Towards Irish Water

The public consultation on the establishment of Irish Water opened today. See here and here.

As I’ve argued before, charging for water and waste water is right and proper; and doing so through a state-owned, tightly regulated monopoly is a reasonable solution (although you can argue for a mutual company instead).

The contents of the position paper published today were well-leaked and contain little news. The position papers confirms that Irish Water will also be responsible for waste water and waste water treatment. Council staff will be transferred to Irish Water, probably with a considerable improvement in working conditions.

The Commission of Energy Regulation will regulate Irish Water. There is no sign of the creation of a super-regulator. The new CEWR will be inter-departmental, though, an interesting experiment.

The department persists in two follies – mandatory roll-out of water meters, and free allowances – but a third folly – universal metering – has been dropped.

The time table has been slipping, which is no surprise as it was so ambitious. The public consultation was supposed to start in October, and Irish Water was supposed to start work in January. Originally, the plan was to install 1.4 mln meters in 2 years time; that is now 1.0 mln meters in 3 years time – less than half as fast. It is not clear to me that this would support 2,000 jobs: 500 meters per job, installing two meters in three days.

To make up for lost time, the Department of the Environment now intends to start the work of Irish Water. This is a mistake. Like any department, Environment is struggling with staffing as it is. Utilities are better at being utilities than departments are. Utilities are also better at resisting cronyism than departments – every TD will want a water metering contract to go to their favourite engineer cq plumber. Irish Water will wrestle with the legacies of the county councils, and it is now being saddled with a departmental legacy as well.

Maybe the public consultation will further improve the plans.

37 thoughts on “Towards Irish Water”

  1. You must be missing the dysfunction of governance, policy and regulation in the Irish environment and energy spheres so much that you can’t let it go. But I expect you are enjoying the freedom to highlight it without the purveyors of this dysfunction determining the funding and scope of your research in these areas.

    However, there is as much, if not more, dysfunction in these areas in Britain. Britain needs you. There is scope there for advocating sensible policies and some limited chance that they will be considered on their merits, debated and might impact on policy implementation. There is absolutely no chance of this in Ireland. The purveyors of dysfunction reign supreme.

  2. “Well leaked”
    I like it – you are mighty crack Toll.
    I recommend you read Pompeii by Robert Harris.
    First to solve the problem.
    Taxing water use in this country is a form of deep insanity.

  3. @Richard Tol

    “1.0 mln meters in 3 years time – less than half as fast. It is not clear to me that this would support 2,000 jobs”

    But you need one senior manager and two middle managers per meter guy don’t you? Then there’s the IT department, customer support, change & development, strategy division, marketing and PR, finance department, any other little empires the senior managers can build, …… sorry, I’m being sarcastic.

    Anyway, I thought you had gone?

  4. “The department persists in two follies – mandatory roll-out of water meters, and free allowances – but a third folly – universal metering – has been dropped.”

    What is wrong with the above? Just curious but to me water meters seem a sensible thing to do, how would fair charges be levied otherwise?

  5. They are taxing the wrong things me thinks.

    Its as if oil was seeping out of the ground and the “authorties” declared they could not afford to refine it.
    We must CONSERVE rather then invest – and to conserve we must divert resourses from refining.
    Entropy thinking.

    Water is not a scarce commodity in Ireland.
    Oil is.

  6. I’m pretty pleased with the document they published. Given the scope for all sorts of mad notions, they’ve done OK. I’m not terribly worried about the Department having a transitional role -this is a long term project, and I’m fairly confident the Department will make sure it gets off on the right foot.

  7. Farmers and those with wells will be exempt water charges as far as I know, which seems reasonable.

    There is a great deal of hot air in Ireland about water charges which in several Continental countries are very much part of the canvas (and more often than not controlled by local subsidiaries of the original French ‘Suez’ corporation).

    At one stage in Italy we were paying over €600 annually in water charges. When eventually, we put in our own system, I had to pay for non-receipt of water before the contract could be terminated.

    Again, I read that local authority tenants etc, will not have to pay. Another curious decision.

  8. How quickly will this charge rise. If it’s anything like the bin charge in the Fingal region they will have increased by over 200% in 3 years.
    All well and good charging for water, bins etc but the question is how many will loose their jobs because this is just more money taken from the economy that will not be spent where it can create something other then fear and stress in the minds of people who have nothing left in their pockets each week after the bills are paid.

