Oireachtas Joint and Select Committees
Tuesday, 11 February 2014
Joint Oireachtas Committee on Environment, Culture and the Gaeltacht
Standards of Service in Water Supply: Irish Water and CER
We will consider the maintenance and adherence to the necessary standards of service to customers in the administration and distribution of water with delegates from Uisce Éireann and the Commission for Energy Regulation. From Uisce Éireann I welcome Mr. John Tierney, managing director; Mr. John Barry, programme director; Mr. John Dempsey, head of finance, and Mr. Jerry Grant. From the Commission for Energy Regulation I welcome Mr. Paul McGowan, commissioner; Mr. Garrett Blaney, commissioner; and Ms Cathy Manning, director.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. If they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person or an entity by name or in such a way as to make him, her or it identifiable. The opening statement and any document provided for the committee may be published on its website once the meeting has concluded. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.
In compliance with the decision of the committee and the agreement of the Minister, Uisce Éireann is the newest Irish utility and its establishment and ongoing progress are watched by the public at large, not least by elected representatives. It is a major undertaking and a very good one. Many of us have been concerned and curious about issues in rolling out the metering project, the decision-making process around it and the efforts to set up this utility. There were serious concerns expressed earlier about outside expertise and I thank the delegates for their appearance at the meeting held in January. By and large, there was a good flow of information - no pun intended - between Uisce Éireann and the committee. In many ways, it satisfied much of the curiosity. The hallmark of this project is transparency and we are anxious to do everything we can to advance that concept.
A number of issues will be raised in respect of the establishment of the utility. There is a certain level of curiosity and people tend to presume when there is no information available. In so far as it can be established, we will deal with issues concerning pricing. We are aware that households are cash-strapped and anxious to establish that the commission and the board of Uisce Éireann are mindful of this in setting prices.
With regard to local authority staff now working with Uisce Éireann, I understand completely the service level agreements between trade unions and organisations. Some people do not understand this and do not want to. However, as a committee, we must be satisfied that people with the appropriate skills set from local authorities are doing exactly what it says on the tin. Irish Water is not in the public sector in the conventional sense, as it is a semi-State commercial company. There will always be issues relating to people working in the public sphere who then transfer to another area. In an era when employment is scarce, any variance in a switch in remuneration is like a red rag to a bull. It will be beneficial to the committee and the board of Uisce Éireann to establish this.
We will engage in a robust question and answer session after the opening statements and I believe all members will offer to speak. I now invite Mr. Tierney to speak to the committee.
Mr. John Tierney:
It is good to be here at what is a scheduled meeting. I am joined by Mr. John Barry, Mr. John Dempsey and Mr. Jerry Grant.
Water supply and wastewater treatment infrastructure, more than any other type of infrastructure, determines the health of communities, protects the integrity of the environment and unlocks our potential to achieve economic prosperity. The purpose of Irish Water is to safeguard water as a precious natural resource and deliver water services in a way that meets the needs of all citizens now and into the future. In doing this, it will deliver a standardised asset management approach across 34 local authorities, drive efficiencies, improve customer service, ramp up the delivery of capital projects and raise international capital to help to deliver much needed investment in the sector.
I want to refer to our seven key messages before synopsising what is included in the paper. Ireland’s water and wastewater infrastructure does not meet the needs of a modern economy and there are significant quality, environmental and service challenges. Irish Water has been established to put the structure and systems in place to address this challenge. In 2009 the water services investment programme would have cost €6 billion to implement. The overall requirement to upgrade services has been estimated at €10 billion. Since 2009 we have invested €1.5 billion in water services infrastructure.
Mr. John Tierney:
I am referring to what is contained on the first page of that document.
The current delivery of water services is not fit for purpose on a consistent basis and continuing to deliver in this way will only result in a further deterioration in water and wastewater services. There are serious health, environmental and economic risks inherent in this model. The establishment of Irish Water as a national utility will secure improved water services by bringing a systematic approach to how we operate and manage services, centralising and standardising procurement and other activities to deliver major cost savings, adopting best project management practices to reduce the capital needed for projects, while accelerating their delivery within budget, delivering the largest metering programme for a water utility, and implementing a system of charging and collecting revenues from over 1.8 million customers. There are no quick fixes; it is going to take time, substantial investment and a long-term systematic and strategic approach. That is the only viable way to solve this problem for the country.
Local authority staff are critical to delivering services.
Continuity of supply to customers cannot be put at risk as we make the necessary changes. The Irish Water programme, as we debated the last day, has defined and built the processes, IT systems and capabilities to set it up as a modern utility. The delivery of the project is to best utility standards and the investment has delivered an asset that will serve the needs of the country into the future and will stand up to scrutiny in any objective international benchmarking process. We have tried to do three things, namely, to set out how Irish Water will tackle the problems in water services and what difference this will make to people; to set out the major plans in which Irish Water will be engaged during 2014 in order that the committee can understand what to expect from us; and to provide clarity on a few key issues which have arisen in recent weeks. However, it is important to remind ourselves of Government decisions taken on water sector reform, namely, to establish a new public water utility building on the proven capability of BGE; to establish independent economic regulation of the water sector, set tariffs and protect customers' interests by ensuring efficient delivery of services by the new utility; and to create a sustainable funding model to facilitate much needed investment in water services.
In 2014 we find ourselves with an abundant natural water resource but through under-investment and other factors, we have faced and are facing huge challenges in delivering water services. I point to a particular case. The European Commission has launched a pilot infringement case in regard to a number of plants. The potential cost of fines would be additional to the cost of the infrastructure required to address non-compliance. It is fair to say people involved in the service have been seriously concerned about the levels of investment. If this was allowed to continue, it would store up even greater problems for the future that would manifest across the country. Irish Water will take on this challenge by planning and investing wisely in improved national water infrastructure to meet present and future needs; implementing systems and processes that best manage this national water services infrastructure; and reducing costs by improving operational performance to the best levels of other utilities. We have set out the benefits of national utility managed water services.
I mention our approach to asset management. I will not go through all of it, but it is the area in which the committee will see a radical change in strategy and approach in asset management and capital delivery. Critical to this is central strategic planning, based on accurate asset performance data and full control of all investment decisions, both capital and operational. International benchmarks suggest efficiencies of up to 40% are achievable in capital investment alone from a combination of adopting the right choices and delivering them efficiently. The short to medium-term challenge will be to drive much higher levels of service from the existing asset base, but even with these higher levels of capital investment, a transformation of assets is a long-term project.
I have set out the priorities and related issues for Irish Water in taking over water and wastewater services. Drinking water quality is the first priority to protect consumers in terms of health risks, seeking to eliminate boil water notices and alleviating the problems of up to 50,000 people in areas where there are water restrictions. Immediately on becoming the responsible authority on 1 January Irish Water put in place a special team to assess the issues involved and progress the solutions. We point to the particular problems encountered in County Roscommon. We are trying to build on the work done there to date and bring forward the work as quickly as possible.
Drinking water capacity is the second priority. There is a series of measures in progress to ensure we stay ahead of demand. I mention the greater Dublin area where there are particular problems.
The third priority is wastewater treatment plants and compliance. Wastewater treatment plants servicing the majority of the population are currently non-compliant with the water framework directive. That is a significant challenge which will take a number of years to resolve. Irish Water's focus is on targeting those plants that will give the greatest environmental benefit in protecting waters as part of a credible plan that will allow us to meet EU requirements. We need a new focus on how to upgrade existing plants, wherever possible.
Our fourth priority is wastewater capacity. There is little point in addressing the problems with water supply in places such as the greater Dublin area if one does not address the issue of wastewater treatment capacity also. Our fifth priority is planned asset improvement schemes and development capacity schemes, as required.
I refer to major plans and developments. In the coming months one will see Irish Water undertaking a range of actions, about which we hope to keep the committee informed. In terms of capital investment, at this stage the projected capital funding available is €930 million for the three years 2014 to 2016. That figure needs to grow to an annual figure of €500 million to €600 million to meet urgent needs. Given all of the competing priorities, it is necessary to consider how to maximise output in the short-term, given the need to tackle water quality, water conservation and urgent pollution issues. Based on the asset management approach where we focus on obtaining the maximum benefit from existing assets and taking a critical look at the cost benefit balance on every scheme, we are confident that we will deliver efficiencies of at least 30% on the capital spend. An example is the Ringsend wastewater treatment plant where an alternative approach may be possible. On water conservation, Irish Water is targeting a capital spending figure of almost €200 million over three years as part of the capital investment plan.
We have to commence work on the Irish Water strategic plan for the 25 years to 2040. We will shortly open a broad public and stakeholder engagement on the high level objectives looking forward to 2040.
On interim price control from 2014 to 2016, in a few weeks Irish Water will make a submission on interim price control to the Commission for Energy Regulation. During the year we will start work on the first full regulatory cycle which runs from 2016 to 2021.
Irish Water formally took responsibility for water services six weeks ago. Our goal is to be a professional organisation which is responsible, expert, efficient and operated with integrity and the best interests of the customer at its core. To achieve this, we need to do a number of things. In response to the significant demand for information on Irish Water, we are committed to productively publishing on our website all relevant information on water services in Ireland. We will develop an integrated communications plan to inform and involve all citizens in understanding water services and engaging on managing water demand. Following on from today's briefing, we will be inviting all Members of the Oireachtas to meet management team members of Irish Water to be briefed in more detail on the points we have raised. We will put in place an information service for Oireachtas Members and council members to ensure their information requests are responded to in a timely manner. We will supply details of this service to all Oireachtas Members this week.
I refer to some of the items involved in regard to Irish Water and the local government partnership. We are transforming the water services sector, building from the current model and not replacing or duplicating it. Continuity of water services is the absolute priority. The optimum number of staff required to deliver services, after a managed transformation, will be determined by business needs, including, most importantly, public health, under the scrutiny of the regulator who will take full account of comparators with other similar utilities. There will be no allowance for surplus staff.
I mention some of the Irish Water programme in terms of the delivery of customer benefits and the high performance utility model and the system and structures put in place to drive high performance to ensure that over time we will have the organisation required to drive efficiencies and so on.
The Chairman has mentioned the metering programme which is a very ambitious one. More than 115,000 meters are in the ground and we are meeting the 27,000 meters per month installation target, which is an enormous achievement.
Reference was made recently to leaks. The metering project is uncovering leaks and provides the opportunity to deal with them in partnership with the local authorities.
Investment in water services infrastructure is a catalyst for achieving prosperity, health and sustainability. Every generation has tried to play its part within the resources available at the time and every subsequent generation has benefited from the efforts made.
Our water services are in need of serious transformation. We must learn from the delivery of services in the past century. We must finds new ways of managing the assets, delivering, developing and paying for our water services. Uisce Éireann has been given this task and will work with the local authorities and the people. We will do our utmost to meet the challenges. Through incremental progress in the next 15 years, we will deliver on our vision of building a high-quality water service. High-quality water will protect the health of our communities and the integrity of our environment and will be a driver of economic development. We want to ensure that people have a clean, safe and affordable water system.
Mr. Garrett Blaney:
I will outline to the committee the broad role of the Commission for Energy Regulation before I hand over to my fellow commissioner, Mr. Paul McGowan.
CER has been the energy regulator in Ireland since mid-1999 and has broad economic and safety functions. CER's role covers the networks, wholesale markets and retail markets. We were appointed on 7 February 2013 as economic regulator for Uisce Éireann, and CER covers water and wastewater services. Our role in broad terms is to protect the interests of consumers and this sets the framework for all our other activities. We will regulate the network costs of Uisce Éireann and ensure they are efficient. Networks are a natural monopoly. There is a standard model for networks in energy and water. We will set the costs through price controls, and we will use standard international processes for establishing the price controls.
Price controls ensure that standards are imposed on the functions, and also that sufficient capital is achieved at the lowest cost from the consumer point of view. Water and energy services are very capital-intensive industries and controlling capital costs is as important for water services as it is for energy services. It is important that capital is sourced at a low cost. Price controls provide a stable environment and that environment ensures we can build in targets and efficiencies to improve delivery for consumers. We have introduced seven price controls in the energy sector in the past 14 years in both the electricity and gas services. As a result, operating costs have decreased and performance has improved. We have set targets which have been achieved and exceeded. This has allowed us to get efficient capital from capital markets, which is an important factor in capital-intensive industries.
My colleague Mr. Paul McGowan will focus on the CER's role in the provision of water services.
Mr. Paul McGowan:
The Water Services Act 2013 sets out that CER's function in respect of water is to protect the interests of customers. The Commission for Energy Regulation, CER, will regulate Uisce Éireann so that customers are provided with a high-quality service via codes of practice and Uisce Éireann provides water services in an economical, viable and efficient manner. The legislation also places other duties on CER, and these are listed in the documentation. It should also be noted that the Minister for the Environment, Community and Local Government has the power to issue directions to the Commission for Energy Regulation under this legislation.
The codes of practice will be one of the key instruments that CER will use to regulate the interface between the consumer and Uisce Éireann. Uisce Éireann will submit codes of practice on customer-service-related issues to CER for approval. These codes of practice will make provision for issues such as standards for Uisce Éireann in performing its functions. Standards will be set for communication and service to customers as well as water quality. The codes of practice will also cover the billing of customers for water services and how that should be done, the methods of payment available to its customers, information to be provided to customers in communications from Uisce Éireann, how customers should go about making complaints, and any other matter the CER considers necessary to protect the interests of Uisce Éireann customers. It is expected and will be a requirement that the codes of practice are freely available online and accessible to customers and that the CER can issue a direction to Uisce Éireann to comply with those codes.
The CER will consult upon the codes of practice and other issues during 2014 and has set out timeframes for this. We will issue the following public consultations. In April we will set out our views on options for the structuring of water charges and customer protection issues and invite the public to engage in the process of consultation. In June we will issue a consultation that will set out proposed water charge levels based on submissions from Uisce Éireann. In July 2014, we will issue a decision on the codes of practice and other customer protection matters and in August we will issue a decision on the structure of water charges and the water charge levels.
Our broad remit is to protect the interests of water customers. The CER will aim for a high-quality and efficient public water system. Our focus is to ensure that only efficient operating and capital costs will be passed through to customers. We will achieve this by using benchmarking with best international practice.
The key issue is how much people will pay for water services. That relates to both Uisce Éireann and the CER. There is a cost in keeping costs down and in upgrading the distribution and quality of water services.
