Water charges good, bilinear taxes bad

The government is still keen on introducing water meters and water charges, as reported in the Irish Times. I agree in principle, but not in detail. I’m glad that the government seems to have abandoned a poll tax. The current announcement, however, foresees a bilinear tax: The first N cubic metres of water are free, the rest is paid for.

Bilinear taxes are rarely optimal. In this case, a substantial share of water is untaxed so that there is no incentive to preserve water below the free allowance.

Much better, therefore, to charge for all water use — and rather than give people a benefit in kind (free water), give those on benefits a “water allowance” and those on wages a “water tax credit”.

61 thoughts on “Water charges good, bilinear taxes bad”

  1. “The current announcement, however, foresees a bilinear tax: The first N cubic metres of water are free, the rest is paid for.”

    How can this be done equitably prior to water meters being rolled out?

    The cost of water treatment is not relevant as we are paying for that with our taxes. The issue is whether we need to conserve our water resources to prevent resource depletion and pollution. Will water charges fix that or will they just transfer the cost of treating water from those who can afford to pay it to those who cannot afford to pay it?

  2. “Much better, therefore, to charge for all water use — and rather than give people a benefit in kind (free water), give those on benefits a “water allowance” and those on wages a “water tax credit”.”
    Why give a tax credit to those in work? Why not a water allowance too? Or give both the cash benefit? (So both are free to be dirty and cash richer…).

    I don’t really see the difference between this an a bilinear tax? Can you expand please?

    Would it not make sense to have a series of user bands – low/medium/high, before getting to the per litre charge? This could provide an incentive to reduce, but at the same time providing the relative certainty of a cap (i.e. no-one should pay more than x unless they choose to do so).

  3. The potential administrative burden may outweigh the optimality gap if the government was to employ a tax credit/water allowance mechanism you suggest. So perhaps their decision is a rational one in that they decided this overhead was too onerous?

    p.s. Do you not mean piecewise linear instead of bilinear?

  4. @Yoganmahew
    Please reread what I wrote, and what you cited verbatim.

    The difference is in the incentives (at the margin). The distributional effects of the proposal and counterproposal are identical (to a first approximation).

  5. @Richard Tol, when I first read the headline I thought it said ‘binliner taxes bad’..

    The one upside with water charges, and all water being metered at the point of consumption is that we might finally get an idea of the amount of leakage there is in our water delivery system. (As long as the water was also metered as it left the point of production).

    It would certainly make the cost/benefit analysis of pipe replacement obvious and ensure that capital went to where it is most needed.

  6. @Lorcan
    Binliner taxes are bad too.

    Water is metered at the point of production.

    If you have a smart meter in every household, then you can work out where the leaks are. You also know which households keep their taps running and send them an email or txt to stop.

  7. Don’t forget the VAT must be added to the cost of the standing meter charge and the cost per liter of water. It’s just the thin edge of the wedge again!!

    However charging for water is most probably the only way to get people to change their habits. But I feel that by the time I get to become a old age pensioner I will have very little money in my pocket left.

  8. One wonders how our near bankrupt local authorities are going to manage this roll out of water meters.

  9. “The admin burden of a water allowance and a water tax credit is trivial if everyone is entitled.”

    I think you may be over-looking the implicit political economy constraint.

    An x* daily allowance (once reasonable) is acceptable to the public, with the possible exception of reasonable cries about “what about the children?”

    A y* income threshold is far more debatable. What’s y*? Do we pick social welfare levels of income (~€10,000), median income levels (~€35,000) or as is often discussed in Ireland “high-earner levels” (which vary from €70,000 to €120,000 depending on who you ask)?

    Essentially, there’s more room for whinging if the policy variable is y*. These debates rarely return anything optimality in Ireland. Government turkeys don’t vote for Christmas, so the theoretically optimal option may be ruled out by a political economy constraint.

  10. Water taxes like VAT are regressive. I am against them for that reason alone.
    However, there are other important issues here:

    1. Why is the money going to central government and not the local authorities? Why is a water tax needed to pay in part for John Gormley’s limo and two Garda drivers?

    2. Do I still have to pay if I don’t want fluoride in my water? Do I still have to pay (e.g. as in Galway) if there is fecal matter in my drinking water and I have to buy proper drinking water from a shop?

