Mr. Jerry Grant:

I am the managing director of Irish Water. I will take a few minutes to talk about some aspects of Irish Water, starting with the period before the set-up of the company. For the previous decade or two, rising standards and the constant challenge of new technologies had put real pressure on the model that existed. Between complexities around the funding model, the fragmented structure and the lack of upskilling of resources at the level needed within each local authority to be able to manage those assets, what we saw was that big capital investments were made and, over time, those assets degraded and their lifetime performance did not match expectations. This has given rise to the deficits we have in drinking water, particularly the inconsistency of compliance in many parts of the country, the difficulty of meeting capacity, particularly in the greater Dublin area but also in other urban areas, and the very significant compliance issues in regard to wastewater, whereby 70% of all the communities are served by plants that are not compliant. Wastewater capacity deficits are often caused by overloading due to lack of management of trade discharges and the growth in the economy, all of which leads to service outages and breakdowns that absorb too much money and operating costs because of the condition of the assets.

The challenge we face is to achieve catch-up on compliance, particularly around drinking water as an absolute priority initially, because it concerns the safety of the water we drink, but also in regard to wastewater to stop pollution and make sure we protect the environment. I refer to the urgency of meeting housing need and development need, particularly in parts of the country where that is a real pressure, and to making rapid significant changes to our operating model and therefore to the work practices and expertise that is available in our operations. We must be able to use the technology to be as efficient as possible in order to devote resources to making sure that when we spend money on operations, it is delivering service. All of that must be supported by certainty of funding, not for one year or for two, but looking ahead five to ten years, because that is the key to this.

What Irish Water has put in place has delivered an asset management capability which is about having information, standards, policies and specifications that are standard across the industry. We must be able to carry out a needs assessment across the entire asset base and to prioritise that to do the right things with the money we have. One never has enough money to do all the things one wants to do in an infrastructure-intensive business and, therefore, one must prioritise. We are beginning to put together detailed strategic and sectoral investment plans that have national and regional application. This is done with wide consultation with a broad range of stakeholders, particularly statutory stakeholders such as planning authorities and in the context of delivering the data, the analytics and the business information that are now available to every part of the organisation.

Allied to that, we must have a capital delivery machine that drives out very substantial amounts of capital in the most efficient way possible. That means programme and project management. It means having the environmental, legal, planning and engineering skills to be able to deliver very complex statutory processes in regard to planning, site acquisition and all the permits that are required. It means having the supply chain of designers, contractors and specialists that are essential to the delivery of such a programme and, obviously, the contract and procurement arrangements and health and safety and quality management processes to ensure the right result for the expenditure.

In terms of operations and maintenance, we have overall responsibility to co-ordinate the operation of the services across the country. We have to set the targets, define the budgets and ensure that local authorities are working to the objectives we share with them. We want to ensure that the asset maintenance delivery is planned as much as possible so we anticipate and avoid failures. Clearly, we have to respond to outages and look after our critical assets in particular because they have a huge impact when they fail and we see the consequences of that every day. We need to use the process instrumentation and the control visibility we now have to anticipate problems and send dispatch crews more quickly to deal with issues where that is possible and get resolution for customers.

We have a facility that allows us to take customer calls and transfer them to the individual local authority within seven minutes. Where the system works very well, the work gets done, the report comes back and goes back out to the customer. Increasingly that is happening and that is at the heart of good customer service.

We also have the capacity to deal with the impact of outages, of course, and in particular for vulnerable customers. About 30,000 properties are registered as vulnerable and they are a particular focus whenever there is a problem. Clearly we need to have an efficient means of billing and collection of revenues from the non-domestic sector in terms of traders charged and connections. We also need to have the necessary support services to work effectively and productively with the economic regulator and with the environmental and health authorities, in particular the EPA, which is our environmental regulator.

Irish Water delivers water and provides wastewater services to 1.7 million customers, between domestic and non-domestic premises. That equates to almost 1.7 billion litres of water every day with almost as much wastewater collected, treated and discharged to receiving waters. We have 2,000 significant treatment plants and 95,000 km of network. We dealt with 140,000 customer queries last year. On average 4,000 work orders go out every month to crews throughout the country. We made 3,500 new connections last year and that will rise significantly in coming years.

We manage a pipeline of work in the capital programme of between €3 billion and €4 billion. That indicates the scale of the pipeline needed to deliver the target level of annual investment of €600 million. At any one time we are managing that level of work through the process from feasibility study through to handover. We currently have 20 capital programmes where we are upgrading assets across the country. These include disinfection, cleaning reservoirs, rehabilitating sewerage works, aeration plants and so on. There are nearly 500 projects at the moment. We are spending €7.5 million every month on that work. That is improving health and safety, and improving operation on existing assets. We plan to double that over the next 12 months.