As I understand it, Uisce Éireann will send a proposal to the Commission for Energy Regulation. This is very different from the way Bord Gáis Energy and the ESB engaged with the CER, because these were pre-existing services. Uisce Éireann is constructing a network to take over a service that was delivered by individual local authorities. How will the CER be able to satisfy itself on the costs that Uisce Éireann incurs, such as the cost of capital? We know, for example, that all customers will be given a free allowance, so how will charging be structured? Who will determine what is sufficient capital for Uisce Éireann? Some parts of the country have higher population density and have more developed water and wastewater infrastructure, so the existing water services are not developed equally across the country and can be worlds apart. In the case of the ESB, the service in the west is the same as it is in the east. Will the witnesses address the issues arising from the unequal water services throughout the country?
I want to go back to the question of Irish Water's transition office, an issue which was not really touched on in the opening statement. It seems from replies to parliamentary questions that the number of people working in that office is quite small. More than €5.7 million - a total of €7.3 million - has been allocated for the office and I would like to be satisfied in that regard. Perhaps Mr. Tierney might come back to us on that point. I do not understand where the money is being spent and how the costs are being kept down.
Will Irish Water make a proposal to the Commission for Energy Regulation on the extent of the free allowances, or will this be done exclusively at Government level? There are issues in respect of income also. Local authorities have collected a sizeable amount of money in development contributions - I think the figure is close to €1 billion - but they are not permitted to spend it. Some of this fund relates to water and wastewater, some to roads and some to other services. Where is the fund counted? Will all of the moneys that have been designated for water and wastewater services be transferred to Irish Water, or will some continue to be controlled by local authorities?
There are other issues in relation to who is going to be included. This applies to both groups. A sizeable number of housing estates have not been taken in charge. The responsibility of Irish Water extends to estates that have been taken in charge. Other estates will continue to be controlled by developers. How will this work where a developer is not in place? Some people are complaining about being asked to pay property taxes and water charges, even though they are receiving a substandard service by virtue of being in limbo. The officials might address this issue. I am not sure how the system will operate.
Electricity and gas are provided as a door-to-door service, whereas water is provided up to the public footpath. The householder is responsible for maintaining the service beyond the footpath, even to the point of having to dig up his or her garden. I have come across several people who were told there were major leaks in their gardens and had to go digging. Is the first fix policy proposed sufficient from the point of view of the Commission for Energy Regulation? Is it likely that people living in areas with older pipes will have constant problems with leaks? There is often an older population who might not be able to deal with these problems in such areas. There could be a significant problem in this regard as complaints are made. How would these complaints be dealt with? Will there be an appeals mechanism for those who fall into this category?
I would like to return to a point made the last day about the cost of the infrastructure being developed. Has all of the €44 million being spent on information technology systems been spent at this stage? Will the delegates describe on what exactly it is being spent? Is it being spent on hardware, software or licences? I am still trying to get my head around how such an amount of money could be spent in such a short period.
Mr. Paul McGowan:
I will address the Deputy's question about the difficulties that arise by virtue of the fact that this is a new utility. We have experience in the regulation of existing utilities such as Bord Gáis Networks and ESB Networks. We have gone through the process of price control and cost review on numerous occasions. The additional complexity in this regard arises from the fact that this is a new utility. We are going about this by looking at international experience. In the first instance, it involves benchmarking, or looking at what happened when new utilities were established in other jurisdictions. We examine how much that cost and determine whether the costs being incurred here are reasonable in that context. In addition, we are in the process of establishing a network of fellow water regulators around Europe that have gone through similar experiences. We are keen to have dialogue with other regulators to learn from their experiences and share our own. There is additional complexity, but I am satisfied that it is not insurmountable. We will be able to come up with a view on which costs are being efficiently incurred and, therefore, capable of being passed on in charges.
I hope that addresses the Deputy's questions about the establishment of the new association and how we satisfy ourselves with regard to costs. Perhaps my colleague, Ms Mannion, might handle the Deputy's question about who determines whether the level of capital is sufficient. I think it relates to the plan submitted.
I asked several questions. I have asked who determines whether the level of capital is sufficient. There is a great deal of money to be spent on an annual basis. Is the decision on what level of capital is sufficient made by Irish Water or the Commission for Energy Regulation? Is the ability of the end user to supply that capital, if it is to be derived from consumers, factored in?
Ms Cathy Mannion:
It is a mix of all of those things. Irish Water provides the Commission for Energy Regulation with an investment plan. We examine the costs set out in that plan to see what is reasonable and what is not. We are developing a memorandum of understanding on how best to work with the Environmental Protection Agency which is responsible for the quality of water. This is one of the areas we need to work our way through. The agency will state what projects it thinks should be built, just as we will. It is a question of finding a balance. A separate discussion is taking place about the level of Government subvention. In the interim period, investment in water infrastructure will be funded partly from the Government's subvention and partly from tariffs imposed on domestic and non-domestic consumers. We will sit down with the Department, the Environmental Protection Agency and Irish Water to see what we can do during the interim period - the next two years - with the money available. I am quite sure we will take account of the level of subvention that is realistically available and the ability of customers to pay their bills. We will all have to work together to see how best the constrained level of funds available can be used.
There could be significant variations in water quantity and quality, depending on where people live and how advanced the systems are. Is it possible that people with very deficient systems will be charged the same amount of money as those with better systems? How will that issue be dealt with?
Ms Cathy Mannion:
Many of these issues will be the subject of consultation. I am giving some initial thoughts. As I said, we will work with the Environmental Protection Agency to rank the most important things that need to be done to build the quality of the service. We will work our way down the list. During the consultation process we will look at the question of whether a customer in an area where a water notice has been issued and the water is not drinkable should have to pay the full cost of water supplied.
We cannot presume that is what the outcome of consultation will be, but, realistically, I expect them to pay somewhat less because the quality is not the same as elsewhere. We have to work closely with the EPA to determine the aspects of quality for which a customer should pay less.
Mr. John Tierney:
On the questions about Irish Water and the transition office, the position was explained the last day by the departmental officials. It is an arrangement between local government and the Department directly, as opposed to something that is governed by Irish Water. From our perspective, it was beneficial from the point of view of initial co-ordination, fact-facting and streamlinging the flow of information, but the breakdown of the figure would have to come from either the water services transition office or the Department of the Environment, Community and Local Government. The free allowance is a matter of Government policy. I invite Mr. Dempsey to respond on the issue of levies.
Mr. John Dempsey:
Deputy Catherine Murphy asked about the development levies. Local authorities have levied development charges for water service provision. To the extent that development charges have been collected by the local authorities they would be recorded in their accounts. At the point of asset transfer to Irish Water on 1 January, these charges moved to Irish Water and will have to be spent on water service provision in the local authority area in which they are collected. It will be around the middle of the year before we know the exact quantum because, first, the local authorities will have to finalise their year-end accounts to the end of 2013. We will then have to get into an agreed process between us to clarify and confirm the numbers. Essentially, that is what is happening on development charges. They have been levied for water service provision and will be spent on water service provision in the area in which they are levied.
On that point, part of the reason they have not been spent in recent years is that they have been placed on the balance sheet against the general Government deficit. Will that continue to be an issue in respect of Irish Water or will it have control over these funds?
Mr. John Barry:
I appreciate that €44 million is quite a sum. For that spend, in terms of IBM, we are getting a customer care and billing system that will have to have the capacity to deliver several million bills, a work and asset management system which, when we start to record data on the network, will be data hungry. By that I mean that when we start to make investment decisions, based on information coming back into our work and asset management system, it is vital that the system has the capacity to record that data and that we extract them to make sensible investment decisions. The system will handle an enormous amount of data on an annual basis. The third area is back office systems, audit financial systems. Obviously, we have to carry out procurement exercises and pay our suppliers. That is the third part of the plank.
We have delivered probably eight major stems in the past 12 months. If one compares what we have received for the €44 million with has happened in other jurisdictions where companies such as Thames Water invested £100 million in an asset management system alone, the relevancy of the cost involved comes into perspective. What do we get for the money? When companies such as IBM come, we sit down and define with them the business requirements and write business processes around these requirements. To date, we have probably written about 1,300 or 1,400 business processes. They then configure the systems which come out of the box, so to speak, and are standard, but we can fit them to suit our particular business requirements. We test them and, obviously, before we go live, they have to be working end to end. An enormous amount of work goes into this task. When we go live, there is an element of post-live support. We are in that mode with a large portion of our system which went live on 1 January. In setting up this utility we cannot achieve what we want to achieve without the systems being in place, including systems to manage information and the data flowing around them. For what we are getting, the €44 million compares well with what has been spent in other jurisdictions. We now have systems and processes in place that will enable it to be a high-performing utility into the future.
Mr. John Barry:
What we brought to this exercise was knowledge of what exactly we wanted to get out of this process. In terms of customer billing, work and asset management and all of the financial issues involved - the systems with which we are familiar - we have a key requirement and a programme such as this should define the scope very clearly and distinctly. One of the major drivers of cost overruns is scope creep. We would have started out to find exactly what we wanted, based on our experience and the PID document which was given to the bidders. It gave a very clear indication of scope to each of the bidders. When we engaged in these contracts, they would have been clearly aware of what we required and the timeline as to when we expected them to deliver.
Mr. Barry is saying it was never realistic, that Irish Water was going to be hooked onto Bord Gáis and that there would be a minimal level of investment required to establish the new utility. He is saying it was the knowledge of Bord Gáis that was of benefit rather than its systems.
Mr. John Barry:
I suggest that without the involvement of Bord Gáis the whole approach would have cost tens of millions of euro more because of the expertise we had brought to it. We brought more than systems. The policies being followed in terms of corporate governance, risk management and performance management were all cut and pasted from Bord Gáis into Irish Water. We brought a lot of valuable information, but we also brought the policies and procedures embedded in the Bord Gáis organisation and transferred them to Irish Water.
On a point of information, I know that the Chair was very fair to the Opposition at the last meeting, to the detriment of the Government. At meetings such as this it was my understanding that the order moved in turn from the Opposition to the Government in the early stages. That is what normally happens in other committees.
At this committee the system I inherited was that an Opposition speaker was always called first, followed by a Government speaker. This is taking up unnecessary time. The Deputy's points are well made and will be borne in mind when I ask him to conclude.
I thank both bodies for appearing before the committee and their presentations. There are a few issues from our previous deliberations that we might address. In the first instance, on page 20 of the documentation, Mr. Tierney says he put in place an information service for Oireachtas Members and council members to ensure their information requests are responded to in a timely matter and that he will be supplying details of this service to Oireachtas Members this week. Will this include details of the €185 million in set-up costs and the €500 million for water meters raised as a commercial loan from the National Pensions Reserve Fund? There is a contradictory statement emanating from members of the Government on what information can flow in this regard. Why can we not be told today what we will be told later this week? What is the reason for the delay? What is the arrangement that will be in place? Does Mr. Tierney wish to respond now?
Mr. John Tierney:
I can answer the question now. Just as we did on the last occasion, we will try to give the maximum amount of information on the establishment of Irish Water and of the business and metering. During the week we are going to circulate details of the email address to be used in order that we can respond to queries and, if necessary, replace the parliamentary question procedure by giving Members the information directly without having to go through the Department.
We will give it time to bed down to see if it proves more successful than was in place heretofore.
I refer to the water service transition office. Did the funding which was spent on the office come from the €185 million in set up costs for Irish Water or was it a departmental spend based on the figure the Minister gave us in October 2012 in the Vote for the Department?
He said the set up cost would be €10 million, but that turned out to be €16 million.
There were two establishment costs. There was an establishment cost of €10 million, which we were promised by the Department and there was €185 million that was drawn down from the National Pensions Reserve Fund that was used by Irish Water and approved by the Cabinet sub-committee.
Mr. John Tierney:
In regard to the drawdown from the National Pensions Reserve Fund, that would be used to cover two things, the establishment costs incurred to date plus the metering costs incurred to date. The cost I assumed the Deputy was referring to, relating to the establishment of Irish Water, was the cost we debated the last day we were here. It does not come from that figure.
Approximately 70 people worked in that transition body and also retained their work with local authorities. Some €3.5 million was paid to them, which would average €41,000 per person. Mr. Tierney can tell me if I am on the right track when I put this question to him, but can either he and Irish Water or the Department establish what specific work, over and above the work they did on a daily basis within the local authorities, was carried out by these people in order to amass that funding? If Mr. Tierney tells me it is the duty of the Department to answer that question and to provide the details I seek, that is fair enough.
Point three of the presentation relates to the delivery of water services that are not fit for purpose on a consistent basis and the fact that continuing to deliver in this way will only result in a further deterioration of water and wastewater services. Point four states the establishment of Irish Water as a national utility will secure and improve water services by bringing a systematic approach to the service and so forth. Specifically, Irish Water suggests that 34 local authorities managing €11 billion worth of assets does not deliver the required economies of scale at present. The lack of standardisation in how plants are operated and services delivered leads to a variable quality and added costs. Irish Water goes on to say that it will identify priority areas nationally that require focus and investment to solve problems. Does Mr. Tierney accept this is very similar to the sort of comment made in the establishment of the HSE? If so, is it not strange that in the coming weeks we will see the disbandment of the HSE, due to the fact it is not achieving the sort of savings it envisaged it would? Does Mr. Tierney wish to comment on that?
No problem. Mr. Tierney can note that one. On staffing levels, as Mr. Tierney knows, Irish Water has entered into a 12-year service level agreement with 34 local authorities and the staff of local authorities conducting work under these arrangements will remain local authority staff. The head count for 2014 for service level agreements is 4,320, but will Irish Water also employ an additional 520 staff? Irish Water and others have continued to state that they will achieve €2 billion in cost efficiencies by 2021. The ESRI report by Dr. FitzGerald estimated excessive staffing costs if staffing levels went beyond 1,700. However, I am not sure that 1,700 figure was crystallised. Dr. FitzGerald referred to Scotland and I understand the water authority in Scotland has 4,000 staff, not 1,700. What is Irish Water's position on these figures? Does he think a staff of 1,700 is sufficient or does he think we require 4,000 or 4,800 or for how long should this be the case? Has Irish Water carried out any assessment of natural wastage or the loss of staff over time and what the position will be by 2021? Is it correct that Irish Water staff will benefit from a bonus system similar to that in the parent body, Bord Gáis, and will be eligible for payments up to €7,000? Will bonus payment criteria and numbers be made available publicly over time?