    3. Will this roll out be done competently? Are we going to establish a water quango with a politically appointed board, large administration, etc., etc.

    I am not ready to pay another tax.

  11. @John M
    Water charges are regressive. This is negated if there is a free water allowance (as Gormley proposes) or if there is a lump-sum transfer (as I propose).

  12. @John Muldoon

    “I am not ready to pay another tax.” You’re currently paying for water indirectly via taxation. The current system is stupid and just facilitates idiots who leave hoses on in fields, etc.

    As for the central govt vs local authorities issue, it’s a bit of a moot point. “HQ” in Dublin have shown time and time again that it’s easy to withhold alternative funds when county councils start getting a few extra quid for themselves: tax revenue is fungible.

  13. I would tend to agree with Alan that a bilinear function f(x,y) has the property that f(ax,y) = f(x,ay)=af(x,y) for scalar value a, whereas a piecewise linear function is continuous and linear on segments, but perhaps the use of the term depends upon the context?

  14. @John Muldoon

    The fluoride thing is middle class liberal paranoia. If you take out the flouride the victims are children from the lower classes who can’t access dental care. And yes I know if would be wonderful if we had proper free dental care for all children, but we don’t so fluoride is a good solution. And sure if you’re buying drinking water at the shop it doesn’t affect you anyway.

    Water charges are the only way people will conserve water. Once the revenue was ringfenced for re-investment I think its a great idea. That tap running business confirmed, even though we didn’t need it, how utterly irresponsible people are. An effective fine is the only way to get them to cop on.

  15. @ Sarah Carey,

    “Once the revenue was ringfenced for re-investment I think its a great idea.”

    Sarah, we have been down this road before with the health levy etc. Just how does one guarantee the money will be ring fenced? I am afraid I do not trust the authorities that the money will be spent appropriately. While I accept big tax changes are in progress there still appears to be an inability of the state’s systems to do anything right.

    What will we have next? How about a air tax, the average human being breathes air at a rate of x liters per minute. Maybe we should start taxing this as well? Still no guarantee that the money will be spent wisely.

    The more I look at Ireland the more I think our corporation tax rate is just too low. Will it be possible to provide good quality services by taxing the population highly but corporations lowly? I am beginning to have my doubts.

  16. Like Richard I agree with the principle of charging to recover the costs of acquiring, treating and delivering water fit for human consumption, but I have concerns about more than the detail. And that, as mentioned by Zhou, is pouring money into the unreformed pit of multiple local authorities.

    We might like to believe we have top-class electricity and gas businesses with effective metering and charging, but look at the reality. SEI has just published its latest rationale for glorious inefficiency:
    http://www.sei.ie/Publications/Statistics_Publications/EPSSU_Publications/Understanding_Electricity_and_Gas_Prices_in_Ireland.pdf

    It’s dressed up as good news and, hot on its heels, is a press release from the CER:
    http://www.cer.ie/en/information-centre-newsroom.aspx?article=b8b3a79d-3369-478e-badc-e185eac1a04a
    waxing lyrical about the wonderful job it’s doing.

    The basic price (without taxes) of electricity to industry is the 4th highest in the EU and Ireland is uncontestably in the top spot for electricity to households. The basic gas price to industry comes in around 9th, but it is more than 16% above the UK price – though the bulk price in Ireland is determined by the UK wholesale market. Ireland is, once again, clearly most expensive for gas to households – a good 40% above the UK price.

    The need to invest in infrastructure (to make up for the failure to invest enough in the ’90s), the electricity generation mix in Ireland, its peripheral location and the fact that prices may be too low in other countries certainly contribute to a high cost base. But enforcing competition in generation when the scale of the market is insufficient, forcing consumers to compensate the ESB and BGE for any detrimental impact of competition, requiring consumers to finance a share of investment up-front and then to pay the full return on all investment and forcing consumers to pay for some pretty dumb investment decisions contribute even more.

    Given this experience, when it comes to water charges, citizens should beware.

  17. Taken from here and shows that Prof Tol’s income tax compensation may be difficult to implement fully.

    —————–

    It has been suggested that we could reduce our income tax by about 8% if the costs of water were paid through water charges. This has many advantages. If it is revenue neutral there is no additional burden placed on society. If water is metered, as it should be, and people pay by use, we would have an excellent demand side constraint on quantity. This could see an average water charge of about €600 levied per household or about €1.60 per day. Based on current usage of 40 gallons per day this €600 would equate to an average price of about 4c per gallon of water or just less than 1c a litre.