  9. @Alchemist
    What exactly are you trying to conserve when you spend money to install water meters ?

    Surely its not water ?……..in Ireland !

    You are diverting resourses from actually fixing the problem, post war pipes with serious metallurgy issues.

    I.e. this expenditure will be a waste of resourses.

    Its like a doctor prescribing medication to prevent the pain rather then curing the Cancer.
    This is simply a lack of investment in basic life support.

    This is not oil we are talking about here. – the basic resourse is not depleting.
    Confusing two very different materials & sticking identical depletion stamps on both is a very sick joke.

    If you want to see waste I will show you waste………..

    http://www.youtube.com/watch?v=flZi4SHlhXg

    In 2008 we imported more petroleum and petroleum based products then food & live animals
    Oil imports : 4.913 Billion (Exports 757million)
    Food imports : 4.681 Billion (Exports 7.08 Billion)

    This situation reversed during the implosion in 2009 & 2010.

    Well the trade stats for 2011 are indicating that oil imports will be higher then food imports again this year.
    Its really a unbelivable situation – people are willing to forgo investment in basic life support so that they can continue to drive their cars & heat their homes with oil – I guess its convenient until you can no longer source the stuff.
    Then you will find you have a spot of bother.
    PS add the cost of road vehicles to this disaster and you will get a better indication of inputs.
    Road vehicle imports for 2008 was 3.228 billion.

    Producing money to pay people to fix the problem is not a problem if the country can learn to tackle the real waste in our country – the built environment

  10. @Dork

    Ireland in my humble opinion would function much better if everyone had to pay something rather than whole swathes of the population being granted rebates and derogations – applies not just to water.

    Something for nothing is rarely appreciated as a boon over time.

  11. I’m jiggered if I can see how universal water metering is a bad thing. There are enough GWS’s which have adopted it to run an empirical model, I’d have thought. A correctly pitched flat charge, to encourage householders/residential unit dwellers to pay for meter installation, would likely help offset the capital cost to the State of installation (which should realistically not exceed c.€400 per meter, capital and labour included).

  12. I’ve just had an opportunity to peruse the PwC report. On the revenue and funding requirements – which will determine the level of water charges – we have the following helpful statement:
    “For the Public Utility Model a high level assessment was undertaken in relation to what the financial position of the business might be and in particular the likely funding requirements, based upon a number of assumptions made and sensitivities chosen. Given the commercially sensitive nature of aspects of this assessment, some of the specific assumptions and the detailed findings have been redacted from this section of report.”

    The suppression of this analysis because of ‘commercial sensitivities’ is total and utter balderdash – and dangerous balderdash. I’m not blaming PwC; this is clearly a political and official decision. Irish citizens ultimately own the existing diffused water activities and finance all of its activities as businesses paying charges (and passing them on to their customers) or as taxpayers. They will ultimately own Irish Water as a public utility and via water charges will finance all of its activities. It will be regulated, presumably by the revamped CER (as the CEWR) in an open, transparent manner. What on earth could be commercially sensitive in this context and in the development of a high level aggregated analysis?

    It is very clear that households are being set up once again to be hosed to pay through the noise to finance the activities of this utility – in the same way as households and businesses are being hosed to finance the activities of the ESB and BGE. It is probably no coincidence that the CER which is already sanctioning this rip-off of energy consumers will have responsibility to sanction this water rip-off.

    The state, as the owner on behalf of citizens, is no position to finance investment so water consumers will be required to finance up-front the share of the investment the state should be financing and will then be required to pay in their charges to recover all of this investment plus the return on investment. This is a classic scam that allows the state to avoid confronting its failure to discharge its ownership responsibilities.

    The rational and efficient solution is politically frightening and governments would rather hose consumers to avoid confronting this fear.

    There is absolutely no reason why the financial analysis conducted by PwC should not be published. Its suppression is prima facia evidence that a scam similar to that being perpetrated for the benefit of the ESB and BGE is being intended once again in this case.

    It’s time to shout stop and demand the publication of this financial analysis.

