels around the world to rise. Singapore, being a small island nation surrounded by water, is vulnerable to rising sea levels. So, we must seriously take action to protect our country and our future generations as climate change is not a distant problem. It is right on our shores.

The establishment of the Coast and Flood Protection Fund is a concrete step in the right direction. It demonstrates the Government's commitment to make good judgement and give priority to Singapore’s long-term interests. I know it is tempting for some political leaders to kick the can down the road, leaving it to the next government to handle. But not this Government in Singapore.

Even amidst other challenges for budget, we must not be distracted from this crucial challenge.

Substantial funding is necessary to implement the coastal protection and drainage measures. During the National Day Rally last year, our Prime Minister mentioned that coastal defences may cost $100 billion or more over 100 years. What are the Government’s plans to ensure that there will be sufficient money in the Coastal and Flood Protection Fund?

As I believe existing infrastructure will have to be enhanced, or even new infrastructure may have to be built as part of the protection measures, I hope we will tap on local resources and companies for these works? So, besides shoring up our coastal defences, we can also shore up our job creation for Singaporeans, and the local knowledge around such projects.

Water security is also a critical issue. The low rainfall in Singapore and droughts affecting our neighbours such as Malaysia from whom we get our water supply give rise to grave concerns.

There are different scenarios that can be played out: (a) reduce the supply of water to us; or (b) see the price of water going up.

The PUB has been doing a good job over the years to improve our self-sufficiency on water. By this year, PUB will have three desalination plants, and three NEWater plants under the Design-Build-Own-Operate (DBOO) model. This means that a private organisation builds, owns and operates some of the facilities or structure of the plants, but there is some degree of support from the Government. Together, these plants make up a significant part of our water supply. It is important for us to strengthen oversight of these DBOO plants.

I note that the amendments to the Bill will now allow PUB to be informed of, or to give approval to companies or persons gaining significant control of these critical water infrastructure. I support this as water is our critical national resource. We have to ensure that these DBOO plants are in good hands and operate reliably to meet our nation's water needs.

However, given that PUB has been partnering with the private sector under the DBOO model for over 10 years, with majority of the partnerships being successful, some may wonder was the decision triggered by the situation with Hyflux? Definitely, this is a good move. Perhaps MCCY should also introduce this over our Sports Hub.

The Bill also introduces powers for the Minister to issue Special Administration Orders under certain circumstances. This will allow the Government to take steps to ensure that Singapore’s water security is not compromised, such as by ensuring that the DBOO plants continue to operate regardless of circumstances. Nonetheless, the concession companies of these DBOO plants may be concerned about whether these powers will affect their rights and interests under their existing agreements with PUB. Can the Minister clarify when Special Administration Orders will be invoked, versus the existing contractual safeguards?

Even as our Government and Public services work tirelessly to develop our self-sufficiency and grow our water supply, we must not rest on our laurels, and we certainly cannot be complacent. I would like to take this opportunity to remind everybody that water security is not the sole responsibility of the Government. Every one of us residing in Singapore, from commercial entities and organisations to individuals, must play our part to use water responsibly. Let us reduce, reuse and recycle water and do our part to mitigate the impact of climate change. Sir, in Chinese, please.

(In Mandarin): [Please refer to Vernacular Speech.] The Government has a long-term vision and plan to build more barrages along our coastlines. May I ask if we could deploy more local companies to build these barrages? This will not only help our local companies, but also ensure that we have enough relevant knowledge that will be useful in time of crises.

The Government also seeks to be empowered to issue Special Administration Orders to the water supply companies. This will further ensure our water security. However, it may also bring some uncertainties to relevant companies. Can the Minister clarify under what circumstances these powers will be invoked? I would like to take this opportunity to remind members of the public that protection of water resources is not just the responsibility of the Government. Everyone has a duty to save water to ensure that we have enough water resources.

3.50 pm

Mr Gan Thiam Poh (Ang Mo Kio): Deputy Speaker, Sir, I applaud the decision to set up the Coastal and Flood Protection Fund. In the face of climate change, we have not a moment to lose. Our very survival depends on future-ready infrastructure and measures to kick start sustainable solutions. Very fortunately, Singapore has had some money set aside for contingencies like this. I really thank our predecessors from the bottom of my heart. Their hard work and thrift have made it possible for us to commence on ambitious projects like this.

We have started with $5 billion for this Fund. The battle against rising sea levels will be a long-drawn-out and expensive one. Prime Minister Lee had estimated that coastal defence might cost us $100 billion or more over 100 years. How is the Government going to ensure that we will have enough money in the long haul to sustain this Fund? In addition, the Fund must be ring-fenced and protected from the vagaries of domestic politics and economic cycles. Would the Minister share what measures will be in place to ensure strict oversight and prudent utilisation of the Fund?