    If we increase income tax credits by €600 then nobody can be left worse off. In fact, those who use their water carefully will have a water charge of less than the tax credit so will be better off. Those who waste water will have a higher water charge and will be worse off. That’s the theory.

    The first problem is that those who are retired, out of work or unable to work will not benefit from an income tax reduction so they will be substantially worse off. This can be addressed by increasing welfare payments to compensate. Secondly many people in Ireland do not pay enough tax to fully benefit from a €600 tax credit. Figures from the Revenue Commissioners for 2006 indicate that the average amount of income tax paid on incomes of between €25,000 and €27,000 was €325 per year. Some 58% of tax returns handled by the Revenue Commissioners in 2006 had an income of less than €30,000. For these 1.3 million cases the average amount of tax paid was €450 euro. These 58% of earners paid 5% of total amount of income tax.

    Low earners in Ireland do not pay much tax and thus cannot benefit significantly from tax cuts. Using income tax to offset water charges would be highly inequitable. Low earners would see little change in income as they don’t pay income tax but their expenditure would increase as they would have to meet the water charges.

  18. @Enda
    I think it is actually the other way around.

    Gormley proposes that the first N liters are free, and that one pays for water use over and above that. The water provider does not know how many people are in the household, so that would the N liters per household. This is an implicit tax on large families.

    I would charge for all water used, and give the money back as a water allowance for adults (outside paid work) and children and as a water tax credit for other adults. This is neutral in family size. There is no income threshold.

  19. @ Sporthog

    “What will we have next? How about a air tax, the average human being breathes air at a rate of x liters per minute. Maybe we should start taxing this as well?”

    Just as soon as air has to be filtered and piped into people’s homes.

  20. The underlying assumption here is that there are sufficient households wasting water to pay for the additional overhead of metering and administering whatever charge we come up with. What’s not established is that a charging model will produce changes in behavior in this group, sufficient to fund the development.
    Additionally we have to consider the social cost of other unintended changes in behavior brought about by the new charges. For example the presence of parsimonious but smelly people on public transport, and the public health considerations of reducing water use in Schools, Restaurants, and hospitals.
    To my mind, intensive water conservation should be an issue for arid climates, not ours, and the current water crisis reflects more a lack of infrastructure maintenance, than a true shortage. The challenge here is to come up with a financial model which will reward authorities for high water quality and low transmission losses.

  21. One cannot privatize water supply without having a revenue model that can be increased over time as water “shortages” occur! Hence the need for meters! SMART? Why it is almost criminal!

    Yes, it is a tax and one that will increase once it is sold off to say Mr O’Brien or the Kaiser.

    Don’t forget folks, it is all your fault: you voted in and continue to enjoy an admin that thinks that 54,000,000,000 Euro is an appropriate price to pay for a bankrupt bank system!

    Wonderful little cOuntry!

  22. @Pat,
    I agree. This is another tax. Where does the money come from? My disposable income (after tax). It also imposes an extra burden on business. How is taxing consumers and businesses a good idea in a near depression? This plan has not been thought through.

    @Enda,
    If I am already paying for water, why introduce a new tax?

    @Richard,
    You may think you have safeguards in your proposal but history tells us the thresholds will be lowered over time to become meaningless. Therefore, we will end up with a regressive tax.

    @Sarah,
    Name calling aside, you never addressed the substantive issue of paying for water with suspicious additives. I still do not want to pay for water with chemicals or poo poo in it. If I am piped unusable water, will I still have to pay for it?
    By the way, I’ll see my “middle class liberal paranoia” with your toothless, lower-class, child “victims.” Would it not make more sense to divert tax money to dental health if that is your concern?

  23. John/Sarah: Behave yourselves

    John:
    Given the fiscal situation, it may well be that the proposed water charges are indeed a net increase in the tax burden. I would prefer spending cuts and the sale of state assets. However, if the tax burden needs to go up, water charges are less detrimental to the economy than are higher labour taxes.

  24. @Richard Tol

    Can you give us a brief description of the environmental reasons why domestic water usage needs to decrease in Ireland or link to a relevant overview?