  13. @Alchemist
    I am not averse to tax to prevent malinvestment – but this will simply not solve the problem , sorry but we can all feel happy clappy pulling together & all but its pretty pointless if you lose the war.

  14. Well spotted, Paul.

    State-owned, price- and conduct-regulated monopolies citing “commercial sensitivities” as a reason not to release data is a peculiar Irish pastime.

  15. This is an appeal to everyone here who has an interest in this issue – and that should be every citizen in the state as they will end up paying directly for whatever the Government decides to do.

    Please write to the Water Section in the Department and demand the full publication of the financial analysis prepared by PwC. The address and e-mail are here:

    Water Services Section
    Department of Environment,Community and Local Government
    Room 1.23
    Custom House
    Dublin 1

    Email: water@environ.ie

    It would probably make sense to head it with ‘Consultation on reform of the water sector in Ireland’ but to make clear that it is not a submission; it is a demand for relevant information to be able to make a proper submission.

    The key issue here is not the proposed structure or organisation of Irish Water, but the projected revenue requirements and how the business will be financed. This will determine the level of water charges. The structure of water charges – how charges will be levied on households – is obviously an important matter, but it is of secondary importance. The first step is to agree how much revenue must be recovered; the second step is to decide how this revenue is recovered in charges from water users.

    These ‘public consultations’ are a total farce. They are never initiated until government has decided what it intends to do. It may be prepared to contemplate some modification of details, but it will totally ignore any critique of what it has decided ‘in principle’ – how ever wrong-headed it might be.

    In this case, in the absence of full publication of the financial analysis performed by PwC, citizens will be forced to buy another ‘pig in a poke’. Ireland is in the mess it’s in because successive governments were successful in selling no end of these pigs in pokes. This Government has learned nothing and it has forgotten nothing. It’s just a continuation of the same game.

    There is only a slim chance that the Government will be compelled to re-consider what it has decided, ‘in principle, to do, but this ‘public consultation’ exercise will be flawed and, potentially, invalid, if the Government is not prepared to publish the information required to allow all citizens potentially, but certainly all those who have an interest, to make informed submissions.

    The European Commision, effectively in place of the Government, is being forced to answer a case before the UN Committee enforcing the Aarhus Convention on the validity of public consultations in the energy and environment areas conducted by previous governments. The Government has a legal obligation to demonstrate that these public consultations are conducted in a manner to secure informed democratic consent to what is being proposed.

    Its failure to publish relevant information in this case means that is is not discharging this obligation.

    Let everyone who has an interest please demand that the Government publish the full financial analysis.

  16. Thanks, Richard. Our comments crossed in the ether. (Btw hope the settling in process is progressing well.)

    I have just sent the folowing to the Department:
    ———————————-
    To whom it may concern,

    Please note that this is not a submission; it is a request for vitally necessary information.

    The section of the PwC report dealing with the revenue and funding requirements of the proposed Irish Water utility is prefaced by the following statement:
    “For the Public Utility Model a high level assessment was undertaken in relation to what the financial position of the business might be and in particular the likely funding requirements, based upon a number of assumptions made and sensitivities chosen. Given the commercially sensitive nature of aspects of this assessment, some of the specific assumptions and the detailed findings have been redacted from this section of report.”

    Given the full ultimate public ownership of the existing activities and the full ultimate public ownership of the proposed Irish Water utility, there appears to be no reason why this high level assessment should not be published. The Government has a legal obligation to ensure that this ‘public consultation’ is conducted in a manner that will secure informed democratic consent and will allow interests citizens and parties to make informed submissions.

    By failing to publish this high-level assessment the Government is failing to discharge this obligation. It is vital that the water users who comprise a large proportion of citizens, residents and businesses in the state and who will pay charges to satisfy the revenue requirements of Irish Water are presented with relevant information on the likely future revenue and financing requirments of this utility. It is difficult to appreciate why certain aspects of this assessment are of ‘a commercially sensitive nature’. But, even if some aspects are, this should not prevent the structuring and presentation of such a high level assessment in a form suitable for publication. In broad aggregate terms citizens are entitled to know the projected revenue requirement, the components of this revenue requirement and the projected evolution of the capital and funding structure of the utility.

