Bernard Allen (Cork North Central, Fine Gael)

The Bill deals with many issues, one being the metering of premises. The charges for non-domestic water consumers at present are hefty and those users bear the brunt of increases on an annual basis at local level. There is no respite for them in the Bill.

From time to time people are critical of EU directives but directives on the environment, particularly with regard to the quality of drinking water and the treatment of waste water, have transformed the way we think and, more importantly, act on these issues. They have served the country well by ensuring greater care, management and accountability on environmental issues. Significant resources have been spent on the delivery of water and EU funding has assisted greatly in co-financing many of the schemes. The water services authorities seem to be presented in such a way that they can be easily cut off from the umbrella of the local authorities and the definition of functions and powers leaves me to suspect that the ultimate goal of the Government is the privatisation of the water services.

I have no problem with the requirement of a six-year strategic plan for the purpose of improvement, management and operation of water services infrastructure. This is a sensible approach and one that can be measured to provide a maximum return on the significant investment of public finances in this area. Reports coming from the Environmental Protection Agency state that some public water supplies are regularly in breach of standards for nitrate pollution. What is the up-to-date position on this issue? The Government has long prevaricated in regard to the nitrates directive. When will it make up its mind on this issue? The previous Minister conceded that Ireland is not yet ready to meet the terms of more stringent regulations on drinking water quality. When will we be in a position to comply fully with these regulations and to state what EU directives we are still not implementing?

Group water schemes contribute less than 10% of the country's water supply and problems have sometimes been recorded with the quality of water from such schemes, although I accept that major improvements continue to be made in this regard. It must also be acknowledged that the voluntary group schemes have played a major role in rural areas and I hope the new licensing system will assist in their development and address water quality issues in that sector. The Minister is aware that in many areas raw sewage is still entering rivers and the sea, which is a disgrace. He should tell the House when he expects sufficient waste water treatment plants to prevent raw sewage entering the waterways.

In the 1980s and 1990s a water charge for domestic and non-domestic uses was in place. However, in 1997 the Government decided to abolish domestic water charges and this was given legal effect in the Local Government (Financial Provisions) Act 1997. Commercial and industrial users of water and waste water continue to be charged for it on both a metered and non-metered basis.

The capital cost of major infrastructure was traditionally borne by central Government. Planning contributions levied by local authorities were used mainly for small capital improvements. In the late 1990s the capital cost of providing new infrastructure was part financed through securing major contributions from industrial and commercial users of water and waste water services, especially given that the required investment in water services infrastructure through the national development plan was estimated at about €10 billion. Could the Minister provide analysis in regard to the slow progress of developing some of the major infrastructural schemes? For example, the waste water scheme at Little Island, County Cork, has been ongoing for approximately seven years and is still being commissioned. Has any analysis been undertaken regarding such projects being kept within their cost projections and estimated completion times? Has the Comptroller and Auditor General carried out any analysis of the cost overruns for this type of infrastructure projects?

This is important because the rising cost of doing business in Ireland is posing a serious threat for industry both in terms of competitiveness and viability.

One cost which is of major concern relates to the charges to be imposed on local industry as a result of newly built waste water treatment plants. One example of this is the charges being imposed on local industries in my area of Cork following the building of the waste water treatment plant at Little Island. IBEC has been in consultation with the two local authorities, Cork City Council and Cork County Council, over the past number of years on this issue to ensure that industry is equitably charged for that plant. I am sure the same arrangement exists in other locations throughout the country.

Under the polluter pays principle, the non-domestic sector in Cork city and Little Island will be expected to pay charges towards the construction, operation and maintenance of the plant. The process to determine exact charges for industry has been slow, and it has not yet been fully resolved. However, I am aware that industries will be issued with bills shortly in relation to the operation of the plant.

IBEC has a steering group comprising its own representatives and member companies to monitor the progress of the charging mechanism and engage in dialogue with the local authorities concerned. Again, there is an example in the Cork region where the IBEC steering group has engaged with the Cork Chamber of Commerce which is fully supportive of the need to ensure fairness, transparency and equity for local industry which provides many jobs in the region. To give an indication of the seriousness of the situation, one company has been quoted charges of approximately €400,000 per annum. That level of charging is unsustainable for many companies and will lead to job losses if not total cessation of operations. Many companies in my constituency are facing an increase of at least 400% on their current water bills. That matter must be addressed.

