Q&A: Irish Water and metering

Tue, Apr 17, 2012, 01:00

Below is an edited version of a question and answer briefing on the establishment of Irish Water provided by the Government.

Why has the Government decided to establish Irish Water under BGE?

The Government decided last December to establish a public water to take over the
provision and supply of water from local authorities.

Irish Water is being established as an independent state owned company within the Bord Gais Group.

The move of water sector functions from local authorities to a semi-State company will include the introduction of domestic water charges.
The reason Irish Water has been set up under Bord Gais is to utilise the existing expertise and experience to manage the set up.

Is this the first step towards the privatisation of water services?
Irish water will be a public utility - there is absolutely no intention to privatise water services. Investment in this sector is key to our strategic interests and legislation will restate the existing prohibition on the privatisation of water assets.

Any revenue generated by Irish Water will be re-invested in infrastructure.

When will LA staff move to Irish Water?

There will be a phased transition of functions from local authorities to Irish Water.

This transfer of functions requires legislative underpinning in the first instance.

From an operational perspective, it is envisaged that local authorities will be engaged as agents of Irish Water until 2017 at the earliest, based on the independent assessment.

The majority of local authority staff will therefore remain in the employment of their authority for a considerable period of time.

Will there be staff reductions, and if so, when?
It will ultimately be a matter for Irish Water to determine the staffing and skills required for the new organisation.

In the initial phase, Irish Water will work largely through service level agreements with local authorities. It will also mean that the majority of staff will remain in the direct employment of local authorities for a considerable period.

When will the implementation plan be available?

We expect the plan to be finalised over the coming weeks.

Why is Irish Water being established?

Quite simply, we are faced with a substantial investment requirement in future years, a funding model that is not sustainable, and a scale of operation which is not efficient or effective.

Delivery through 34 separate authorities inevitably leads to fragmentation, inefficiencies and inability to achieve economies of scale.

Why was an independent assessment undertaken?

A specific requirement of the Programme of Financial Support for Ireland with the EU/IMF/ECB is the preparation of proposals for implementation of the recommendations of an independent assessment of the transfer of responsibility for water service provision to a water utility and that water charges would be introduced.

A team led by PricewaterhouseCoopers, which includes legal and engineering consultants, was appointed through an open competition to conduct the independent assessment.

What will the Irish Water do?
It will be statutorily responsible for both investing and operating water services infrastructure in its role as a provider of drinking water and waste water services to household, commercial and industrial customers in Ireland (not served by Group Water Schemes). It will be have responsibility for:

• The abstraction, treatment and distribution of drinking water;
• The collection and treatment of waste water and sludge disposal;
• Strategic planning for the sector including water resource management;
• Source private finance for investment in capital projects;
• The roll-out of the water metering programme;
• Customer billing and relationship management, including requests for new connections;
• Conservation of water supplies through maintaining and upgrading the infrastructure including investment on mains rehabilitation.

The utility would need a regional and local focus, which would be achieved by organising operational regions based on river basin districts. It would be responsible for the collection of water charges, both domestic and non-domestic.

What is the timescale for implementation?
• The appointment of an interim board and project management structures in 2012 pending the establishment of Irish Water under its own statute by mid 2013;
• Irish Water acquiring statutory responsibility for water services in mid 2013 and Local authorities would be agents of Irish Water for a period with Irish Water taking over their operations on a phased basis from January 2015, ending in at the earliest.

Will there be a need for continued Government funding?
Water services cost over €1.2 billion to run in 2010, of which operational costs amounted to some €715 million, with capital costs of over €500 million.

With revenue of just over €200 million from non-domestic charges, the balance of around €1 billion is largely State-funded, through a combination of Exchequer grants and local authority resources, including the Local Government Fund.

Future funding requirements will be determined by the level of charges and the extent to which Irish Water will be able to access financial markets to fund its investment programmes.

Will local authorities have any role once Irish Water is set up?
Irish Water will be working in partnership.

This phased transition will mean local authorities will operate under service level agreements with Irish Water for a considerable period, doing exactly what they do on a day-to-day basis at present.

Will Irish Water be responsible for septic tanks?

No.

What did the Government decide today in relation to charging?
The only decision taken by Government today was in relation to the establishment of Irish Water as an independent State owned company within the Bord Gais Group.

Will households be required to pay for their water meter and not the installation?

• Irish Water will commence meter infrastructure installation by the end of the year.

• There is absolutely no question of households being asked to pay for meters with an upfront charge.

• The funding model (including the free allowance and metering programme) has yet to be finalised and will be a matter for the Regulator.

• The Regulator will act in the best interest of the consumer.

• Similar to other utilities (Gas, Electricity) the consumer will pay for the delivery of water services through a variety of payment options.

Why has the Government decided on universal metering?
The Government believes that metering is the fairest way to charge households for water.

The introduction of volumetric water charges will provide households with an important incentive to reduce their consumption of water. International experience suggests the introduction of water meters can achieve a reduction in consumption of at least 10%.