    This is a public business proposition to which citizens are being required to give their informed democratic consent. Any business proposition worth its salt would require the preparation and presentation of pro forma projected income and funds flow statements and balance sheets. There may be considerable uncertainties, but there is no reason why indicative projections within a likely range may not be published.

    I look forward to the publication of this high level assessment to allow the preparation of an informed submission to this consultation process.

    Please advise when and how publication will take place – and whether or not the deadline for submissions will be extended to allow proper consideration of this vitally necessary information.
    ————————————————

    I would encourage anyone here who has any interest to use this or draft their own request to the Department.

    Successive governments have gotten away with daylight robbery in all of the infrastructure and utility services. This is one of the main reasons why the price level of household consumption remains stubbornly above the EZ average. This gap has to be reduced – and not just in these sectors, but in all the sheltered sectors – if the domestic economy is to have any chance of recovery. It is not, repeat not, primarily a labour cost issue. Some labour costs are high because workers require and demand higher pay to pay these excessively high and unjustified final prices.

    The revenue requirements and the financial structure of this new proposed utility will simply increase this excessively high level of final prices. This has to stop and the gap with the EZ average has to be closed.

    And we can start right here on this issue.

  17. @Paul.

    If you start off with the simple sum of 2,000 employees at an average salary level of €40K (plus employer PRSI 10.75%) and divide it among the 1.4M households one has a starting fixed cost base of €63.28 per household to cover annual salary costs. Lots of add ons after that….

    Thames Water invests £1BM in its network p.a. serving 14M households – on a comparable basis this would add another €81.43 to the annual bill.

    Looking at Thames water turnover numbers would indicate that an average charge of €140 p.a. should be expected however this figure would probably be higher given the scale of Thames water relative to Ireland (and the dispersed nature of our population centres).

  18. @Barry T,

    Please don’t take this the wrong way, but there is little point speculating about the likely average charge per household. We simply don’t have the information to make any judgement. That’s why I’m demanding the publication of this high-level financial assessment prepared by PwC.

    The Government would love public attention to focus on the structure of charges as it would allow them to play different groups of consumers off against each other. It provides scope for all sorts of fixes and fiddles to keep the more vocal quiet while hosing those who are less able to exercise economic or political clout. And it allows them to come up with all sorts of spin about charges relative to those in other countries and about all the specific, unique, but specious, factors in Ireland that would justify higher charges. And there is a whole ‘industry’ of reseachers, consultants, PR operatives, etc. – with academics among them – with their hands out for the Government shilling to make its case.

    The focus has to be on ensuring the lowest level of revenue requirements consistent with the efficient provision of water and waste water services to the required standard. But the Government will strain every sinew to avoid consideration of the projected revenue requirements.

  19. @Barry, Paul
    The average annual water charge is not that difficult to calculate. The Water Framework Directive specifies that there must be full cost recovery of water services. If you take the average annual expenditure and investment on water over the last 10 years, substract the water charges paid by businesses, and divided by the number of households that are served by public water at present, you find a number of about 500 euro per household per year. UPDATE: BELIEVE EDGAR’S NUMBER BELOW

    It would be more interesting to find out what the Department assumes about the cost of installing water meters. I’ve seen numbers ranging from 200 to 800 euro per meter. I’ve not seen any numbers on the cost of setting up the back office to process that data and bill people.

  20. @Paul & Barry T.

    There is another way to look at this. We know how much it currently costs to run the water services (that is drinking water and sewerage treatment) is €1.2 billion per year. Operational costs are €715 (it would be interesting to see how that breaks down exactly)and the rest is capital. On the basis of a few assumptions it is possible to work out the per household cost (the EU Water Directive requires full cost recovery).

    First, how many households do we have? Unfortunately, the Census numbers are not out yet but in 2006 there were 1,462,296 permanent private households. So lets say that there are 1.5 million households. Let’s assume that all households pay.

    Second, the businesses do pay for water already so that revenue has to be netted off – in 2010 income was €263 in 2010 according to the PWC report (lets assume that stays fixed).

    Thirdly, assume that the capital investment needs to stay at the current level indefinitely (it might have to rise), which implies that we do not have to worry about the time profile of capital repayments.

    1.2bn – 263 million=937 million divided by the number of households = €625 per household. I think this is a reasonable starting point.

