Water charges

The draft Memorandum of Understanding with IMF, ECB and CEC has that the government will study the transfer of the provision of water services from the county councils to a water utility, and will start charging for water no later than 2013. This is a year earlier than in the four year plan.

The Irish Times has some more detail. Besides the water utility, there would be a water regulator. That is silly. There is a regulator already: the EPA. It would be better to extend the mandate of the EPA to price regulation than to create a new body (plus CEO and fancy offices) and a turf war.

It would be better still to do away with the separate regulators for this and that and create a unified regulator. The Commission for Energy Regulation, for instance, reports to the Department of Energy, who write the regulations and own most of the regulated companies. It may be better to have the regulators report to Department of Finance or the Central Bank. A unified regulator would have economies of scale (regulation is regulation) and be less prone to regulatory capture.

The plan is still to have a central program to install water meters in every home in the country, and to have a free water allowance. Fortunately, the IMF will review the plans and chances are they will talk some sense into DEHLG under the new minister.

25 thoughts on “Water charges”

  1. Richard. Any chance we might have those leaky pipes fixed before metering? Estimated loss is 40%+ …

    BpW

  2. I didn’t pick up on the creation of a single water authority.

    This is badly needed to iron out the massive variances in the quality of water provision. Indeed, despite the austerity, I think this is one area that badly needs investment, whether through rates or exchequer support. We need to bring our water provision up to acceptable standards. A single body responsible for the provision of safe, clean water, funded by users seems the optimal outcome.

    I quite like the structural reforms part of the MOU, whatever about its other terms.

  3. Apart from some unconvincing waffle about lawyers, medics and pharmacists I think this, rather vague, commitment to have an independent assessment of the need for a single water authority and a regulatory body (coupled with another independent assessment of the electricity and gas semi-states – based on the report of the Review Group on State Assets and Liabilities) is the only non-labour market structural matter being addressed.

    Don’t you just love these ‘independent’ assessments. Still, I suppose they’ll provide a good chunk of revenue for the consulting fraternity – and we’ll be hugely wiser as a result. I expect the IMF was encouraged not to look too closely at the catalogue of dysfunction in the state, semi-state and private sheltered sectors – and its team was probably comprised of financial and fiscal experts. “Ah shure, ’tis all under control. We’re going to get stuck into the solicitors, doctors and chemists. And isn’t one of our very best economists digging into the semi-states. We won’t have his report until after ye’re gone, but we’ll look into what he’ll have to say very seriously. Don’t be bothering yer heads about all that stuff; shure, ye have enough on yer plates already. We’ll look after it.”

    Despite all this nonsense, we’re still left with the problem – which is common to all regulated utilities in the EU – of how to secure efficient investment in long-lived, specific assets at an appropriate cost of capital. The US has solved this problem in its gas industry by establishing Coasian property rights in transmission capacity; and it is getting to grips with the problem in its electricity industry. The EU doesn’t even recognise the problem and is proposing that the huge future investment required will be financed by citizens both as final consumers and as taxpayers. The vested interests, lobbyists and subsidy chasers are smacking their lips in anticipation.

  4. @TM: Thanks for update.

    A -20% change implies that half of leaky pipes have beeen attended to ??? Thats a lot of digging and filling. Forgive me if I appear dubious. I have little faith in ‘official’ publications, they do awful things with stats. Now if RT could confirm – that would be something.

    BpW

  5. Water Regulator:

    The EPA acts as a “quality” regulator, so it would not be appropriate to ask it to take on a “price” regulation role also. I think there is a lot of merit in the proposal to bring in a water “price” regulator under the existing CER. Indeed Northern Ireland has a similar Utility Regulator who looks after water, gas & electricity areas.

    Leakage:

    The average “unaccounted for water (ufw)” across the country is still between 45% and 50% as far as I am aware. It may be down below 30% in Dublin but there are other parts of the country that have significant mains rehabilitation programmes to address.

