Barry Cowen (Laois-Offaly, Fianna Fail)
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The joint committee will now consider the topic of water tariff principles and proposals with representatives of the Commission for Energy Regulation. I welcome Mr. Garrett Blaney, chairperson and commissioner; Mr. Paul McGowan, commissioner; and Ms Cathy Mannion, director, and thank them for their attendance.
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 committee. However, if a witness is directed by it to cease giving evidence on a particular matter and continues to do so, he or she is entitled thereafter only to qualified privilege in respect of his or her evidence. Witnesses 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 any person or an entity by name or in such a way as to make him, her or it identifiable. In addition, the opening statement and any other documentation provide for the committee may be published on its website after the meeting. 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, either by name or in such a way as to make him or her identifiable.
Before we commence, I must inform the delegates of the committee's disappointment - it is obviously through no fault of theirs - that the final submission from Irish Water has not been received by the Commission for Energy Regulation. Members had envisaged the commission would have been in possession of the submission for at least one week by this stage, whereby the committee would be privy to it. It would have been open to members to question its contents and to scrutiny by members on behalf of the public in such a way that they could be sure the commission would be making an informed decision in adjudicating on it and other matters pertaining to submissions the commission has received to date and so forth. I believe this was the second time the commission was given a commitment by Irish Water that the aforementioned document would be made available to it. On the first occasion, the committee agreed to delay its meeting to accommodate the submission. I do not wish to mince my words, but members are very disappointed - many are annoyed - by the attitude of Irish Water and its treatment of both the committee and, by association, the commission.
We will do what we can within the confines of the meeting - considering that we lack much valued information - now that we are getting down to the nitty-gritty of the process whereby the actual charging system and the principles behind it are to be agreed to and published, with a further public consultation process emanating therefrom. It has been delayed further and is one of a series of delays during the process. While I recognise the Commission for Energy Regulation has no responsibility in this regard, the point must be made. Members will deal with the many queries we have about the commission in the process to date. In addition, we ask the commission to consider appearing again before the committee when it has received the aforementioned submission and had time to digest and assimilate it, thereby allowing members further opportunities to scrutinise its contents and seek the commission's thoughts and opinions on what has been submitted to it. If the commission is agreeable, I will seek the further agreement of the committee. Is that agreed? Agreed.
I now invite the Commission for Energy Regulation to make its submission.

Mr. Garrett Blaney:

I thank the Acting Chairman and members. I echo the disappointment that we did not receive the submission. It was intended that we would be able to talk to the joint committee about the full submission at this meeting. We will be happy to come back before it at any time that suits it. It is important for us to have a frank and open discussion of all the issues involved. It affects water consumers nationwide and obviously is very important. I will talk members through the first couple of slides, after which I will hand over to my colleague, Mr. McGowan, who is the lead commissioner for water services and will talk them through the rest of the slides. In this presentation we intend to cover a brief description of our broader role which does not simply cover water services but also covers energy and safety matters. Thereafter, I will hand over to Mr. McGowan who will cover water charging matters and the issues of customer protection and timelines, within which context the delays will be covered.

I will talk briefly about the Commission for Energy Regulation's broader role and note that it has been the energy regulator since late 1999-2000. We started out covering the supply of electricity and soon thereafter the supply of gas. We cover the electricity and gas networks, as well as the retail and wholesale markets in electricity and gas. We also have a broader consumer function in energy matters. In the intervening period there has been significant investment and, I hope, some stability from a regulatory point of view. We work very much in a European context on the energy side. Consequently, we have a broad economic, safety and consumer protection function in energy matters, much of which is driven by directives at European level.

We have been appointed this year as economic regulator for water services, a new function for us. However, there are some similarities and an overlap with the functions we carry out in respect of energy matters. I hope we will use and reuse some of our in-house expertise to supplement the additional staff we have available to look directly at water services.

We also have a consumer interest at our heart. I note that our strategic statement for the organisation has been refreshed recently, particularly with reference to water services being one of our new functions.

In that statement, we set out that reliable water, efficient delivery of safe water and efficient waste water is a key strategic objective from our organisation. On that note, I will hand over to Mr. Paul McGowan.

Mr. Paul McGowan:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Barry Cowen (Laois-Offaly, Fianna Fail)
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Not at all. I thank Mr. McGowan for his statement and what was contained in it. Despite the fact that many of his views and contentions are well meant, I do not think they can be fully substantiated until such time as they are challenged by virtue of a submission by Irish Water and by others, including political parties and various organisations throughout the State which will have much to say about that.

Having listened to Mr. McGowan's statement, I was struck when he said it was understood that Irish Water does not necessarily agree with the free allowance calculation of 38,000 litres per child. In recent months, we were led to believe that was clear but it is now not the case.

Mr. McGowan also mentioned the first-fix policy, which we were led to believe was clear and concise when the Government spoke about it in months past. However, when they were questioned about the 5% of housing throughout the country with lead pipes - and the costs associated with rectification works - we were informed that it may not be what it says on the tin. They are just two examples that jump out at me. It makes me wonder how Mr. McGowan will react to Irish Water's contentions in these areas.

The bigger question in the public mind is the commissioner's response to a request, in 2012, by Bord Gáis for a 7.5% recommended price increase. Mr. McGowan granted them an 8.5% increase, so how can the public be sure that he is on the consumers' side and will not be subsumed by this monopoly which is Irish Water? Will he have consumers' best interests at heart? That is the overriding question at the back of many people's minds.

The situation is exacerbated, and members of the public are becoming more worried and nervous, because Irish Water had guaranteed a submission to the commissioner in weeks past and prior to our meeting today. Yet here we are again without such a submission, which is the substance of what we wanted to discuss. Notwithstanding Mr. McGowan's views and contentions regarding the legislation and his role, his interpretation of that submission is something we need to know. We will not get that information today, however. I am glad that Mr. McGowan has agreed to return to the joint committee when he is in receipt of that submission. It is only then that many of us, and many organisations, will be able to make more meaningful submissions themselves.

I have a few brief questions to ask. We will all get to speak but the order if which that will take place is - Fianna Fáil, Fine Gael, Sinn Féin, Labour or Fine Gael, and the Technical Group. That is what was agreed by the committee, is that not right?

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Mar is gnách.

Barry Cowen (Laois-Offaly, Fianna Fail)
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I have to adhere to that. My first point concerns flat rate charges. There has been a delay in the timescale but there will be no delay in charging, although Mr. McGowan did not allude to that. We know that about 1 million homes will not be metered when charges are introduced, despite the fact that €530 million will have been spent on metering. Mr. McGowan said he hoped to put structures in place for rebates on homes that may be overcharged when one compares the assessed charge with the actual charge when the metering system is put in place. What examples or models of assessment - or countries where such assessment takes place - has Mr. McGowan investigated in order to arrive at his decision in this regard? In other words, what real examples on the ground can Mr. McGowan point to which show that the occupancy and potential water usage of a house is being properly assessed, and so that people can have faith and confidence in his decision on flat rate charging?

My second point concerns the quality of water supply, which is something to which Mr. McGowan alluded during his presentation. He said he was looking at a 50% reduction on the element of water within that bill, which is essentially a 25% reduction.

Mr. McGowan says that the CER may allow for further reductions where a boil notice has existed for a certain length of time, if there is a risk of lead poisoning. Given the difficulties that exist in the country, should the CER not have a more definitive idea of how any such assessment in that area would be addressed? Is that any comfort to the people in Roscommon for example? I acknowledge that rectification measures will be taken in the coming years but meanwhile they, and others like them, would need a more definitive response from the CER. Consumers do not have much faith in the CER’s role and they question its standing when they see that in the past somebody who looked for a 7.5% increase got an 8.5% increase. It has a job to do to obtain people’s trust. A comment that lacks clarity about a process that is over two years old needs to be addressed.

In respect of medical requirements, Mr. McGowan says the CER will be guided by Government on the detail and impact of medical requirements provisions. At what point will the cap be set? Does he have an opinion on this or is he totally dependent on Government direction? Someone who has home dialysis needs clarity and a definitive indication from the CER, even in the absence of any submission from Irish Water, that it has case studies from other jurisdictions where best practice exists, which will be implemented in this State.