    You can change the assumptions to see what happens (1.56 million households gets you to about €600 per household). You could think of exemption schemes. You might want to account for the fact that some households that receive water through the public mains are not connected to the sewerage system (i.e you might want to charge them less) etc. etc.

  21. @Richard,

    Your estimate of the average annual water charge is fine for a first approximation, but you are using a very simple and crude ‘pay-as-you-go’ (PAYG) model. Given the specific, long-lived nature of the assets in this sector and the extent to which the recovery of, and return on, investment in these assets comprise a large portion of the revenue recovery requirement, efficient financing of investment should be a priority. Rather than forcing taxpayers to shell out for a PAYG model (the current situation) or forcing water users to shell out for a PAYG model (this proposed utility), a primary objective should be securing efficient financing of investment at a low WACC that will be recovered over time.

    Forcing water users to contribute up-front the share of investment financing the state should be providing on top of the full return on and recovery of all investment is gloriously inefficient and wasteful and could easily add 20% to average annual water charges unnecessarily. This is the approach employed for the ESB and BGE to compensate for the failure of the majority owner, the state, to finance a share of investment directly. Given the refusal of the Government to publish this high level assessment performed by PwC one can only assume that the same approach is envisaged for Irish Water.

    I agree that meter installation, maintenance and operation are important issues – as is the structure of charges – but, for goodness sake, let’s focus first on the efficient level of revenue recovery.

    I’m gradually coming to the conclusion that the only reason I seem to be alone in focusing on this issue is that those who are aware of it are unwilling to contemplate the implications. When times were good the state could have invested directly in the ESB and BGE, made a handsome profit and this would have resulted in lower final prices. It could have done the same for a restructured water industry.

    Now the coffers are bare and, for this proposed utility, there is not only a significant ongoing investment requirement, but there is also a significant backlog of investment. The Government wants to reduce, if not eliminate, direct financing of this investment. There is no doubt that water users can, and should, pay to finance this investment. They will do so via the annual depreciation charge and the regulated return on the accumulated, depreciated investment in place. But they should not be required to pay more than this to compensate for the failure of the shareholder to contribute its share to finance investment.

    But what to do? And, aye, there’s the rub. The rational efficient solution would be to sell the restructured utility to pension funds with an enforceable obligation to provide the investment needed to meet the required standards of service.

    But this is the fear that dare not speak its name..and water users will be hosed, both literally and figuratively, to pay over the top for this policy failure.

  22. @Paul – the assumption on capital is quite restrictive and changing that makes the calculations more difficult. It would appear that more investment is needed rather than less and chances are that at some point investment needs will decline i.e. we need to make up for past under-investment. If you exclude the capital and assume that all the revenue goes to operating costs then the cost per household is €300 – you can bolt on any capital repayments you like to that.

  23. @Edgar,

    Thank you. I presume you mean operating expenditures, rather than operating costs to arrive at your €300/HH estimate, since the annual depreciation charge (which I would view, with the return on investment, as part of the annual capital charge) would be included in the latter and not in the former.

    But it is not an issue of bolting on any capital repayments I like; the focus should be on identifying an efficient level and profile of capital repayments. The impact on the average annual water charge would be significant.

    If I had access to the high-level assessment performed by PwC I am reasonably confident I would be able to illustrate this point sufficiently clearly to convince, at least, some people that what I am advancing is not just a figment of my imagination. This is the kind of ‘bread-and-butter’ work I do on gas pipelines and energy networks in many jurisdictions other than Ireland. For some reason, this type of analysis, which draws on a huge body of economic theory and practice, is not in demand in Ireland.

    Unfortunately my request to the Department to publish this high-level assessment has been refused – and without any leave to appeal:
    “Dear Mr. Hunt,

    I would like to acknowledge receipt of your email of 18 January setting out your views regarding the release of financial data in relation to what the future financial position of Irish water might be and future funding requirements. I would like to confirm that the decision was taken to redact a limited amount of material from the report on the basis that they were identified as commercially sensitive. It was considered that the release of such commercially sensitive information could prejudice the future competitive position of Irish Water and as such, it is not proposed to review this decision. Your views have been noted.”
    ————————————————–

    I’ve been inundated with some baderdash in previous dealings with government departments, regulators, parts of the quangocracy and semi-states, but this really takes the biscuit. What is this nonsense about the ‘future competitive position of Irish Water’? As a regulated monopoly, the only market it is likely to be competing in is the market for investment financing. The nature and quality of regulation and the commitment of the regulator are the principal factors that will impact on the assessment of prospective providers of finance. They will have absolutely no interest in whether the level of water charges is high or low once the regulator sets and enforces charges that generate sufficient free funds in excess of the debt service recovery requirement they demand.