    However, the ufw figures include leakage on the customer’s side of the stopcock as well as in the public network; and that may be as high as 50% of the total. That is why water meters are necessary to reduce the “leakage”. Ironically, as the local authority repairs leaks in its own pipes, it often means that water pressures increase and then more weak spots on the customer’s side open up into leaks.

    KJM

  6. I would NOT NOT NOT like to see EPA involved in setting prices.

    Safety must be separately regulated and immune from economic arguments. In fact, it’s time that the existing water authorities were given the resources to making the existing supplies safe (see Galway for instance).

    The second idea to have a unified regulator seems more sensible.

  7. @Mark

    The EPA produce a Remedial Action List (RAL) of treatment plants that need improvements to reduce risks of non compliance with the EU Drinking Water Directive. The local authorities then prioritise those projects with funding from their own resources and the Dept of the Environment. They are working systematically through the RAL list over the last couple of years and progress is being made.

    The EPA conducted over 100 audits of water treatment plants in 2009 and a similar number in 2010, and issued 28 “directions” to local authorities in 2009 and 9 in 2010 so far.

    They started with 339 water schemes on the RAL and 172 of them have had works completed so far. Most of the rest have agreed timeframes in place to get them addressed.

    KJM

  8. I read in the IT today that re.a proposed water authority – it has not yet been decided if it would be a private utility or a public body.
    As we know that huge corporate bodies are buying up the water authorities in small countries might we see our water on sale?

  9. @longhand:
    Just my little joke, I’m afraid, but it does show that many people are prepared to pay for water.

    Thanks for the link to your website.

    bjg

  10. There is a regulator already: the EPA. It would be better to extend the mandate of the EPA to price regulation than to create a new body (plus CEO and fancy offices) and a turf war […] It may be better to have the regulators report to Department of Finance or the Central Bank

    So, essentially; this is just the latest scheme you’ve come up with to shank any sense of environmental protection in this country?

    Ok, so noted.

  11. “There is a regulator already: the EPA. It would be better to extend the mandate of the EPA to price regulation than to create a new body (plus CEO and fancy offices) and a turf war […] It may be better to have the regulators report to Department of Finance or the Central Bank”

    Kevin Murray is right, don’t put quality and finance regulation in the same entity. The UK regulates drinking water quality through the Drinking Water Inspectorate and pricing through Ofwat. The US regulates quality through the EPA and State Health or Environment Departments and water pricing through State-level Regulatory Commissions (although some publically owned water systems are not subject to price regulation). In Australia quality is generally regulated by State health agencies and price by independent State tribunals. The skills required for the two kinds of regulation are very different and do not fit together.

  12. This separation of responsibilities applies across the whole area of public good and utility service provision. The state has a responsibility to set the standards required and economic regulatory bodies have the responsibility to ensure these standards are met efficienctly without the gouging of final consumers or taxpayers.

    This a basic requirement in any country. There are two further dimensions in the Irish context. First, much of the standard setting is developed at the EU level and there is member-state responsibility for application via subsidiarity. Secondly, in a small economy and at a time where there is a pressing requirement to improve the efficiency and effectiveness of state agencies – and when the current model is totally dysfunctional – there is a strong case for consolidating the standards-setting and economic regulation activites in two separate agencies and have them report to the DoF (which is reporting to our real masters in the Troika).

  13. I’m surprised that they don’t begin this with a roll out of water meters for the network infrastructure itself. Say a meter for each large estate or heavily populated road. If they could see which areas were using far too much, they may likely identify losses from the pipes. I am working under the assumption that a lot of the “consumption” is wastage though, which I concede may not be the case…

  14. This is bizarre. The introduction of water charges and the privatisation of water (which is transparently what the structural adjustment point in the MoU is about) seem to be taken here both as a given and self-evidently a good thing.

    Why? What is the reasoning behind this cosy consensus? Why is the privatisation of water obviously good? I speak as someone who moved to Dublin from Yorkshire. A region that was in the news in the mid-90s, post privatisation, for running out of water. The newly privatised Yorkshire Water, deciding that spending money of fixing leaks would be contrary to their primary mission to maximise shareholder value by abusing a natural monopoly. I fail to see why the same will not happen here. Will there be competition in water provision? That was a rhetorical question by the way. I explain that as it appears that the blatently obvious appears to be mysterious to a good number of folk here.

