Oireachtas Joint and Select Committees
Wednesday, 21 September 2016
Joint Oireachtas Committee on Housing, Planning and Local Government
Ervia: Chairperson Designate
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. If, however, they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable. The opening statements submitted to the committee will 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.
On behalf of the committee, I welcome Mr. Tony Keohane who last July was announced as chairman designate of Ervia. In line with normal procedures, the committee has an opportunity to engage with him on his appointment. I invite him to make his opening statement.
Mr. Tony Keohane:
I thank the joint committee for giving me the opportunity to address it. I was appointed to the board of Ervia and nominated as chairman designate in July. I have a number of non-executive roles. I am a former chairman of Tesco Ireland and was its chief executive office from February 2006 until July 2013. I served as chairman of the board of Repak for three years and have been a board member of Trinity College Dublin and Bord Bia for over a year. I am on the board of Inner City Enterprise, a charity which supports unemployed persons in starting their own businesses. For the past three years I have been a member of the Labour Market Council which was set up under the Department of Social Protection to advise on implementation of the strategy Pathways to Work to tackle unemployment.
I was the chair of Efficient Consumer Response, ECR Ireland, for a number of years. ECR Ireland encourages long-term co-operation between trading partners to better serve the Irish consumer and remove costs from the supply chain. I am also chairman of Market Hub, a startup retail technology company and chairman of the Malone Engineering Group Ireland which focuses on the food and pharmaceutical sector. I run a business consultancy, Keohane Conaty, providing advice on strategic development to businesses. I am from Cork, live in Dublin and am married with three children.
Having spent many years in Tesco fulfilling customer requirements I hope to put the wide breadth of business skills and experience I have gained through my career in commercial, finance, decision-making, analysis and team building and my proven track record on delivering value to a business, to effective use, as chairman of Ervia. Ervia is a 100% State owned commercial and semi-State utility responsible for Ireland’s national gas, water and wastewater infrastructure and services. It delivers these services through two subsidiary companies, Gas Networks Ireland and Irish Water. Ervia is one of Ireland’s largest indigenous companies with 1,600 direct employees and a further 5,700 directly employed in partner organisations providing services to its 2.4 million gas and water customers. In 2015, Ervia contributed €1.8 billion to the Irish economy, €1.3 billion of which went directly to Irish suppliers.
As the parent company, Ervia has overall responsibility for the operation and performance of its subsidiary utility companies. It ensures that long-term strategies are in place for national gas and water services, that each business has a robust business plan in place and that they deliver against these plans. Ervia has overall responsibility for the funding of these utilities and ensuring appropriate financial facilities are in place to allow the utilities operate and deliver their capital investment programmes.
Gas Networks Ireland, GNI, is a long established infrastructure company that manages the national gas distribution network of 11,300 km and the transmission network of 2,400 km to safely deliver natural gas to homes and businesses in Ireland. The transmission system is linked to the UK and European gas markets through two undersea interconnector pipelines to Scotland. Natural gas is now available in over 160 population centres in 19 counties for 673,000 gas users in Ireland.
In January 2014 Irish Water took over responsibility for delivering and managing water services from 34 - now 31 - local authorities. This was done under service level agreements with local authorities, ensuring drinking water and wastewater services continued to be delivered to businesses and the public, while the utility was established and Irish Water began to take over full responsibility for the operation of the systems and implementation of the capital investment programmes. Irish Water is a very new public utility with responsibility for 60,000 km of water pipelines, 25,000 km of sewers, 900 water treatment plants and 1,000 wastewater treatment plants. It serves 3.3 million people, produces 1.7 billion litres of drinking water and treats 1.4 billion litres of wastewater every day. Current estimates are that an investment of €13 billion is needed to bring Ireland’s public water services to an acceptable standard. This will require a multi-annual multi-billion euro investment programme and is one of the largest national transformation programmes ever undertaken by the State.
The Ervia board operates under the code of practice for the governance of State bodies which sets out its key responsibilities. Our role is to ensure the proper governance and oversight of the operations of Ervia and its companies and to hold the CEO and senior executives to account in delivering the objectives set by the shareholder. The board’s responsibilities include guiding the strategic direction of the company, ensuring risks are managed appropriately, approving annual budgets and business plans, approving large capital projects, and major investment decisions and setting and monitoring performance objectives. As chairman of Ervia I will be responsible for leading the board and ensuring its effectiveness.