My main query relates to the €2 billion efficiencies that Irish Water, the Taoiseach and the Minister have said will be achieved by 2021. What percentage of that €2 billion is made up of water charges? What will the savings be if staffing levels remain in place? In other words, the €2 billion savings has two elements, water charges and savings relating to staff. Has Irish Water calculated these or can it give us an estimation or indication of these savings?
I guess the issue of water pricing relates to the regulator. Unfortunately, I must refer to the set up cost of €185 million and the €82 million within that for consultancy costs. The Department says it dealt directly with Irish Water in regard to the submission it made to establish and agree those costs before making them available to Bord Gáis when it went about the process of setting up Irish Water. The Minister has explained that he would not have had access to the minute detail of those figures, although he said he passed them on to the regulator. Correct me if I am wrong, but is Mr. McGowan quoted directly in saying that on his initial review of the establishment costs last year, he was not aware of the amount involved in consultancy costs?
Mr. Paul McGowan:
I will answer that immediately. The submission we received showed us the costs at the various line item levels, such as customer billing, customer service, but was not split down into the level the Deputy describes. We carried out a high level initial review at that level of detail.
Mr. Paul McGowan:
No, given we carried out the review in a compressed timeframe and that it was a high level review, and given those caveats, we identified the costs appeared to be reasonable in terms of the level and could provide a benefit to the consumer. However, we had yet to carry out a full, detailed analysis, and that is what we are about to embark upon.
In hindsight, would the regulator prefer to have had the information, particularly regarding the level of consultancy fee costs and considering that many people feel that because of the reasons Bord Gáis was taken on board, much of those costs, which we have since learned about, might be available?
Is it only now that the regulator is going to analyse those costs? Therefore, it is only now that it will become apparent to taxpayers and customers who will be expected to pay water charges that they will have to foot the bill for the costs incurred, despite the fact the regulator might have been given notice of them, without the specific detail attached to that notice at the early stage.
Ms Cathy Mannion:
We have provision for up to 15 staff. Currently we have one manager, five analysts and one administrative support person working in the water division, in addition to, on a part-time basis, one commissioner, one director, one manager and one personal assistant. We have had some level of support from consultants in building up our expertise in this area. Gradually, over time, we will hire the additional resources and fully establish our water division.
Deputy Murphy commented that this was a new area the company is working in, despite the fact that it is a monopoly. Have many of the staff taken on had experience working in the water sector in the past?
Ms Cathy Mannion:
What we will do is use our expertise in the regulation of networks. We are competent in that area and we know well how to do that. To the extent that we need specific and detailed experience in respect of water, what we will do, like most efficient organisations, is hire in that expertise as we require it. If we had that resource in-house full-time it would be far more expensive than taking it on as we need it, which is usually for the five-year reviews.
I picked up on another point from Mr. McGowan's presentation. He said the regulator would receive submissions and that there was a window between April and June. By June the CER expects to publish what the costs are expected to be at the doors. Is that correct?
Mr. Paul McGowan:
There are several key dates. In April, we will publish our proposals – they will simply be proposals - around the structure of water charges, without identifying what the level might be. These relate to how an assessed charge might be structured, perhaps depending on different factors such as house type or occupancy levels. All of these things remain to be worked out. Where a meter is already installed we will determine how the water charge might be structured in that scenario. They are the options. Then, in June we will have costs based on the submission that we will have analysed from Uisce Éireann. Then both of those come together in August for a final decision on the structure and level of charges.
When will Irish Water make submissions to the CER outlining its costs, targets, plans of expenditure and so forth to allow the CER to digest the data and, ultimately, set a price for water? When will Irish Water make that submission to the CER?
I would have thought the CER might have got to that information before now, considering Mr. Tierney is talking about vague plans of 25 years and 40 years down the line, but that is for another day. Does the CER have any costs in respect of consultancy fees?
Ms Cathy Mannion:
No. In total for last year we billed the Department for €690,000. Of this, €234,000 was the direct cost of consultancy and the remainder of costs related to the cost of the staff I referred to earlier. In the sense that these staff were not working in gas and electricity and were now working in water, their costs were allocated to water. For next year, the total is €2.73 million with a maximum of €1 million on consultancy and the remainder for in-house staff who are now working in water.
I tabled a parliamentary question seeking data on consultancy fees incurred by the CER in recent years. Last year in the area of electricity the figure was €2.6 million, in the area of gas it was almost €1 million, in petroleum it was €1.5 million and in water it was €300,000.
Mr. John Tierney:
I do not believe there is any basis for making the analogy that Deputy Cowen made at the outset. In fact, the establishment of Irish Water is more analogous to what happened in the gas industry. During the early 1980s Bord Gáis Éireann brought together a collection of gas companies to form a high-performing utility model. Thirty years later we probably have the safest gas infrastructure in Europe and a model that delivers efficiencies year-on-year in the gas industry. That is why I believe the expertise of Bord Gáis has been so vital to the successful establishment of Irish Water.
Reference was made to efficiencies in respect of staffing levels. The direct capital and operational efficiencies that we referred to were €1.1 billion, but added to potential from income would have created savings to the Exchequer of €2 billion and we were clear about that-----
Mr. John Tierney:
An analysis was carried out on those figures. The assumption, as I read it, was that 20% could be taken out of costs over five years. If we apply that pro ratain respect of staffing, it does not bring us to a figure of 1,700 because it depends on which way we devise the model. If the model is being devised as I believe Professor FitzGerald set out, on the basis of 1,700 staff in the local authorities with another quantum of staff in an outsourced model, then one would have to take the total head count involved in delivering the same services as today. That would be a figure far greater than 1,700. We should bear in mind that there would still be 2,600 other staff left in the local authorities without the job they have today in water services. Therefore, technically, we would have much greater overall cost to the economy by dealing with simply one part of the equation in that fashion.
We produced figures around the initial experience in Britain which, over ten years, saw reductions of staffing in the order of 21.5%. We have referred to Scotland previously. What we should remember about Scotland is that the set-up there does not include the billing aspect within its staffing numbers. Scotland did not get the levels down as far as 1,700 directly in any such length of time.
I suppose the position is that many things will have an impact on staff numbers over time. The committee members will be well aware and would agree that the local government sector, probably more than any other sector within the public sector, has contributed to the reductions in respect of staffing and costs. I cannot remember the figure exactly but I gather that the sector accounted for 12% of the staff but almost 25% of the reductions. It is nothing new for local government to be dealing with these issues. If we are to analyse the service in terms of what is ultimately needed, let us remember that we are coming from a reduced number already as of 1 January 2014. We have 2,000 plants throughout the country. It will take analysis and investment but there will be situations whereby, as the committee has rightly pointed out, we will have natural attrition through retirements and so on.
There could well be situations where voluntary redundancy schemes will be introduced to manage how the situation will be dealt with in the future. It is not a question that in modelling any scenarios it is assumed there will be the very same number in 2021 or 2025 when the SLA 12-year period comes to an end.
On the question about the at-risk part of performance payment for the staff in Irish Water, we gave a very detailed response in answer to a parliamentary question. The Deputy asked what will be declared at the end of any particular year. We will publish both the total amount paid out under that heading plus the average payment.
On the question about the percentage made up by water charges, we will be making a submission based on expenditure and allowed revenue. I think I described to the Deputy previously that unlike, for instance, the gas industry where it is simply based upon the charge, we have a hybrid situation with subvention and charges. Therefore, the determinants are twofold and one has to know both in order to make up the total. I am not into the world of guessing.
I will try to be brief in my questions and I ask for brief answers so that other members can contribute. What will be the overall operational costs for Uisce Éireann in 2014? What is the figure for capital investment this year? These are two straight questions.
If I may cut to the chase. Irish Water will have roughly €200 million from non-domestic customers which is less than 60% of the overall and €490 million subvention from the Exchequer - I just want to clarify this - which came through from the local property tax and €240 million for capital works provided for in the budget. It will have roughly €125 million from water charges - if everyone pays - for quarter year because the billing will be for October to December. That comes to €1.055 billion. Does Mr. Tierney agree with those figures? A subvention of €490 million from the Exchequer; €240 million from the Exchequer for capital works; approximately €200 million from commercial water rates; €125 million from domestic water charges which will be collected in January 2015. Are these figures correct?
We will put a question mark on the €125 million for now. I have a question about the loan from the National Pensions Reserve Fund of €500 million and the €185 million in set-up costs. Is the €185 million on top of that or is it included in the €500 million?
That is my point; it is additional. It is a considerable sum of money when it is put all together. I refer to the repayment of that money to the National Pensions Reserve Fund. What is the timescale for the schedule of payments?
A large call centre has been established. Is the call centre part of Uisce Éireann operations or is it a subcontracted outfit? I am interested to know where it is located. Is it in Cork? We will find ourselves having to call it occasionally. Is the call centre contracted to an agency? What is the annual cost of the call centre?
Mr. John Tierney:
We announced the call centre last June. The call centre is located in Cork and operated by Abtran. It is part of the operational costs of Irish Water. As Mr. Dempsey points out, the cost ramps up on the basis that it was initially put in place for the metering programme. It comes in place this year to take-----
Mr. John Tierney:
I need to explain to the Deputy how it ramps up. I am glad to report that we are only getting 10% of the calls so we have been able to ramp up on a lesser basis on the metering. At the end of this year it begins to come fully in vogue for 2015 as we take on the domestic piece. We will get the exact figure for the Deputy.
There has been a substantial problem associated with the fitting of meters in the Dublin area where several hundred leaks have been caused during the fitting and the local authority is picking up the tab for repairs. We are concerned because we were told that these would be fitted professionally and there would be no leaks, that there would be minimum disturbance and problems. Meters are being fitted to stop leaks and to reduce the amount of water being used.
We now discover that there are hundreds of leaks and that someone must foot the bill in that regard. I estimate that if this continues during the entire metering programme, the total bill for repairs across the State will be between €18 million and €20 million.
Yes, I would appreciate it if I could continue without being heckled.
I understand the Department has already paid out in the region of €89,000. Who is ultimately responsible for paying for repairs? It was previously stated the contractors would be liable. Does that remain the case? Are the contractors liable?
Mr. Jerry Grant:
I am happy to report that the contractor is liable for the leaks he causes through his own negligence, which is a very small percentage of the total number of leaks. As the Deputy is aware, meters are being fitted to existing service pipes, some of which are in poor condition and many are quite old. When the contractors dig down into the ground, they often find that the connections to the main are corroded and already leaking. These leaks are reported to the local authorities which fix them. During 2013 the Department of the Environment, Community and Local Government provided funds for local authorities to cover the cost of this. In 2014 Irish Water will cover these costs.
Mr. Jerry Grant:
In 2013, before Irish Water officially came on board as the water services authority, the Department made provision for recovery of these costs to local authorities. In 2014 the local authority staff are obviously working for us under SLAs and we are meeting the cost of these repairs. These are leaks are in the system and we are happy to see them being repaired. The fact that they are being repaired gives rise to a greater level of water conservation.
The SLAs that have been signed with the local authorities will last for 12 years and, as I understand it, will be reviewed every two years. Will Uisce Éireann be in a position to terminate these contracts when they come up for review? How easy will it be to terminate a contract?
Mr. Jerry Grant:
As the Deputy stated, they will last for 12 years. There will be reviews after two years and seven years. The position on termination is set out in the actual contracts. The SLAs are about working together to achieve continuous improvement. An SLA would only be terminated in the event of there being a significant failure. A great deal of work was done in defining the circumstances in which terminations could be contemplated.
I hope they will not be terminated and I am not suggesting they should be. I am concerned, however, that local authorities are being reduced to the role of subcontractors or "subbies". Contracts can be terminated and if that happens, other agencies will have to be brought in. Does this mean that private contractors could be brought on board? If, for example, Kildare County Council did not do the business, would Irish Water bring in a private contractor in its place?
Irish Water is going to have responsibility for foul sewers, while local authorities will retain responsibility for storm sewers. Mr. Grant who is a former county manager will know what I am getting at in this instance. An issues arises in this regard in that the foul and storm sewers in many towns and cities are mixed. A problem which immediately arises in the context of works relates to circumstances where foul sewers run into storm sewers. Where a storm sewer runs into a foul sewer, a different problem arises. Has this matter been teased out with the local authorities? I do not know in how many towns problems such as those to which I refer would not arise. Many foul and storm sewers are combined, even in estates built less than 20 years ago. They remain combined, even under main streets that were redeveloped, and foul material from hotels and public houses continues to run into the storm drain system. Is Irish Water putting in place measures that will lead to the two systems being separated?
Mr. Jerry Grant:
We are very well aware of the reality of combined sewers in old towns, particularly town centres. Up to the 1970s, pretty much all sewers were combined. Any sewer that contains foul sewage will become our responsibility. Separate storm sewers will remain the responsibility of local authorities. There are many difficulties associated with combined sewers, both in the context of the load on treatment plants and pumping stations and in respect of the overflow to rivers and streams during periods of rainfall. These are creating compliance difficulties for us with the EPA. Part of our responsibility will be to consider how we can control this and, where possible, separate storm water. We will do this in conjunction with local authorities. As part of our capital investment programme, we will be seeking to fund the separation of storm water from place to place. Local authority staff deal with both storm sewers and combined sewers. We are covering the cost in the case of combined sewers.
Unfortunately, we will not know before 23 May what people are going to be charged for water. What penalties does the Commission for Energy Regulation envisage for non-payment of water charges? There may be individuals who will not pay, but there could be quite a number throughout the country who cannot pay. What will be the position on those who cannot pay? We have been informed that their supplies will be reduced. Does this mean that they will have access to perhaps one quarter or one tenth of their normal water supplies? What will be the percentage involved?
It is related to the level of supply that will be available to those who cannot pay. There is potential for ten gallons to come through the pipes into my house every hour. Will those who cannot pay only have access to one gallon every hour or perhaps three gallons?