  15. @ eidgenosse

    Not familiar with events in Yorkshire. I would make two points though:

    1) If fixing the leaks was bad for profits (I’ll get to that in 2), then the revenue from water supply (i.e. the price of water) was not high enough. One way or another, the maintenance of the pipes costs money. If water is charged for, the users pay for this. If it is not charged for, the taxpayer pays.

    2) If the supplier is earning supernormal profits, the regulator is likely failing in its duty to protect consumers. A competent regulator (arguably a big ask) should solve this.

  16. The argument over private versus public ownership of water and wastewater services is irrelevant. The privatized water service industry in the UK is regulated to a degree that would be unthinkable even in other monopoly utilities. The Dutch and the Australians have first rate publicly owned water service systems. Two keys to that success are corporatized entities and good regulatory systems. It is regulation and governance that matter not ownership.

    It should also be noted that the big water industry corporations that have emerged from Germany, France and the UK make most of their profits from supplying operations services in other countries not from the bread and butter utility operations in their home countries.

  17. @MarcusOC

    The local authorities are putting meters on the network (and have been doing so for years). These are bulk meters on District Metering Areas (DMAs); and they use them to identify where they can best invest in water mains repair or replacement.

    This is all part of the Water Conservation Programme that is funded largely through the Water Service Investment Programme from the DEHLG.

    However, the non-domestic metering programme and the rural water programme have shown that you need to be able to get down to the individual connections to identify a lot of the leakage.

  18. @John Kehoe
    I agree that proper regulation is all-important
    .Greg Palast of BBC2’s Newsnight, wrote wrote an interesting book in 2003. “Democracy and Regulation”,( http://www.democracyandregulation.com/ ), describing the American system (a legacy of FDR’s New Deal) for regulating gas, power, water electricity and communications utilities.
    This regulatory system is based on complete Freedom of Information regarding the above-mentioned utilities, and full public participation in setting prices and standards of service.
    There are no secret meetings of the regulator, and no secret documents. Anyone can make a submission to the Regulator – individuals, industrial consumers, economists, unions, competitors. The American regulatory process seems to consist of endless successions of public hearings of submissions to the Regulator, and decisions based on those hearings.
    This regulatory system is litigious, adversarial, lengthy and complex. But it is profoundly democratic, and, according to Greg Palast, has delivered a high-quality essential services at some of the lowest prices in the world , for over eighty years

  19. @davidc,

    +1

    For years, I and others have being making the case for the application of key features of the US approach – that are possibly to replicate – to infrastructure and utility services in the EU.

  20. For years, I and others have being making the case for the application of key features of the US approach – that are possibly to replicate – to infrastructure and utility services in the EU.

    This American regulatory regime is starting a steep decline under business lobby pressure, though (the abject FCC surrender on net neutrality this very week being the most glaring victory for would-be monopolists in the US for some time).

  21. @EWI,

    No system is perfect. While recognising that it is an association of sovereign states bound by treaties, I believe the EU could usefully adapt aspects of the US approach. And I also recognise that the US system of governance is overdue some reform.

  22. From talking to people, no body I know has a problem paying for water that they personally use. Polluter pays system. What riles people is paying a flat rate for water that is being lost in leaks.

    The problems local authorities and councils are having is that they can’t find leaks in plastic PVC piping with their older equipment which is more suited to metal pipes. We have started using a new hydrophone system from Canada which is having great results on plastic. A private company called Echologics developed the product in partnership with the National Research Council of Canada. This flagship product was developed to work on PVC pipes in particular, because in the past, correlators have had difficulty locating leaks in PVC. Irish Councils are doing their best with the equipment they have.

    Also more district meters need to be installed to help the councils narrow down the location of these costly leaks. Local authorities know they have leaks but don’t know how much there are losing and where. If district metering was put into place it would help the council to repair the areas that are most cost efficient to repair. Galway city for example have started to put a program in place to set up district metering areas.

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