  25. I still think tihs is flawed for Irealnd.

    What has been proven beyond doubt over the last couple of years and by recent events is that we need more efficent application of capital in water distribution and treatment.

    Adding a substantial layer of fixed cost (meters, admin./accounts billing, regulation etc.) to a monopoly industry for an inconstrained resource – yes we still have never “run out of water” in Ireland will create a substantial loss of consumer surplus.

    No need to look further for a shockingly poor application of economic theory to policy.

  26. @Geckko,

    Perhaps the typical economist’s preference for seeing a price is coinciding with the current political desire to generate revenue without full consideration of what’s required to make this work.

    My list of requirements (from a previous comment):

    – rationalisation of the multiple local authority activities into regional water and waste water companies,
    – effective strategic planning, quality control & long-term policy commitment to plans and quality standards,
    – the application of an effective regulatory revenue model,
    – some degree of private sector participation in financing,
    – cost-based water charges and a move to metering and
    – direct compensatory payments to low income consumers

  27. @geckko

    “Adding a substantial layer of fixed cost (meters, admin./accounts billing, regulation etc.) to a monopoly industry for an inconstrained resource – yes we still have never “run out of water” in Ireland will create a substantial loss of consumer surplus.”

    back-of-the-envelope calculation (area = 70,000km2, rainfall=1.5m/y,population =5million, usage = 100L/person/day) indicates domestic use is equivalent to 0.2% of rainfall.

    not exactly the atacama desert

  28. Why do they think this will work? We have just had a great ten years and very little was given to this area within the country.

    It almost seems like a great job for many people to be in houses all over the country insatlling meters. We will end up buying the meters from somewhere outside the country and then pay to get them installed – do I believe then that all the money will go to fixing the pipe?

    The easy way to deal with this is just include the water charge in the forth comming property tax based on the size of a house. Then we can save a lot on all the costs in the current scheme.

  29. I have argued for water charges a long time ago and have even paid some as I am a member of a local water scheme.

    I agree with Richard that the regressiveness of the charge should be dealt with through the social welfare system rather than the bilinear solution. The bilinear approach, if it is applies as it has been in my scheme, implies that the charges are merely an extra tax whereas a charge per cubic meter for all the water used yields revenue and incentivises individuals to reduce their water consumption. From an economic point of view the latter is Pareto optimal.

    Some people argue that they do not want another tax, yet they are quite happy to subsidise water wasters through the general taxes they pay. If you pay directly for something you can expect to get a certain standard and that has to be part of the changes. In other words you should not be having to pay for water that has to be boiled.

    The issue of charges should also kick off a debate about rationalisation and privatisation of water. As the many private schemes prove, drinking water can easily be provided privately, indeed many individuals have their own private source.

    It does not matter how much it rains, unless you are prepared to drink untreated water it will cost money to purify it, and supply it. The infrastructure costs are substantial the last €4.75bn was spent under the last NDP and the same amount was allocated for the current NDP. You have to add to this the operating costs.

    @ zhou
    The evidence that I have seen from the UK (you can find references in the 2006 Investment Priorities report) suggest a 15% reduction of water use once meters are introduced. It is actually quite difficutl to find studies that analyse this as most Western Europeans have been paying for their water (and waste water) for a very long time and one does not hear to many complaints!!

    In the context where there have been some capacity constraints in some parts of Ireland and given the cost of the infrastructure, a 15% reduction of demand would make a huge difference. There are many parts of Ireland that could not accomodate an additional business with high water usage and indeed I am aware of a number of location decisions where water supply determined the final location!

    @ john muldoon & gekko – you can always organise your own supply by drilling a well – if you get lucky you get clean water but it sure does not come for free.

    @ John Muldoon – business is already paying water charges. Ireland only has a derogation from the EU for domestic supply.

  30. From Zhou’s first comment:

    “The cost of water treatment is not relevant as we are paying for that with our taxes.”

    Surely the cost of treating the water is related to how much has to be treated? Therefore shifting the method of paying for it from central taxation to household water charges could reduce the overall cost of treatment, no?

  31. @James Conran

    I don’t know if it will reduce the cost of treatment.