Initially it was thought that there would be a standing charge and that was dropped for political reasons. I have since studied the indicative pricing mechanism that has been mentioned, which suggests the prices might be higher. A representative of Irish Water said at the time that, irrespective of there being a standing charge, it will receive the sort of funding it expected anyhow. Does Mr. McGowan have any concerns that, in the absence of a standing charge, Irish Water will struggle to attract international investment and, if so, will struggle to implement the commitment it has given to the electorate to address the deficiencies in the systems? In what circumstances can the charges be finalised in August and not be amended before the end of 2016? Is that subject to a ministerial direction? If this is set in stone do we have a guarantee that the CER will not interfere with it until 2016?

The cost is approximately €1.2 billion per annum with €700 million going on capital expenditure and €500 million on capital investment. The Government has yet to outline how much it will provide to subsidise Irish Water. This year, for example, €500 million was raised from local property tax, which had been earmarked for local government but was diverted to Irish Water. The Government has yet to outline how much money it will pour in to enable it to carry out significant infrastructural investment. In the absence of that commitment on the subsidy is the CER operating in the dark? If Mr. McGowan cannot answer my previous question about international investment is he doubly worried that the Government has not made a funding commitment to date?

Mr. Paul McGowan:

I will address some of the questions and pass others to my colleagues. It probably is fair to say that it is up to the CER to establish itself as the economic regulator for water, to show by its actions that it does have customer interest at heart and is acting in the public interest when it comes to water charges. In respect of the Bord Gáis price increases, we did not award a higher increase than was sought. Bord Gáis asked for 7.5% but subsequently the international price of gas went up and its request went over 8.5% which we awarded but which was less than it asked for. Those were the facts. Our record will show that we have always shown a healthy level of scepticism about requests for price increases in submissions from utility companies. It will also show that we have rarely awarded an increase higher than the one sought. Invariably we have managed to find efficiencies which the utility company had not identified and therefore lessened the impact on the utility customer. It is important to reassure people that is the approach we take to water, a healthy level of scepticism of the submissions from utilities in order to ensure that only costs that are warranted and efficiently incurred are passed through to consumers.

The purpose of the consultation process in July is to put forward our views and submissions from Irish Water in order to gain feedback from the public rather than put out definitive positions which people would rightly criticise us for as being diktat rather than public consultation. We have to strike a balance and not be completely definitive because otherwise we run the risk of not going through the process according to good regulatory practice. Where we are of the view that particular issues need to be addressed in a certain way we will put out a “minded to” position and will be clear.

The key issue in respect of water quality is people’s ability to consume the water. There should be a reduction in the charge where it is not drinkable. We have said that the minimum level for that is 50%. We are now looking to consult on whether there should be circumstances in which it should be higher than 50%, perhaps even 100% where it has been undrinkable for a prolonged period. We do not want to be definitive about that. We want to put it out to public consultation.

It would be very unwise of the CER to offer a view of what medical conditions would warrant a cap on water charges. We are not medical experts. It is covered in the ministerial direction that the Department of Health has that expertise and will advise on the medical conditions.

Barry Cowen (Laois-Offaly, Fianna Fail)
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We were informed that the Ministers for Health and the Environment, Community and Local Government would engage in consultation with a view to making a recommendation to the commission. Do the officials know whether that consultation has taken place? I assume a submission has not yet been made.

Ms Cathy Mannion:

As far as I am aware, the Ministers' consultation has not taken place. As Mr. McGowan said, we will take their advice when they have concluded that consultation. We will be guided by the HSE, which has the expertise in this area.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Have the officials been told why that submission has not yet been made, or why consultation has not taken place with a view to the making of a submission?

Ms Cathy Mannion:

No, but I expect the consultation to take place and the decision to be made in a way that is line with our timetable and fits in with our tariff process. Everybody is well aware that the tariff will be in place from 1 October. Everybody must be aware of their rights in September.

Mr. Paul McGowan:

I would like to respond to the more general point that was made about whether the existence of a standing charge would have an impact on Irish Water's ability to access finance. Various potential tariff structures are used in other jurisdictions across Europe. Payments can be based on rateable value, for example, or purely based on consumption. It is clear that one of the stated aims of water charging in Ireland is to reduce overall consumption and thereby conserve water, which is a precious resource. One could argue that a water charge which is purely based on quantity is a rational response to that goal. Equally, we would have argued in favour of a system that takes account of the fact that a zero cost is not associated with dwellings that are not primary residences and have zero consumption. One would expect that there would be a level of consumption in all households with residential occupancy, but there might not be any consumption in premises with no residents. It is important that a minimum charge is associated with those premises.

On the specific question of Irish Water's ability to attract finance regardless of whether there is a standing charge, the feedback we have got from the ratings agencies indicates that the foremost issue is the stability of the regulatory regime. One of the key areas we addressed early in this process was what the overall regulatory regime would look like. When we issued our advice to the Minister - that has now been published - we focused on the idea that we would go through six-year revenue controls and identify a reasonable return and a reasonable cost of debt, etc. That indicates to rating agencies and the wider capital markets that the utility has a reasonably robust revenue stream in order to meet its funding commitments. I would contend that the markets look at that level of information, rather than the minutiae of particular tariff structures. My colleagues might have other points to make in that regard.

Mr. Garrett Blaney:

I would like to emphasise the importance of capital for us. The water industry is a very capital-intensive industry. There is a great deal of further capital investment to be made. It is very important for us to be able to access cheap finance. We believe that part of the role of the regulator is to provide the stability and the framework to encourage people to make investments that are not based on the view of the Minister of the day. There should be regulatory certainty over a continuous period of time. We have seen significant capital investment and relatively low-cost financing within the energy sector. We hope to use the regulatory certainty and the model in that regard to assist the water sector. At one point at the height of the crisis, the cost of debt for the various utilities was lower than the cost for the Government. The capital markets value regulatory certainty. It has a measurable value for consumers. We have been in discussions with some of the big international funders. I think they will want to see some certainty, particularly around the revenue streams for Irish Water. I do not think we will get international finance from day one. It will probably take some time for that to develop. The more that can be done on a stand-alone basis, the better. We will continue that. If international funders are to grow in confidence, they will need to see that the regulatory framework is stable.

Ms Cathy Mannion:

I would like to respond to some of the other questions if that is okay.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Yes.

Ms Cathy Mannion:

A question was asked about charges for customers who do not have meters, in light of the fact that there will be 1 million such customers in October. We were asked whether we have investigated other ways of calculating the unmetered tariffs. That is part of the policy direction request we have made to Irish Water. We have asked it to do that analysis and provide it to us as part of its submission to us. I know from a preliminary view of other markets that it is based on property value in the UK, for example. We did not think that was an appropriate way to proceed because there is no link between the value of a property and how much water is used in that property. I am aware from our discussions with Irish Water that there is no link between the amount of water one uses and the size of a house or the number of bathrooms, toilets and bedrooms in that house. That is why we are coming to the view that occupancy seems to be the closest indicator we can find. We have asked Irish Water to gather a lot of data about the number of people living in houses, their ages and how many of them are children or older people to see whether there is a link between such factors and water usage . That is why we will have the rebate system in place. If we get the assessed charge slightly wrong, a rebate will apply. The information about how much water people use is only coming in now. If one moves from an assessed charge to a metered charge, and one's metered charge is lower, one will get a rebate. People should get some comfort from that. They will be no worse off by virtue of having started off on the assessed charge.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Did Irish Water examine assessed charging systems in any country other than the UK?

Ms Cathy Mannion:

It will when it makes its submission. We are carrying out an assessment of other markets in our office in order to double-check the figures.

Barry Cowen (Laois-Offaly, Fianna Fail)
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The commission will not divulge the results of that assessment until it has measured the Irish water submission.

Ms Cathy Mannion:

We will bring it all together.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Okay.

Ms Cathy Mannion:

We will set out what they are saying and what we think of that. We were asked whether the charges that will apply from October to the end of December 2016 are fixed in stone. They are subject to two caveats. First, the Minister can always issue a policy direction. However, he has given no indication that he will issue any policy direction in this area. He is very clear that it is fixed until the end of December 2016. The only area where we have to be careful relates to the free allowance of 38,000 litres of water per child. The policy direction requires validation of that figure. In other words, a decision will have to be made on whether that figure is appropriate or should be lower. Irish Water will make a submission to us in that regard. If we think the evidence is robust, we will take it into consideration. If we do not think it is, we will get Irish Water to carry out more analysis. We will then decide what to do with that information. We might decide to wait until the end of the two-year period, or we might ask the Minister to consider a different figure at some time during that period. As Mr. McGowan said, it is very important for us to get that figure correct. If the allowance per child is significantly over-inflated, people living in a house where there are no children, or where the children are over the age of 18, will be paying more than they should because we have provided for an allowance that is too high in respect of children under the age of 18. We have to weigh up the interests of all consumers carefully when we are determining what the right figure is.