I am aware this is a challenging role and I am committed to bringing my skills and experience and the necessary time to meet that challenge. I look forward to working with the board, the executive and the staff of Ervia, the shareholders and all stakeholders to continue to build trust and confidence and to ensure the board does its job effectively to deliver on the business objectives that have been set for the company.
I do not have any questions. I am familiar with the State companies and I have been a director with one for two terms, so I know the challenges, the complexities and the tensions that can arise between a board and delivering for shareholders. I do not know what the dividend is, and I am amazed and shocked at the number of State companies that do not deliver any dividend to the State. Every company should be commercial and viable in the long term, whatever about the short term, with regard to their key objectives. Clearly Mr. Keohane has vast experience and has not been chosen because of the lack of it. I have gone to the trouble to look at both Ervia and Mr. Keohane's record and I am highly impressed. I wish him well and I hope we will have, and develop, a good relationship be it with this committee or whatever committee is relevant to aspects of his work. It is going to be a major task and there will, quite obviously, always be political tensions. However, that is the great thing about having a stand-alone, focused, strategic body that will, in this case, oversee the corporate governance of the issues. I wish him well in what will be a very difficult task in the years ahead.
I welcome Mr. Keohane and thank him for putting himself forward to serve in, what is essentially, a very public and challenging role. Like Senator Boyhan I also note Mr. Keohane's vast experience in the various non-executive roles and the various boards on which he has served. It is excellent that he is now willing to bring that experience forward in this new challenge with the semi-State utility, Ervia. Ervia is an essential semi-State utility with overall responsibility for Bord Gáis and Irish Water which are two critical utilities in the Irish economy in their responsibility for the public supply of energy and water.
In Mr. Keohane's view, what is his understanding of the challenges facing both of the utilities with regard to keeping pace with national economic development and consumer demand? There are two issues. One is the huge capacity issue facing Irish Water in delivering quality water supply to our capital city Dublin and other major urban centres. Our rural regions should also not be forgotten in terms of strategic development and investment by Irish Water.
I will now turn to the second issue. Mr. Keohane made reference to his previous role and his involvement in efficient consumer response. Being a new utility, Irish Water expended huge amounts of energy and investment just in getting established. I believe there is still a challenge in trying to enhance public confidence in the utility and I would like to hear Mr. Keohane's views on that. What can he bring to the role in enhancing the public confidence and making Irish Water more customer-friendly in its engagement with the consumer?
I welcome Mr. Keohane to the meeting and thank him for attending. I wish him the best of luck in his role in the future which will be challenging. I wish to address two issues that are not controversial. One issue pertains to commercial water. When does Mr. Keohane see Irish Water taking over the billing process? There are multiple rates for commercial water throughout the State based on county boundaries and local authority areas. Does Mr. Keohane see this as becoming one charge throughout the State or county-wide charges remaining as they are? There is a significant difference between water rates in Dublin city with the cheapest water rates in the State and Wicklow, which has the highest water rates in the State. There will probably need to be a harmonisation process.
The second issue concerns the contributions for the connection of, or provision of, services for new builds. We talk of rebuilding Ireland and the construction costs per housing unit. Where does Mr. Keohane see the contributions figure? Will it be a national figure? I believe it is currently based on the county councils' development contribution schemes, inherited by Ervia. Does the witness see the contributions model staying that way or does he see a national figure emerging?
At council level we received some presentations from Irish Water.
It used to be said there was a ten-year payback horizon on any capital investment. Coming from a rural part of Ireland, I have concerns in regard to our small towns and villages where investment with a repayment horizon of ten years will never be repaid. We need to look at a 20-year or 30-year horizon. Most small rural towns have no capacity at the moment and are way down the line in regard to capital infrastructure investment. I wish Mr. Keohane the best of luck.
I thank Mr. Keohane for his presentation. There is no doubt he is very well qualified and has a long history of dealing with companies. There are a lot of challenges, particularly with regard to Irish Water. Mr. Keohane knows of the review that will take place and the challenges that will throw up, whatever way it goes. He could not have come in at a worse time, given there is going to be a lot of controversy in the coming months.