    It depends on a number of factors:
    1. How much water is being wasted through over-use.
    2. How much water is being wasted through leaks in local authority pipes (including local authority housing and accommodation).
    3. How much capacity we have for treating water.
    4. How many water treatment plants we have that will have to be upgraded one way or another.
    5. How much more it costs to run at greater capacity of one is running at high capacity.
    6. How much capacity we will require for treating water if water charges are effective.
    7. How much capacity for treating water we will require if water charges are ineffective or are not brought in.
    8. How much it would cost to identify water wastage without bringing in charges.
    9. How motivated and how effective local authorities will be to improve water facilities if charges are brought in and rates drop.
    10. How much more competent and efficient our local authorities will become as a result of having additional money to spend on water treatment 🙂 .

    In any event, water is a utility and the most equitable way of charging for utilities is through taxes. Increasing the cost of healthcase could reduce the numbers of people attending our hospitals. Increasing the cost of public transport could reduce the numbers using buses and therefore the number of buses we require.

    The real justification for water charges can only be that over-use of water is degrading the water table and therefore we are facing a water shortage. I think water charges are a good idea in that case once the meters have been put in everywhere and there is transparency as to where the real water wastage is.

  32. @ John

    “The easy way to deal with this is just include the water charge in the forth comming property tax based on the size of a house. Then we can save a lot on all the costs in the current scheme.”

    could not agree more amalgamate the two charges (property and waters) into one and cut down on the admin side!!

    still have to make the comment that in my simple mind it beggars belief that we are even talking about water shortages in this damp wet place

  33. @TOD
    Water is not short. Potable water is.

    @John/TOD
    A water charge per house is silly. Houses don’t use water. People do. A water charge per house is regressive, it does not reduce waste, and it does not increase accountability.

  34. @ TOD “it beggars belief that we are even talking about water shortages in this damp wet place” as I said above unless you are willing to drink untreated water you are going to incur costs.

    Unless you make the cost of water explicit there will be no incentive to cut down – those who use it sparingly will subsidise the wasters. I can’t see any reason why I should subsidise wasters!

  35. @Edgar.Morgenroth

    Who are these water wasters? I don’t know of anybody who I would say uses an excessive amoutn of water. We are not exactly a nation of avid car washers like our neighbours across the water. I am sure there are some crazy sprinkler users out there at the height of our arid summers but I am not familiar with any such people.

  36. @Zhou
    The average production of drinking water is 450 litre per person per day. This varies from 350 l/p/d in Kilkenny to 650 l/p/d in South Tipp. If we believe the county councils, about half of water leaks away (compared to about a third in similar countries). That makes for a water use of 225 l/p/d (compared to 100-125 l/p/d in similar countries).

  37. # Richard Tol Says:
    January 25th, 2010 at 2:41 pm

    “If you have a smart meter in every household, then you can work out where the leaks are.”

    The statement above is wrong unless you only mean leaks on the consumers side past the meter. No amount of household and business meters, whether smart or dumb will tell you anything about the spatial location of leaks in a water distribution system if these are the only meters apart from the meters at the outlets from the treatment plants. In that case you would have some idea of leakage in the entire system but no information about where that leakage is happening. If this doesn’t make sense think of a very long buried pipe with leaks where you are measuring the water going in at one end and the water coming out at the other. Subtracting water out from water in equals water leaked, but that won’t tell you where it is leaking.

    In fact locating leakage requires a technique called district metering which involves putting meters on the distribution watermains at places where you can make all of the water entering a small enough area during the night pass through the meter. Smart consumer meters wouldn’t help much, if at all, because you need to do your measurements at night when consumption is low. That is shown by the fact that district metering to determine local leakage has been pioneered by the Water Authorities in the UK, one of the few developed countries where residential metering is not widespread.

    More generally water supply practitioners have moved on from simple leakage models. The modern methodology refers to unaccounted-for-water, of which leakage is only part.

    One thing that is striking about the original post and the subsequent comments is how little knowledge is displayed about real water supply systems. It reminds me of an old joke about an economist on a desert island whose punch line is “assume a can opener”. If anyone out there wants a good introduction to the worldwide organization of water supply services including economic aspects, they could try “Institutional Governance and Regulation of Water Services” (2007, International Water Association) by Michael Rouse, formerly Head of the Drinking Water Inspectorate in London.