We were also asked whether we have figures for the level of subvention from the Government. The charges will be fixed for a period of two and a quarter years. When we are making a decision on the charges, we will need to know exactly how much we will get from tariffs and from the Government's subvention. When Irish Water makes its submission to us and we publish our figures, we will make it clear to everybody how much money will be provided by the Government over two and a half years. We will also set out the level of the charges, the number of people who will pay those charges and how much revenue it will bring in. We will do the maths at the very end.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Has the commission received a commitment from the Government in relation to the subvention over the next two and a quarter years? Can the commission adequately cater for and allow for low-income supports, for example? Perhaps this is another area in which the commission is not free to divulge any information until it has received Irish Water's submission and made a judgment on it.

Ms Cathy Mannion:

We are working on estimates provided by the Department. We have to make sure we review Irish Water's costs and come out with a reasonable figure for total revenue for the two and a half years in question. Therefore, we have to come up with a way of funding those costs. It will be partly covered through business tariffs, partly covered through domestic tariffs and partly covered through Government subvention. An assurance with regard to each of those elements will have to be received before the tariffs become operational in October. I am confident that we will receive the assurances in question.

Barry Cowen (Laois-Offaly, Fianna Fail)
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A Fine Gael member is due to speak. Who will speak on behalf of the party initially?

Caít Keane (Fine Gael)
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We will have a vote in the Seanad in a moment. I hope I will be present for the response but it will be recorded nonetheless. Medical conditions are an important consideration. The Minister said - I read it in the newspapers this morning - that medical conditions will be assessed and consultations will take place. When I read that, I was assured that the Minister for the Environment, Community and Local Government and the Minister for Health in consultation would set down the specifics. The CER is not an expert in health. What is the importance of consulting it on health matters? It is clearly set out in the water policy direction that both Ministers would get together on the issue. We must ensure that all of the necessary health grounds are set out. We should be able to tell the Minister that the CER thinks A, B and C should be considered. Is it possible to outline those points today?

The Minister set out in directive 5 that there would be a free allowance for households and children. An upper age limit has been set at 18 for the definition of a child who is in school or college. What if young people are working? Will that be considered to be a policy direction?

Another directive from the Minister related to a reduction in the charge in the event of water quality being inadequate or where there is impaired service. The CER has taken that into consideration. A rebate will be available for impaired service. If boil restrictions are in place, a rebate will also be available. How will the rebate be managed or who will say a person did not have X amount of water for six months? Will it be the local authority, Uisce Éireann or the regulator? How will a decision be made on rebates?

I note that 153 submissions were received by the CER and they are being taken into consideration. I made a submission on medical issues and water conservation. Could the CER indicate whether it will make recommendations or if the Minister will make them to facilitate water harvesting and other such measures? The Minister has referred to the matter also.

I welcome the accelerated metering of apartments. Does it mean it will happen in two months, six months or a year?

The CER stated in its submission that discounts will apply where water is unfit for human consumption. The Minister referred to it also in his directive. The CER will publish regulations in December. The first fix will be free. People are worried about what the cost will be if leaks are discovered. In the event that only 10% of water is used in a property, will a recommendation be made on that and will there be separation at source. If only 10% of water is used then it is very expensive to treat it all. There is much waste involved if water is leaking. It is expensive to treat water that is flushed down the toilet. Reed bed treatment is being used in Offaly rather than the more expensive conventional treatment.

Reference was made to what happens in the United Kingdom. The system in Northern Ireland is the same as in the United Kingdom which means we do not have to look too far up the road to see the charges are more and are based on property value. There is no encouragement for people conserve water. Will there be a directive on education in terms of water conservation and will there be an onus on schools, parents, local authority representatives and Oireachtas Members to play a part in educating people to conserve water?

Reference was made in the directive that came from the Minister to a fixed fee until 2016. Because it is a statutory directive I do not believe it will be changed or could be changed until after 2016. Am I correct in my assumption?

Ruth Coppinger (Dublin West, Socialist Party)
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It will take a long time to answer the questions. It would be better to group them.

Caít Keane (Fine Gael)
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I have to go now. I would like the same courtesy as is afforded to the Chair. We have a vote in the Seanad.

Ruth Coppinger (Dublin West, Socialist Party)
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I am just saying it will take another hour or hour and a half to answer the questions. Would it not be better to group them?

Barry Cowen (Laois-Offaly, Fianna Fail)
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An agreed approach was taken.

Caít Keane (Fine Gael)
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We agreed procedure initially.

Ruth Coppinger (Dublin West, Socialist Party)
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I am just proposing that we consider the option. Senator Keane did not listen to the previous responses.

Barry Cowen (Laois-Offaly, Fianna Fail)
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I have to take the questions in the order that was agreed by the committee.

Ruth Coppinger (Dublin West, Socialist Party)
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That is grand.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Many of the questions will overlap and it might be faster if a response is given to those ones.

Mr. Paul McGowan:

I will deal with the questions, some of which were answered.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Would Mr. McGowan like to hear more questions?

Caít Keane (Fine Gael)
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I want to hear the response to my questions, which were totally different to what the Deputies have asked.

Ruth Coppinger (Dublin West, Socialist Party)
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Half of them have been asked already.

Caít Keane (Fine Gael)
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If we had less interruption, we would be finished by now.

Ruth Coppinger (Dublin West, Socialist Party)
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The question on health was answered.

Mr. Paul McGowan:

I will kick off. On medical conditions it is important to point out that we will take a list of medical conditions and exemptions will apply in those cases. We are not experts and it is not our role to decide on the conditions.

I will ask Ms Mannion to respond to the question on how the free allowance is defined. My understanding is that it relates to those in receipt of child benefit. That is how the definition is determined.

On quality and how the rebate will be managed, we will seek proposals from Irish Water but we will expect that rebates will kick in quickly and there would not be too long of a waiting period once it is decided that one’s water is not fit for human consumption. Ms Mannion will be able to provide more information on the issue. Ultimately, we will set down the rules by which rebates will be determined. If a customer feels that Irish Water has not complied with them he or she can complain to Irish Water and if he or she does not get the expected answer or he or she is unhappy with the response then ultimately a complaint can be made to us.

We would not give particular recommendations on water harvesting. What we will do is work with Irish Water through, for example, our research and development fund, and its obligation to give information on water conservation to customers. Ultimately, this is about water conservation so even water charging based on metered consumption is a water conservation measure of itself. As with various other ideas such as, for example, a schools programme, those are the type of things we would encourage Irish Water to work on and develop proposals. We will give it an allowance for a certain amount of research and development but there will be other agencies it can work with in that regard. That is certainly something we would promote as part of the overall package of water regulation, and for Irish Water to engage with the water customer.

To be clear, it is not a case of accelerated metering of apartments, it is an accelerated roll out of metering to those who rainwater harvest and who want to avail of the advantage that gives. Where there is a pocket of them they would be grouped and they would get priority meters.

In relation to the metering of apartments generally, this is currently an issue in terms of how it can be done. It is a matter that is being examined and in time we hope that proposals would be introduced to allow for metering of all premises. It is currently envisaged that in the first metering programme that is being set out that all residences will have a meter. As of now, certain residences cannot have a meter but we are seeking to resolve the issue in the long term.

We have good links with the Northern Ireland water regulator because it is the energy regulator there too and we deal with it every day. It does not have a domestic water charge as it receives direct funding.

Ms Cathy Mannion:

On a rebate for a customer affected by a boil-water notice, we would have a detailed set of rules with Irish Water as to how it is applied, compensation is calculated, how soon the consumer gets that payment and how it appears on their bill. There will be complete clarity around when people will receive these payments. It will not be for the customer to contact Irish Water to say they should get the payment. Instead, the onus will be on Irish Water to promptly contact the customer about the rebate. We have changed the emphasis there slightly.

We have asked Irish Water for a first-fix policy for a consultation paper. There is a lack of clarity around what exactly is covered in the first-fix policy and how it will operate. We will be consulting on that over the next month. Everyone will then have the opportunity to explain what should or should not be included in that policy.

