Six local councils have accused water companies of unlawfully introducing new systems of paying bills through electronic "smart cards".

John Howell QC, for the six, said the "pre-payment water devices" wrongly forced customers to pay their bills - or face being cut off without the protection of the courts.

He told London's High Court the smart cards breached the code governing the disconnection of water supplies to people's homes which protected "those of small means and the public interest."

He said: "The use of the devices to cut off water supplies to domestic premises is not provided for in this code and is inconsistent with it, and their use is accordingly unlawful."

Customers transfer credit bought on "smart cards" to water supply pipes

The test case challenges the refusal of the Director of Water Services to ban the use of the smart card devices. It was brought by Manchester, Liverpool and Birmingham city councils, Lancashire County Council, as well as Tameside and Oldham borough councils. They are being supported by 14 other local authorities around the country.

The industry regulator, Ofwat, along with companies North West Water and Severn Trent, are all opposing the application by the councils for a judicial review.

The councils want a declaration that the cutting off of water through the new systems was in breach of the companies' duties and conditions of appointment as water provider under the 1991 Water Industry Act.

"Spread of diseases"

The local authorities say the new pre-payment systems were marketed as a means of budget payments, but in reality they collect arrears and force payment.

The copuncils say this creates a severe public health risk as people are forced to pay out or be cut off without the water companies having to resort to more "sensitive" debt recovery methods.

Doctors, environmental health and other experts have voiced their concerns that there could be an increase in the risk of the spread of infectious diseases, such as dysentery and hepatitis A.

Councils say number of people running out of water creates severe health risks

The councils also say that the use of the smart cards, or "waterkeys", bypasses the county court system and the protection from disconnection contained in the 1991.

They add that the pre-payment systems hide the true extent of the "astronomically high and frightening" number of disconnections now being made.

"Customers have no choice"

The legal battle arose after the water companies argued they no longer had to seek permission to disconnect supplies under the terms of the 1991 Act because customers "self-disconnected" when they failed to keep their smart cards charged up with "units of credit".

Mr Howell described to the court how, under the new systems, control boxes were installed in customers' homes and a valve fitted to the water supply pipe.

Customers were given an electronic smart card, or waterkey, and bought "units of credit" from post offices or other local outlets. The credits are automatically transferred to the control box once the card is inserted.

Ofwat stressed the new payment systems could only be installed on a voluntary basis, arguing that they gave customers a more flexible means of paying their water bills and made provision for emergency situations.

But the local authorities said in a statement that the systems were not voluntary in all cases. "Customers have told us the company appears with a disconnection notice in one hand and a waterkey in the other.

"They have little option but to accept."

In Oldham, where 120 mostly council-owned homes have been fitted with the devices, there were 132 disconnections lasting for over 24 hours between January 1996 and September this year. Over 100 were repeat disconnections, with some households cut off on up to seven occasions.

This compared with two statutory disconnections in all other Oldham households - about 90,000 - in the same period.

Birmingham's figures for the same period show a total of 3,807 disconnections in 1,500 households using the new systems compared to 77 statutory disconnections in all 400,000 other city households.

The case continues.

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