Mr. Paul McGowan:
The details of how customers will be treated in circumstances where they cannot pay will be set out in the handbook we will publish. This, in turn, will have to be translated into codes of practice by Uisce Éireann. They will clearly set out the process the company would go through in a situation where somebody had difficulty in paying his or her bill. The position on non-payment would be very much the same as that which applies in the case of gas and electricity, namely, disconnection for non-domestic customers and restricted flow for domestic customers. This would be viewed very much as a last resort. We would be looking at a staged process designed to try to ensure the customer would be put in a certain position. In the case of gas and electricity, we have payment plans and so forth which can be put in place. Disconnection of electricity and gas is the equivalent of restricted flow in the case of water and we very much view both as a last resort. The details in this regard have yet to be set out, but they will be published for consultation as part of the overall consultation process on customer protection and the structure of water charges. We do not envisage at this point that there would be penalties for non-payment. Ms Mannion will answer the Deputy's question on that matter.
Ms Cathy Mannion:
What we will probably do is put incentives in place with Irish Water to try to maximise payments in the domestic and non-domestic markets. As Mr. McGowan said, there will be stringent rules in place with regard to flexibility and offering customers payment arrangements with which they will actually be able to cope.
As Mr. Paul McGowan said, as in the case of non-payment in respect of gas and electricity, it would be very much a last resort that we would contemplate disconnection.
It was said that the regulator did seven price controls over 14 years and that the operating costs in real terms have decreased in the energy sector. I cannot argue with that, and it probably has happened, but I know what has happened at the other end. I am using less energy in my home than I used 40 years ago but I am paying multiples of what I paid for it at that time, as is everybody in this room and outside this building. Is it the case that the regulator does not have the power to intervene in this respect? What type of restrictions apply to the regulator? I am puzzled about this. How does the regulator explain the huge gap that has opened up between the operational costs - I do not doubt, as was said, the impact if they have been reduced in real terms - and increased efficiencies there and, on the other hand, the massive increase in costs across the energy sector? Our energy bills have skyrocketed in the past 14 years. What has the regulator done to regulate that sector and rein in those costs? Has it not had the power to do that, or what is the position? I am concerned that, with regard to water charges, we would start off with an amount for the charge and within a few years the charge could be multiples of that amount.
Mr. Paul McGowan:
I will address those points on two fronts and perhaps Mr. Garrett Blayney might follow up. In regard to gas and electricity, it is probably worth noting that when we started regulating both of those industries, particularly electricity, they had suffered from decades of under-investment. During the past decade or more there was massive investment in the electricity infrastructure in order to bring it up to the standard that is required in a modern economy. That has been a driver for cost increases, undoubtedly, in the energy area. The second point is that, unlike water, the price of energy is very much driven by the price of fuel, predominantly gas, in international markets. That is completely outside the control of the State or the regulator. We are price takers. We have to accept the international wholesale price for gas, for example, which in the case of Ireland is pretty much set in Great Britain at what is called the national balancing point, which is its wholesale market. Those costs have been rising over the years. We have investigated and looked at the costs of delivering both the capital investment and operating expenditure of Bord Gáis and the ESB and the backdrop to that has been rising fuel prices and a massive investment programme in order to bring both electricity and gas networks up to international standards and, for example, to ensure that the amount of minutes lost by customers who are attached to the electricity network has decreased since we took over as regulator. That probably reflects the level of investment that was necessary to improve the overall system.
I welcome our guests. To follow on from the regulator's point, water services in Ireland have suffered from decades of under-investment. The statistics are frightening. A total of 40% of all treated water is being lost through leaks. Another statistic that is even more worrying is that 25% of water treatment plants have failed to meet international standards. We have an enormous responsibility to make sure that everything is transparent and crystal clear in how we do this and in the steps being taken by this committee, Irish Water and the regulator. To be clear on the timeline involved, the first factor is a price control submission, and this is a question for Irish Water. That cannot be made to the regulator until the Cabinet makes a decision on the free water allowance and the subvention. Is there any other controlling factor that may delay the price control submission to the regulator? I will await a response to that question and then ask my next question rather than get a block response to all my questions.
Mr. John Dempsey:
Essentially, the price control submission would cover the three-year period from 2014 to 2016, inclusive. It will lay out our strategy to deliver the Government's objectives of providing a safe, clean and affordable water service to consumers. We will outline our strategy, which is based on the utility model, and we will go into quite a bit of detail on the individual elements of the utility model. In that regard, if we consider other economies that have gone down this road, there is probably a well established model there. The regulator mentioned its interaction with other regulators and we would be familiar with that model. We would give the detail that the regulator will need to form an opinion on our costs and it will be based on expenditure, so we will submit our operating expenditure and our capital expenditure proposals.
The next step will be the tariff structure and connection charges. Will that include the price per thousand litres and the cost of the connection charge to the business or the customer, which is to be made in March?
Ms Cathy Mannion:
Perhaps we should take this question, as we know what we expect to see in it, and hopefully that is what they will send in to us. What we expect is submissions on what the tariff structure would be both for a metered supply and an unmetered supply and both for domestic customers and non-domestic customers. There may be more detail on domestic customers because there is a lot more work we need to do on non-domestic customers, so we might do more work on that next year. It has nothing to do with the price level. As Mr. Paul McGowan said, we will issue a consultation paper on the tariff structures in April.
Quite a number of customers will have a non-metered supply. A large number of customers would be connected to the mains water supply but would not have an outfall to a treatment plant; they would have a septic tank or whatever. Would the regulator expect there to be a difference in the charging level because the costing there would be double? Would there be two costings within that?
Ms Cathy Mannion:
I would expect proposals on what the standing charge might look like, but not so much in terms of what the level would be, because we are not talking about costs at that stage. It is more, for example, the relative size of the standing charge compared to the variable charge. I would expect some information from Irish Water on that basis. We will look at that and then when we start reviewing the costs we will feed in the cost figures into those standing charges and variable charges to get a good feel for what an average bill would be for a family or for an individual person in a house.
Irish Water is often compared to Scottish Water. In regard to standing charges, in the UK they use a standing charge that is related to one's rates. The regulator would not envisage that the standing charge would be related to property tax in Ireland.
Ms Cathy Mannion:
Obviously, we are looking to the example of what happens in other countries and the benefits and disadvantages of different approaches, but what we want to do is to get the one that best suits the Irish customer. I see no automatic link between the valuation of houses and standing charges.
Mr. Paul McGowan:
We will get the submission on costs at the end of February. We have to analyse that and determine whether we believe they are reasonable, etc. When we have done that analysis we intend to publish both our analysis and the submission to give people a full picture. That would be the standard process we would go through. We do not normally take submissions and immediately publish them because it does not have the value added in terms of the view as to whether those costs were efficiently incurred.
There has been a huge focus on cost per litre but I would imagine there is much more involved in the regulation of Irish Water than just cost. In terms of what happens across the Irish Sea, targets are set. Will Irish Water set targets for leakage, for example? We are doing a combined drain, and therefore targets are set for sewer flooding. In the wastewater treatment plants targets are set for capacity and odour abatement. What other targets and monitoring elements will Irish Water be involved in with regard to regulating Irish Water?
Mr. Paul McGowan:
We will be regulating Irish Water in terms of the standards it achieves in the widest sense. In regard to quality, for example, we would be in discussion with bodies such as the Environmental Protection Agency, EPA, to determine the key issues and therefore the key improvements that need to be made on a national basis to meet the requirements of, say, the European directives on wastewater treatment and so forth. Typically, on any price control, in addition to determining the overall costs we would ask what that is delivering and what are the targets that have to be achieved in terms of quality, output etc. That is typical of the process we would go through. It is probably worth bearing in mind that we are doing an interim control for a period of two years before we then step into a full five-year control period. Those two years will allow us gather even more information to ensure that full five-year control is fully defined and detailed in terms of the targets we set for Irish Water. Separate to that, we may also consider the standards we expect it to achieve in terms of customer service, complaint handling etc. All of that is typical of what the regulator will consider. Once we have set those, we then enter into what we call a monitoring phase, which is reviewing through performance reporting or whatever in terms of what is being achieved on a month-by-month, quarter-by-quarter or annual basis, depending on what is the appropriate reporting cycle.
Mr. Paul McGowan:
We have not defined what all of these targets and standards will be at this point, but we will be setting standards. Just because we have an interim control period does not mean we would not also set standards during that interim control period. It is just that we will have a two-year control period and then a full five-year control period.
This question is for Mr. Tierney. I have asked parliamentary questions previously to seek some clarity on the bonus structure. I take his point of clarification about cases in which there is no increment payment to staff, etc. However, a reply to a parliamentary question indicated that the bonus structure operates somewhere between 3% and 14%. What is the structure of the bonus repayment? Do the different percentages kick in according to the different salaries? Would someone on €20,000 be on the lower 3% bonus and somebody on €100,000 be on 14%? What are the structures for the bonuses?
I raised the issue of recruitment yesterday. A number of positions were advertised in Irish Water. Some Bord Gáis employees applied for those, got them and transferred into those positions, but at a higher salary than that at which the jobs were initially advertised. Did that happen, and if it did, how many people were involved?
Mr. John Barry:
I cannot say definitively that they were all replaced. We have been trying to downsize, so some of them may have been replaced, but that would have been by open competition. It depends on the requirements. Sometimes people internally might have got promoted and they would be replaced at a lower level. There is no one set rule for-----
Mr. Barry might come back to me on that, because my concern is that Bord Gáis used it as an opportunity to downsize its own costs and move them on to Irish Water. I would like some reassurance that this did not happen, and I would like to see the costs and the analysis in that regard. Could Mr. Barry provide that to me?
I accept that. The example given to me was that the job was advertised at approximately €50,000. A Bord Gáis staff member applied for that job and transferred into it at a salary of approximately €70,000. Irish Water might have had many more applications for that position if it had been advertised at €70,000 rather than €50,000. I ask the regulator to examine that closely because I would not like to see a cost transfer from Bord Gáis to Irish Water, which the customer eventually will have to pick up. If the job is advertised at a salary of €50,000 and somebody applies for it and gets it, the job should be filled at that salary rather than what may have happened in the example I have given. However, I will await the further clarification on it but I ask the regulator to examine that closely.
Mr. Tierney is talking about the bonuses.
I stated the more one earned, the higher the percentage of one's bonus. I accept Mr. Tierney's point. I thought he had misunderstood me, that the jobs were advertised at a rate of €50,000 but were filled at €70,000. My point is that many more people would have applied had the jobs been advertised at €70,000.
I also ask Bord Gáis to revert to the committee separately and provide me with the details of how these positions were backfilled and the salary rates.
I will conclude with a brief question on something that happens a great deal in urban areas where there is a single feed to two or three houses which, therefore, cannot be metered. Another point is that in Dublin, Cork, Galway and Limerick, in particular, apartment dwellers are used to paying their utility bills individually. However, my understanding is that the proposal from Irish Water is to have a single levy and that it will not be possible to meter apartments. Can this issue be dealt with and, if so, can a timeframe be given for how this might happen?
Mr. Jerry Grant:
On the first category, it is a common feature of cities, in particular, that residential properties dating from a certain period have a common backyard service. These services very often have lead pipes that often are in poor condition. A fair amount of work has been done in starting to remedy such services. It is complicated and expensive work because one must put a pipe in the front and mould services to the back of the houses. Certainly over a relatively short time - it probably will take ten years - we hope to eliminate all such common services through a programme of work. As I stated, this will take out the issues of lead and leakages and is improving the service and in so doing makes such properties available for metering purposes. Clearly, they are not amenable to metering at present.
In respect of apartments and other multi-use properties, Irish Water has carried out some pilot work on the potential for the metering of apartments. It is a highly complicated task because buildings of different type and from different ages have all kinds of plumbing systems. For example, some apartment buildings have approximately three separate feeds to different parts of the system in individual apartments. A percentage of multi-occupation buildings have individual stop cocks at the front and can be metered. For the balance of such properties and beyond phase 1 of the metering process, we are looking at the options. It will be a matter of being able to fund and deliver the programme over time. Certainly, however, it is beyond the scope of phase 1.
I thank the delegates for the level of information they are providing for the joint committee. It is very helpful in the public discourse on the establishment of this national utility. My first question is to the Chairman. While Mr. Tierney made an opening statement, he also provided a more comprehensive statement for the joint committee. In the interests of public information, is it possible to have it taken as read?
It will go up on the joint committee's website this afternoon. It is part of the working procedure to tell delegates that any documentation they provide will go up on the committee's website after a meeting.
That is fine because the aforementioned statement contains a lot of information that sets out details of the system that has been inherited, as well as the objectives of Irish Water. It is important, from a public information perspective, that this be made clear and communicated. Consequently, I welcome it. Ultimately, this is about the customer and providing a quality and efficient service. That is what Irish Water is being established to do and it is clear from Mr. Tierney's opening statement that were Irish Water not established and were the planned level of investment not to be made, we would be in a far worse position, with the assets degrading further and further leakages. I understand more than €1.2 billion per annum is being spent, of which 40% is going into the ground, which is completely unsustainable. Members are aware that this is the standard of network with which Irish Water must deal. Will Mr. Tierney indicate what is the standard of records or the actual asset data Irish Water has inherited from the local authorities? Essentially, is Irish Water starting from a zero point to establish a new asset management system? As Mr. Tierney has noted, the underground pipe network extends to more than 50,000 km and there are 10,000 overground facilities, of which 2,000 are treatment systems. It will be a huge challenge to establish a starting point and then understand maintenance, replacement plans and so on. Is this an entirely new body of work that Irish Water has been obliged to undertake?
Mr. Jerry Grant:
Mr. Barry spoke about the investment in and the work on the asset management system. The value of that system is that it brings us from a position where there was very little visibility of asset records and performance to one where across the 50,000 km of pipes, the 10,000 above-ground assets and, in particular, the more than 2,000 treatment plants we will have both data on what they are, their size and capacities and their condition. Over a couple of years, as we roll out workflow management, we will be able to attribute the operational expenditure, maintenance activity and repair activity to these specific assets. The starting point is that there is a reasonably good, although somewhat out-of-date, geographic information system, GIS, for water mains which was developed mostly in the past 12 or 15 years. It is not too bad in terms of where the pipes are and the basic information available on materials. It is not particularly good, however, on things like burst history, condition and fragility of the pipe. It certainly does not pinpoint leakages.
In terms of sewers, we are not in such a good place. There is a certain amount of information available on the GIS and mapping which we have started to pull together. By the end of 2014, we expect to have all existing data on the layout and whatever information is available on all underground assets. However, there will be big gaps, particularly on the sewerage side.