I agree that if only 10% of the water coming into a house is for drinking, then it seems to be a waste of investment if the rest of the supply is given over to showers and washing cars for example. There is a small amount of money given over for research and development. I have asked Irish Water to examine minimising future investment for the treatment of drinking water as against the treatment of other use water. I can imagine that it would be an expensive proposition because it is about splitting drinking and non-drinking water, effectively meaning two supplies for a house.

Caít Keane (Fine Gael)
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Will there be two meters?

Ms Cathy Mannion:

There is one meter to measure all water coming into a house. We understand the point about 10% of water going into a house for human consumption.

Caít Keane (Fine Gael)
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My question is more about mixed premises. What if one has a building with an upstairs as a domestic dwelling and a downstairs being a commercial unit? Would there be two meters then?

Ms Cathy Mannion:

Initially, there will be one meter. The person upstairs would be on an assessed charge while the business downstairs would be on a meter charge with some adjustment for the domestic assess charge.

It is part of phase two with Irish Water, in that we have to see how we can separate meter supplies in such scenarios.

Mr. Garrett Blaney:

There is also rebed technology. Setting up a pricing structure encourages people to put in their own technology rather than pay for a service from Irish Water. On the rain-harvesting question, one would have to separate potable from non-potable water. People could use rainwater to flush toilets and so on. These technologies will all have a commercial signal, once pricing from Irish Water comes in as people will then have an alternative to Irish Water.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Does Deputy Stanley agree to share his time with Deputy Coppinger?

Brian Stanley (Laois-Offaly, Sinn Fein)
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If Deputy Coppinger wants to, but I will be brief. I think we should have limited it to 15 minutes at the beginning rather than going this way.

Michelle Mulherin (Mayo, Fine Gael)
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Chairman, in fairness the order was agreed at the start.

Barry Cowen (Laois-Offaly, Fianna Fail)
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It is because many of the questions have already been asked.

Michelle Mulherin (Mayo, Fine Gael)
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We should stick to the sequence agreed.

Barry Cowen (Laois-Offaly, Fianna Fail)
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If I can move it along quickly, people will be happy.

Michelle Mulherin (Mayo, Fine Gael)
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I can ask the same questions.

Brian Stanley (Laois-Offaly, Sinn Fein)
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When did the commission request the pricing policy from Uisce Éireann? In excess of €185 million is earmarked to be spent on the establishment of Uisce Éireann as a corporate entity. The commission’s role is like that of county councillors in monitoring water services and their improvements while the executive role has been handed over to Uisce Éireann. Public representatives would traditionally have had an input into this process but now we do not which is very frustrating. What is the commission’s view on this, particularly as there have been no improvements or fixing of leaks yet?

In a reply to a question on a capital project for a wastewater treatment in my constituency, Irish Water stated, as a regulated national utility, it must submit its proposed capital investment plan to the regulator which will assess it to ensure it is appropriate and delivers value for money for customers. Ultimately, it is the Commission for Energy Regulation that decides what investments can be made. Would the commission go to, say, Rathdowney, County Laois, to determine whether a new sewage treatment plant is required for the town? Would it talk to Uisce Éireann, local businesses and people on the need for such a plant? Is this a correct interpretation of the commission’s role in deciding capital investment plans?

The Department of Health and Children and Health Service Executive will set out the parameters for charge exemptions and medical conditions. For those with a disability which might not fit into the criteria of a medical condition, will they come in under that heading? When the Bill was going through the Dáil, I submitted amendments to exempt pensioners, particularly those living on just a State pension, from water charges. What is the commission’s view on such an exemption?

The witnesses stated the average charge per household should be no more than €240 per annum from now until the end of 2016, and that is fair enough. In terms of the minimum charge, an elderly person who lives alone may spend time in respite care or with relatives or may have periods of hospitalisation. They may spend periods of time outside the State, such as living with relatives abroad for a period of time. Do the witnesses have a view on a minimum charge for primary residents?

This charge will work in two ways. There will be the charge for the household through the bill and a transfer of money from the Exchequer, or from the property tax as happened this year of €186 million. What percentage should be in the bill which comes in the post and what percentage should continue to be subvented by the Exchequer and taken from general taxation?

With regard to the economic rate, it has been stated there will be no change until 2016. What do the witnesses see as the economic rate? Have they done a calculation on the economic rate for water? What does it actually cost to provide it per household? Do they see it moving quickly towards the full economic rate being included in the bill in the post, perhaps over three to six years? In other words, the full economic rate would be levied through water charges.

The Taoiseach has answered the question on the reduction in supply as he told us a long time ago there would be a reduction in supply for people who cannot pay or who will not pay. There are probably people who cannot pay, such as those in negative equity. They are already on a starvation diet and freezing during the winter trying to heat the house in which they live. They suffer great deprivation. What level of supply will these people have? These are people who simply cannot pay. Uisce Éireann will have the power to turn down the water supply electronically. What level of supply will they get? Will they get 1 gallon, 10 gallons or 1 litre per day? This will be a major question for the regulator because the issue will arise. I know many people in this situation, such as constituents who do not have tomorrow's dinner. They do not have breakfast for tomorrow morning. How do the witnesses envisage this panning out? What will be the level of reduction? How much water will they get into their houses?

Impaired water quality is an issue. The witnesses mentioned a reduction in the bill of 50% in cases where water is not fit for human consumption, and perhaps going beyond this reduction in cases of ongoing and continuous boil notices. There is a problem with regard to hard water, which is where there is lime in the water. In the part of the planet which I inhabit in the midlands there is a huge problem with regard to lime content in the water. This is the case in Kildare, Laois, Offaly and other counties. I have an expensive water softener in my house as do many of my neighbours. Even with this we still have problems with electric gadgets being corroded and blocked. People who cannot afford to put in a water softener are bedevilled with problems. Do the witnesses envisage these people getting a reduction? The water coming in is not of a quality which should be going into a house with regard to electrical appliances. It costs hundreds of euro to deal with electric kettles, showers and washing machines and other appliances which are being destroyed.

With regard to projected increases, a €240 average is envisaged for the first two years. On the first day of a sale one always pitches good prices to attract the public. This question is linked to that on the economic charge which I asked earlier and the witnesses may link the two for the purposes of answering. What is the projected percentage increase over a three to five-year period? Do the witnesses see it as being 5% or 10% a year? What do they consider reasonable?

Tenants will be liable for water charges in private rented and local authority accommodation. An issue will arises where a tenant cannot get a landlord to fix leaks in the pipes or the plumbing system, be it the local authority or a private landlord. Hundreds of gallons would go through a small leak over a week or a month. How will we address this? Tenants tend to be a lower income group.

We do not have an out-of-hours service arrangement between Uisce Éireann and six local authorities, including Laois County Council. I stumbled across this because of a weekend emergency. A problem which occurred on a bank holiday weekend could continue for 72 hours or longer without any emergency services. Uisce Éireann has tried to tell me and the public there were no emergency services prior to it taking over but there were and I have highlighted this. I ask the witnesses to deal with this because it is a huge issue of concern.

Ruth Coppinger (Dublin West, Socialist Party)
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I am equally dubious about how the timeline has been completely thrown off by the lack of information from Irish Water. The public is being deliberately kept in the dark. This is the only conclusion we can draw. The water charges are political dynamite as everybody who canvassed knows.

CER states the average charge will not be more than €240 on average. From where does it get this figure? OECD best practice for government services in general and water charges is full cost recovery. This is what is in the document drawn up by the IMF and the previous Government. Full cost recovery includes operational and capital costs. The current cost of supplying non-domestic and domestic water is approximately €1.2 billion. As €200 million is paid by the non-domestic sector I will work on the figure of €1 billion. A total of 1.48 million households are on the public water supply system with others on group water schemes. If this is divided into €1 billion the result is €675. Why does CER, the Government and Irish Water keep stating the average figure will be €240? I have seen water bills in Britain for more than €600. One can see them on Facebook. People should be told what the real figure will be. Why does CER operate on the lower figure?

So-called allowances of water were trumpeted before the election, but now we read that what has been discovered is that children consume less water than was previously thought. I do not know how one measures what a child consumes. How does anyone know what a child consumes? The meter records the use of the overall household. The free allowance of 38,000 litres which was trumpeted has been thrown off course and it may be that people will have much higher bills. What is the attitude of the witnesses on this?