  38. @Richard Tol

    Such huge disparities between local authority areas suggests that wastage has more to do with the local authorities record in maintaining pipes than with wildly differing behaviour of householders.

    Many leakages occur in Local Authority pipes, in commercial lands (including incomplete developments), in unoccupied and untended lands and on farms.

    Is there empirical evidence that imposing water charges on residential users will substantially address water wastage?

    One would hope that Local Authorities have more granular data from all those meters that froze and cut off water supply to thousands of people during the recent cold snap!

  39. @Zhou
    Typically, if you get something for free, you do not complain about the quality and certainly not about the cost. If you have to pay, on the other hand, you may ask the question: I’m using 150 l/p/d. Why does my county council charge for 450 l/p/d? People in South Tipp may start to wonder why water charges in Kilkenny are half theirs. Or compare prices between Ireland north and south.

  40. @zhou:

    I don’t know whether you and your friends “waste” water but, if you’re in Dublin, I’d be happy for you to waste your own, without having to steal extra water from us Shannonsiders. As it is, the Dublin water authorities, who (pace Paul Hunt) do work together and engage in long-term strastegic planning, think Dublin and district will run short of water soon. So they’ve been planning, for many years, to do something about it. Which will cost money.

    Anyone wanting to learn about Dublin’s impending water shortage should boogie on over to http://www.watersupplyproject-dublinregion.ie/

    Now, if only decentralisation had gone ahead properly, the problem could have been avoided; those exiled from Dublin would have found plenty of water in Ballinasloe.

    bjg

  41. Bilinear water charges: are they being proposed on a per person or per household basis. If the former than local authorities will need an accurate database of the number of persons in each household which is a tall order. If the latter there will be fairness arguements as higher occuapancy households will be paying more per person for their water.

  42. Leakage. Individual household metering will assist in leakage dectection in the public mains. The water network in Dublin is broken down into district meter areas of approximately 1000 houses and a mass balance is done to estimate leakage. The legitimate use for households is currently estimated on the basis of an average use per person per day which is not necessarily accurate and an estimate of the customer leakage. Household metering would allow a much more accurate figure for these two components of demand and therfore accurate determination of leakage in each District Meter Area therefore accurately identifying priority areas for mains rehabilitation and replacement

  43. @J Daly
    The current plan is to give a free allocation to each household. That’s the only pragmatic way to do this, and it is terribly unfair on large families.

    Charging for all water and returning part of the revenue as cash can easily be done per person: raise benefits, pensions, child benefits and tax credits — although Seamus Coffey rightly argues that you won’t reach everybody.

  44. Water charges in most cases also cover the costs of wastewater collection systems and treatment. A large part of the the cost of wastewater treatement in not related to the volume of water going into a house (or factory) but related to the amount of crap in the wastewater. I don’t think its going to be possible to measure this for each individual household.

  45. @Richard
    “People in South Tipp may start to wonder why water charges in Kilkenny are half theirs. Or compare prices between Ireland north and south.”
    Eh, yeah. And then they might?…

    Oh yeah, vote in the gombeen that got them a passport quickly and got Mrs. O’Grady’s daughter moved up the social housing list. Lovely fellow. Keeps a stoat warm just with the power of his head. Drives a merc, you know, so he must be important. The Taoiseach drives one of those. I’ve always voted for him…

    It will take more than expensive water to jolt the few grateful-dead who bother to vote in local elections out of their fairytale. Of more concern is whether the indolent majority who don’t bother to vote will spring into action heralding a new dawn in political representation. If you could afford to water-board me, I like to think I still wouldn’t give you an answer…

    PS Look at council tax in the UK. It is not a good that can be substituted or shopped around for.

  46. @J Daly,
    metering homes and businesses will only quantify the amount of water being wasted from leakage in the mains, it will give no information on where the leaks are unless there are meters at the branches along the mains back to the reservoirs.

    THe govt should have installed a grey main alongside the blue main in the building boom and while replacing mains install a grey main so untreated water can be supplied for those high usage items where flouridated, chlorinated potable water just isn’t necessary.

    Also a co.co worker wrote a letter to the irish times during the week stating that the Dublin area had only a 2% margin in treatment capacity. This shows complete incompetence by the national and local governments. What organisations would be uniquely knowledgeable about the extra housing and business needs in their area? they give planning permission to these new developments…….

