Pat Swords v The World

The UN-ECE Compliance Committee of the Aarhus Convention has now ruled in the case Pat Swords v European Union. The ruling has implications far beyond this case.

To recap, Pat is no friend of renewable energy. He complained about the government’s renewable energy policy to every authority in Ireland and was either ignored or told to go away. So he complained to every European authority with the same result. And so he complained to the United Nations Economic Commission for Europe under the Aarhus Convention on Access to Information, Public Participation in Decision Making and Access of Justice in Environmental Matters.

In February 2011, the Committee admitted Pat’s complaint. This is significant. Ireland did not ratify the Aarhus Convention. The EU did, however. Because Brussels handed down its renewable energy policy, Dublin is bound by Aarhus.

This sets a precedent. Any Irish policy that is somehow proscribed, inspired, or constrained by EU policy, is now subject to Aarhus.

The Committee has now issued its draft ruling. It is long and complex. It is silent on the policy itself. On procedural issues, two points stand:

  • Ireland made a mess of its public consultation on the National Renewable Energy Action Plan.
  • The European Commission failed in its duty to supervise Ireland.

So

  • Anything in the NREAP can now be challenged.
  • Consultation on the NREAP was not pretty, but it was not particularly ugly by Irish standards either. Other government plans can now be challenged too.
  • And the EU has been told to intrude more.

The hidden depths of the water charge

as submitted to the Sunday Business Post:

In a somewhat haphazard style, the government this week announced more details of its reform of the water sector. Unfortunately, the plans are about as well-crafted as the announcements.

People focused on the revelation that Father Christmas will not bring water meters this year. Instead, water meters will have to be paid for. It does not matter much whether households pay upfront or over time, through higher taxes via the Department of Finance, or through lower pensions via the National Pension Reserve Fund. Households will pay.

How much will households pay? A basic water meter costs €60, a fancy one €150. (The government appears to have picked the latter model.) An experienced plumber can fit a meter in 15 minutes or so. This is not terribly expensive, but many people are hard-up.

The government, however, does not trust households to install their own meters. The government could use a flat charge for people without a meter and a volumetric charge for people with a meter. If the flat charge is high enough, many will install a meter. This is a common arrangement in other countries. It is perfectly fine with the EU, ECB and IMF.

The government does not want to give people this choice. Ireland will be one of the first countries in the world with universal water metering. The government has yet to publish the cost-benefit analysis that shows that this is indeed the best bang for what little buck is left.

Because the government suspects that some people will not be happy to have their water metered and charged – and may thus refuse the government’s plumbers access to their house – the plan is to install water meters just outside the property, on council land.

That means what holes will need to be dug. The exact location of water pipes is not always known, so there may be some searching involved. Furthermore, water meters will be far from the smart electricity meters that the ESB is installing everywhere. Water meters therefore cannot piggy back on the communication network that the ESB is also putting up. Water meter readings will be collected separately.

All this makes water metering rather expensive. The government is not very forthcoming with its estimates, but it will be at least €500 per meter. The government will be happy to lend you that money – in fact will leave you no choice – so that a few hundred euro in interest should be added.

It is easy to get excited about such details – why pay €800 or more for something that can be had for €200 or less – but they distract from the bigger picture. Water meters are only the beginning. Water is metered so that it can be charged.

The government is tight-lipped about what the water charges will be. The EU Water Framework Directive is clear. Water charges should fully recover the cost of drinking water provision and waste water disposal. Ireland spends about €1.2 billion per year on water. Only some €200 million is recovered from non-domestic users. The total amount that will need to come in through household water charges is therefore €1 billion per year – or, not counting those with private or collective wells, €560 per household per year.

Unmetered households in countries similar to Ireland use about 150 litres of water per person per day. Full cost recovery implies that the water charge would be about €3.80 per thousand litres. As metering and charging reduce water use, typically by about a third, Uisce na hEireann would be quickly forced to increase the water charge to €5.70 per thousand litres.

