One of the largest waste collection companies in Ireland, Panda, has unilaterally announced a fuel surcharge of 97 cents starting this month. It does not sound like much, but when you include VAT and multiply it by the firm’s 350,000 customers, it comes to €385,000 a month or more than €4.6 million a year.
That’s a lot of money and the surprising thing is we have no way of knowing whether it is justified. We know the price of diesel – on which Panda’s trucks mostly run – went up from around €1.70 a litre before the US and Israeli attacks on Iran to close to €2.30 before falling back to about €1.95 after the Government cut excise duties temporarily.
We have no idea what this means for Panda because, like other waste collection companies, it is essentially a black box. Very little financial information is available about the business and its parent, Beauparc Utilities, a waste management business that operates in Ireland, Britain and the Netherlands, which is in turn owed by Macquarie, an Australian investment bank.
Panda is an unlimited company, so it does not have to file accounts with Companies Office, and there is little to be gleaned from the Beauparc accounts. More pertinently, prices in the domestic waste collection industry in Ireland – which is estimated to turn over €1 billion a year – are not regulated.
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There are many regulations that companies follow but, unlike other utilities such as electricity, gas and telecommunications, no one is responsible for making sure they charge their customers fairly. In the current context, this means no third party has looked to see if the Panda’s fuel surcharge is warranted and proportional.
So is it reasonable? One way we can answer the question is to look the impact of the surcharge on a theoretical waste management company – let’s call it Koala.
Here is the science bit, so pay attention. The answer may surprise you.
The first thing is to work out Koala’s fuel bill, which is tricky when all you know for sure is that it has 350,000 customers. If you take industry norms, Koala would need between 400 and 450 bin lorries, which would each have to do between 30,000km and 40,000km a year. These are not very fuel-efficient, doing between 1.4km and 1.8km a litre.
On this basis, Koala’s monthly fuel bill has increased by between €139,000 and €268,000 a month based on forecourt prices. Koala probably pays less because it buys in bulk.
Panda’s surcharge looks a bit steep on this basis, but it obviously has other substantial energy bills in its operations, so it is in truth impossible to say, based on what we know, if a monthly surcharge worth €385,000 is warranted. And that is the real point.
We are obliged to have a contract with a waste collection company unless we can show we regularly use a dump or recycling centre. There are a lot of rules about what can be collected and how and what must be done with the waste and by whom. But there are no rules about what they can charge
In theory, they compete for our business and this should ensure that pricing is low and service high. But in practice we have some of the higher bin charges in Europe, with the Irish Waste Management Association’s research putting Ireland eighth out of 14 European countries, although this falls to sixth if the higher density of apartments in other European states is taken into account.
As far back as 2018, the Competition and Consumer Protection Commission (CCPC) found that the “side by side” competition model we use here was significantly more expensive than the European norm where local authorities either collect waste themselves or contract it to a private company. It called for economic regulation.
In European markets where there was “side by side” competition, the local authority tended to retain ownership of the waste, the CCPC said, giving them the ability to influence the behaviour of the waste collection companies and achieve recycling goals.
Ireland, by contrast, seems to have created an almost perfect environment for waste companies, which can charge what they like and keep the profit on recycling what they collect. Unsurprisingly, these money machines have changed hands for huge sums. Beauparc was valued at €1 billion when it was bought by Macquarie five years ago.
Last May, the Government commissioned a public consultation on moving to alternative models of waste collection, including franchise tendering. The context included potential problems in meeting European Union recycling targets under the present model.
A follow-on study was due to be completed at the end of April, but has yet to be made public. The bin companies may be running out of road.