I expect that seawalls, land reclamation and planting of mangroves would be considered for different parts of our coast. Would the Minister tell us what are some examples of the types of coastal protection and drainage infrastructure which will be financed by the Coastal and Flood Protection Fund?

Due to our geographical constraints, we will have to cooperate with our immediate neighbouring countries for some of these coastal works for the benefit of all people. I would like to know where would be the areas we will need to consult with neighbours before proceeding with the appropriate constructions.

Next, I welcome the relevant amendments and continual investments by both public and private sectors in our domestic water treatment capability. These will enhance our water security. However, the question remains on the feasibility of the Design-Build-Own-Operate (DBOO) model. Would the Ministry consider other models?

In addition, will the Ministry be able to keep the facilities financially independent and operational while the operator is struggling to keep the company going, falling short of triggering the invocation of Special Administration Orders by the Minister or seeking redress by the high court? Is the list of events of default sufficiently comprehensive? Have they been reviewed to ensure that they are not overly rigid or restrictive in order for the Minister to invoke the orders when necessary? With that, I conclude my support for the Bill.

Mr Deputy Speaker: Minister Masagos.

3.53 pm

Mr Masagos Zulkifli B M M: Mr Speaker, I would like to thank the Members for the support and comments on the Public Utilities (Amendment) Bill. I just want to make one comment that Er Dr Lee Bee Wah mentioned about self-sufficiency. I think we have to be careful about this word. We are not self-sufficient, but we should say we are resilient. We are resilient against weather, we are resilient against possibly climate change just to put a point across. Thank you.

Let me run through the queries and concerns raised topically. I will begin by addressing coastal and flood protection issues first.

Er Dr Lee Bee Wah and Mr Gan Thiam Poh asked for about the Government's plans to ensure that there are sufficient funds in the Coastal and Flood Protection Fund. Climate change and rising sea levels will not only affect our current generation but future generations and beyond. Coastal protection requires hefty upfront investments. But once built, they benefit many generations of Singaporeans. This is a complex and significant, long-haul effort and we need to distribute the share of funding more equitably across current and future generations.

The $5 billion injection from this term of Government represents our generation’s contribution towards safeguarding Singapore’s continued survival. Setting up the Coastal and Flood Protection Fund now provides us with a longer runway to build up the Fund, and allows the Government to save up across successive terms. The Government will top up the Fund whenever our fiscal situation allows.

Given the significant outlay required, the Coastal and Flood Protection Fund will not be the only source of funding. We have to use a combination of funding tools – the Coastal and Flood Protection Fund, borrowing, budget from the Government-of-the-day, as well as past reserves for measures such as land reclamation. PUB is working with agencies to refine our modelling and develop more detailed plans on the type of protection measures required and the costs. This will allow the Government to better assess the funding required and financing options.

Mr Gan Thiam Poh asked what measures will be in place to ensure strict oversight and prudent utilisation of the Fund.

First, it will be ring-fence through this legislative amendments to fund expenditures relating to coastal and drainage flood protection measures.

Second, PUB will have oversight over the management and withdrawal of the Fund. PUB will publish the Fund utilisation annually in a separate section in its financial statements.

Third like any other large scale and complex development projects the Government undertakes coastal protection and drainage measures will continue to be subject to MOF's evaluation and prevailing approval processes.

Finally, the Government will also employ a competitive tendering processes to ensure that the cost of the coastal protection and drainage measures implemented are value for money.

Mr Gan Thiam Poh asked for some examples of the uses of the Fund. Ensuring our flood resilience will require careful planning and seamless integration of protection measures in our infrastructure. First, to prevent sea waters from flowing inland, we will need to construct structures such as sea walls, revetments, dykes, tide gates or barrages to serve as coastal defences and physical barriers. We will study the feasibility of all these options for our coastline. Where feasible, we could even integrate nature-based solutions, such as the planting of mangroves to break wave energy. While structures such as tidal gates and barrages stop sea water from flowing inland, they would likewise prevent storm water from flowing out into the sea, especially when intense rainstorms coincide with high tides. As such, we will need to install outlet pumps at some of our waterways to pump floodwaters into the sea. Finally, our vast network of inland drains must also be expanded and upgraded to cater to more intense and frequent rainfall.

Er Dr Lee Bee Wah rightly pointed out the extent of infrastructure works required to protect our coastline. She asked if we will tap on local resources and companies in this journey. Coastal protection is a new area in Singapore and capabilities will need to be built up. We will indeed have to tap on the best engineering capabilities available. Where they are not available in Singapore, we will have to bring them in, even as we grow our own talent and capabilities. The Government and industry will have to work hand in hand. We are confident that over time, we will grow a strong and vibrant local industry, just like what we did with our water sector. We hope that our local firms will proactively build up their capabilities in coastal protection, hydraulic modelling, and flood risk forecasting just to name a few areas, and to tap on these opportunities when available.