I understand the witnesses stating they will go with what the HSE or the Department of Health has to say with regard to health, but they also told us they are independent. Why will they leave such an important matter to what is effectively the Government to decide?

If people have serious health needs that require them to use much more water, will the independent regulator have a role in that regard?

When will people know the water charges they will have to pay? I am still not clear how it will work. Is Mr. McGowan saying each household must fill in a form, similar to a census, indicating to Irish Water who is living in that house? It is not clear how that will be done.

Finally, as the energy regulator, Mr. McGowan might have a word with someone about the air conditioning level in here, which is ten times higher than necessary. We are all freezing. If it was lowered it might reduce considerably the costs of running the Dáil.

Mr. Paul McGowan:

Many questions were asked and I will work through them. Ms Mannion and Mr. Blaney will also contribute. I will work backwards to refresh my memory. I cannot answer the Deputy's last question. That is a matter for the Deputies.

In terms of the way the assessed charge will be done, if it is to be based on occupancy we must have knowledge of the occupancy of the various households. We expect that will be done through a self-declaration, which Irish Water would perform. Essentially, a self-declaration of the number of people in the house, and the number of children, is the basis on which the assessed charge would be determined.

As to when people will know the charge, we will be putting out the substantive consultation regarding the various water charges in July. We had hoped it would be June but it will be July, and the decision will be made in September. People will have a strong indication of the charges in July, and they will know for sure in September.

On the reason the Commission for Energy Regulation, CER, is not involved in the health aspect, that is not our area of expertise. Those in the Department of Health, I believe through the Health Service Executive, are the people who have the expertise regarding this area. We do not have it, nor do we have the legislative remit. That is the reason it would be appropriate that Irish Water is advised of the relevant medical conditions.

Mr. Garrett Blaney:

In terms of how our independence works, our independence is set out in statute. We have to work closely within the statutes we are given and, rightly, people will test us in that regard. They have gone to the Supreme Court with one of the decisions we have taken. We must work within our legislative framework but we do that as independently as we can within that context.

Mr. Paul McGowan:

Regarding the allowance, the ministerial direction is clear. The allowance per child has been identified as 38,000 litres but if there is analysis that shows the number is different, that should be taken on board. This is a matter of equity. As Ms Mannion pointed out earlier, if the allowance of 38,000 litres is too high, essentially, people with no children would be cross-subsidising people who have children. It is important that we know whether the number is right. That does not mean that because Irish Water says the number is wrong we will accept what it says without question. It has to convince us that 38,000 litres is not the right number in terms of the correct allowance for children. We expect to see robust statistical analysis coming from Irish Water, possibly even peer reviewed, to ensure it is adequate.

Ms Cathy Mannion:

I have spoken to Irish Water and it is contacting the ESRI to go through that assessment. I want an external party to give us an independent view of how good it believes that analysis is but there will be an allowance for children up to the amount they use. We are not undermining that in any way. It is about trying to get the appropriate number that should be used for that allowance.

Mr. Paul McGowan:

Deputy Stanley referred to an average charge of €240 for the first two years and asked about the position beyond that. He also asked about the economic rate. Deputy Coppinger asked how there can be full cost recovery and yet a charge of €240. Those questions are within the same ambit. The Deputy is right. There are three sources of revenue to Irish Water - non-domestic water charges, domestic water charges and Government subvention. When taken together those three will equal the total revenue Irish Water will earn. To be clear, as long as there is a level of Government subvention, the charges to customers will reflect that. It stands to reason that if Government subvention falls, charges would rise to compensate for that, all other things being equal. It is as straightforward as that.

We have not done the analysis in terms of what the charges will be in the future. We have been clear that we are looking at the first two years to the end of 2016. That is our interim revenue control period. As this is a new process it is important that we do not try to forecast too far forward. We need to learn more about the dynamics of the water system. We would expect our next price control would be a typical five or six year price control. When we consult on that, probably in 2015 or 2016, there will be more information about the likely charges for the following five or six years.

Deputy Stanley raised the issue of hard water, which was something that came back to us in terms of the responses we received. Everybody acknowledges that in Ireland hard water is a fact of life for many people. We have looked at other regimes. Discounts do not typically apply for areas that have hard water. Our focus is very much in terms of where a discount will apply where the water is not fit for human consumption. That is the focus we are maintaining with regard to that entire area.

The Deputy also raised the issue of the reduction in supply and customers who cannot pay or will not pay. Ms Mannion may have more information in terms of what the outcome of a supply restriction may be but it is important to distinguish between those who cannot pay and those who will not pay, as we do in the energy sector. In terms of people who cannot pay, Irish Water will have obligations to work with those customers to ensure that as far as possible, payment plans that can meet the requirements of the individual customer are put in place and that there are many payment options to ensure people have different means by which they can pay to allow them pay a little at a time on a regular basis or pay it off in lump sums. It is important to distinguish between the cannot pay and the will not pay customers, as we do in the energy sector.

I have covered the economic rate. The Deputy asked about people who do not spend much time in the residence because they are in respite, they travel or whatever. To be clear, this is about the primary residence. If it is their primary residence and they are on a meter, effectively, they will be paying nothing if they are not in the residence because they will not consume water. We are talking about a minimum charge for non-principal primary residences.

Brian Stanley (Laois-Offaly, Sinn Fein)
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To be clear, there will be no minimum charge on a primary residence.

Mr. Paul McGowan:

Yes. To be clear, if it is one's primary residence one will be charged the metered charge or the assessed charge.

Ruth Coppinger (Dublin West, Socialist Party)
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Is that just for the first two years?

Mr. Paul McGowan:

One will be on the assessed charge until the meter is installed. Once they are on the meter, if they discover that their metered charge is much lower than they paid on the assessed charge, they are in a rebate situation. Once they are on the metered charge they are on the metered charge from that time on.

Ms Cathy Mannion:

Deputy Coppinger asked about the capital programme and stated that Irish Water in a statement said it submitted the plan to the CER to review and, ultimately, decide on the schemes that are to be progressed. I see it slightly differently to that because there are two regulators who have a say in this. First, the CER is the economic regulator but the Environmental Protection Agency, EPA, is the quality regulator. The EPA has strong views, particularly on wastewater compliance. A good deal of work has to be done for Ireland to comply with European directives. Irish Water has published an investment plan for approximately €2.7 billion. Our consultants who reviewed that plan said that every one of those projects are needed but what we believe will happen, at least in the coming years, is that this €2.7 billion is not enough to fund those and there will have to be some prioritisation as to what is the important scheme to do first and what to do second, third and fourth. Everything gets done ultimately, but it is a case of timing and what is started first, second and third. I see the CER, the EPA and the Department having separate but linked roles in deciding how we prioritise and approve the list of investments.

The CER will work with the EPA - and we have started this work - and the Department on how best to prioritise.

Brian Stanley (Laois-Offaly, Sinn Fein)
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The reply from Uisce Éireann is very clear and says "Ultimately, the CER decides what investments can be made."

Ms Cathy Mannion:

Ultimately we decide on the level of cost for a particular investment but I do not think that tells the whole story to say that we decide on each and every investment, which is done through ranking them first, second and third. Clearly, as the Deputy can see, the EPA does have a role because it is the quality regulator.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Yet again that is another example how the matter might be better teased out when assessing the submission by Irish Water specifically. This is something that we can note and discuss further when we have the submission by Irish Water.

Ms Cathy Mannion:

We are talking to the Department about this matter. We propose a separate consultation on it because it is a very important area, there is limited funding and there is an awful lot of investment to be made. Clear and transparent processes must be in place to determine what gets invested in first, second and third. There will be another opportunity to express views.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Please continue.

Ms Cathy Mannion:

A lack of an out-of-hours service in six local authorities has the potential to impact on 600,000 water customers. I read about it in a newspaper. All I can do, at this point, is draw the committee's attention to the CER's consultation paper on the handbook that contains the rules Irish Water must abide by. One of the rules that we have put out for consultation is that it should endeavour to repair a leak within 12 hours and repair a major mains leak within 24 hours. I have not fully assessed the response by Irish Water to the rule but its response will answer the Deputy's question. I can come back to him once I have reviewed same.