    The CER has an enviable track record, in the absence of any direct shareholder investment financing, of hosing final consumers to ensure that more than ample free funds are generated to satisfy the demands of external providers of finance. The fact that the CER is earmarked to take responsibility for water regulation will provide them with all the assurance they might require.

    But water users have no assurance that they will not be hosed unjustifiably to contribute unnecessarily to these ‘free funds’ – and no shortage of grounds for fears that that is precisely what will happen.

    I have had my shot at trying to secure sight of this high-level assessment which would confirm what has been decided ‘in principle’. The door has now been slammed in my face; but I refuse to leave it at that.

    I would welcome suggestions from anyone interested on how this might be progressed. This stone-walling by Government is not on – and it simply adds to the suspicion that they are up to no good.

  24. @Paul – “I presume you mean operating expenditures, rather than operating costs ” – yes, sloppy of me.

    “the focus should be on identifying an efficient level and profile of capital repayments” – spot on!!!!!

    “The impact on the average annual water charge would be significant.” – that is what my crude calculations on restrictive assumptions would also suggest.

    “For some reason, this type of analysis, which draws on a huge body of economic theory and practice, is not in demand in Ireland.” – like so many others.

    I take it that all you would need is aggregate data broken down into the right categories? I was skimming through the PWC report to find this too. I cannot see any commercial sensitivity since Irish water does not exist and the data for individual water authorities would not be identifyable. As you rightly point out once Irish Water is established, it looks like it will be a public monopoly provider. Of course a look at such data would enable an international comparison that might not be terribly comfortable for some.

  25. @Edgar,

    I wouldn’t need a huge amount of data – and there is some in the PwC report, but I would have to make some heroic assumptions to come within the proverbial ass’s roar of replicating the high-level assessment described so cryptically by PwC.

    And, as I sure you are aware, if one is assembling any analysis of this nature that might cause some dicomfort to the ‘powers-that-be’ all one has to do is to make one mistake – irrespective of whether it is material or not – and it will be seized on with great glee and used to dismiss and reject the entire analysis. If this escapre route doesn’t reveal itself readily the alternative tactics involve deliberately misinterpreting some aspect of the analysis or feigning not to understand it or highlighting some peculiarly Irish factor that would invalidate this ‘alien’ analysis. The failsafe option, of course, is to ignore it.

    I think I’ve been through the entire ‘playbook’ with various representatives of ‘Official Ireland’ in the last decade.

    However, in this instance, I think we are agreed that there is no reason why this high-level assessment should not be published. I expect you’ve seen (above) the ‘ex cathedra’ rejection by DECLG of my request. I’m resolved to press on, but I’ve no clear idea as to how best to force publication of this assessment. Irish citizens have paid for it. The analysis in it will impact on what they will pay for water and waste water services in the future. Even though this ‘public consultation’ exercise is entirely farcical it is being pursued ostensibly to secure some informed democratic consent to what is being proposed. But the public is being deprived of key information necessary to make an informed judgement.

    This assessment should be in the public domain. Irrespective of any analysis I or any other might wish to do, this is something the ESRI should be critiquing and assessing in the public interest. It should strike people as ridiculous that people with knowledge and competence in this area, such as you and Richard, have to resort to calculations similar to those on the back of a proverbial fag packet.

  26. Paul Hunt:

    ‘the future competitive position of Irish Water’ would be prejudiced if the PWC data were released. Competitive with whom, precisely? Irish water is going to be a regulated and state-owned monopoly.

    Edgar: have you allowed for group water schemes? Numerous country folk provide their own water and waste disposal, and are not served by the local authorities.

  27. @Colm McCarthy,

    No point asking me. I’m just quoting from the e-mail from DECLG refusing my request to publish the high level assessment performed by PwC. I thought I’d made it clear that I can see no justification for this refusal. In general, the public consultation process is a total farce, but, with this refusal to publish relevant information, this exercise is plumbing new depths.