I will next address the questions on safeguards over PUB's DBOO plants. Mr Gan Thiam Poh asked about the feasibility of the DBOO model and whether other operating models for water plants have been considered. Besides the DBOO models, PUB also employs other models. For example, PUB employs the design and build model where it partners the private sector to design and build the plants while PUB owns and operates the plants.

As explained in my opening speech. the DBOO model has been useful in allowing us to tap on private sector innovations and cost efficiencies to deliver water services more effectively. By combining design, build, own and operate functions in the same DBOO contract, it gives the private sector a strong incentive to ensure that the project design takes into consideration operational and other life-cycle costs.

The DBOO model also strengthens the capacity of the private sector, just like Er Dr Lee Bee Wah has asked just now. When companies undertake DBOO projects, we hope they develop a track record that allows them to grow in our region and compete on the world stage.

Mr Gan Thiam Poh asked about PUB's ability to maintain oversight over concession companies which are struggling. As I had explained in this House in April 2019, even though PUB does not interfere with business decisions made by the concession companies, PUB monitors the performance of the plants under the DBOO models to ensure that the concession companies can meet the contractual obligations to PUB. Concession companies are required to submit financial reports to PUB on a regular basis. Where there are issues, PUB will require the concession companies to rectify them, failing which, PUB may exercise its right to terminate the DBOO contracts and take control of the plants. These contractual oversight will continue and, with the new legislative mechanism, will have greater assurance and oversight over our DBOO plants.

Er Dr Lee Bee Wah rightly pointed out that PUB has been partnering with the private sector under DBOO model for over 10 years. The majority of these partnerships have been successful. Given this, why the decision to introduce legislative levers over DBOO plants now? Allow me to explain.

As part of our regular review of the safeguards over DBOO plants, we observe that, unlike other critical infrastructure, the Government did not have legislative safeguards for critical water infrastructure under the Public Utilities Act. We concluded that it would be prudent to put in place similar safeguards, especially as more DBOO plants are being completed.

Er Dr Lee Bee Wah also asked if the legislative levers over DBOO plants are triggered by the Hyflux situation. The review to enhance our oversight over DBOO plants started way before the Hyflux situation emerged. That said, the Hyflux situation was a reminder that we need to exercise proper oversight over our DBOO plants which are a key part of our water supply infrastructure and have effective levers to intervene when necessary in order to ensure Singapore's water security. As mentioned in my opening speech, PUB has in place robust contractual safeguards which allowed us to successfully execute the contractual remedies for the Tuaspring Desalination Plant.

With the additional legislative safeguards introduced under this Bill, we will further strengthen our oversight over critical water infrastructure and enhance our levers, in case it is necessary to intervene.

Er Dr Lee Bee Wah and Mr Gan Thiam Poh also asked for elaboration on when and how Special Administration Orders will be invoked versus the existing contractual safeguards.

PUB's interest is in safeguarding Singapore's water security. The grounds under which the Minister can impose Special Administration Orders are: first, the designated party is or is likely to be unable to pay its debts; second, the occurrence of a public emergency; third, the Minister considers it in the interest of the security and reliability of the supply of water in Singapore; and fourth, the Minister considers it in the public interest. These are similar to those found in a Special Administration Order regime of other essential services.

I would like to assure the House that the power to issue a Special Administration Order would not be exercised lightly. Such Orders are meant to ensure Singapore's water security and would be used only under exceptional circumstances. PUB will continue to rely on existing contractual remedies under the Water Purchase Agreements as far as possible.

Mr Speaker, Sir, as I have said in my opening speech, PUB's role continues to evolve. This Bill is an important step forward as PUB builds up its coastal and flood protection role, strengthens its oversight over water concession companies, implements smart water meters and enhances the security of our water tanks. Sir, with that, I beg to move.

4.05 pm

Mr Speaker: Er Dr Lee Bee Wah.

Er Dr Lee Bee Wah: Mr Speaker, I have one question to clarify with the Minister. Will PUB be employing more engineers so as to build up our in-house technical capability or would we be farming out the consultancy work?

Mr Masagos Zulkifli B M M: I think of all the agencies that I have seen, PUB is one that has always maintained strong lines of engineers. As old ones retire, new ones have learnt from them and they continue to give us the water security that we are comfortable with. With these new functions that we have taken up, we will certainly build the capabilities in-house, but we will not ignore cooperating with any other parties that can value-add to our functions.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Masagos Zulkifli B M M].

Bill considered in Committee; reported without amendment; read a Third time and passed.