In terms of treatment plants, there is a lot of publicly available information that we have collected which arises from the Environmental Protection Agency's reporting on drinking water quality and which references all plants, as well as schemes and water quality information. Moreover, wastewater plants have been the subject of licence applications which provide a lot of detail on the plants and in general on where they are short in being able to meet either capacity or compliance standards.
Consequently, with a little maturity and additional surveys and work, we will end up with a national database of all the assets. We will have standard policies and specifications and standards for all equipment across these assets. We will have the capacity and the customer service that we can deliver throughout the system. From all of this, we will be able to calculate the risk of not being able to comply with service needs. Fundamentally, that is what will drive investment. It will be tailored at a target risk of compliance or service provision that should be consistent across all customers. Consequently, it should not matter whether one lives in a city or a rural area. If the system is working well and one is investing properly and targeting capital maintenance, in particular, one will have an equivalent result and over time bring that standard up to where it needs to be.
Perhaps one of the biggest gaps in the water services area has been the lack of planned proactive investment in maintenance. This is part of the reason we end up with assets in some places that are not fit for purpose. Essentially - this is particularly true of the high growth period from approximately 1990 - all investment had to be in two areas. The first was chasing capacity because we needed additional capacity, while the second was dealing with compliance with European standards. As a result, almost nothing went back into the older assets which were deteriorating behind our backs.
This is the basic model against which one plans the work one seeks to do. One can then introduce measures such as spending to save, for example. There is considerable potential for us to reduce operating costs by putting in new equipment to reduce energy costs, chemical usage or sludge production, as well as repairs. One key outcome in any 12 month period should be considering where one is spending one's money on repair and maintenance work and ascertaining where one could replace a particular part of the asset base. Even in respect of leakages, for example, a joined-up approach that involved more intensive find and fix measures in respect of items such as pressure management to reduce stress on the system would indicate to us - we will be mapping all of this activity - where we needed to go to replace pipes that would produce the biggest yield in reducing water losses. This has allowed me to explain how the investment Mr. Barry described effectively will underpin the entire approach to operation and, in particular, maintenance of the asset base across the sector.
To follow on from that reply, my understanding is we have inherited a completelyad hocsystem that has poor data records and in which there is considerable inconsistency across the various networks, despite the fact that the local authorities were doing their best to keep the networks going.
This asset management system is critical to the establishment of the utility and to the future planning of investment in the networks, in terms of sustainability, life cycle, maintenance, etc. That is part of the considerable controversy and criticism about Irish Water on its establishment. The agency took a lot of flak for the establishment of something that is critical to the infrastructure. How much was spent on establishing that asset management system?
Mention was made of an estimated €80 million in savings because of the Government decision to go down the route of engaging Bord Gáis and utilising its existing expertise, systems, protocols and understanding. How was that achieved? Could Mr. Barry give the committee a broad outline of where those savings were made?
Mr. John Barry:
When we put together the budget for delivering Irish Water, it was €150 million plus contingency of €30 million. At the time, we took the view it was an initial budget but it is still proving to be a valid budget. We provided for a contingency of 20% within the budget. With the involvement of Bord Gáis, the risks and the timeframe in which we were set to do it, we reckoned 20% was sensible.
When we looked at it again, we decided that as it was coming up from a greenfield site, one should add at a minimum 15% to that. That equates to approximately €29 million of the €70 million or €80 million. The other lump of money comes from savings we got on software licences. By using our existing systems, we were able to get good value for money in negotiating software licences with the various players in the market.
The sum of €70 million or €80 million alone is completely understating it. As I mentioned earlier, without Bord Gáis's involvement, I would argue that this project would have cost tens, if not hundreds, of millions more had it not been because of the control and project management we brought to what is a unique achievement. To the best of my knowledge, what has happened here on two fronts in the past 12 or 18 months has never been done anywhere previously. First, we are delivering 27,000 metres a month, which has never been done anywhere in the world. At the committee in the past month, we confirmed we had consulted Scottish Water and Thames Water. When we said to those bodies that our target was 27,000 metres a month, they said we could not do it. However, we are doing it. Second, from a standing start with a letter from Government asking us to do it in 18 months, we have created a national utility with systems, processes and staff. I would argue that has never been achieved anywhere. The utility is now up and running. We have met all the milestones that have been set for us. We are on time and on budget.
I thank Mr. Barry. Other Deputies mentioned unusual situations, such as the networks at the back of houses. There is quite a lot of that. I come from Waterford where huge sections of the city have a lead network at the back of houses. There are numerous estates that have private water supplies but use the public sewers. Will all that be part of the consultation or how will Irish Water capture those unusual situations, be fair to those customers and keep the service going?
For example, where an estate has a private well and its residents maintain and pay for that well to keep the water service going but use the public sewer system, how will such a scenario be captured? Perhaps that is a question for the Commission on Energy Regulation.
Mr. Paul McGowan:
I would be happy to address that. We will be looking at charging in two distinct areas: the provision of water and the provision of wastewater services. We have identified there are customers who take both services or one or other of them. We will be devising a charging system which will deal with those four or five different scenarios.
That leads to another couple of questions I have for the CER. Like other utilities that operate customer charters dealing with standards of supply, in the case of water, one is looking at water quality - there was mention of the Environmental Protection Agency - and water pressure. Will the CER require Irish Water to have a customer charter to reassure customers that it must maintain an acceptable standard of service, and if that service cannot be achieved, will a penalty of some sort apply as is the case in other utilities? If the pressure or quality is not adequate, surely the customer should have recompense to a charter of some sort.
Ms Cathy Mannion:
There will be incentives for Irish Water to achieve certain standards. In addition, as with energy, there will be certain payments to consumers for non-performance. On the measures against which we will decide whether to pay consumers, we will have to consult and have further discussions with the EPA. Deputy Coffey mentioned water pressure. I do not know whether water pressure is one of those issues. That will all come out in our consultation in the coming months. I am not saying it will not be. I am only saying I am not sure either way at this point.
Ms Cathy Mannion:
We will expect Irish Water to forward what it thinks is a reasonable suite of measures. We will put this out to public consultation and all will have every opportunity to feed into that process. We are happy to come back here at that time to take the committee through the papers, if it so wishes, and take on its comments.
I would appreciate it. My last question is also to the CER. When one compares other utilities, Ireland is regional by nature. There would be concerns that in future investment plans, Irish Water would cherry-pick the urban areas. Customers and water users will all pay no matter where they live. My concern is that while there are probably well-deserved priorities for larger urban areas, rural or regional areas might not receive the investment they require due to their more sparse populations. How can Irish Water reassure customers in the regions that they will receive the service and investment they require, similar to the larger urban areas?
Mr. Jerry Grant:
This is a big topic. First, we put in place the resources to deal with new connections generally. There is a team in place which is picking up on all planning referrals since 1 January in order that we are aware of planning pressures and planning applications as they arise, particularly any of those that are significant in terms of water-using activity. Through that team, we will be referred to by local authorities in terms of local development plans, regional plans, etc. When we come to make our own plans, we will take account of both regional plans and local development plans in terms of the expectation for development. In relation to the public water supply systems, our hope is to be able to keep a basic headroom in place in order that we can meet development on an ongoing basis, based on understanding capacity, availability and headroom.
The difficulties arise in smaller rural settlements which are not connected to the public system. In that context, it can be costly. Clearly, it could be beyond the scope of the public water customer to pay for the capital investment in those situations. That has been dealt with, as Deputy Coffey will be aware, through the rural water programme. The rural water programme continues to be important in terms of providing local water supplies which are beyond the scope, at least in the medium term, of the public water system.
Am I correct in assuming that Irish Water will make presentations on any investment plan, whether for new infrastructure or refurbishment of infrastructure, to the CER and the commission will analyse that, ensure it constitutes value for money and approve it before proceeding?
I welcome the witnesses and thank them for their presentation and information. Irish Water inherited the assets and liabilities of local authorities, including water and sewerage infrastructure, on 1 January. With regard to projects under the current water services investment programmes approved by local authorities and the Department, in respect of which the Department has committed to making progress and to making funding available, can Mr. Tierney confirm they will be completed and continue to be prioritised as they were prioritised by the Department? How do they feature in Irish Water's capital development programme, the two year programme that the agency is undertaking? How will new projects be selected? To what extent do local authority members set the priorities?
Mr. Jerry Grant:
With regard to the ongoing investment programme, the transfer of live contracts from the local authorities is happening. These are all to continue. We are in the business of processing through to contract a significant number of projects to which the Minister committed funding and in respect of which contracts were signed or letters of intent to award contracts were issued prior to the end of the year. This is to allow them to proceed. We are not second-guessing them; they are all proceeding. This means a very significant amount of the funding available to us for the next two years, in particular, is committed to those projects.
The rest of the water services programme represents approximately €4 billion to €5 billion in potential projects, some of which were in the early stages of planning and others of which were at later stages. We are reviewing all those against the criteria we have set out for the evaluation of projects. We are determining whether it is possible to bring forward lower cost schemes in the shorter term that might allow us to defer certain projects. Quite clearly, we will not be in a position to fund work worth €5 billion or €6 billion in the immediate future. However, we must make a big impact on the non-compliance issues associated with drinking water and wastewater. To do so, we must come forward with asset improvement schemes that result in the greatest benefit for the money available.
Projects with contractual commitments are going ahead. Those without contractual commitments are under review by us. We take submissions, particularly from the capital offices of local authorities, which are working with us and feeding in their assessments of what is needed in their areas. We cannot afford everything and, therefore, we must make choices on priorities and use minor capital improvements in substitution for big projects where it will buy us some time and deliver a service in the short term.
Basically, Irish Water is to reassess priorities associated with the water services investment programmes of local authorities that have not been committed to contractually or in respect of which a letter of intent has not been issued. Therefore, the priorities could be turned on their head. Irish Water is going to take a different approach.
Mr. Jerry Grant:
Each local authority has key priorities of which we are very cognisant. The Deputy is absolutely correct that we must determine where the greatest risks and pressures lie. Drinking water quality is our top priority. Drinking water capacity comes next, as does wastewater compliance. We would like to be able to spend money on energy reduction and capital maintenance that will keep existing assets working better. We desperately need to spend money on automation and control in order that we can get better performance from existing assets. We have a range of priorities in which we want to invest. The key criterion concerns what will deliver the greatest impact in the short term.
My understanding is that Irish Water sets its priorities after reassessment, and that these are approved by the CER. The CER will approve Irish Water's priorities if they meet the criteria after it consults the Environmental Protection Agency.
Mr. Paul McGowan:
Yes. We will receive a submission that will include details on the levels of capital and operating expenditure. Ultimately, we must decide whether to approve it. There will be some projects in regard to which we will not get into detail. With major items of capital expenditure, we will carry out detailed analyses. There will be items of small capital expenditure that will not be analysed individually by the CER. This is typical of how we regulate the gas and electricity networks.
On the new approach, be it associated with the upgrade of an existing wastewater treatment plant or the provision of a new one, the CER will be taking a more short-term view than the local authorities did. The local authorities would have planned to have design capacity for a period of 15 to 20 years. I understand from my local authority in Mayo that the delegates are considering a period of five to six years. Is this the case throughout the country or does it pertain more to rural areas where there is an effort to gauge population growth? If capacity is reached after five or six years, in respect of wastewater treatment or otherwise, there will be a need to plan again and reconsider whether to increase capacity. More projects will be entering the system again if the approach is uniform throughout the country. Is that correct?
Ms Cathy Mannion:
No. Let me give an example from the electricity and gas industries because we have regulated these for a long period. There may be slight differences with the water industry. We take a very long-term view. When we are examining capital costs, we look ahead only five years, but this is part of a much longer planning process. With regard to network development, while Bord Gáis and ESB Networks give us a five year view, they constantly update it to account for the next five years. There is not a series of disjointed five year plans but a continuous plan. The companies are always re-evaluating their plans and they come back to us with the next five year sections of the overall plans.
One does not normally seek to upgrade a wastewater treatment plant for 15 to 20 years. My local authority has been informed that provision is being made by Irish Water for upgrades in five to six years. If the plant reaches capacity at that point, there will be a need for another phase of planning to expand the system. That is different.
Mr. Jerry Grant:
We are happy to deal with that. The practice associated with the current model has been traditional, probably because capital became available relatively regularly to design schemes covering a very long period. It was difficult to get hold of it. A 20 year design–build–operate model is being used because the general practice was to design a plant that would operate for a long period on the basis that one might not get a chance to invest again. That does not necessarily result in the best value for money, nor does it necessarily result in the lowest operating costs in the system. As has been explained by the CER, we have a long-term view that maps out a growth and developmental scenario. Thus, we have plans in place. We are continuing with our long-term planning so we will be aware of how we will meet demand in five, ten or 15 years. We are ensuring we are investing across the board in those plants and assets in which it is necessary to invest to secure customer service over the next five or six years. That model does not require one to plan now for 20 years' time because one knows one can return to the matter again in the event that demand will necessitate it in five, six or seven years. Obviously, all these projects are subject to a statutory process and planning, but the important point is to get the best result for the customer at the lowest price. The objective is to do so consistently across the customer base rather than one having to depend on one's being lucky enough to be in an area with a large scheme that might have been put into effect in the past three years.
Mr. Garrett Blaney:
We are keen for the company to consider conservation measures.
These capital investments are expensive and impose extra costs on consumers. We want to ensure the company has looked at all of the options, particularly conservation measures - even if it has deferred all or some of these capital investments - and that there is a significant benefit from a consumer point of view.
My colleague mentioned it, but I also want to refer to the concern about the delivery of water services infrastructure in rural areas. As there are fewer houses and businesses, it will cost more per unit to deliver a sewage treatment plant in a village. During the years many smaller towns and villages failed to come up with their polluter pays contribution because the local authority did not have the money when that system was introduced. They are undeveloped, so to speak; therefore, it makes the case for doing something about the current position. In my area there are 30 applications to the EPA for discharge licences, but only 15 have been issued. The other 15 have been pending for quite some time because works are required. That gives weight to the idea that we need an organisation such as Uisce Éireann to fix things. However, I am unclear on at what point it will state a sewage treatment plant in a certain area is not commercially viable, will not provide a return on investment and that it is over to the Department. I understand group water schemes come under the heading of rural water, but where will Uisce Éireann draw the line in the case of villages?