With regard to the gas network, there is the question of how long the Scotland-Ireland interconnector will last, given we will then have to find new sources of gas. Although Mr. Keohane may not be fully in position yet, can he tell us how long the current arrangement can last and where it will take us, as this is likely to be an awful challenge in the future?
There are huge challenges in regard to Irish Water. There is the plan to bring water to Dublin from the midlands, which has been and will be very controversial. I have been at many presentations on this in the recent past and I found it very difficult, particularly for the areas along the Shannon we have been talking about. I would like to know how is Ervia going to handle the consultation process.
I have always been opposed to the idea of the local authorities losing control in this area. Whether we like it or not, this will come back on the agenda at some stage. Many powers have been transferred to Irish Water and I have always felt this was a step backwards. Our biggest problem was funding for local authorities. This will be a big challenge. I am not asking Mr. Keohane for an opinion as he will not necessarily be able to give a response, but it is my opinion that this was a big mistake. We have wasted a huge amount of money in the transfer to Irish Water, in particular the money spent on consultancies and paying people. The whole set-up has been a disaster, and we have seen this in the numbers on the streets, with 60,000 to 80,000 people on the streets the other day. It is not going to go away and Mr. Keohane will probably be thrown into this in some way.
I thank Mr. Keohane for attending. The other speakers asked on specifics but I would like to ask about Mr. Keohane's vision for the next three to five years and how he sees the whole energy market in Ireland in terms of supply and, in particular, efficiencies. The other speakers also talked about the challenges. For me, one of the greatest challenges in the coming years is the whole issue of climate change. How does Mr. Keohane see Ireland operating with regard to climate targets and challenges? Within that vision, how does he believe we can mitigate this and put Ireland on a good footing going forward, nationally and internationally, in regard to energy and water?
Mr. Tony Keohane:
I thank the Deputies and Senators for their supportive comments, which are very important to me. They will have to accept I am in the door a wet day so I am not really in a position to answer their more detailed questions. What I can say is that I know what the job is and I know what is needed. I am working with the board and the executive team. My plan and, therefore, my vision is to make sure Ervia works under extremely strong governance, is absolutely transparent and develops a customer-led culture, but also a value for money culture. That combination is where I hope I can, with the support of the board and executive, guide the company over the next number of years.
The committee members are right that there are many challenges but I believe many of those can be overcome with the support of the staff and the team in Ervia, Gas Networks Ireland and Irish Water, and with proper dialogue and transparency with the stakeholders. Whatever the outcomes of the reviews taking place, the board will have to take them on board and simply do its job, which is to be guardians of the operations of those companies. That is where I intend to put my focus. As I said in my earlier remarks, I hope my experience, particularly in the area of customer relations and customer priorities, will be of some value.
The members raised some specifics and, quite frankly, I would be spoofing them if I started to give answers as I simply do not have those answers at the moment.
Mr. Tony Keohane:
I have attended one board meeting and I have spent time going around the sites, meeting the teams and briefing myself. A speaker mentioned the challenges around the local authorities and the framework agreement in place. I know there will be challenges as that rolls out and I know consultation needs to improve in terms of any strategic changes that are made by the company as time goes on. I am aware we will have to work with whatever the guidance is from the shareholder, as well as working with the climate change requirements of the State. Ervia obviously has a key role to play in all of that. I will come back to Deputy Ellis with regard to the life-span of the interconnector but I know it is a vital part of the current infrastructure.
This is our first opportunity to question Mr. Keohane but it is quite difficult as he is not in a position to answer the fundamental questions on the company. I presume that is an opportunity we will have later. With regard to his professional ambitions, I welcome his customer focus because that is what it is all about, the customer in this case usually being the average consumer.
I will mark one concern for Mr. Keohane, although I do not expect him to answer now. This is the question of the relationship between Ervia and Irish Water, in particular the services that are supplied by companies within the group to Irish Water, the cost of those services and the transparency of the accounting. I put down a parliamentary question on one other issue and the Minister was unable to answer, so I am not sure where I will get the answer. The question concerned the cost of the water metering programme to date and the plan for extension, if there is one. I will just mark out those issues and I need answers to those questions. I appreciate Mr. Keohane cannot answer the questions now but they are hugely important in terms of public confidence. Perhaps we will have the board of Irish Water before the committee at a future date.