    The same council worker threw in the strawman argument about a dry summer causing water shortages even though the current shortages in the Dublin area are because the output of the treatment plants are not able to supply demand; not because the input to the treatment plants are unable to meet demand.
    He was quoted again claiming that most of the leaks in the mains supply was likely to be between the likely meter location and the household/business.

  47. I can confirm that people in South Tipperary and Co. Kilkenny are culturally similar notwithstanding that North Tipperary is more similar to Kilkenny in terms of gra of the stick and sliotar. Both are relatively frugal.

    The idea that people in South Tipperary are wasting twice as much water in their homes as Kilkenny people is obviously nonsense. The idea that imposing water charges is going to stimulate local authority reform in South Tipperary becaue the people are angry and are not going to take it any more is genuinely comical. Maybe they will place on embargo on water going to those gobsheens in Dublin like BJG would like to do 🙂 . Now that’s what I call local action!

    If the difference between Kilkenny and South Tipp is an illustration of the case for water charges then we are on very shaky ground. There is a genuine chance the Government could fall over this.

  48. @Zhou,

    “There is a genuine chance the Government could fall over this.”

    Given the measured and reflective tone of your comments on this blog, the portentous nature of this takes one aback. But I think you may be on to something. With unreformed local authorities applying any form of water charges is like putting lipstick on a pig. Minister Gormley just wants to smear it on; some of the economists here wish to apply it more precisely in the expectation that it will have a catalytic effect on public opinion.

    I don’t think the Government will fall. Too much effort has been put in to get to this point. Expect some sort of fudge.

  49. JDaly:
    “Leakage. Individual household metering will assist in leakage dectection in the public mains. …. Household metering would allow a much more accurate figure for these two components of demand and therfore accurate determination of leakage in each District Meter Area therefore accurately identifying priority areas for mains rehabilitation and replacement”

    I meter on every house and on groups of houses surely would identify leaks. However, is it the most cost efficient way of doing so? Where is the leak report website? Where is the leak hotline? Where is the communications drive?

    Also, what are the maintenance costs down the line? Is it the case that installing meters and making them the responsibility of householders is another way of imposing a flat tax on those who can least afford it?

    After that, where is the guarantee of transparency of publication of metering data? How do we know it will be acted on and the money will be allocated to fixing all the leaks? Will it not be the case that the same amount of money will be allocated and only so many leaks can be fixed?

    As for the Tipp South / Kilkenny differential – another possibility is that the data is faulty for one reason or another. I recall there was water contamination in Tipp South in the last couple of years.

  50. @ J Daly
    “the volume of water going into a house (or factory) but related to the amount of crap in the wastewater. ”
    In Germany wastewater is charged on a per person basis as the amount of c**p is dependent on this. Of course that won’t work in Ireland as there is no compulsory residential registration system. They also charge per m2 of ‘covered area’ e.g. roofs and drives as the runoff ends up in the treatment plant as well. That is why grey water systems are becoming popular – you can reduce your runoff charge and your water charge.

    @zhou – not all leaks are visible i.e. water might not come to the surface.

    I made the point above – but nobody took the bait – so I make it again. The water sector should be rationalised and privatized. Regulated properly (I know its a big proviso) it will have an inventive to reduce leaks as they would cost the industry and not the consumer.

  51. @Edgar,

    Not sure if anyone will take the bait this time either. There seems to be a weariness among the academics since this solution is seen as a “no-brainer”, but among politicians, policy-makers and interested parties (both professional and in civil society) “rationalisation and privatisation” seem to have the mark of the devil. The Eircom debacle retains a malign impact, selling the “family silver” in a “fire-sale” is a frequent debate-killer, the extent of the effort required (and the vested interests that would have to be squared) is an enthusiasm-deadener and the experience in Britain isn’t a wonderful ad.

    However, it would make sense to have an informed and open debate about the semi-states and infrastructure and utility services. The current approach is inefficient, wasteful and excessively costly for citizens and the economy. The false boom during the last decade helped to conceal this. Now that boom has turned to bust and the state must seek to deleverage its balance sheet (however defined), this inefficiency, waste and excessive cost may be sustained no longer.