Brian Stanley (Laois-Offaly, Sinn Fein)
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Loss of water from the system is one issue but there is also a health and safety issue. I refer to a case where sewage was at risk of flowing in through the front door and out through the back door of a house. It was caused by an overloaded public water mains located on the roadway and was not the fault of a pensioner who lived in the house. If CER feels it is appropriate and within its role then I ask it to take up the matter with Irish Water. To date, Irish Water has not put anything in place with local authorities. The situation is an issue of huge concern to public representatives and the management of local authorities.

Ms Cathy Mannion:

I give the Deputy a commitment that we will pick up the matter with Irish Water as part of the handbook work.

Mr. Paul McGowan:

There were one or two other questions on establishment costs and so forth. As the Deputy will know, in response to previous questions from the committee we carried out an initial analysis around establishment costs. As part of the consultation that we will issue in July we will include a full assessment of establishment costs and all other operating and capital expenditure.

The Deputy also asked about free allowances and pensioners. We cannot give him an answer on exemptions for pensioners and affordability measures are a matter for Government policy. We set the charge irrespective of whether the Government decides to put in place allowances or otherwise to assist people in their ability to pay, which is a matter of Government policy.

I think we have covered all of the questions but please let us know if we missed anything.

Barry Cowen (Laois-Offaly, Fianna Fail)
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There are five Fine Gael representatives present and I call Deputy Mulherin because she was the first to indicate her wish to contribute.

Michelle Mulherin (Mayo, Fine Gael)
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We rely on the Acting Chairman to pick up on who indicated first.

Barry Cowen (Laois-Offaly, Fianna Fail)
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No problem. Please commence.

Michelle Mulherin (Mayo, Fine Gael)
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Mr. Blaney mentioned, as reiterated by Mr. McGowan, that affordability was not part of the CER's consideration other than as directed by Government policy. Obviously that is what the Minister for the Environment, Community and Local Government set out in his water charges policy directive 2014. The CER abided by that policy when looking at allowances and so on. Ironically, affordability is nearly the biggest obstacle because the general public are concerned about their ability to pay for water. A lot of people are seriously concerned about getting another bill in their door. I shall add a point now that I was going to make later. Whatever the amount, the liability or charge should not arise at the same time the local property tax is sought, and preferably it should not arrive on 1 January or just after Christmas. I ask that because we must be sensitive to the fact that people are at the pin of their collars.

There is general acceptance of the broad principles on which CER operates and creates a pricing model which includes conservation. We should not waste water but it happens. People have discussed rainwater harvesting and the use of treated water for toilets, etc. We also know that we have a very poor pipe infrastructure. It is amazing to think that in modern Ireland, particularly in large centres of population and business, there is no regular supply of water due to the standard of infrastructure. It is only as the debate evolved that I realised that the problem was widespread and not just confined to my town in Mayo, and around County Mayo, but even in places located in the heart of Dublin. The system is failing and we had no systemic way to reinvest in it. Therefore, we appreciate that we need to invest in a structure because people want quality water and a proper water system.

I have an issue with a model that would pass on a cost, other than incidental costs, for the treatment of water and infrastructure set-up. I refer to excess staff which is an issue that has been highlighted already. Under service level agreements with local authorities, staff coming from the local authority water services department are excess to requirement. However, Uisce Éireann has estimated that it will require in the region of 1,700 staff and that means 4,300 staff will pass over under the service level agreements. If one applies the rationale that only costs associated with the production of water, including capital infrastructure which can be phased out over a basis, then I think excess staff - which has been estimated to cost €2 billion, up to 2026, when the service level agreements expire - should have no part in the CER's pricing of water. That is my submission which I made to the Minister when he sought public consultation on his directive. I do not think excess staff should be included in the price and it does not make sense to include them. That is aside from the subvention issue which obviously involves other Departments such as the Department of Social Protection. That model does not make sense. We must bear in mind that in the future more cost will be borne by people and there will be less subvention. That cost will become a very real factor, particularly at a time when there is less Government support, post-2016. However, the measure has yet to be decided. Does the CEO accept as reasonable and logical the premise that the cost of excess staff should be ring-fenced in terms of water pricing and removed from the equation? The cost should not be included when the CER decides the price of water.

Recently the head of Irish Water, Mr. John Tierney, issued a letter to local authorities. Basically, he stalled the process of taking charge of housing estates which is long overdue in many cases. With regards the great debate on parliamentarians versus the very local parochial and parish pump business, the fact is people come to us about lighting, footpaths, potholes and having no developer to resolve their problems. We have cases where local authorities want to take charge of housing estates. However, Mr. Tierney has said "No, we have to develop a protocol". Irish Water did not mind installing meters outside people's houses in those estates. Therefore, if there is a problem with the pipeworks then Irish Water needs to say it will take over the entire system. It wants to charge and keep the money but offload any problems with the system on to the local authority or the residents of the estate, in some shape or form. That idea must be knocked on its head and Irish Water asked to carry the can.

Let me refer to the idea that Irish Water will not take over a problematic system of, for example, 100 houses in an estate where the developer has not installed the correct pipework. Naturally, the developer, if in existence, should be held responsible and the local authority should be allowed to deal with the developer.

The idea that Irish Water might contemplate not taking responsibility is unacceptable. The other part of that letter indicated that in the case of cluster developments, which would be more relevant in rural areas where there may be a proprietary effluent treatment unit as opposed to a main sewer, it has no intention of taking over the pipework system and wastewater treatment system. That is unacceptable. If it is doing the job, which we are all heralding saying there are good points, these are the difficulties that have to be overcome. It should take responsibility for the whole network, including the treatment plants and should not pick and choose. It is taking money from people on the one hand for these services and yet is not responsible for them. The shortcomings, whether in the wastewater treatment plan or the pipework, would not appear on a capital programme, whatever its priority. At the outset, it is suggesting there will be no priority for these because it may not take them in charge. That is wrong. I mentioned flexibility and timing of bills. Timing is very important.

The final point is one to which I think I know the answer. It is not a new issue but it is one that is of concern to people, that is, the treatment of water, what goes into it and especially the fluoridation of water and safe water. The issue of safe water was mentioned at the start. Does the Commission for Energy Regulation have a view on the fluoridation of water or is it kicking it back to the Department of Health again? It is an issue we have engaged with at times and we get that answer. There are different views on it. Given that people are being asked to pay for water it is important that there is a definitive view from the commission's point of view as it appears to be getting involved in all sorts of things, prioritisation, making sure there is a stable environment for investment and so on, bar affordability as was pointed out. On safety grounds, there are people who are complaining. We do not get to say what goes into this. A public health consideration should prevail as we have a more nuanced understanding of these issues.

Mr. Paul McGowan:

I thank the Deputy. I will take the last question first, to which she has anticipated my answer. Clearly it is not within our remit to offer advice on the health impact or otherwise of water fluoridation. I am aware it has been a matter of public debate. It is a matter for public debate and public policy but also Irish Water would have a voice in that debate and would, ultimately, comply with the outcome, whatever it was. It would be outside the remit of the regulator to offer a view on that issue. We would expect, if there was a clear policy on the issue, that Irish Water would comply with it in the most efficient way.

The Deputy did not raise a question but made an opening remark around affordability. Perhaps I should clarify. Affordability measures are a matter for the Government. Affordability is very much a matter for us in terms of our role as economic regulator. It is our role to ensure that only the costs that are warranted and that are incurred efficiently pass through to the customer. That is about affordability. Therefore, we are concerned about affordability. Once we have determined a reasonable economic level of revenue or charges we do not have a remit as to what particular targeted affordability measures may be put in place by Government. Clearly that is a matter for Government. I reassure the Deputy that we are concerned about the overall affordability of water and ensuring only efficiently incurred costs pass through to the customer.

It is difficult for me to give the Deputy direct answers in respect of many of the questions she raised around the letter from John Tierney. I can take it away and look at the particular issues.

Michelle Mulherin (Mayo, Fine Gael)
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I mentioned affordability first. Before that it was the efficient SLAs.

Mr. Paul McGowan:

I was going to come back to that issue. We would not expect a situation where Irish Water would charge people for a service it does not deliver. That is the first point. We will have to come back to the Deputy on the second point, which was the adoption of schemes. One can understand that there may be an issue whereby schemes have been put in place where, perhaps, there are concerns over the quality of the pipework and there is potential liability for rectifying inferior quality pipework. One can understand that is an issue because in a socialised tariff, all that cost is borne by all customers when in fact it may be appropriate that the developer or somebody else would be forced to address that particular issue. I will not give a definitive answer on that question until we have investigated it a little further.