    The willingness of people to allow the Government to get away with this damaging nonsense is informative.

  28. I was speaking to a designer friend of mine last night and asked him what sort of logo he would design for ‘Irish Water’.

    He said he wasn’t sure how to accurately illustrate money being pi55ed up against a wall or down a drain. How terribly cynical 🙂

  29. @Colm – no but that is easily done. In 2006 about 13% of dwellings are supplied by either private group water scheme or have a well. Taking them out increases the household charge accordingly (you can add another €100 to the €625). I wanted to keep it simple as we do not have exact numbers for 2011 yet, but I think these numbers are a useful starting point.

    There is a further issue that seems to have escaped people so far – the number of dwellings supplied by public water supplies (i.e. mains and public gropus water schemes) is not equal to the number on the sewerage mains. Charging those that have one but not the other (18%) would seem unfair. I have also not dealt with exemptions etc..

    It is also worth noting that the Census data on water and waste water comes with a health warning. Householders self report what type of service they have but some seem not to know – when you look at the Small Area Population Statistics you find plenty of septic tanks in central Dublin!

  30. I know Colm McCarthy, and I’m sure many others, views me as being ‘obsessive’ when it comes to the structure, financing and regulation of the infrastructure and utility sectors. And so I am. There is a simple reason. I have no problem with people highlighting the sheer economic stupidity and bloody-mindedness of the EU’s Grand Panjandrums’ unnecessary imposition of the Anglo legacy cost on Irish taxpayers. Or with highlighting the malign impact of the manoeuvres of EU politicians that appear to be making this crisis even worse. But these is very little we can do about these things.

    However, the structure, financing and regulation is the infrastructure and utility sectors is almost entirely in our own hands. These are entirely dysfunctional – and what the Government is proposing to do with Irish Water will add to this dysfunction. And, not surprisingly, DECLG is refusing to publish part of the analysis it commissioned as it would reveal this dysfunction. And so the saga continues:

    I have just sent the following to the DECLG in response to its refusal yesterday to publish the high-level assessment prepared by PwC.
    ———————————————————
    Many thanks for your prompt response to my request. It is regrettable that the Department is unwilling to review its decision not to publish this high-level assessment prepared by PwC. The reason you advance for the Department’s refusal to review this decision is puzzling, to say the least – and on a number of grounds.

    First, you assert that the assessment contains material of a commercially sensitive nature. This is ‘Alice in Wonderland’ territory – “words mean what I say they mean”. If the Department decides something is commercially sensitive then, almost by definition, it is. No external assessment of whether it is or not is neither possible nor permitted.

    Secondly, in the context of wholly publicly owned water and waste water activities administered by local government which it is proposed to transfer to a wholly publicly owned state utility it is difficult to conceive of matters that would be sufficiently commercially sensitive to prevent the publication of an assessment of this nature. Even if they were to arise, it should not be beyond the wit of those involved to present aggregated data in a manner that would conceal these self-declared commercially sensitive aspects. This is common practice in the public and commercial sphere internationally. I would be surprised if PwC, given its enormous capability and experience, would be unable to modify and re-structure the presentation of its analysis in a manner that would address any concerns the Department might have – but only, of course, if the Department were so minded to direct PwC to do so.

    Thirdly, you assert that the release of such commercially confidentially information could prejudice the future competitive position of Irish Water. This assertion is totally mystifying. The preferred option is to establish Irish Water as a state-owned, monopoly water and waste water service utility subject to regulation by the CER following extension of its remit. It will be the sole supplier in the market. There will be no competition, so it will neither have, nor be required to have, a ‘competitive position’. As the sole purchaser of external water industry related material and services, businesses providing these materials and services will compete to provide them. Only in the context of securing external financing is it possible to conceive of it being in a competitive market. And, even here, it is the efficiency of its operations and its ability to generate secure, sustainable cash flows that will impact on the assessment of prospective providers of finance. In any event, the key factor that will ensure its attractiveness to prospective providers of finance will be the role of the revamped CER (as the CEWR) in determining the adequacy of its future revenue flows. And the CER has already established a strong track record in determining these in the case of the ESB and BGE to the apparent satisfaction of external providers of finance, but to the detriment of final consumers. The issue of securing or maintaining a ‘competitive position’ is entirely irrelevant even in this context. So there is no ‘competitive position’ to be prejudiced in this case – irrespective of whether or not the Department is determined to treat some material as commercially confidential.