The government has repeatedly promised that each household will get a generous allowance of free water. This is not clever. Again, the government has left us in the dark about the size of the allowance. If it is 100 litres per household per day, the water charge would be €9 per thousand litres. If the allowance is 200 litres, the water charge would be €22.

And therein the problem lies. Uisce na hEireann will supply water to households. The free water allowance will be for households. Small families will get all their water for free. Big households will pay through the nose. The minister will spin this as a boon to little old ladies living alone. A family of four would pay €800 per year without a free allowance but €1600 with. This is a baby tax.

Uisce na hEireann could only give a free water allowance per person if it would track how many people are present in a household.

The free allowance is best done without. Water charges place a disproportionate burden on the poor. Therefore, water charges should be raised and Uisce na hEireann should pay a dividend to the government, which should be used to increase benefits and tax credits. Not everyone would trust the government to pass on that dividend. Uisce na hEireann could have been mutualized, with every man, woman and child in Ireland owning an equal share.

Instead, Uisce na hEireann will be a subsidiary of Bord Gais Eireann (BGE). The government did not want to create a new state company, and it did not want to call on the private sector. That left little choice. BGE has a sound track record in providing households with gas, and it has successfully added electricity. BGE should be well able to deal with the retail side of Uisce na hEireann.

But Uisce na hEireann will do more than charging for water. It will run the water network and the treatment plants. BGE has diversified into wind power, an unfortunate decision which led to a downgrade of its credit rating. BGE loses money on its gas-fired power plant because it relied on in-house knowledge rather than external expertise. Let’s hope BGE has learned from this, because not anyone can run a sewage treatment plant.

Any manager would lose sleep over Uisce na hEireann. 34 local water boards will be merged to form a national company, with 34 different IT systems, 34 different model contracts with suppliers and operators, and 34 different labour regulations. 32 counties will transfer their water assets to Uisce na hEireann. Uisce na hEireann may initially employ 4,000 people, compared to the 1,000 people that now work for BGE proper. Was it wise to limit the competition for Uisce na hEireann to BGE and Bord na Mona?

Uisce na hEireann will be regulated by the Commission for Energy Regulation (CER), presumably soon to be renamed. The CER is struggling. It is wedged between the minister for energy qua policy maker and qua owner of the dominant companies. It has to deal with the far-reaching reforms of the energy market imposed by Brussels. And now its remit will be extended from energy to energy, drinking water, and sewerage. The CER cannot expect additional resources. Will it cope?

The government has embarked on a transformation of the water sector. That is welcome, in principle. It is unfortunate that options are not thoroughly scrutinized before decisions are made. The public debate has been distracted by the minor question how meters will be paid for.

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.

ESRI Environmental Economics Seminar

Venue: The ESRI, Whitaker Square, Sir John Rogerson’s Quay, Dublin 2

Date: 03/05/2012
Time: 9.00 -13.00

This seminar will present some of the latest research undertaken by ESRI researchers as part of an Environmental Protection Agency (EPA) funded project. A range of topics will be covered, including surface water quality, transport and energy.

Agenda

9.15     Introduction

9.30     Towards Green Net National Product: A Summary of modelling and other output – Edgar Morgenroth

10.0 The Impact of Land Use on Lake Water Quality in Ireland 2004-2009 – John Curtis and Edgar Morgenroth

10.30 The value of domestic building energy efficiency – evidence from Ireland – Marie Hyland, Ronan Lyons (U. Oxford), Anna Alberini (U. Maryland) and Sean Lyons

11.00 Coffee Break

11.30 An Analysis of Non-Commuting Travel – Aine Driscoll, Edgar Morgenroth and Anne Nolan

12.0 Estimating the Impact of Time-of-Use Pricing on Irish Electricity Demand – Valeria di Cosmo, Sean Lyons and Anne Nolan

Booking

To register to attend this Seminar, please register here.

View map and how to find us.

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Yet more on water meters

Prime Time last night showed a few clips of me commenting on the establishment of Irish Water. As is usual (given the time constraints) a lot of my interview was not included. There are a few points worth making: