Mr. Paul McGowan:

I thank the Cathaoirleach and the members of the committee. I will talk them through where we are on various aspects of the water charges plan and our recent consultation on tariff structures.

The water charges plan is designed to cover the water charges, how they are calculated and the likely costs that are incurred by Uisce Éireann in discharging its functions as the Irish water utility. We wrote to Uisce Éireann to request a submission on its water charge plan. This will cover the period October 2014 to the end of 2016. It is just over two years - what we would call interim revenue control rather than full revenue control because of its relatively short duration.

The guidance that we have issued to Irish Water in respect of its water charges plan is based on the Minister's water charges policy direction, which was published in draft form a number of weeks ago. It is also informed by our review of the responses that we received to our two main publications on tariffs, namely the Domestic Water Tariff Principles and Proposals consultation paper and the Interim and Enduring Non-Domestic Water Tariff Proposals consultation.

I will briefly go through the presentation because the draft policy direction has been in the public domain for some time. The policy direction applies to the interim regulatory control period of Q4 2014 to the end of 2016. A key for us is that we must be consistent with the conditions of funding that are set out by the Department to Uisce Éireann. These conditions are set out by the Department in a letter to Uisce Éireann but that letter is incorporated into the policy direction and, therefore, we must comply with that as well.

It includes matters relating to free allowances, such as the 30,000 litres per child per household as well as a 38,000 litres allowance in primary residences. That 38,000 litres per annum is to be verified through an actual metered consumption data analysis.

The charges are to be fixed to the end of 2016. As the committee probably will be aware, there is to be no domestic standing charge for residencies but there is a discretion for there to be a minimum water charge for non-primary residences. The latter is something we propose to have.

The draft policy direction via the incorporation of a letter to Uisce Éireann is quite clear that the average annual bill to the end of 2016 for those households with combined services, that is, water and waste water, is not to exceed €240. It is important to note that this is an average figure. It would have been envisaged that some households would incur charges above that and other households would incur charges below that, but that the average would be €240.

The direction also is clear that the assessed charge, where no meter is available and, therefore, customers are to have an assessed charge for their water and waste water services, is to be based primarily on occupancy and also that in the transition from an assessed charge to a metered charge, there is to be a retrospective adjustment to ensure that customers who, for example, pay less on the assessed charge than they subsequently pay on the meter charge will have a cap placed on their charges for a period of time at the assessed charge and, equally, those whose metered charge turns out to cheaper than the assessed charge will have some form of rebate to reflect the fact that their consumption is lower. There is also a key provision in the policy direction on impaired services where water quality is impaired and arrangements that are to be put in place in those circumstances. I suppose the key point there is that it relates to where water quality is such that it is not fit for human consumption.

The next slide in the presentation gives an overview of the broad issues that were raised on the domestic water tariff consultation that we carried out. We had, from our perspective, a large response. Some 153 individual responses were received to the consultation. There was a range of responses and I will give the committee some sense of what they were.

There was a lot of response around the area of social protection measures. Affordability measures are not a matter for the Commission for Energy Regulation. We do not set, for example, policy on whether customers receive any form of financial assistance with the water bills. We set the bills but affordability measures are a matter for Government policy. Nonetheless, customers have identified various affordability issues, such as low incomes, the elderly, customers with disabilities and medically vulnerable customers. Some of these feed through into tariff proposals, particularly in relation to what might apply for those who have medical conditions such that they have high water usage.

The responses also focused on matters such as encouraging water conservation through rain water harvesting. In fact, one of the areas identified is that those with harvesting already deployed would be prioritised in terms of having their meter installed because, clearly, they would benefit from lower bills if they are deploying such technology. As the committee can imagine, there were a lot of responses around water quality issues. For example, there is a lot of concern out there about hard water and customers requesting that tariff discounts should apply in those areas.

A matter on many customers' minds was the area of flexible payments and the ability to pay by a range of means, from cash to direct debit to more flexible payment arrangements, such as Pay Zone. Customers also raised issues such as the need for minimum pressure standards and how customers access their meter data to determine their level of water usage. Other matters that were raised included how would rebates be managed following somebody's transition from a high assessed charge to a lower metered charge, but that is covered off in the ministerial direction.

The next area on which we consulted was interim and enduring non-domestic water tariffs. I would remind the committee there is already a series of tariffs in place for the non-domestic sector. These have been in place for a number of years. The issue here is that the tariff arrangements varied across all then 34 local water authorities and as a result, there are, we believe, in the order of 600 different tariff designs in the non-domestic sector at present.