    Fourthly, and finally, although it may not be presented in its current form, there can be little doubt that the information and data contained in PwC’s high level assessment will be published when Irish Water is regulated by the CEWR and is required to publish accounts. The ostensible purpose of this public consultation is provide sufficient information to the public so as to secure informed democratic consent to what the Government proposes to do in terms of the structure and organisation of Irish Water. Therefore the public requires relevant information to grant informed consent – and to consent to their elected representatives enacting enabling legislation. The proposed financial structure of Irish Water will impact on its revenue requirements and these in turn will determine the level of annual charges. This is, and should be, a matter of great interest to all citizens and businesses. Yet the Department is refusing to publish relevant information and analysis on these matters.

    This, quite simply, is an outrage and makes a total mockery of this public consultation process. I ask the Department, once again, and on the grounds advanced above, to please review its decision.
    ——————————————————-

    It’ll be interesting to see how they’ll field this.

    And, btw, have people noticed how enthusiastically, expansively, energetically and forcefully the gallant members of our Fourth Estate are pursuing this issue? 🙂

  31. If you want to guess what domestic charges might be, then you might look to the existing non-domestic charges.

    Typical non-domestic volumetric charge €2.20 /m3; Typical per capita domestic consumption 135 /hd/day; Average household occupancy = 2.9

    2.20 x 135 x 2.9 x 365 / 1000 = €314 per annum.

    Then add in a €100 per annum standing charge (as with existing non-domestic charges), and the average annual bill would be €414. So, for a typical family home you are probably looking at €500 per annum.

  32. @Kevin Murray – prices vary significantly (between €1.49 and €3.04 – €2.2 is at the lower of the distribution) and appear to be subject to cross subsidisation (that is one reason why it would be interesting to get access to more data). Without metering we do not know what true consumption is, but 150 litres is a figure often cited. Average household size is smaller ~2.68 in 2006, possibly less now.

  33. @Kevin Murray

    “So, for a typical family home you are probably looking at €500 per annum.”

    It doesn’t sound out of the ballpark. I think water charges in other European countries I have lived in are around that figure. I had assumed that the introduction of this and property tax will see a low starting figure e.g. 100 for property but will quickly move up to the European average. They seem to be very regressive taxes in the UK and you only ever see poor people in court for not paying them.

    @Paul Hunt

    Do you think they are saying that all this info is ‘commercially sensitive’ because they know damn well ‘Irish Water’ is going to be sold/privatised at the first possible opportunity and they are trying to do what they can to protect that sale/improve its value in some way? Ramp this up, get it launched, keep increasing the prices and flog it on to a few buddies as a nice cash-cow so that some people can ensure they don’t have to sell other state assets instead that they’d rather not.

  34. @PR Guy,

    No. I don’t think privatisation is on the agenda – at least not for the foreseeable future. Since the Government has no money and wants to minimise any direct investment in this business it’s looking to replicate the extra financing extraction from consumers that is being applied for the ESB and BGE, but it can’t release the high-level assessment prepared by PwC because that would reveal that this is precisely what it intends to do.

    It just wants to get this public consultation exercise over as quickly as possible and ram some enabling legislation through the Oireachtas without revealing any of these details. There’ll be a drawn out transition period, but once the CER gets its hands on the business, it’ll apply its tried and tested asset valuation model and forward-looking cash flow generating model without any scrutiny. The cash will start to flow and water users will be hosed.

    This approach was developed in the Dept. of Energy in 1997 and applied, though not fully in anger, to the BGE transmission network. It was brought across from the Dept. to the CER when it was established in 1999 and subsequently applied to the ESB networks. It was then applied to the BGE networks in 2003. It looks like it’ll get another run ‘on water’.

  35. Charging for water is “right and proper”, well you certainly lost me their Richard. What comes out of the taps is not water by any stretch of the imagination. What does come out tends to subdue the imagination “right and proper” thats for sure.

Comments are closed.