Irish Water (again)

I had an op-ed in yesterday’s Business Post, together with a raft of other pieces. The points raised should come as no surprise to those who read Morgenroth’s and my earlier blogs. Conor Pope independently confirms our numbers. Summary:

  • The government plan for water meters is exceedingly expensive.
  • Free water allowances are a bad idea, particularly if the allowance is per household (as is likely) rather than per person.
  • Is Bord Gais up for this? Can the Commission for Energy Regulation cope?

The Sindo also wrote about Irish Water, which highlights another issue: Bord Gais is not fully state-owned. Employees own a fair chunk too. An uncompensated transfer of water assets from the counties to Irish Water would be a windfall for Bord Gais employees, a capital gain that will be taxable at some point in the future. It would be better if Irish Water would pay a fair price for the assets, funded by newly issued equity. The county councils would then be part-owner of Bord Gais, which would further complicate the planned privatization of part of the company.

23 thoughts on “Irish Water (again)”

  1. Heard you this morning Richard. Good stuff.

    Next time, don’t forget to mention the 40% that is lost down the leaks and the drains etc and that it might make more sense to fix this hole in the Irish Bucket, which is by far the biggest hole in the EU.

    Paying €800 over time for something that Siemens can offer for €150 is really insane. Hope Sussex treating you well, and that you will be back in Friesland in time to vote in the general election in Die Nederlands which is nigh!

  2. “a capital gain that will be taxable at some point in the future.”

    By “will” I imagine Richard means in a country where some fairness applies to gains that are achieved by ex-semi-state employees.

    The full expectation of these BG employees is that any personal gain will be completely untaxed, much like the TE/Eircom employees extracted 1B in untaxed income after the sale of that company.

  3. The Bord Gais decision is great. They’ve just built a wind farm too.
    Bord Gais is being loaded with assets and extraction powers in readiness for sale – possibly early 2014

  4. I suspect BGE got this contract because some of their senior employees are looking for a life raft to transfer into prior to privatisation.

  5. PS, if there was an option of having the meter installed in your house, I’m sure most people would consent to it rather than have the state metering from the roadside.

  6. A friend of mine proposed a mad but obvious solution. Get people to install their own meter in a convenient location, and submit the readings via the web.

    Obviously there would have to be occasional audits, and over time the indoor meters would naturally be replaced by outdoor meters, as the system is upgraded. But as a way of getting up-and-running quickly for all types of premises, it is a beautiful and simple idea.

  7. @Antoin
    Indeed.

    If you install the right kind of meter, it can upload data automatically, either via the smart electricity meter, your internet connection, or your mobile phone (in order of cost).

    Simple ideas do not employ civil servants, however.

  8. @Antoin and Richard

    You think people will voluntarily install a device that directly leads to an increase in their cost of living?

    Keep bashing away at the civil servants – it will get you plenty of places in Sussex.

  9. @Steve
    People who install their own would not have to pay the standing charge, I presume, in Antoin’s plan.

    In our proposal, people without a meter would pay a flat, annual charge, rising over the years.

  10. Nothing mad at all about that idea Antoin… practical, simple and value conscious …. you want to rent a meter, go ahead… you want to buy, go ahead, want to keep costs down and self install … why not…. quite easy to add a seal after fitting…. Bypassing the meter, same as bypassing the gas/electricity, it can be dealth with…

    irish water should be set up as a series of co-ops owner by the consumers, where the focus is on value, providing a quality service to the customer/owners (who are the same people)… not a rent or wealth extracting device….

    But that kind of thinking is not welcome in Ireland…. no opportunities for cronies to enrich themselves….

  11. @Garry
    I now recall your earlier proposal. In my SBP op-ed, I suggest mutualisation as an alternative ownership structure for Irish Water. Particularly, the annual dividend is a monetary alternative to the proposed free allowance.

  12. The idea with letting people have their own meter is that you help them do the right thing. Many householders are enthusiastic at some level about the idea of saving resources and are attracted to the idea that they should only pay for the resources they actually use.

  13. @Antoin O Lachtnain
    We must never forget that we are living in Ireland.

    When you say ” they should only pay for the resources they actually use” I agree with you.

    But and big but, this is Ireland the land where bag men are busy collecting “contributions to the cause” in return for favours. The result would be various exemptions and discounts for those who did their bit for the cause. Hotels, B&Bs, restaurants, manufacturing, slaughterhouses and many more would be lined up at the water trough.