Would a flat rate not be cheaper?
An important element in the introduction of water charges is to encourage reduced consumption and flat charges do nothing to encourage households to use less water.

How long will it take to rollout metering?
The installation of meters will commence in 2012 and the programme will be rolled out on an accelerated basis.

Will jobs be created?
The Department estimates that there is the potential to provide up to 2,000 jobs per annum from the metering programme.

Do Irish companies have the experience to project manage this kind of a project or is it more likely that a foreign contractor will win the business?
Yes, Irish companies are well equipped to undertake key elements of the programme.

How many companies will be involved?

As some contractors may tender for and be awarded a number of contracts, there could be in the region of 50 to 100 companies involved.

What will the meters look like?
The meters will be installed in a boundary box with just the cover visible at ground level similar to those that can be seen outside shops and other commercial premises at present.

How much does the meter cost?
The Department has prepared detailed cost estimates following extensive market soundings. It would be inappropriate to release these estimates in advance of a competitive procurement process. The cost of installing an individual meter will vary depending on the location of the property.

Where will they be on the property?
Meters and boundary boxes will be located outside the curtilage of the property in the public footpath or in the grass verge at the roadside.

Will household have to grant permission to access their land for installation?
Access to private property will generally not be required as meters/boundary boxes will be installed outside the curtilage of the property in the public footpath or in the grass verge at the roadside.

Is the meter connected automatically or will households have to give permission/do anything?
Householders will not have to give permission or do anything to facilitate boundary box installation. A short interruption to water supply (in the order 2 to 3 hours) will arise while the boundary box is being installed. Meters will be installed later.

What households can not be metered?

Certain categories of household may not be metered initially due to the high cost or technical difficulty of doing so. These would include flat and apartment complexes as well as households with shared service connections.

How many of them are there?
The Department estimates that up to 300,000 would not be metered.

What will be the level of charges?

The regulator will be responsible for determining the cost of water services.

Will there be a standing charge?
Standing or network charges are a common feature of charges for other utility services here in Ireland and internationally.

Will the charge cover waste water?
Yes, the cost of providing water services includes the cost of treating waste water discharged to the public sewer. However, not all households supplied with drinking water are connected to the public sewer and similarly there may be properties connected to the public sewer who do not receive a public water supply.

Can households provide their own meter?
No. There is a need to ensure a uniform standard of meter is installed to ensure accuracy of readings and also to facilitate a common approach to the collection of meter readings.

How much will the free allowance be?
No decision has been taken on the level of free allowance.

What about affordability for low income and other households who have a high essential use for water?
The Government will ensure that measures are in place in advance of the introduction of water charges to address affordability issues, including situations where a medical condition might require a higher essential use of water.

How much will the metering programme cost and how will it be funded?
It would be inappropriate for me to release these estimates in advance of a competitive procurement process. It is intended that the metering programme will be funded through borrowing on commercial terms from the National Pension Reserve Fund.

How will quality control be ensured?
A quality assurance system will be put in place to ensure that contractors install the boundary boxes and meters to a common and agreed set of standards.

Will houses on group supplies or private wells be required to pay water charges?
No.

What will the role of the Economic Regulator be?
The economic regulation functions are being assigned to the Commission for Energy Regulation. Legislation will govern the functions and operation of the Economic Regulator.

The main role of the Regulator will be to protect the interests of customers.

Will consumers be consulted by the Regulator?
The protection of consumers will be the key role of the Regulator and it would be expected that there will be consultation with consumers as is the case in other regulatory systems e.g. OFWAT, the water regulator in the UK regularly consults on issues of concern to the consumer e.g. performance standards, affordability, etc.

Will the Government be incentivising water conservation measures?
From an environmental point of view, the best way to conserve water is to incentivise people to use less.

What actions can householders take to conserve water?
Householders can ensure that there are no leaks within the curtilage of their property, that any dripping taps, toilet cisterns or showers are repaired, that taps are not left running when washing their teeth or washing fruit and vegetables. They can also collect rainwater for plant or garden watering rather than using tap water.

What is the State doing about leakage?
Most of the investment and work so far has been of a preparatory nature with the establishment of district metering areas at local authority level. Mains rehabilitation strategies have also been developed by local authorities.

Would it not be preferable to address leakage rather than install meters?
The cost of the metering programme will be finally determined through public procurement. However, our cost estimates indicate that the savings in consumption and customer side leakage arising from investment in water metering, with consumption based charges, would reduce water demand by 2 to 3 times the level which would arise from a similar level of investment in the public water main replacement.

Key Statistics – Water consumption facts

Domestic water consumption in average sized household is 145 litres per person per day.

Using national average house occupancy rate of 2.8 (2006 Census), water consumption in an average household is 148 cubic metres per annum.

Typical household water consumption:
Drinking water             3%
Shower/bath                32%
Toilets                          28%
Washing machine         12%
Sink/dishwasher           22%
External use                  3%