The Deputy mentioned the SLAs and costs. We have not taken the costs under the SLAs and said that is fine, that is what Irish Water will get. However, we have analysed Irish Water's costs - this will be in our publication - to determine the efficient level of costs. We have to recognise from where Irish Water is starting. All new utilities, where they have been established on the back of an existing local authority provision or an existing provision by some other means, have taken on board a particular cost structure, a particular set of circumstances. The role of the economic regulator has been to state the utility's starting point, where it wants to get to, what is its glide path and what are the efficiencies we think it can achieve. That is what we are looking at. We are not looking at the SLAs and saying Irish Water has got those costs and that is it. We are looking at its cost base and identifying what efficiencies we think it should make. We expect Irish Water to achieve those efficiencies. As stated previously, we note that there is a review under the SLAs after years two and seven. That is the point where Irish Water needs to engage in terms of how those SLAs are structured, but we are not just taking SLAs and saying that those costs have to pass through to the Irish Water customer. We are looking at these costs independently against the types of costs that have been incurred for similar services in other jurisdictions and by other water companies.

Michelle Mulherin (Mayo, Fine Gael)
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In a direct answer then, will the Commission for Energy Regulation disallow the cost of excess staff, which has been identified as being the case, who are coming under Irish Water?

Mr. Paul McGowan:

Basically we are allowing Irish Water an efficient level of expenditure.

Michelle Mulherin (Mayo, Fine Gael)
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What is Mr. McGowan's view on it? I understand the generalities but this is a specific point in relation to how the price will be arrived at.

Mr. Paul McGowan:

Our view generally is that we are not going to allow Irish Water to expend money inefficiently. Equally, we are not going to identify individual positions which need to be done away with. We give them an efficient level of cost to carry out the function which is in line with other utilities across Europe. Ms Cathy Mannion may wish to add a further answer to that question.

Ms Cathy Mannion:

I will add a few comments. The service level agreements currently in place allow for a review after two years and another review after seven years. The starting point with Irish Water is that it has these service level agreements with the staff and the staff are much needed to carry out the work. We have to acknowledge that is the starting point. As Mr. Paul McGowan has said, we have looked at its costs and, acknowledging that this is where it is starting from, we have put some efficiency measures in place for the first three years. We plan to try for further efficiencies in place over that period in order that in the next review period, which will be six years after the end of 2016, we will probably seek harsher and more challenging reviews. We have to acknowledge that the starting point is the service level agreements and the good job that people are doing with Irish Water.

One other point was the suggestion that there should be some flexibility about the timing of billings to ensure they do not coincide with, say, the property tax. That is a reasonable point. We will speak to Irish Water to see if anything can be done to stagger these bills compared with, say, the property tax bills. On the issue of affordability, we consulted our handbook which has two or three pages setting out the requirements placed on Irish Water before it even thinks about a notice of reduction of supply. We have got many responses, particularly from organisations such as the Society of St. Vincent de Paul which has asked us to strengthen it further. We will do that. We will strengthen our handbook and look at the flexibility of the payments.

Michelle Mulherin (Mayo, Fine Gael)
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On a final point on the service level agreements, I do not understand the point about the two or five year reviews. I understand the review will change the fact that the need for these staff has passed.

These staff and their cost are under the umbrella of Irish Water. There is no plan to make staff redundant. In fact, the only way these excess staff will go is through natural wastage. They will still be there to be paid unless they retire or something else happens. That might divert from the fact that Ms Mannion states that the die is cast because they have to carry the excess staff.

I have no issue with the good job done by local authority staff. I was a member of a local authority. I deal with them, and they are great staff. However, if Irish Water states it needs 1,700 of those staff for the company to function and there are 4,300, but it sounds like CER will not look at it because this is the poison chalice that Irish Water has been given-----

Ms Cathy Mannion:

That is not my intention at all. What I am saying, to be clear, is that we have put efficiency measures in place with Irish Water. It is for Irish Water to achieve those efficiencies in the best way it can. What I also stated is that we acknowledge the starting point of Irish Water, that is, with the service level agreements, and we have measures in place for the next two years and we will be reviewing those measures for the following six years. It is up to Irish Water to decide how best to achieve those efficiencies. What is true is that if they do not achieve the efficiency, the additional costs they incur will not pass on to customers.

Mr. Garrett Blaney:

In terms of the importance of conservation, from our point of view it is good for the environment to conserve. However, given our system throughout the country, there is another reason for conservation. In many places, as the Chairman stated, we are running out of the infrastructure for the provision of services. Efficiency will defer capital costs. The value of that to consumers is significant. We like to encourage conservation, not only from the environment point of view but also because it can save money. We do not have to get debt from the international markets if we do not have to make those investments for some period of time. Anything we can do to defer that, particularly anything the members can do to encourage the message of the importance of efficiency, would be helpful.

Paudie Coffey (Waterford, Fine Gael)
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I thank the commissioners and the director for their presentation today. At the outset, I also welcome the fact that they agreed to return to the committee once the final submission of the Uisce Éireann water charges plan has been made to them. It is in the best interests of transparency and public debate on the charging plan.

We are debating a new national utility that will manage a reformed water system. No doubt the existing system has been identified as being a broken system. It has been inconsistent in terms of the state of the network where it has been identified that over 40% of the water goes into the ground through leakage even though we spend more than €1 billion per annum on it.

I acknowledge CER's track record. The only comparator is the electricity sector. When CER was established in 1999, I would suggest that the electricity networks may have been inconsistent and substandard in many areas around the country. Am I correct in assuming that CER will adopt a role with the objective of trying to achieve a consistent standard and quality of utility throughout the country, similar to that which it adopted when it took its role in the energy sector?

Mr. McGowan stated that CER will not allow Irish Water to expend money inefficiency. Does that apply to the set-up of Irish Water as well? There has been much controversy around the moneys expended on the establishment of the national database and the asset management system for Irish Water. Has he reviewed that? Is that seen as a necessity and a good investment in terms of where Irish Water is starting? It would be important to clarify that for the committee because there was much criticism and controversy around that. I believe it is important as a benchmark or as a starting point. One needs a properly audited oversight system or asset management system. Mr. McGowan might clarify that point.

Many areas I want to discuss have been covered and I will not go back over them. I have three areas they might address. One relates to the important customer charter or customer service obligations. I note at the outset of the presentation that CER states one of its duties is to protect the interests of customers. That is an important role and function of CER. When it states that, the obvious objective is the protection of water standard and quality for the customer. The three areas I would see as important are water pressure, water quality in terms of human consumption and water capacity. The witnesses mentioned that the discounts that are envisaged will only apply where water is not fit for human consumption, but I would argue that where water pressure is not adequate, it is not fit for domestic use. If, for example, there is only a dribble coming out of a tap, surely compensation or a discount should apply. The same may be said of capacity. If there is not enough water in a supply to service a domestic household adequately, surely there should be compensation for that household, such as a discount. Is there room here for a graded discount system, from where water is not fit for human consumption to pressure, water quality, capacity and other issues?

I understand similar standards apply in the customer charter for electricity supplies. Is that a fair comparison? Could the witnesses elaborate on that? Where the customer is the focal point and if the quality of supply is not sufficient in the three areas I mentioned, surely there should be a compensatory element in the supply contract. Will that be considered?

The other area I want to touch on is mixed use and other unusual scenarios. We will all be aware of the shared service supply where the supply is at the back of houses and for which CER will use an assessed means at present. I am conscious of some places where there is not a public water supply but there is a connection to the public waste water system. Given there is no meter, how is it envisaged that will be assessed? Will it be looked at on the basis of the number of occupants in the house or how will that be worked out? No doubt these scenarios will arise around the country.

The third area I want to touch on is the capital investment priorities outlined by Uisce Éireann. CER may well have good intentions and priorities in this area, but I refer back to its duty to protect the interests of customers. When I see that, I would contend that this involves the interests of all customers, both urban and rural. While the priorities for Uisce Éireann might be one matter, the public would depend on CER to ensure there is equality of delivery of capital investment throughout the country. In other words, those in towns and villages who have a real need in terms of water should not be forgotten and CER has an important role as the regulator to ensure Uisce Éireann's investment priorities look after those as much as the larger urban centres. Perhaps Mr. McGowan would comment on that.

Does CER have access to the asset management database that was mentioned earlier or does it depend on reports from Uisce Éireann? Does CER have independent access to such database?