    It boggles the mind that a country where drainage, dredging and getting surplus water into the sea is a major concern would privatise its potable water supply and sewage disposal.

    We are definitely living up to our unfounded reputation as a nation populated with more than its fair share of drunks, clowns and fools. Quite simply we are totally incapable of governing ourselves responsibly.

  14. @Richard

    Why do you think the government haven’t gone with your kind of proposals? Presumably they explored them and rejected them. Does the Bord Gais/external meter have some advantage?

  15. @Sarah
    The government plan for metering was conceived by James Nix. I never understood any of James’ ideas.

    The plan was embraced by the civil service, because it adds power and work. Engineering and construction companies are enthusiastic too, because of the work. For politicians, it is attractive because of the patronage — all those contracts to be given the local builders.

    As to Bord Gais, they could not create a new state company because that would run against the smaller government plans of the right wing of Fine Gael. They could not call in the private sector (Veolia, Suez) because the Labour Party would not accept privatization. That left the semi-states.

  16. Sigh.

    That makes a depressing sort of logic.

    Except for James Nix. Off to ask The Google who he is.

  17. Although…

    Civil service: power and work. I might add – control.
    But, could something positive be said for that…i.e. they can control the standard of work. I understand that you set a standard for the actual meter, but maybe they think that might controlling directly the installation they can also be sure of the standard of work/placement etc. Is there any potential for haphazard work, fraud etc if it’s all decentralised? (not making accusations, just asking)

    Engineering/construction: I heard a fellow from a plumbers union on Sean O’Rourke last week complaining about the proposals. Obviously he wanted a more decentralised system since his members would be more likely to get work by being individually hired by householders as opposed to the likes of Sierra getting it. But as he himself pointed out, companies like Sierra function by subcontracting on a labour only basis to sole traders. So his people would end up with the work anyway, but at the vastly reduced rate which presumably Sierra would negotiate. Householders could find themselves with plumbers setting a higher price for installation and a price fix situation. Not to mention uneven standards of work.

    Politics/patronage. Well, presumably Irish Water under Bord Gais will run the tender competition so there are two steps removed from the Department. Once the main contracts are handed out, I can’t see how any minister could claim some sort of credit.

    On not creating a new state company, couldn’t an argument be made that could take aaaages. Whereas Bord Gais has a corporate structure in place , with existing expertise and it’s quicker to set it up under them. And speed is clearly a priority.

    And..maybe the Labour Party is right not to accept privatisation. In fact, maybe there are plenty in FG who would heartily agree that handing over key infrastructure to a private company does not have a good track record. In fact, I’d agree with them.

    I agree a complication then is the proposed privatisation of Bg, but you know maybe that complication doesn’t bother the government so much. If politicians are still feeling burned, rightly, by the Eircom experience, perhaps making BG less attractive to a buyer isn’t such a bad thing.

    So of the various aspects of the proposal I think the corporate structure doesn’t bother me sooo much.
    But I’d like to see the government’s arguments against setting a standard of meter and installation and letting everyone put in their own, using a high flat rate for non-metered houses as the incentive to act.

  18. @Sarah
    It’s a simple meter. They just need to license sales of meters with the right specs, and agree on a communication protocol.

    The work will go to the larger construction companies rather than small plumbers.

  19. “They could not call in the private sector (Veolia, Suez)”

    Have they not already called them in? From the Veolia Ireland website:

    20 April 2011: Veolia Water been awarded a design build and operate (DBO) contract for the provision of a greenfield water production plant at Srowland in Athy.

    The plant will have a maximum production capacity of 38,400 m³/day and will feed the distribution networks of Co. Kildare. The design and construction component of the contract is valued at €24.6 million. The operation part of the contract is for a period of 20 years and will represent total revenue of approximately €57 million for Veolia Water.

  20. The larger construction companies do not have cost advantages when it comes to very small jobs scattered all over the country. They will have the advantage of a skewed procurement process designed to benefit the clients of lobbyists.

    Water has always been and still is highly localised the origin whether it be aquifer, groundwater, stream, lake or pond is always close to the end consumer. Potable water and sewage treatment are closely related.

    Creating entities to manage water and sewage at the national level does not make business sense. It certainly ensures a role for our national politicians which will prove to be quite profitable and totally unnecesary.

Comments are closed.