I am familiar with some areas which need upgraded wastewater treatment plants but which are in SACs or NHAs. Will these areas be given equal priority? Parts of rural Ireland are heavily designated environmentally. Shellfish are designated off some coastlines where the local authority is responsible for water quality. If there is any diminution in that regard, they will be prosecuted. Will this matter be given priority? I am not just talking about drinking water.
I also have some questions on pricing.
Mr. Jerry Grant:
Our responsibility covers the entire public water system, in both large and small areas, urban and rural areas. Scotland has been mentioned, but it has approximately 254 wastewater schemes, while we have well over 1,000. On the water supply side of things, the position is similar. Part of the cost challenge is the fact that we have such a dispersed population and so many smaller schemes. The objective of Irish Water is to apply, as near as we can, consistency of approach and standards for customers, as well as targeting investment on the basis of need to meet service standards. Many of the smaller schemes would benefit from an approach Irish Water favours, to have frameworks of contractors that can deliver standard unit solutions for small communities, in respect of which there is good potential. One could deliver ten, 15 or 20 similar typical plants across communities of an appropriate size, while getting good value for money and achieving savings. We have considerable ideas in that regard. Equally, we must examine sustainable solutions concerning reed-bed technology. We need to consider low operating costs and low energy solutions in rural areas for wastewater systems.
As regards pricing proposals, I know that there will be public consultation. Commercial premises are charged for water. Will it be something similar in the future or will that model change? Will it be uniform across businesses and households? It is proposed that households will have a free allocation of water after which they will start to pay.
Could existing wastewater treatment plants, not at capacity, benefit from extensions being built? I am thinking of the number of septic tanks on the outskirts of towns where the only sensible option is to link them with a mains treatment system. Could a scheme be established across the board to include such households? People are anxious to do something about their septic tanks. I can see the benefit in having of such a scheme.
How will Uisce Éireann's operations affect public private partnership, design-build-operate or DBO schemes? How will the current arrangements be affected? I presume they will not be affected owing to contractual arrangements, but how does Uisce Éireann plan to enter into public private partnerships in the future? As many such contracts operate on a 15 to 20 year basis, will Uisce Éireann consider shorter term contracts? What are the company's plans in that regard?
Mr. Jerry Grant:
The current model that has been favoured for some time is the 20 year design-build-operate model. It had considerable merit in combining the design and technology being offered, with the responsibility to operate it. Our view is that a 20 year period is probably too long. We would like to see break clauses more frequently because there are issues of flexibility and being able to deal with change during that 20 year period. Twenty years is a long time to plan for and build into a contract arrangement. However, the contracts have worked quite well.
We have no particular responsibility for septic tanks and sludge. It may be that we can provide a service to deal with the treatment of septic sludge transported to some of our sites where we have the capacity to deal with it. That is a service we could probably offer.
I thank the delegates for attending. They have been honest, open and not hidden behind the bushes in providing their answers, for which I thank them. I notice that members of the press leave when members on the Government side give their answers and are not always here to hear members on the Opposition side. I will give them the benefit of the doubt and presume they are looking at the proceedings on the monitor. Usually, the questions that bring out the good side are asked by members of the Government parties.
I was just about to thank the one member of the press who had stayed for the duration of the meeting. However, that is an aside because what we want to know is the truth of what is happening in Irish Water, including the cost of delivery, which is important.
Mr. Grant referred to new and innovative measures for the provision of utilities, including reed-bed technology.
We do not need Deputies to answer questions. We have the delegates in front of us. I will not be long. I will ask all of my questions together because they are short.
Reed-bed technology is on the agenda, with conservation and recycling. Does Mr. Grant make policy to introduce reed-bed technology for water treatment plants, or does it have to come from on high?
The paper made a comparison in the delivery of upgrading costs between Thames Water and Uisce Éireann. Thames Water spent €150,000 on the one system while Uisce Éireann did eight systems for the same amount. I would like this information in written form because it is valuable. If Uisce Éireann can do something for one eighth of what it costs Thames Water, it should be getting a clap on the back rather than a kick in the backside.
The submission states that Bord Gáis Energy capabilities and systems saved €87 million to date on this project. Will the delegation give me a detailed written explanation of where that €87 million was saved?
The water framework directive stipulates that the user pays for the cost of water provision, an onus often directed at the Government. In Ireland, we essentially do not have a choice about water charges, as a member state must abide by EU directives. If it did not, it would be fined. If this happened, would it be Uisce Éireann or the Government that paid these fines?
Commercial water charges vary drastically across the 34 local authorities, from €175 in Kildare to €375 in Wicklow, the dearest. Will these charges be streamlined by Irish Water? Will they be averaged? A domestic allowance of 225 m3is available where the water supply is used jointly for domestic and commercial use, but local authorities interpret it differently. I presume this will be streamlined too.
If a boil-water notice is in place, will the users affected not be charged? Will that be the policy, or is it yet to be decided? When smart meters come on stream, will the ones put in place now be able to communicate with them and not have to be replaced? I could not find any information on the qualifications required for meter installers and site supervisors. Are there any recommended training courses for builders who may be interested in such a job and want to improve their skills?
When does the company expect the codes of practice to be available? The submission stated that 80% to 85% of costs incurred to date are reasonable. The delegation stated that the cost-benefit exercise would be completed at a later date. When will it be completed? Will the company be able to give the committee details of the exercise to confirm they were reasonable costs?
Has Bord Gáis Energy calculated what it has saved by having the staff transferred to Uisce Éireann? It is agreed that the Irish name of the company, Uisce Éireann, will be used rather than the English form, Irish Water. However, I note that in the company’s submission today the English form is used throughout, when even the Commission for Energy Regulation used the correct form. As well as that, I note the e-mail address we received from the company secretary of Irish Water, Liam O'Riordan, uses the bge.iedomain. Why is Uisce Éireann not used? It may not seem important as people do not drink water in Irish or English. However, the Irish form is used in the legislation and it is important for the Irish language too.
Mr. John Tierney:
I take the Senator’s last point. While it would not make sense to change the water.iedomain, all of our stationery and e-mail uses Uisce Éireann first. The reason the bge.iee-mail was used in correspondence from Liam O’Riordan is that we avail of the company’s secretariat to share costs.
The paper makes it clear how smart meters can be adapted to new technology.
Mr. John Barry:
There is some work to be done on the savings to the company from staff transfers and so forth. We will come back to the Senator on this.
Senator Keane asked about the job spec and how a person would be trained for it. In the first instance, a person should send an expression of interest to the-----
Mr. Jerry Grant:
Irish Water is building at its core an innovation and technology component. Part of that is the consideration of sustainable solutions within the whole climate change area. Irish Water/Uisce Éireann is one of the highest energy users in the State sector, at between €70 million and €80 million a year alone, which excludes the design, build and operate, DBO, contracts.
We would have to play our part in reducing our carbon footprint and bringing down our energy costs. To do that, we need to look at research and technology opportunities in respect of the basic technologies and how efficiently they work but also, as the Senator says, introducing wetland and breed bed-type technologies. These have already been very successfully used in some parts of the country. They are somewhat dependent on the availability of relatively low-cost land and perhaps marginal land but where that is available, they are very good solutions because from our perspective, they reduce operating costs in the long term and are very good from an environmental perspective. Technology generally, research and in particular looking at energy conservation and management are very important parts of what we want to do.
Mr. John Barry:
I will provide information in writing to the Senator relating to the eight systems versus the one and the comparative costs. The second piece relates to the tangible savings of the €80 million or so. I have said a few times that this does not include the element of risk we have taken out and the potential extra cost if Bord Gáis Energy is not involved in this. That is very hard to quantify but I will try to explain what I mean by that in my response to the Senator.
Mr. Paul McGowan:
I will respond to some of Senator Keane's questions on the CER and pass over to my colleague, Ms Mannion. The question of how charging might pan out if a boil notice is in place has yet to be decided. We indicated that there would be an issue. It would seem sensible that where quality is not within reasonable bounds as determined by the EPA, we investigate what rebate, if any, applies. That has yet to be decided but we will be consulting on that.
We will consult on codes of practice and the general structure and format around those in April and a final decision on that is due in June or July. I can confirm that date for the Senator. That is the approximate timetable during which we will deal with that.
We said that based on the high-level analysis we carried regarding Uisce Éireann's establishment costs, we thought that 80% to 85% of these costs appeared reasonable and could represent value to the Uisce Éireann. We said that this did not mean that the other 15% to 20% of costs are unreasonable but just that it would take further analysis to determine whether or not they were reasonable and that detailed analysis will essentially commence once we receive the detailed submission from Uisce Éireann at the end of February. We then analyse those costs and, ultimately, we will put out a consultation paper that will include our analysis and whether we think all of those costs are reasonable. That will occur in June.
Ms Cathy Mannion:
The Senator asked a number of questions about non-domestic charges and charges that are a mixture of domestic and commercial charges. I am sure the Senator is aware that there are more than 600 different charging arrangements for business so we will be looking at this carefully and will take more time to look at the detail of it. We want to make sure that we are well aware that when we are making any tariff proposals for non-domestic use, we know the price customers are paying and what price they may be paying under any proposal we may have for changing them to a different tariff regime. We did this in the past with gas tariffs. We took a good number of years to sort out what tariffs should be in place so we will take the same approach with water. We will carry out a lot of analysis and find out what the impact on these consumers would be. To the extent that there are a large number of charging arrangements for combined domestic and commercial use, we will take a similarly slow and cautious approach to find out the impact of any changes in tariffs.
The final question concerned smart meters. We look after smart meters for gas and electricity. We are evaluating whether or not to rule them out and the numbers are stacking up. A number of years ago, we looked at whether water could be included in that process. We found out at that time that technology was not there to allow that to happen so we are keeping that constantly under review. As the Senator says, it would be very useful and efficient if at some point in the future, we could combine these programmes. We will keep our eye on that and see what happens.
Deputy Michael McCarthy resumed the Chair.
Before I call on Senator Landy, can I ask the speakers from Uisce Éireann to clarify the at-risk element of the bonus? The question was asked by Deputy Humphreys. I was not entirely sure what the position on the at-risk element was.
I thank both groups for coming in today. We have certainly learned a lot this afternoon as there has been much clarification. My first question is to the delegation from the CER. A number of speakers have spoken about quality of water and how one will charge for that. In the last round of questions, Senator Keane again asked the question and the response as I understood it was in the context of a rebate in areas with poor water quality. I know the CER has made no decisions and I am prefacing everything I say on that basis. The delegation from the CER said earlier that the CER would be liaising with the EPA on this matter. There has been a boil notice on a continuous basis in Roscommon. Does the delegation not accept that it would be very difficult to start people off on a metering system where they are told they will get a rebate rather than a reduction or no charge? I think it would be no charge. Could the delegation address that issue because it is very significant? I picked out Roscommon but it affects other parts of the country.
The CER presentation referred to benchmarking best international practice. Benchmarking is based on looking at what is happening in other places and making a decision. Can the delegation give us some idea of what it is going to start off with? Deputy Humphreys referred to Scotland and there are other examples of how charging is arrived at in other countries. Could the delegation tell us what the CER's starting point in this is so we have some idea of where it is coming from? Does the CER envisage a suite of charges? The issue was outlined by Deputy Coffey. What happens in my area where one has water in but no water out or where one has no water in but water out? Will there be different levels for categories or charges? I will continue with questions if the Chairman likes.
I asked a question about the value of the assets held by Uisce Éireann on 14 January and was told it was €11 billion but that we would come back to it and that liabilities were included in it. Has there been any clarification since the last time we were here?
A question was asked about whether the water part of development levies collected at local authority level would be spent at local authority level. The hard reality is that no local authority except perhaps Dublin collected any amount of money in 2013 that would carry out any infrastructural improvement works. The money is just not there. In reality, where will that money go?
In respect of the detailed explanation given by Mr. Barry about the charges by IBM, the actual consultancy costs were part of much of the questioning on the last occasion. We were told we would get a scoping document which set out the breakdown of the charges. When we were told that, I expected that we would have it the next day. I raised the fact that we still had not received it in the Seanad a couple of days later.
We were supposed to receive a breakdown of the costs for each consultant. I have not received that information; nor has Deputy Cowen, as the spokesperson for Fianna Fáil. It is important that we receive a copy of the document for the purpose of clarity and transparency.
When I asked about the supply of water to Dublin at our last meeting, Mr. Barry pointed out that €67 million had been set aside for the matter. Has the money been spent and what is being done with it? I understand that Bord na Móna has completed much of the preparatory work on the Garryhinch project but the dots have not yet been joined with Dublin City Council, which had assigned 12 staff to work on the project, and Irish Water. Based on the answers I received at our last meeting I thought we would get specific information on this project, given that the biggest problem Irish Water faces is the lack of capacity in Dublin. However, the 26-page document we received today did not provide the requested information. Can the witnesses clarify whether Irish Water is intent on proceeding with the Garryhinch project? What are the specific timelines for completing the work outstanding in advance of seeking planning permission? I understand Bord na Móna has carried out an environmental impact assessment and is waiting for the Dublin end of the work to be completed. At a cost of approximately €500 million, this will be the biggest single project for which Irish Water is responsible.
I am mystified as to the amount of capital investment that is available. It is either €930 million or €310 million per year. As Deputy Stanley already went through the figures, I presume the figure is €310 million per year for the next three years. The documents indicates that between €500 million and €600 million will be needed every year to build or repair infrastructure. If the Garryhinch project will cost €500 million, where does that leave the remainder of the projects? What is our capacity to attract international investment and how are we setting about attracting it? The money is clearly not there but the problems in Dublin and the Leinster region will not go away. How are we going to address that issue?
In regard to projects like the Fethard-Burncourt scheme in County Tipperary, which has gone to tender, and the Seven Villages scheme in County Waterford, in respect of which a letter of intent has been issued, I have been told by my local authority that it is a matter for Irish Water to complete them. Mr. Tierney noted that a new point of contact had been established for public representatives. Will we get the level of information we require from this point of contact, and where are local representatives to find information on schemes and repairs? Irish Water's website appears to be a work in progress because it is limited in the amount of detailed information provided. I ask Mr. Tierney to confirm that the website is still a work in progress.
Mr. John Tierney:
The website is a work in progress and we will be populating it as we develop our plans. In terms of taking over services, it has been a relatively short period since 1 January but I have given a commitment that we will populate it with as much information as possible. We will endeavour to provide the level of information required through the point of contact for public representatives, including the up-to-date position in regard to decisions on projects. We will also be gradually taking over complaints from 1 April and members will be advised about the takeover point.