Mr. Garrett Blaney:

I will take the question on the comparison with the electricity system first. I would agree with Deputy Coffey that we were in a similar situation when the CER was first formed, that there had been a lack of capital investment. Possibly, it was not as bad as we see in the water system, but there certainly had been under-investment in the electricity system. We must achieve a balance here. Obviously, there are major investments needed. We need to ensure the priorities are correct. We, as the regulator, need to guard against any gold plating or persons building what is not absolutely necessary because there is a strong cost element to all of this and we want to ensure consumers are protected in those costs.

We will try to have the same level of standard throughout the country in order that there is no sense of one place taking priority over another. We will also need to factor in large industries where they come along. Water provision, similar to electricity and gas provision, can be a major determinant for them coming into the country. We will try to factor that in and ensure that is facilitated. It is obviously important from a regional point of view and a national point of view that inward direct investment is not frustrated by a lack of water infrastructure. In general, I would agree with the Deputy. That is quite important and we will try to do that in as cost-effective a manner as possible. I will hand over to Mr. McGowan.

Mr. Paul McGowan:

I will address some of the other questions.

First, on the efficiency and whether it extends to the establishment costs, yes it does. The documentation we have put out is both an assessment of its capital costs for establishment and other capital investment and for its operating expenditure. Members might recall that when we appeared before the joint committee previously, we had previously carried out an initial assessment. This is a more robust assessment and I can reassure Deputy Coffey that it does extend to the establishment costs. As to the particular point raised by the Deputy, in the first instance, we recognise there are properties which will have both services, that is, both water and wastewater, as well as those that will have only one service, that is, either water or wastewater. For a wastewater-only service, it will be an assessed charge based on a self-declaration of occupancy because we will have no other means of assessment as, clearly, there will not be a meter and this will be the basis on which it will be done. The Commission for Energy Regulation, CER, does not have direct access to Irish Water's asset management systems as such but has the ability to require from that company whatever information, report or record we require to do our job. Essentially, we would simply request it.

I think that deals with most of the points raised by the Deputy.

Paudie Coffey (Waterford, Fine Gael)
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I also referred to water pressure.

Mr. Garrett Blaney:

We will talk the Deputy through the issues in respect of pressure and capacity. Pressure is a complicated feature and, obviously, it has been highly variable across the country. Low pressure has been a significant feature of water within the Irish system. In some ways, that actually has been designed for in that, for most properties, the building standards specify that one will have a tank in a property. The water pressure will vary significantly over the day and therefore at times of high pressure, one can fill the tank, which will cover against periods of low pressure for everything other than the direct means for consumption. Consequently, going back historically, some elements of pressure have been built into the design of properties. Pressure also is complicated in the sense that there is a relationship between pressure and the leakage in the system. Obviously, if one jacks up the pressure in the system, one also increases the leaks and we must make sure there is a nuanced approach to pressure in order that it does not increase what already is a very high leakage rate, as the Deputy mentioned, in the system. Overall, it is not so simple to even set a standard pressure.

Paudie Coffey (Waterford, Fine Gael)
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Will there be a minimum pressure?

Mr. Garrett Blaney:

These are the things we must work through over time. There is a complexity in this regard that we will need to understand. As matters stand, there is no minimum pressure. While we will examine this, a standard in this area is not simple.

The Deputy also mentioned capacity, which is very important. Obviously, we wish to try to enhance the system's resilience in order that as we develop the system over time, the system will remain in place even when under duress, in the event of risks arising such as the big freeze in Northern Ireland that caused major havoc to the system there, a drought or a major infrastructural collapse. It will take some time to make sure that we build up resilience to such risks within the design in the future but these are all areas we will consider. From the point of view of the customers, they simply want to know that they have reliable water, which obviously is an extremely important part of how the commission will try to incentivise the company.

Mr. Paul McGowan:

Ms Cathy Mannion will address the issue of investment priorities.

Ms Cathy Mannion:

Just before that, for the complete picture in respect of pressure, in our consultation on the handbook, we included a statement that with regard to pressure, the commission expects Irish Water to be able to fill a tank on the first floor of a house within 12 hours. While the company must revert to us in this regard, that is some sort of standard. As to whether Irish Water can achieve this standard because of the issues raised by Mr. Blaney, again, we will be able to provide a much fuller view on that when we respond to the consultation.

The Deputy mentioned the prioritisation of capital investments and the need to take urban and rural areas into consideration equally. I agree with the Deputy and as I stated previously, it is all about having a transparent process. In particular, when finances are limited, the commission must work closely with the Environmental Protection Agency, EPA, and the Department in determining the priority of the investments and the approval thereof. Consequently, I agree with the Deputy.

Barry Cowen (Laois-Offaly, Fianna Fail)
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I now call Deputy Corcoran Kennedy, who I thank for her patience in waiting.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I thank the witnesses for their attendance. What level of engagement has the commission had with Irish Water to date in respect of what it is trying to do with that company? What will happen with group water schemes? While there is much focus on people paying for water as though it had not happened across the country already, many people have been paying for water for a long time, myself included. Will there be any allowances for the group water schemes to pass on to the users?

I note that holiday homes were mentioned in the documentation provided. There are many different types of holiday home, ranging from a mobile home renting in a caravan park through to a small cottage somewhere to a palatial mansion. What different types of charges, if any, will be applied in this regard? Has the commission yet considered in detail the issue of sanctions for non-payment? Is this an issue about which it is waiting for Irish Water? I am thinking of the example in respect of electricity, whereby people may well run behind in the payment of their electricity bills. They sometimes have the option of coin metering and so on. Will the commission examine such a possibility for people who genuinely experience difficulties, that is, not those who do not wish to pay but those who are having difficulties in actually paying? The witnesses stated earlier that the commission's role and function is as economic regulator. Can they tell me how this will differ from the other regulatory work the commission does or whether there will be any difference? I acknowledge Ms Mannion mentioned the EPA is responsible for quality. Is this the only difference?

Mr. Paul McGowan:

I thank the Deputy. Ms Mannion probably will answer most of these questions, certainly on the level of engagement because she has been doing most of the engagement, as well as on group water schemes and holiday homes. As for the difference from the other work the commission does, the best way to characterise what the CER is doing with regard to the regulation of Irish Water probably is how we regulate the likes of ESB Networks and Bord Gáis Networks, as well as our customer protection role for electricity and gas customers. That is the closest analogy but we also have wider statutory functions in the area of safety which do not extend to water. That function we have regarding energy safety is quite distinct and we do not have it with regard to water. While that probably is the closest analogy, it is very similar to the work we do on network regulation. Does Ms Mannion wish to respond on the other questions?

Ms Cathy Mannion:

I may as well cover the last question as well, in that there is one further important difference between water and gas and electricity. In the case of the latter, we have a legal basis for resolving disputes and for dealing with customer complaints. There was no legal basis in the water legislation for anyone to carry out that role. Consequently, we have decided, on an agreement basis with Irish Water and the EPA, to put in place a process whereby if a customer rings Irish Water, he or she can immediately approach either the CER or the EPA to the extent that the complaint is not dealt with properly within Irish Water. In short, we will put in place a harmonised approach between the three organisations to allow customers to have a single point of contact whenever they have a complaint. Clearly, in the next round of legislation, we will seek the legal basis to do this because it always is second best to do it on an agreement basis, rather than having the legal rights.
As for our engagement with Irish Water to date, we have been working closely with the company for up to 18 months. It started out by just getting to know each other and working out a way of working together in order that Irish Water knew what were our goals and vice versa. The culmination of all this work will take place tomorrow, when Irish Water makes its full submission to us. As Mr. McGowan stated earlier, the last piece of work that had slowed up Irish Water was the need to conduct a market corporation test, which is very important because to get Irish Water off the Government's books, it must be fairly certain that it can pass this market corporation test. Consequently, it took a little more time to make sure that it got that right, probably rightly so from its point of view because we cannot get that one wrong.
As for holiday homes, no, we had not thought of having a different small standing charge. We are thinking of a single simple standing charge for all types of holiday homes because I suggest that in reality, the level of the charge, whatever it may be, will be much lower than the cost of providing the infrastructure to the property. It is more just an additional contribution that we want the second house to make towards its cost because it will be using very little water during the course of the year and otherwise might be paying too little in total for the water. The Deputy also mentioned payment options for energy.