Water fees plan unlikely to flow smoothly
In the big switch from free to fee, installing more than 1.5 million water meters in three years might prove unrealistic, writes CONOR POPE
HOW MUCH will we pay for our water in the years ahead? No one knows and, despite the fact that charges have been planned for more than two years, nobody in the Department of the Environment appears willing or able to even hazard a guess.
And no one knows how and when meters to measure usage will be installed, and who will pay for them.
Charges for domestic water were scrapped in 1997 but under the financial bailout agreed between the State and the troika, they must be reinstated before the end of 2013.
While there is some opposition to water charges, particularly from members of the United Left Alliance, most other parties, environmentalists and think tanks accept they are not only inevitable but also desirable.
The Economic and Social Research Institute believes such charges are “simple elements in any rational tax system”. According to the Paris-based Organisation for Economic Co-operation and Development, they are a necessary step forward, and “the absence of household water charges impedes the development of an economically, environmentally and socially efficient water services sector”.
There are two systems on the table: one based on metering, the other on a flat rate charge. The Government favours the former, as it is seen as more equitable and better-suited for water conservation. International studies show 16 per cent less water is used when metered. However, in the short term we are likely to face flat fees, starting with an initial household charge of €100 next year.
How much can we expect to pay by 2013? Earlier this year a conference was told by a Dublin City Council official that when meters do come in, average water bills would be about €400 per household per year.
When this figure was put to Minister for the Environment Phil Hogan last week, he said it sounded like “a lot of money”.
He is not wrong. It is a lot of money. However, the reality is the charges could be a whole lot more, and may even top €1,000 a year, according to Prof Richard Tol of the Economic and Social Research Institute.
He says that while water charges are essential, he is sceptical about the prospects of the Government’s plans to effectively and equitably manage the switch from free to fee. In particular, he does not believe a plan to install more than 1.5 million water meters in houses across the State within three years is realistic. Tol points out that the Government department responsible for charges has not exactly covered itself in glory in recent years. “Look at the mess the Department of the Environment made of e-voting. This is a whole lot more complicated than that.”
He expresses concern that Hogan wants to hold off on introducing metered charges until every household has a water meter installed. “That could take 10 years, and by the end of the process, many of the meters installed in the first few years will probably be out of date.”
He points out that the company responsible for installing the meters exists only in name. Irish Water has no chief executive, no offices, no staff. Tol says it will be all but impossible for it to do what is likely to be asked of it in the time frames proposed.
THE GOVERNMENT SAYS it will install 1.4 million meters between now and 2014, which works out at about 2,500 meters per working day. This seems ambitious, particularly since installers will have to get permission to access people’s homes. Some residents will likely refuse to grant access. The alternative plan may be to install them outside the property boundary, which may be easier but would be more expensive. Experts have said that it could cost up to €800 per meter (€1.1 billion in total).
The Government plans to use money from the National Pensions Reserve Fund to cover the cost.
Alternatively, residents could install water meters themselves and pay by usage while those without meters would pay a flat charge.
There are easier ways. In parts of Britain they have gone down the self-installation route. People who pay to have their own meters are billed based on usage and end up paying less than those on the flat rate. The average annual bill is about £500 (€567) and it is estimated British households using meters can save up to £125 (€141).
The bottom line is that, under EU rules, the Government must recoup its sizeable costs. It spends more than €1 billion annually on water treatment facilities and is currently spending a further €1.8 billion on upgrading the State’s water supply infrastructure.
“I am afraid we will be asked to go down the flat-rate route for a very long time,” Tol says.
“I really cannot see how the roll-out of meters as envisioned can be done. If we have the flat rate it will not give people any incentive to conserve water but may actually encourage people to use more of it on the grounds that they are paying for it. The flat rate would have to go up to as much as €1,000, there is simply no two ways about it. The Minister knows this but can’t say it.”
The Republic is one of the few developed countries where water charges do not exist.
In Australia people are given an annual water allowance but most use well in excess of that. The average cost to households is about $250 (€175) each year.
GERMANY’S WATER CHARGES are among the highest in Europe, with average bills running to €750, although prices across the country vary by as much as 300 per cent.
There are more than 6,000 water suppliers there, and last year the country’s constitutional court extended the powers of state competition authorities to regulate prices and to use price comparisons with other water suppliers as a basis for market abuse charges. Such a scenario will not develop in the Republic: one of the few things known about the charges is that they will not differ between local authorities, and will be centrally administered by the newly established Irish Water company.
Hogan has said that people will be able to avoid paying the water charges if they conserve water, although given the rate at which an average adult uses water and the speculation surrounding the free allocation, that seems unlikely.
The last minister for the environment, the Green Party’s John Gormley, proposed the free water allowance per person be set at about 40 litres a day. To put that into perspective, a typical power shower uses about 80 litres, while flushing a toilet uses between and six and nine litres. All told, an adult currently uses more than 150 litres of water on average each day.
In addition, the Comptroller and Auditor General’s report last month pointed out that more than 40 per cent of water is lost due to leakage in the system.
By any measure, this represents a shocking waste of resources and money, and will have to be resolved if the Government is to manage the move from free water to charges with any degree of success.