Mr. Paul McGowan:

Our role relates to the economic regulation of the water and wastewater sectors. We have put forward to the Minister our economic regulatory framework and he has accepted it. It is based on the retail prices index minus X, RPI-X, model, a typical model used for the regulation of utilities throughout the world and one that represents good international practice. We find ourselves in a situation similar to that in 2000, when we assumed responsibility for the regulation of the electricity industry. At that stage there had been decades of under-investment, as well as a high cost base and quality and security issues associated with the electricity industry. Added to this scenario in respect of water and wastewater services in Ireland we have the establishment of a new utility. Our starting point is that Irish Water, wastewater services and the system are not fit for purpose.

We have three core areas on which we focus as an economic regulator. First, we aim to drive efficiencies in Irish Water and its cost base to ensure value is delivered to all those who receive water and wastewater services. Second, we aim to allow an economic regulatory framework to be in placd to ensure Irish Water has access to capital markets and borrowing in order that it can carry out the vital and necessary investment in water and wastewater services. Third, we aim to ensure the appropriate customer services standards for those who are receiving water and wastewater services from Irish Water.

In July we consulted on a proposed water charges plan which covered a range of matters. I do not intend to go into all of them, but suffice it to say it covered domestic charges and the interim revenue review, that is, the amount of money we were willing to allow Irish Water to earn through charges and other means. In response to this consultation we received 345 comments, all of which we reviewed and assessed as part of our decision-making process. They covered a range of issues, including impaired water services such as boiled water notices, the size of allowances and discounts. Having considered all of the comments made, we issued a direction to Irish Water on 17 September on its final water charges plan. This was informed by the policy direction from the Minister, our review of Irish Water's costs and the review of all the responses to the domestic tariff and non-domestic tariff proposals. It also took on board the Government's decision on 6 May on water charges.

I will not go through in detail the slides on the Minister's policy direction because we have spoken about it before to the committee, but I will be happy to take questions. The policy direction covered the stipulation that there be no standing charges for primary households, that provision be made for customers with medical conditions, that there be a free household allowance and that effectively there be free usage for children. Furthermore, we had to make provision for circumstances where water services were impaired, allow for rebates in the event that a customer's bill was lower once he or she moved to a metered charge and for assessed charges to be a proxy for metered charges insofar as it was possible to do so.

The next slide summarises the decision on Irish Water's overall revenue. The bottom line is probably of most significance. Effectively, Irish Water asked us for €2.26 billion in revenue for the period 1 October 2014 to end December 2016. As part of our analysis, we decided to allow the company €2.08 billion, a reduction of 8%.

We made this reduction in the interests of consumers. We set what we considered to be challenging but realistic targets for Irish Water in terms of the amount of operational expenditure it would incur during the period.

We also reduced the level of capital expenditure in terms of customer charges. This was to recognise, first, that we expected Irish Water to deliver efficiencies in its capital programme and also that it had put forward a very large capital programme. We were concerned about the volume of work it had identified and its ability to have the work done in the two and a quarter year period. We made it very clear to it that if it could deliver a larger capital programme and do so efficiently, it could proceed to do so and that we would take these costs into account in the next price control stage.

The next slide sets out the charges we included in our decision on the water charges plan. Effectively, the charge, after any free allowance is used up by a household, is €4.88 per 1,000 litres in water and wastewater services. If somebody avails of only one service, he or she will only pay 50% of the charge - €2.44 per 1,000 litres.

There is no standing charge for a primary residence. For most people, the first bill they will receive will be based on an assessed charge. The next table shows the assessed charges which are based on estimated consumption in different sized households and take on board the numbers of adults and children living in them. For example, where the number of adult occupants is two and they receive water and wastewater services, the assessed charge is €278 for a full year. Where the number of adult occupants is only one and he or she receives water and wastewater services, the charge is €176. It is worth pointing out that if there were three children in either household, the assessed charge would remain at €176 or €278, respectively, because water used by children is free.

In the assessed charge it is assumed that a one person household consumes 66,000 litres of water per annum and that for every additional adult in the household the additional consumption is 21,000 litres. The estimate is based on data from Irish Water based on information from metres installed in households; it is, therefore, based on the most up-to-date data available in Ireland. It means that for every additional adult in a household the rise in the assessed charge is approximately €102, which is reflected in the table.

The key changes in our decision are as follows. Instead of a 50% discount where water is not fit for human consumption, there will be a 100% discount. The change made demonstrates that we took on board the comments received during the consultation process. In addition, there will be a cap on bills once people have a water meter installed. The original proposal was that a bill would not rise above the assessed charge and that the cap would apply for six months. We have increased the period to nine months.

The original minimum charge for non-primary or vacant homes was €180, but we have now reduced that figure to €125 or €62.50 per service. We have also improved the rebate system for customers. We have included a 60-day look-back rule in respect of the default charge or non-validation. That means that if somebody does not validate or register with Irish Water before the end of November, he or she will not lose out on free water allowances if he or she does so by the end of November.

We have confirmed that the cap on a bill will remain in place if there is a leak which qualifies under the first fix procedure.

We also confirmed that a bill cap will be put in place for customers with medical conditions that necessitate high water usage, and this is a self-declaration system. Finally, we confirmed that there will be quarterly billing and a range of flexible payment options for people making payments to Irish Water.

On the non-domestic tariff, we decided to retain the existing charging scheme used by local authorities up to 31 December 2013 and we confirmed that group water schemes would be treated as non-domestic customers for the interim control period. We established that the domestic tariff and allowances would apply to mixed-use customers from 1 October, bringing such customers in line with every domestic premises in the country and ensuring equitable treatment for all. Still on the non-domestic sector, we introduced a drinking water discount of up to 40% in the event of a boil-water notice or a drinking water restriction notice being in place. We will retain current local authority arrangements for connection charges until we have decided an enduring arrangement.

Uisce Éireann's customer handbook sets out minimum customer service standards that must be applied, and we approved it on 1 October 2014. It includes a €10 charter payment that Uisce Éireann must pay to customers when it fails to meet standards specified in the handbook. We have since reviewed and approved Uisce Éireann's code of practice, customer charter and terms and conditions for supply of water and waste water services. We have also reviewed and approved the code of practice for business customers, which covers areas such as the handling of complaints, metering, billing, customer communications and network operations.

I will now set out the next steps that we will take in terms of work we will undertake in the near future and next year, though the list is not exhaustive. Before the end of 2014 we will have consulted on a first-fix policy with a view to its kicking off in January 2015. We will consult this year on additional service charges that Uisce Éireann may apply to customers and will put in place a partial overall performance assessment, OPA - that is, a set of metrics and key performance indicators to monitor whether Uisce Éireann meets satisfactory performance levels. We will publish the timeline for putting in place enduring non-domestic charges and we intend to establish a large water users' group in recognition of the significant impact this customer group has on the overall system. In 2015 we will examine the enduring connection charging policy for all customers. A big focus will be placed on data reporting and monitoring in the next two years and the purpose of this is to help us do our job of holding Irish Water to account. In 2015 we will also kick off the first full price control, which will apply from 2017 onwards - it takes around a year and a half to carry out such work on a price control that will last six years.