Households to pick up €800m bill to establish water company

IRISH HOUSEHOLDS will be liable for funding arrangements totalling more than €800 million needed to establish a water company, including interest payments on a loan from the National Pension Reserve Fund, the Government has confirmed.

The setting-up of the new State water utility was announced by the Government after yesterday’s Cabinet meeting. Minister for the Environment Phil Hogan described it as the most significant decision taken in relation to a State utility since the establishment of the ESB.

The Government also announced the contract to run the company has been awarded to Bord Gáis Éireann, of which Irish Water will become a subsidiary. It won the contract ahead of Bord na Móna, the other State agency which submitted a tender.

Mr Hogan confirmed the National Pension Reserve Fund would supply a loan of €450 million to establish Irish Water and supply an estimated one million homes with water meters. He said the funding would be provided at commercial interest rates, but the department last night would not give any details of the interest rate on grounds of commercial sensitivity.

The Minister said the annual repayment for householders would work out at about €39 or €40 per year over 20 years. On that basis, the interest payable on the loan will total €350 million, or €340 for each home over that period. According to a source, the interest on the bond-type loan from the National Pension Reserve Fund could be as high as 6 per cent.

Irish Water will gradually become responsible for supplying all public water in the State, taking over the role currently performed by the 34 local authorities.

Mr Hogan said yesterday that charges would be introduced in 2014 and Irish Water would have 90-95 per cent of the meters installed by the end of that year. Decisions on pricing and on free water allowances will be left to the regulator, the Commission for Energy Regulation. The Minister said it was much too early to make any predictions as to pricing levels.

A further 300,000-350,000 homes would not have meters installed in that initial phase. These include apartments and dwellings that present technical difficulties. The bills for these homes will be “assessments” based on comparable households in the vicinity.

The target date for all homes on the public mains being metered is 2017.

The introduction of water charges is a condition of the memorandum of understanding agreed with the international troika as part of the bailout programme. The memorandum has stipulated 2014 as the commencement date for charges.

“I know it will be difficult for some people to find money to pay for this finite resource,” Mr Hogan said yesterday. Setting out the rationale for the tax, he said the Government did not want to increase income tax, or tax business, or cut social welfare payments. “The annual public deficit of €18 billion necessitated a broadening and reform of the tax system,” he added.

“In just 20 years, global demand for water will be 40 per cent higher than it is today so Ireland’s valuable water resources will play a vital role,” he said. “The current system is not sustainable. The funding level is not sustainable.”

He said the leakage levels of 40 per cent were too high; he also said the fact 34 local authorities were operating separate public water systems resulted in too much fragmentation.

Mr Hogan denied the Government’s response to weekend reports suggesting a €300 upfront charge had been confused and contradictory. He insisted the reports had been wrong and said he could not take blame or responsibility for what had appeared in newspapers.