  52. @EM

    Fair enough that not all leaks are visible. However, I am not convinced that it is efficient to put a meter on every house to identify leaks.

    In a dream metering set-up you would have a meter on every house and meters for groups of houses and all would feed data in an accessible format into a central water management infomation system that would be properly designed and configured. All house meters would be associated with the entry meter for that group of houses and the exit meter for that groups of houses.

    Vol [Entry Grp] – Vol [Exit Grp] – SUM [Hse Group] = Local Authority pipe leakage.

    That is a dream scenario with no cost/benefit analysis and no measurements against alternatives. It also doesn’t identify what the priority aspects of water sourcing, treatment, transport, use, wastage and disposal. It would fit in well with the kind of tunnel visioned projects which the civil service has perfected over the last number of years.

    As for privatisation, where do we begin? The commitment to infrastructure; ownership of infrastructure, maintenance of infrastructure; development of infrastructure; guaranteed returns on investment; profit motive; regulatory arbitrage; contractual risk; lack of state influence over input costs for business; monopolies; divergence between different areas; rural areas uneconomic to serve etc etc etc. 🙂

  53. I just had a look on the City of Toronto website – we pay $2.0616 per cubic metre, EUR1.39 for 1,000 litres – probably about half a litre of bottled water in Ireland. (For comparison, a standard barrel which people like my grandmother use to catch rainwater is 200L)

    Most houses are metered now, and while those who remain can’t be forced to change from a fixed charge (here water meters are interior probably because they would stick in the winter), if you want any work done on your water service like a wider inlet you have to accept one. The new meters are wireless so you don’t have to phone in a reading.

    The water is not private here – it is operated by an Agency of the City of Toronto and thus keeps separate books but remains in public ownership. Production is between 1 and 1.5 billion litres per day. There is great sensitivity here about water production ever since Walkerton but that was not a privatisation issue so much as government refusing to do its primary duty which is regulation.

  54. All

    There appears to be some confusion about the amount of water consumed by a typical customer, and what is meant by wastage, leakage and unaccounted-for-water.

    It might help to think of the water that is supplied to the house as being used in three (3) ways. It is either used directly by the customer, or it is knowingly (and visibly) wasted by the customer, or it is unwittingly wasted by the customer. The responsible customer will try to avoid knowingly wasting water (letting the tap flow etc), but may be totally unaware of the leakage that is happening in his or her property between the road and kitchen sink. It is only with the introduction of a meter at the property boundary will the customer be able to capture all water consumption and then do something about leaks as they emerge.

    From the limited data available in Ireland it is becoming increasingly apparent that the customer-side leakage is a lot higher than anybody realised. This is not the customer’s fault as such, because many of these leaks are hidden underground. They may only exhibit as a soft area in the lawn, or a crack in the garage wall, or low pressure in the water at the kitchen sink. Crucially, only in the most extreme cases do they cut the entire supply to the house.

    The likelihood is that a nationwide metering programme will help network managers and customers to identify leaks more quickly and save us all the huge expense of producing water that is never used. We can’t say that all of the leakage is on the customer’s side or on the local authority’s side of the stop-tap, but we can say that both the local authority and the customer have a burden of responsibility to chase and fix leaks.

    I have written extensively on this subject in the Irish Examiner and the Sunday Business Post, and on my blog at blog.kevinjmurray.com. These comments come from my experience of several years as a Chartered Engineer engaged in the non-domestic metering programme in Ireland.

    Kevin Murray

  55. The government are bringing in water rates and yet their own house is not in order. Look at recent reports on water wastage of up to 50% by local authorities through leaks in piping carrying our drinking water. They should look at this first and if water rates are introduced they should go directly to fixing the antiquated water infrastructure with a time line for fixing the water wastage problem by local authorities. Once the water wastage is minimized then the water rates should be revoked.

  56. In 2000 some 47% of clean water leaked back into the ground.

    2% of the water that did not leak away i.e. a little over 1% of the total water produced in Ireland was used by the domestic consumer.

    Ive seen some rough figures and the average domestic use in good practise Holland is 125litres/week/person while here it is 160litres/week/person.

    So essentially what is being proposed here is that if Irish consumers reduce their water usage by 28% of their 1% share, thereby making available 0.28% more water everything will be fine.

    Does anyone get the feeling this government is idealogy bankrupt?

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