Before Deputy O'Dowd came in, we invited Mr. Keohane to outline his strategic priorities, as it is a new appointment. Should we invite him back, he will be more than welcome. On any of the questions he might not have answers to, Deputy O'Dowd might send them on Mr. Sheridan and we can then send them on to the members, if that is agreeable.
I am delighted to do so because we cannot get the answers in the Dáil. My problem is I could not get the answers in the Dáil. I am anxious to know what happens in the water meeting, the cost, who has the contracts and all of the issues surrounding the matter that are of public concern.
Mr. Tony Keohane:
-----is on delivering for consumers and customers, and also the value for money aspect. The structure of the organisation is something of which the board should be conscious on an ongoing basis. It should be reviewed in line with the development of the business plan. I am aware of the points raised by the Deputy. I wish to indicate that the board will be conscious of the matter.
I am not talking about the process. Ervia is an umbrella company for other companies, one of which is Bord Gáis Networks and another of which is Irish Water that is also known as Uisce Éireann. What accountability will those companies have through the Oireachtas? The presence of Mr. Keohane indicates that there must be some accountability. I presume that the companies will report and come before us.
The Deputies were not here for the private session. I can advise them that we agreed in private session that any questions were to be asked through the Chair and anybody who did not speak on what we are dealing with would be asked to reference the page that they will deal with. Supplementary questions will be through the Chair and there will be no cross-over.
As a committee, if an issue arises, we can ask Mr. Keohane to come here at any time to discuss it with us, whether that is Irish Water, Gas Networks Ireland or whatever. The committee has the discretion to invite people to attend at any time.
It seems that we cannot get answers so I will make a suggestion. I ask Mr. Keohane to strongly urge Irish Water, which Ervia was charged with establishing from what I have read, to pull back and waste no further public money on a project that clearly does not have-----
Yes, that is not the committee's opinion. Deputy Coppinger, we asked Mr. Keohane to come in here today to meet the committee and to set out his strategic priorities having being appointed chair. This meeting is not about going back over the issue of Irish Water. I ask Deputy Coppinger to stick to asking a question, please.
The Chairman has needlessly interrupted people and made the debate very difficult. It is absolutely clear that a majority of Deputies were elected on the basis of opposing water charges. Even if that were not the case, it is absolutely clear that the majority of people are not paying water charges. Tens of thousands of people were on the streets to protest on Saturday even though nothing is happening with water charges. No bills are being issued yet people still have strong feelings about water charges. I suggest Mr. Keohane recommends that the water metering programme is stopped, in case the commission on the Dáil in general votes to abolish water charges, because it would be throwing good money after bad. That is my top suggestion for Mr. Keohane.
My last comment is connected to what Deputy O'Dowd asked. We have tabled parliamentary questions on Irish Water but have been told to toddle along-----
-----famously by the Taoiseach in his response at an Irish Water briefing. It is legitimate to make the point that there is no accountability in terms of these organisations. It seems farcical and pointless that when people are brought in front of the committee we are limited in terms of what we can ask. The organisations are not accountable to the Dáil and that was the reason they were established in the first place. It is a similar situation with the HSE and the NTA. One cannot ask Dáil questions about such organisations and instead go to them directly, which is a dangerous precedent.
Mr. Tony Keohane:
I will reply to the questions but not in the order they have been raised.
Ervia has accountability for both Irish Water and Gas Networks Ireland. The board, that I hope I will be chairing, will have accountability for both of those outlets. It will operate under the governance or objectives set by the shareholder whatever they are and however they may change. The job of the board is to run the company under the objectives that have been set by the shareholder. I am aware there may be feedback to change some of that in the near or medium term, and so be it if there is. We will have to operate under the objectives set by the shareholder.
In terms of my international experience, I have spent all of my working life in retail. I started on the ground floor and worked my way up to board level first in Quinnsworth that was then taken over by Tesco. I moved to the UK for a couple of years as part of the Tesco transition period. When I came back to Ireland, I set up the distribution and property arms of Tesco Ireland here and then became the CEO. I have spent all of my career in a retail environment. I also sat on the operating board of Tesco UK for a period. My work experience has been steeped in retail.