The capital investment plan sets out the figures we project will be available to us. If more money becomes available, whether by subvention or otherwise, we will gratefully take it to invest in additional improvements and works in the system. We are trying to build up to a level so that we will have the money required when it comes time for the heavy expenditure on schemes such as the Shannon to Dublin project.
Mr. Jerry Grant:
It is important to outline the context for the Dublin water scheme. Over the coming five or six years we will have to meet ongoing needs for water in Dublin. We are aware of how tight capacity is at present and we are seeking to maximise the output of the Liffey plants at Leixlip and Ballymore Eustace. This means finishing out our current investment in Leixlip and making further investments in Ballymore Eustace and in pipelines to transport the water to where we need it. That will generate additional water, which will help us. It is even more critical that we get to grips with leakage to a greater degree. This will require a regional approach to develop leakage management capacity, leakage zone priorities, intensive find-and-fix repairs, automation of pressure management and replacement of mains. Based on information gathered through the metering project, we hope to target customer-side losses. The evidence of metering thus far indicates that 5% to 6% of households use considerably more water than normal usage patterns would suggest. All of these measures will help us to stay ahead of demand and we have a fair idea of the demand load we will be facing over the next five or six years.
During that period we will be working on the major source of water for Dublin. This involves a statutory process which is currently ongoing. We have a team working on the process. It involves an environmental impact assessment stage which must evaluate all options objectively on the basis of environmental, technical and economic criteria. The final outcome of that assessment will be delivered later this year as a preferred scheme, which will be developed further with a view to going to An Bord Pleanála before the end of 2015. We have assumed that the oral hearings and decision making with An Bord Pleanála will last through 2016 and, assuming we can anticipate a successful outcome, we will be in the design and procurement phase in 2017 and early 2018, with a view to delivering water to Dublin towards the end of 2020.
No; I just want to ask a question. I understand there are three options, namely, the Parteen extraction, desalination and the Garryhinch project. Is the environmental impact assessment considering all three of these options? Where is the €67 million being spent?
Mr. Jerry Grant:
Specifically on that point, the environmental impact statement, EIS, process requires that all options are looked at objectively within that process, are subjected to public consultation and so on, and this is happening. This means all viable options. The Senator mentioned that there are three - there may be some others - that already have been identified. All of these considerations are being re-evaluated within the EIS phase and there will be a preferred scheme later on, in the late summer of this year.
Mr. John Tierney:
My understanding was that we sent in a copy to the Oireachtas Library. We also sent it back to the Committee of Public Accounts, because that was the committee in which that particular document was raised. If there is another document we can clarify that afterwards, but I am pretty sure we already have sent in that document and it is with the Houses of the Oireachtas.
Mr. Paul McGowan:
I might address the Senator's questions. First, on quality, the point I made earlier was it would seem sensible that if customers are not receiving a complete service they would not then be expected to pay the complete charge. However, we have yet to consult on the details of how that actually will pan out in reality. Consequently, I am unable to give the Senator a clear yes-or-no statement vis-à-vischarges. I can state that we will consult on what are the acceptable limits with regard to quality, as it applies to the water that is delivered and the wastewater service that is achieved. We also will consult on what will be the ramifications for water charges once such limits are not met. All of this has yet to be decided and we will engage in consultations on it.
On what best international practice actually means, it is a fairly complex area but ultimately, costs vary significantly from country to country depending on various issues such as demographics and population densities and so on. For example, across Europe right now, a typical customer in Denmark spends €670 per year on water charges, whereas in Scotland the equivalent figure is approximately €390 per year. However, these amounts hide the consumption level per customer, what level of investment has been carried out or whether there has been any catch-up in the various countries concerned. Consequently, many factors must be taken into consideration, and so we look for the nearest comparators we can find. We will consider countries such as Scotland as well as possibly considering regional water authorities in England and Wales that may have a similar distribution of population density and demographics. Ultimately, however, there will not be an exact match and, as a result, we will take the best available information we have on both the establishment of utilities and their operation. We will take and use that information to assess whether we think the costs Uisce Éireann has incurred are reasonable, whether they benchmark well or whether they are excessive. It is only after having carried out such analysis that we can then form a judgment and therefore decide whether to allow that cost, or what level of cost should be allowed.
As for the suite of charges, I again must preface this by stating that no decisions have been made and all of this will be subject to consultation. To revert to a previous question from a member on the water-in water-out principle, it probably is worth noting that we know from other countries that the amount of water that actually is consumed for drinking purposes is low; I believe it is between 5% and 10%. Generally speaking, there is a high correlation between the amount of water that enters a property and the amount that leaves through wastewater. However, that is one of the factors we would take into account. As a minimum, we will have at least two charges. One will be a meter charge and one will be an assessed, non-metered charge. However, in our consultations, we will set out whether there are various options for metered charges, such as a fixed charge element and a variable charge element. On the assessed charge, we may consider different factors that might be taken into account before one's charge is determined, such as occupancy levels, house size or whatever. However, we have yet to determine that, and it all will be subject to public consultation.
I thank the witnesses from Irish Water and the CER for their attendance. Mr. McGowan mentioned earlier that the Minister could issue instructions to the CER in respect of Irish Water. Would that be usual in terms of ministerial responsibilities? My second question pertains to the European Union's water framework directive and Ireland's responsibilities regarding the quality of its water and its effluent management. What is the current position in respect of Ireland's water standards? Could Ireland potentially be subjected to European Union fines and, if so, how much might we be fined if we do not get our act together?
I have a further question on the procurement rules for those who tender for contracts to do some work for Irish Water, such as the water maintenance and support work that would have been carried out on behalf of the local authorities in the past. Media reports in my constituency have stated that a company that was supplying this type of work to Offaly County Council did not obtain a contract. What is the position with regard to procurement? Clearly, one does not seek job losses as a result of changes that are being made.
On personal water consumption and people's individual responsibilities to reduce the amount of water they are using, I note that Ireland's consumption rate, at 150 litres per day, is among the highest, if not the highest, in Europe. While metering obviously will make a difference in this regard, what are Irish Water's plans regarding public information, working with schools and so on? Are any such activities in train? This will be of great importance in the future.
I will not raise the Garryhinch project as Senator Landy has covered it fairly comprehensively, but I was curious as to whether Irish Water foresees a future for itself in the field of rainwater harvesting. Given all this rain falling out of the heavens, there is potential for Ireland as a nation to use it and to give it to other countries that might need it. Could such activities potentially come within the remit of Irish Water in the future?
Mr. John Barry:
On the procurement rules and the continuation or the development of a supply base, when we were creating the frameworks and so on, the continuation of the existing supply base was uppermost in our minds. We carried out a number of competitions to put people onto different framework contracts, such as the one mentioned by the Deputy, as well as others pertaining to chemicals, repair and maintenance and CCTV and sewer jetting. People submitted their applications to go on those frameworks and if one takes the totality of those companies which were invited and the numbers of tenders received, we had a success rate of approximately 80%. However, on the point mentioned by the Deputy, we received communications back from the existing supply base to the effect that they could not get on or whatever. We found in the first instance that it was very difficult to contact some of the suppliers and, second, when we put them through the assessment they were failing on some health and safety regulations. Bearing that in mind, we put in place a particular health and safety specialist to assist them with their documentation to get them onto the frameworks. Thereafter, we wrote to the local authorities stating that if an entity had a contract with the local authority, either formal or informal, we would honour that contract if we could see the paperwork or if we received verbal notification from the local authority that it existed. We stated that as long as a supplier passed the minimum health and safety requirements, we were happy to allow that supplier to continue to do business with the local authority, which could then draw down that service as required. This has proved to be quite successful, but ultimately we seek to reach a point at which we have a competitive supply base with frameworks in place from which Irish Water and the local authorities can draw down for the services they require.
For example, we have 6,000 or 7,000 suppliers. Recently we wrote to 3,000 of them asking them if they wanted to get on the supply base or the framework and we received a response from 10% of them. They are either not interested or they are not contactable. I assure the Deputy that we have made every effort. In some cases we have gone back to people three or four times to see if they want to be included in the supply base bearing in mind that we were conscious that we wanted continuity in the supply base, which is equally important for continuity of service.
Mr. Jerry Grant:
The directive places enormous challenges on us in terms of compliance and this has been recognised by the EU, which now recognises that it has all the legislation it needs. However, it has brought out a blueprint for implementation precisely because many countries, like Ireland, are struggling to achieve compliance. In 2009, we adopted a river basin management plan for the period 2009-2015 to be followed by other plans. Within the plan, we had considerable ambitions around water quality achievement and much of that has not happened because of the lack of funding and the fact that we have not been able to keep up with the programme. We are in some difficulty and a letter of formal notice issued to Ireland, which will result in fines without any action from our side. However, the Department has responded to Brussels and we have worked with the Department to put together a response to that along the lines of setting out a commitment we will make in terms of what is achievable and reasonable. This means making choices around schemes and discharges that will deliver the maximum benefit to the environment in the short term within what we can afford. Clearly, there will be an element of toing and froing on this but, hopefully, we will arrive at a position, although I cannot predict this, where we will have an agreed plan, which Europe can live with and accept and which will represent our best endeavour to meet compliance. It is certainly a significant risk for the country at the moment and the key to it will be that we set out a plan that we intend to deliver and then deliver it and live up to it.
There is a second piece to that around how we engage in the drawing up of future river basin management plans because there is a new plan to be developed up to 2021. It is important that we have all the objective information on catchment water quality to put the right measures into that plan rather than setting standards that are unnecessarily high. Clearly, we have the objective of good water quality but it has to be conditioned on what is proportionate, what is the cost of compliance with a particular standard and what standard will be required to meet the objective. Irish Water can bring a lot more information, evidence and technical engagement with the EPA to that discussion and that will be valuable in saving costs that would not deliver the benefit.
There is a good deal of discussion around rainwater harvesting and clearly it has some potential and it can be incentivised both by grants and the opportunity to reduce costs for water. The difficulty is that it is probably only practical on the basis of incorporation into new builds because it would cost a lot to retrofit such a system in existing housing stock and, therefore, the take-up of rainwater harvesting is likely to be relatively slow and likely to make a relatively small impact. However, I would like to confirm that we have engaged with schools and are getting involved in a schools information programme, which is important. We will also have a great deal of other information coming through in terms of water conservation in the home, tips on best practice and so on. The Deputy is correct that in the context of bringing in charges, we hope to get a dividend of at least a 10% reduction in household water usage and that will make an important contribution to meeting requirements and will allow us to defer investment we would otherwise require in the coming five of six years.
Mr. Paul McGowan:
With regard to the Deputy's question about ministerial directions, it is not unusual to have that provision. For example, the water legislation includes provision for a ministerial direction as does our energy legislation. It is probably fair to say what we are facing in water is not the usual situation. We have a new utility start-up and State subvention and it may well be that the likelihood of ministerial direction is higher in regard to water but this is certainly not an uncommon feature of the legislative landscape.
It was stated that the goal is that Irish Water wants clean, high-quality affordable water, and I agree with the officials on that but at the moment there is not clean or quality water where I come from and once the company starts charging people, we will not have affordable water either. I am, therefore, a little worried about the future.
Members have asked if people cannot drink the water in their homes, will they have to pay for it? However, the position is worse. Not only can people not drink it but they have to stand over their children to make sure they use bottled water when they brush their teeth. The children in my town, Castlerea, regularly have stomach aches way in excess of what to me was the norm years ago because try as one might, children will run for the tap. We live in fear that they will go near the product Irish Water is delivering to our houses. Reference was made to the company putting infrastructure and systems in place. The same structure will be in place and there will be an umbrella over it called Irish Water. That was obvious in the past while but it became even more obvious when Councillor John Murphy from Castlerea contacted the company about the water supply. He received a letter stating Irish Water took "responsibility for water services on 1 January 2014. As the agents of Irish Water, the local authorities will continue to operate the Castlerea schemes on our behalf as well as working with Irish Water to resolve the problem". If we end up with the same system to monitor water, how will that solve our problem?
I do not know if the officials are aware of this but I imagine they are. If not, it is terrifying to think that they have missed it. When people see polluted water, they are meant to go the EPA. When I contacted the agency, it instructed Roscommon County Council to investigate the problem. Irish Water says the council will continue to operate the Castlerea schemes. Where are our assurances that the water quality will improve? If one reports a problem, the council will get to investigate itself. What will change in the system?
It is bad enough that when one goes to the EPA, the agency then goes back to the local authority but I am sure the officials are aware of the pollution An Taisce has highlighted over the past week in a so-called SAC lake in Glenamaddy, County Galway. Raw sewage was being pumped into the lake. The EPA is aware of this and it was known by the agency as far as back as June 1997. The An Taisce report referred to Galway County Council's attempt to consider alternative sewage disposal options for several years but almost five years since the application, the problem remains and the EPA is yet to make a decision. Irish Water is the umbrella group for this disaster and the company will supposedly deliver drinking water to us. How is this possible? The officials talked about the system changing but it will not. The company will continue to work with local authorities. The public made the State's agencies well aware that raw sewage was being dumped in a lake in Glenamaddy. Members of the local turf cutting committee stood in front of Mr. Justice Quirke, a former High Court judge, and informed him that this was going on but nothing happened. What magic will the officials employ to change that?
The urban water in my town scheme is the subject of a boil water notice now as well as the rural water scheme. Families are spending on average €500 a year on water. When one has to use water to brush one's teeth, one has to use a lot of it.
If Irish Water cannot provide us with drinking water, will it buy this water for us? Someone will have to provide it for us and at the moment that is not happening. The local authority on which Irish Water is relying has advised us that it is responsible for providing the water but it is not responsible for it being polluted. What hope would that give us? How will things change under that system?
Rainwater harvesting has been mentioned. Those who install a rainwater harvesting system will end up using less water from the mains. Will that not put up the price of water for everyone who does not have a rainwater harvesting system? From what I have heard about what Irish Water is planning to do, if people do not use enough water and they save water, the price of the unit will need to go up. I cannot see how this will help environmentally and from many other points of view.