We manage a huge amount of procurement. Between operations and capital, we outsource approximately €750 million a year and that will rise further. We deal with all the budget management issues relating to that. We also manage all of the long-term asset planning, environmental management regulatory compliance and so on.

In the period 2015-16, having published our 25-year plan, looking ahead to the ambitions we have and that we share with members of the committee and the Government for the future of our water services, we established that broadly speaking to bring everything up to the level that would deliver against those ambitions would cost over €13 billion, which is clearly far more than could be spent in any single investment cycle. We have had to prioritise that with an immediate €5.5 billion target by the end of 2021, followed by two further five-year periods of €4.5 billion and €4 billion, respectively. That is based on the anticipated work and capital maintenance needed to keep the assets we are building now up to scratch during that period.

Slide 17 shows the breakdown of that across drinking water, wastewater and general infrastructure, which means leakage management and networks, but critically upgrading and maintaining the existing assets and keeping those in as-good-as-new condition. That will absorb that €5.5 billion and we will talk later about what that will deliver.

Slide 18 shows that the investment over the past three years and for the next five is well distributed across the country, but there are particular black spots. For example, drinking water has been a particular problem in Roscommon, Galway, Donegal, Tipperary and Kerry. Wastewater has been a particular problem in Dublin, Cork, Donegal and Waterford. Those are counties where specific problems have existed historically for a very long time.

Looking beyond 2021, in the next period we will have to do an enormous amount of work to rationalise our water supply so that we have sustainable sources, with far fewer treatment plants but to the right standards. We will have to continue to deal with leakage and lead and also with critical assets, some of which have been in place since the 19th century. On wastewater, there is a great deal to do in terms of the ambitions in our river basin plans and our EPA licences that we will not be able to get to in the short term. There are significant flood risk issues in urban areas that will have to be tackled and we will have to begin the work of dealing with brick and masonry sewers that have been in place since the 19th century that are in danger of collapse.

Coping with growth and dealing with strategic development zones that are being contemplated in Cork, Dublin and elsewhere will continue to require money. We have identified two major strategic projects for the future water supply and drainage systems for Dublin. The latter will be based in the north of the county. These will be required by the mid-2020s and delivering them will be a major challenge from a funding perspective. We continue to insist that very substantial funding will be needed to maintain the existing assets and to keep rebuilding them. The plants, particularly those built in the past ten or 15 years, will require significant funding just to keep them working correctly.

Looking beyond that, we can already see the sort of work that will have to be done right out into the mid-2030s. Ultimately, the cast iron and asbestos cement pipes must be replaced and that will take a long time. The rationalisation of our regional supplies and dealing with climate change and its impact on our facilities will be a challenge. We know already that some of our current sources in the eastern region will not have the water flows in summer that they have now and we will have to cater for that. Equally, we will have greater flood densities.

The cost and challenge of keeping very complex assets up to good-as-new standard will be there for us. We can say that in the period to 2016 we have already delivered some real and tangible benefits. We have dealt with - put on and taken off - boil water notices for 145,000 people. That represented critical risks for those supplies and while we know that the job is not finished yet, we have gotten much better at identifying the problems and responding more quickly. We have replaced about 840 km of pipe or laid new pipe and a further 1,000 km have been targeted for replacement as soon as possible. We have built nine new water treatment plants and upgraded 18. We have introduced pressure management in almost 250 sites around the country and have installed 884,000 domestic water meters. In terms of wastewater, 32 wastewater plants have been upgraded and 27 new ones built. A lot of monitoring equipment has been installed and plant optimisation is going on in 436 of our wastewater sites. Members will know from the EPA reports that maintenance and operation is a factor in non-compliance at many of our plants. A lot of work is also happening in terms of health and safety at the plants. Our submission contains some pictures of plants which are fairly typical of the treatment plants with which members will be familiar.

We set out very clearly - some might say bravely - in our business plan that by 2021 we would have delivered a range of tangible benefits for this country from the investment of €5.5 billion with which it was anticipated we would be provided. In terms of drinking water, we committed to eliminating boil water notices and to de-risking the plants that currently serve 700,000 people but which served 940,000 when we took over. In terms of critical capacity in the greater Dublin area and the other growth centres throughout the country, we will have dealt with that sufficiently to meet demand. We will meet the fundamental compliance challenges for which the European Court of Justice is prosecuting us under the urban wastewater directives and will have made a decent start on reducing the leakage. What we have set out in our submission today is the definite progress we have made on that path through to 2016. It is fair to say that we are on track, provided we can keep it going with the funding.