Our proposal was that we would retain the existing tariff structures, we would focus on the introduction of domestic water charges and, subsequently, once all the information relating to the full range of non-domestic tariffs was gathered by Irish Water, we would then assess what sort of tariff arrangements are needed and how we might put a glide path in place to allow for a transition from the current mix of tariffs to the enduring tariff arrangement. That was our broad proposal.

We had 14 responses to that consultation. Generally speaking, there was broad support for the idea that we would retain the current arrangements. Specific questions were raised. For example, where entities have particular contracts with their existing water authority, how would those existing contracts be treated and taken into account?

It was also pointed out in a number of responses that it is not acceptable that the domestic portion of mixed use customers would not be charged for water usage. Typically, an example of this might be where there is mixed use, that is, a domestic dwelling with some form of commercial premises attached where there would traditionally a free water allowance associated with the domestic element because there was no domestic water charging, and then the remainder would be charged at the business rate. Many respondents pointed out that, if that were to continue, then a cohort of domestic customers would not be charged for domestic water charges.

As I already pointed out, we are minded to look at how we put in place a glide path for any new tariff for the non-domestic sector, but the responses also sought that there would be no shocks. I suppose that is a plea that the glide path would take account of the need to move progressively to the steady state rather than over a very short period of time by introducing large price changes, whether they be up or down.

Another plea was that there should be no cost subsidy from the non-domestic sector to the domestic sector.

Let me address the advice we have given Irish Water to guide it on how it should put together its water charges plan. First, we have given it broad support regarding principles and objectives. In this regard, the charges should be equitable and non-discriminatory and designed to ensure efficiency in the use of water. They should be cost reflective, recover the costs efficiently incurred in delivering the service, stable and, where possible, simple. Clearly, not all of these objectives are equally achievable. Therefore, there is a balance to be struck between all principles and objectives.

With regard to tariff structures, there will be a national tariff. There will be a 50:50 split between the cost for both water and wastewater services. If the total cost is €100, €50 goes towards water supply and €50 towards wastewater services. There would be no standing charge. Much of this is in line with the policy direction.

The average household charge, as the committee is aware, has to be capped at €240 per annum. This is an average rather than a maximum charge. If €240 is the average, it stands to reason some households will incur a charge above €240, while others will incur a charge below it.

We have asked Uisce Éireann to prepare a proposal on a minimum fee for services to non-primary residences or houses not normally occupied such as holiday homes. This recognises the fact that even with zero consumption, there is not a zero cost in ensuring the availability of water at the premises.

On affordability measures, there is a free allowance of 30,000 litres per household. The Government, in its policy direction, indicated that there should be an allowance of 38,000 litres per child, unless more robust research on consumption and losses is prepared. We understand that, on the basis of metering work already done, Uisce Éireann has carried out some research on current usage and proposes to seek a reduction from 38,000 litres per child because it does not believe this accurately reflects the rate of usage of a child. It will propose a reduction, but we must be satisfied that the statistical analysis behind the figure is robust before we move to accept it, or any other figure. It is important to bear in mind that if the analysis shows that the consumption per child is not 38,000 litres per annum, reflecting this in charges would ensure no cross-subsidisation between households with children and households without children. That is why it is important to understand whether the analysis is accurate.

On assessed charges, we have advised and guided Irish Water to the effect that one's assessed charge is to be capped for a period of six months after the introduction of the meter. If somebody is on an assessed charge of €240, the average in the Government's direction, and his or her meter-based charge is subsequently recorded as higher, it will be capped at €240. Consumption by a family could be higher than average because of greater consumption or a leak. Our guidance suggests a first fix must be carried out before any cap is removed. Equally, if a metered individual discovers subsequently that his or her water usage is very low by comparison with the usage pertaining to the assessed charge, there is to be a rebate.

On medical conditions, the guidance to Irish Water is that charges are to be capped at the relevant assessed charge. Based on advice that we would be expecting to receive from the Government via the Department of Health on what medical conditions warrant being categorised as relevant, the customers in the relevant categories would have their water charges capped at the relevant assessed charge.

With regard to impaired services, our focus is on water that might be unfit for human consumption. The guidance issued to Uisce Éireann is that, in preparing its proposals, it should consider a 50% reduction in the water supply portion of the bill. The analysis from other countries indicates that approximately 10% of water consumed in a household is actually used for drinking and food preparation; the remainder is for other uses. The figure of 50% represents a considerably higher proportion of the water normally consumed by the householders. It is probably also greater than the typical reduction that would apply in other jurisdictions. We are open to the idea that the reduction could be greater, depending on the severity of circumstances. For example, if people have been subject to a boil water notice for a considerable period, there may be circumstances in which the reduction of 50% could be increased.