The CER has advised that the charging scheme will be decided in June. Why does Irish Water not inform people before the local elections? Has Irish Water gone political now? We heard that there are a number of key dates. As far as I can see there is only one key date, 23 May. That is made even clearer in the letter sent to Mr. John Murphy. The answer to the question as to when Irish Water would know what it will do with my drinking water was two months' time. So it will have news for the local elections, but after the local elections the urgency will be gone and we will be back to going down to the supermarket to get water. All the supermarkets in Castlerea now have bigger drinking water sections than they have alcohol sections, which is some achievement. The problem will not be solved.
On the previous occasion representatives from Irish Water appeared before the committee, I was told I was not allowed to bring up previous experiences of people who were running this organisation. However, today we have heard about the previous experience of other employees of Irish Water and how they need to be well paid, etc. While we are going on about previous experiences, can we please deal with this issue? Efficiency was mentioned. The head of Irish Water is described as-----
----- let me remind him that although he might not read the agenda for this meeting, I do. This is the agenda: Uisce Éireann, the maintenance and adherence to the necessary standards of service to customers in the administration and distribution of water. Stick to that or shut up, quite frankly.
Are we not allowed to mention previous experiences? Why, yet again, have you attempted to prevent me, after sitting here for four and a quarter hours, from asking the killer question that needs to be answered? Why is the head of Irish Water, who has previously been accused of being weak-----
Mr. John Tierney:
Deputy Flanagan asked a number of questions about the current system and the current state of the infrastructure. The primary reason for setting up Irish Water was to take the system from where it is and use the utility model to bring about change in the system so that issues regarding the quality of water that the Deputy mentioned in areas of Roscommon are dealt with, building on some of the decisions that have already been taken regarding projects to be done down there. I will ask Mr. Grant to outline in detail our approach to that.
Mr. Jerry Grant:
The water quality issues being experienced in Roscommon reflect that many of the water supply systems were originally developed from groundwater schemes, partly reflecting that these are very good quality water sources in most cases. However, in situations of high run-off in winter conditions, they are prone to bacterial and microbiological infection. The necessary barriers were not put in when the schemes were installed and therefore they are wide open in that situation.
In a general sense Irish Water is absolutely committed to what are known as water safety plans for every water scheme in the country. Water safety plans start with the source and finish at the tap. That means policing the sources in order to minimise the risk of degradation of drinking water, then providing a minimum level of barrier within the treatment or production part of the cycle and then following it through in distribution so that the reservoirs, pipelines and so on do not allow for recontamination.
I fully acknowledge that a number of schemes are on the books and ready to be started by Roscommon County Council. These are proceeding and obviously the Boyle scheme is well in hand. The Kileglin plant is also about to start or has started on site. We are absolutely committed to getting people who are on current boil notices off them in the shortest possible time. We will do that by putting in appropriate treatment. In the case of the Kileglin plant we are working with the contractor to try to accelerate the programme on that. We are now looking as a matter of urgency to see how we can get a plant as quickly as possible into Castlerea because that situation is as unacceptable to us as it is to the Deputy.
Mr. Jerry Grant:
Well it is, absolutely, because we have that responsibility and we take it very seriously. Clearly we will not be funded to carry out water services if we cannot deliver water to the required standard.
Regarding operations, we will do whatever it takes. Part of the general contribution of Irish Water will be to have capability regionally and centrally in process optimisation, in the training, in the auditing of plants and in ensuring that plants are run correctly. It is very difficult for individual local authorities to have those capabilities in-house on a county-by-county basis. That is particularly true in a county such as Roscommon, which did not have much sophisticated treatment for the reason I mentioned - originally those water sources did not require much treatment and therefore there was no tradition of providing treatment. We have been and are using outsourcing DBO contracts and a number of the Roscommon contracts are ten-year DBOs, which means the contractor will continue to operate under our supervision.
Our annual service plans under the SLA with the local authorities will set out for every county objectives to be met each year, in terms of improving quality and delivering transformation and efficiency.
We have many mechanisms in place. Irish water will make a difference through all those mechanisms, but in the first instance in investing where drinking water is not up to scratch is our top priority.
----- that the local authorities will continue to operate the Castlerea scheme. What will change? With respect, the kids in my neighbourhood are puking their guts up because of what they have to deal with. It would not be possible for it to affect Mr. Grant as much as it does us.
Mr. Jerry Grant:
I think I ran through in fairly brief terms the transformation Irish Water intends to bring about, in terms of its investment and in how it will insist on and ensure proper operation of the plants. We will have within the Irish Water organisation at regional level, professional people to audit the operation of plants on a continual basis. The bottom line is that plans we are putting in now in Roscommon will deliver clean safe drinking water, and we will guarantee that to the customer.
I do not know whether it is the same in every local authority, but in my experience if concerned citizens feel a watercourse is being polluted, they investigate the matter themselves. What is Irish Water's understanding of the position and will it change?
Will Irish Water have people on the ground? In many cases, the same area office which is accused investigates the mistake it has made. Does Mr. Grant know that this is the case because it is my experience? It is untenable. Whatever about the question of whether we agree with Irish Water, this is a problem. It has to be a problem.
Mr. Jerry Grant:
I will not speak for the EPA or local authorities. Local authorities have their own statutory responsibilities as environmental bodies and do their job. Ours will be to protect drinking water. We will monitor sources and treatment plants. One of our first objectives is to provide for remote monitoring in order that we will be able to see from control centres throughout the country what is going on in our plants and water sources.
I am not a member of the committee, but I have an interest in this topic. Quite a number of speakers gave examples of water problems in County Roscommon, in which 90% of those affected by boiled water notices are resident. The Boyle Ardcarne water supply scheme has been subject to a boil notice for almost 12 months.
There have been boil notices affecting the Castlerea urban and rural schemes for three years. A boil notice has been in place in south Roscommon for six months. From what I am told, it will be a number of months before any of these issues is resolved. There was a similar situation in the case of the Roscommon central supply this time last year and within eight weeks a solution was put in place. It was a temporary solution but a solution nonetheless. I know about the specific engineering problem in Boyle, but it does not arise in Castlerea or Kileglan Springs in south Roscommon. Why can people in Castlerea and south Roscommon not have a temporary solution, pending introduction of a long-term solution, as in the case of the Roscommon central supply?
Mr. Jerry Grant:
It is absolutely top of the list. Where we have schemes in progress on site and know a solution is imminent within 12 months, we are driving on with them because it would probably take that length of time to procure a temporary plan and have it commissioned on site. In Castlerea, where no contractor has been commissioned, we are examining whether we can put in place a temporary plant. We need to have it sized properly and figure out requirements. The treatment requirements are not the same from scheme to scheme. Ultraviolet radiation can work in some cases but in others we need coagulation filtration. We need to know what the answer is and will then set about doing it. If we can put in place a temporary skid mounted plant, we will do so, but even this takes a certain length of time. One must investigate and solve the problem and go through a procurement process, build the plant, get it to the site and undertake the ground works. In the case of the Kileglan and Boyle schemes, it will be quicker to put in place the permanent scheme, as the contractor is working on the ground.
That is the difference with regard to the evidence Mr. Grant is giving. A temporary scheme, including the procurement process, was put in place in Roscommon central within eight or nine weeks. It was expedited within the Department. I cannot understand why this cannot be done in Castlerea and Kileglan, pending introduction of the full treatment plant in however number of months it will take. People should not have to tolerate boil notices continuing for 12 or 18 months, or three years in the case of Castlerea.
The Minister of State, Deputy Fergus O'Dowd, said in the House prior to Christmas that Irish Water should not be allowed to charge for water supplies subject to restrictions on health grounds. In its evidence today the regulator stated the new charging regime would not be agreed to before August and that it would be a number of years before issues regarding commercial users would be resolved. In the interim, as a measure of good faith, will Irish Water ensure commercial users of water who are charged for water which is unsafe to drink will have these charges removed? We are speaking about a relatively small number of commercial users such as restaurants, bars and food and drink suppliers in the affected areas. Will Irish Water give an assurance that commercial users will not be charged for water where they spend a huge amount of money on replacement ice and water supplies?
Fair enough. My next question is for Irish Water and the regulator. When the roll-out of meters is complete, approximately 30% of households in the country will not have a water meter. These are houses in rural areas, apartments and houses in urban areas with multiple connections to the same water supply. How will water and user charges be calculated in these cases? It is unfair for people to be charged based on usage in some areas, while people in other areas are penalised because of geographical location. How is it intended to address this issue?
Mr. McGowan has stated costs and charges will be benchmarked against best international practice. What is the international practice in charging for water which is unfit for human consumption? Are people charged for it? It is a simple question to which people want to know the answer. Will they be charged for water which is unsafe to drink? What is the position where the supply is inadequate? Deputy Paudie Coffey mentioned water pressure which is not suitable for showers, washing machines and dishwashers. Should people be charged for a water supply which is significantly insufficient to meet their basic needs?
Ms Mannion addressed the issue of water in and water out. I would like a definitive answer on the issue of water in and water out, or pay as one flushes, which is what it seems will be introduced. In this room 12 months ago I questioned the Minister, Deputy Phil Hogan, on this specific issue. He stated people would not be charged for flushing toilets or water out. I specifically raised the issue on Second Stage in the Dáil on 19 December and the Minister of State, Deputy Fergus O'Dowd, interrupted me to state the water out provision would apply only to commercial premises. The evidence we have heard today from the regulator is that there will be a charge for water out; therefore, a flushing tax will be introduced as part of the water charges to be levied. I want a definitive "Yes" or "No" answer. I can see the merits, but there are conflicting messages from the Minister, Government policy and the regulator. Will there be a water out charge and how will it be calculated as a percentage of the water in charge?
A number of water meters have been installed. Have problems been fixed on the consumer side? I would like to receive an indication of the level of leakages on the consumer side and the savings made.
In many areas where water meters have been installed, there is a temporary reinstatement followed by a full reinstatement. What is the cost of a full reinstatement and does it lie with Irish Water or local authorities?
I have a brief question about a difficulty that I have encountered. An individual has a property that is broken into four apartments. He is paying property tax on each apartment, for example, a total of €800 per year. He wants to install a water meter in each apartment and is willing to pay for them. From my telephone inquiries with Irish Water, however, my understanding is that there will only be one water meter per property with a flat charge applied to the four sub-properties. As a landlord, he does not believe that will work because it will lead to disputes between tenants who believe that one should pay more than the other. It seems perfectly reasonable that, if an individual pays property tax, he or she should be able to get a water meter. What is the witnesses' opinion on that?
Mr. John Tierney:
I can cover some of the last two questions. Regarding Deputy Timmins's question, we have done some pilot work on apartments in respect of a second phase of metering. There may be the potential to install meters in approximately 120,000 of the 290,000 or so units. It will have a cost, but we have presented our proposals to the Department. If a property has four separate supplies, they can be facilitated. It could also be done in a common area. As Mr. Grant explained, the supply to some apartments can come from three sources, each serving a different purpose.
Regarding Deputy Humphreys's question, 5% is the estimate for leaks on the customer's side. The first fix policy has not been decided by the Government yet. The intention was to produce it so that people would have a period within which to assess their usage and take advantage of the policy. Permanent reinstatement is done under the contract.
Most of Deputy Naughten's questions were to the CER.
Mr. Jerry Grant:
Regarding trade discharges, there is a specific provision for charging for non-standard sewage. This is probably what the Minister was referring to, namely, the section 16 charge. Otherwise, the charge relates to water in, water out. If one does not have water in or water out, one will only pay for whatever service one is receiving.
In urban areas where a property is connected to a sewer, a higher rate is charged for water in, as it must also cover water out and wastewater treatment. The Minister and Minister of State have told the committee twice that there will not be an additional charge for wastewater treatment for properties that are on public sewers. This is the specific question that I put to them.
Mr. John Tierney:
To be honest, the only difference should be the trade piece. The charge will be applied on the basis of water in despite there being two supplies. If properties do not have a water out service, they should only be charged for water in. This is our approach. If a property only has a sewage service, it will only be charged for that.
Mr. Paul McGowan:
There will only be one meter. It will measure the water that enters the property. As Mr. Tierney mentioned, the cost of the provision of clean water and the treatment of wastewater must be covered. Some people have both a water supply and wastewater services whereas others only have one or the other. Therefore, we must devise a fair charging structure that deals with all of these scenarios. International experience tends to show that the bulk of the water entering a property exits it through a wastewater treatment service if there happens to be one. The charging system should reflect this. If, for example, the cost is split 50:50, there would be an identifiable charge for water in and another for water out. How this is presented in a bill is yet to be determined, but it stands to reason that we must determine a water in charge and a water out charge in order to put a fair system of charging in place for all customers. The only caveat is that the nuances and how it will work will be subject to public consultation. We are also subject to ministerial direction. That could happen. In terms of good regulatory practice, however, we must identify the costs associated with the provision and treatment of water.
Ms Cathy Mannion:
We will look at that. I do not have the information, as we have not started that process yet. When we consider what benchmarks to use, we will look to other markets to see what constitutes good practice there and use them in Ireland to whatever extent is possible. We must bear in mind that we are starting from a different place compared with other countries, which have had years of investment. We must be careful to ensure that what we put in place, although challenging, is achievable.
Would the witnesses not agree that it acts as an incentive to ensure that water supplies are upgraded to an acceptable standard? The best way to reassure the public in this regard is to avoid making them pay through the nose for an inadequate water supply, be it unsafe to drink or inadequate for meeting basic needs, for example, use in their appliances.
Mr. John Tierney:
Two reasons for establishing Irish Water are to introduce the regulated utility model and to enable an increase in investment. If we can prove a consistent income stream over a number of years, it will give us the ability to raise capital on international markets. We have pointed out to the committee the current shortfall in funding. The estimate for solving all of the priorities that we have outlined is as much as €10 billion. There is a considerable job ahead of us, but Irish Water is up to it and will change this situation. We have stated that it will not happen overnight. Much work needs to be done.
Mr. Paul McGowan:
There was a further question on premises that would not have meters and how charges could be calculated. At the risk of repeating myself, we will need to consider a number of factors when applying an assessed charge. If a property is not metered, there clearly must be an assessed charged. We are yet to determine those factors and, therefore, how the charge might vary depending on, for example, occupancy levels, house types, etc. That will form part of the consultation in April.
I wish to ask a question before they go. There has been much discussion on the logo. Perhaps the witnesses can clear up the matter. Was the €20,000 spent on the design alone or on a suite of elements? To whom is Irish Water trying to sell the water? There is no competitor. What is this branding about?