We have provided Uisce Éireann with further guidance on what "in a timely manner" means. Ministerial directions refer to "in a timely manner" in respect of meeting Uisce Éireann's customer service obligations according to the customer handbook. We have asked the company to prepare a customer impact analysis. Essentially, this would examine various customer types and provide an analysis of the typical charges for the range of customer types. It would give the minimum and maximum we would expect to see in respect of known consumption patterns. I refer also to the numbers of people on charges in between. That is the typical distribution analysis we would have carried out when setting tariffs.

I raised the issue of mixed-use customers in regard to the feedback on the non-domestic charges. We have identified that we expect domestic charges to apply to the domestic portion of mixed-use premises from 1 October 2014. Whether Irish Water will have the data available to start billing from 1 October, we are not yet sure. As a principle, we have stated charges should accrue from that date. This is to ensure all people in domestic premises will be subject to water charges. We believe this is an equitable position to take, given that this is all about the introduction of domestic water charges.

On the non-domestic side, we have indicated that the current charging regime is to apply until such time as the new tariff arrangements and charges are approved by the CER. To that end, we are in discussions with Uisce Éireann on putting together a plan, to be published later this year, for how we propose to go about non-domestic water charging and creating the glide path to which I referred.

We have clarified that later this year we will issue a consultation document on connection charges and what connection charges will apply in the water sector. The water customer handbook is essentially a set of rules that we put out for consultation in terms of how Uisce Éireann should deal with its customers. There are various headings, including how to communicate with customers, how bills should be issued, the format of bills, how regularly customers are to be billed, metering and how to deal with vulnerable customers. We proposed various requirements in our consultation under all of these headings and received 30 responses.

Some 15 of the submissions were from representative bodies such as the Society of St. Vincent de Paul, the Health Service Executive and the National Consumer Agency, while 15 were received from individuals.

It is worth noting that as part of our overall stakeholder engagement, we do have a forum established whereby we speak to various consumer representative bodies, including the SVP and MABS, in order to understand the issues customers face on various matters such as methods of paying bills.

Generally speaking, there was broad support for the customer service obligations that were set out in the handbook. These would subsequently be set out in the codes of practice by Irish Water.

Turning to timelines, in February, we sent the Minister our advice on the economic regulatory framework. In April, we followed that up with our consultations - to which I have just referred - on tariff structures around domestic and non-domestic charges, and the water customer handbook consultation. In May, we published an information note on the connection charging policy, essentially identifying that we propose to keep the existing connection charging policy across various areas as represented by the previous local authority areas.

We had expected to issue the water charges plan for consultation in June, but that will now be in July. This schedule was always a challenging timeline. It is true there have been delays with Uisce Éireann providing us with a full submission. There is a significant amount of work involved in ensuring that the draft water charges plan is consistent with the draft Government direction of 6 May and, in particular, with regard to meeting the market corporation test that is part of that overall policy direction.

At this stage, we expect to publish the economic regulatory framework response document in July. The actual economic regulatory framework, as submitted to the Department, has already been published on its website. This is our document which details all the responses we had to that particular consultation.

We will also put out the water charges plan, which will include allowed revenue and tariff structures and levels, for consultation in July. We will also issue our decision on the water customer handbook. This means that it will be September when we issue our decision on the water charges plan. Subsequently, we will consult on the connection charging policy in the fourth quarter of this year.

We expect to receive a final submission from Uisce Éireann tomorrow, 2 July, on the water charges plan. We hope to publish that very soon thereafter. We will enter into a fairly detailed consultation in the next couple of weeks. We will have our own water charges plan consultation paper. We will have Uisce Éireann's allowed revenue submission on what resources it feels it needs to run the water company for the period up to the end of 2016. There will be our review of that revenue submission. There will also be Uisce Éireann's own water charges plan submission with supporting information setting out what it thinks the tariff levels should be and why. Then there will be our own consultation response papers on the domestic and non-domestic tariff proposals. Therefore it will be a considerable volume of documentation.

At that point in time, we will be more than happy to come back to discuss those papers and the various submissions with the joint committee. In July, we will also publish our decision on the customer handbook. The decision on the water charges plan will be issued in September.

That is the end of the presentation. I am sorry that it was probably a bit lengthier than I expected it to be, but there was a lot to cover.