Approximately €4 billion has been allocated under the national development plan for water supply and waste water treatment infrastructure for the period 2000-06. Under the Urban Waste Water Treatment Directive 1991, local authorities are obliged to construct secondary and tertiary water treatment plants by 2008. The Water Framework Directive 2000 establishes the polluter pays principle as the method of payment for Ireland's much needed water infrastructure. Customers can be differentiated into domestic and non-domestic based on who pays for their share of the infrastructural costs. Domestic consumers will not pay for water supply or treatment as their share will, at least for the moment, be funded from the Exchequer under the National Water Pricing Framework Policy 2000. However, all non-domestic customers must pay both capital and operational costs for the infrastructure, and a capital contribution is their marginal cost which is the cost of providing the facility over and above the cost of levy being incurred if it had to service the domestic sector only.

In dealing with the question of charges, customers in the non-domestic sector can be subdivided into two types of users, significant and general. Significant users are defined as those who have a significant impact on the provision of the service and their number for each treatment plant will depend on the thresholds set by each local authority. Significant users must individually negotiate a contract with the local authority to pay, first, capital costs over a 28 year period and, second, operational maintenance costs per annum. The quantity and nature of output will be metered from each significant user's facility.

General users are defined as those companies whose water consumption and waste water production is relatively small and similar to domestic waste water in quality. The quantity of water used will be metered and general users will pay a consolidated charge which covers both capital and operational costs based on metered usage.

Have the costs for each local authority been defined? To my knowledge they have not been defined in the Cork area, and arriving at the costs is a complex task. Some local authorities currently define a significant user as an enterprise whose effluent floor rate is in excess of 100 cubic metres per day and which has a loading of 100 kilograms per day of BOD. In the Cork area the local authority has identified 18 significant users and they are being charged accordingly.

It seems that where spare capacity has not been provided for non-domestic customers at waste treatment plants, any new industry locating in that area needing treatment capacity will be required to pay the full cost of expanding the treatment plant rather than just a marginal cost as is the case at present. It is believed that this will have very serious implications for industries already located in certain areas that wish to expand their plant facilities. I am also informed that west of the Shannon, areas of lower population density are becoming less attractive to new industries because of these requirements. Will the Minister set out his views on how this arrangement impacts on job creation in areas of less dense population?

I know from discussions with businesses that the business community is extremely concerned about the steady erosion in the competitiveness of Irish companies in recent years because business costs have risen extremely rapidly in Ireland and have far outstripped inflation. The very large rises in non-pay costs such as insurance, energy, waste and rates have made the business environment in Ireland very difficult. Further large cost increases such as those associated with waste water treatment must be examined to ensure the costs do not threaten the viability of companies or hinder future capital investments in certain areas. The scale and range of cost to companies in the Cork region is very substantial and onerous — the annual costs for significant users amount to between €250,000 to €800,000. This is a further tax on businesses and employment. Businesses and their representative bodies are suggesting that, given the business community will be contributing a significant portion of the cost of the treatment plant, the issue of ownership needs to be clarified. In addition, the question of liability in the event of incidents in relation to both the plant and pipework servicing the plant is of significant concern.

The reality is that, in order to comply with very strict EU water quality standards, member states will need sophisticated treatment plants in all urban areas by 2008. However, the quantity and nature of Ireland's treatment facilities are well below what is required and there is need for ongoing upgrading of our infrastructure. Significant investment in water infrastructure will be required in the future.

While water infrastructure predominantly serves the domestic sector, the usage by non-domestic customers is between 10% and 20%, and the full cost recovery from all non-domestic customers could result in business facing a bill of between €500 million and €1 billion in capital charges alone. A recent survey carried out by IBEC of 450 companies showed that the average increases in water costs were in the region of 47% between 2001 and 2003 while a similar survey of local authority water charges showed average increases of 90% since 2000. The impact on hospitals, schools and farms will be significant. Schools are now under tremendous pressure to meet their liabilities as non-domestic consumers and much of the fundraising done is to meet these and other liabilities.

This brings me to the subject of design, build and operate arrangements. If we are not careful regarding design, build and operate arrangements, up to five major companies will control significant areas of our water services. Will the Minister give details of the extent of design, build and operate arrangements that are in place and what are his plans in that regard?

In 1998 the Government adopted a water services pricing policy. Its key principle aimed to make the full cost of water and waste water services transparent and to secure the cost recovery from customers. There would be no cross-subsidy of domestic services from non-domestic charges. Non-domestic charges were to include a maximum 20% allowance for leakage. Another key element was the recovery of average operational and marginal capital costs of water services from all non-domestic users. The framework planned for the completion of the metering of all non-domestic users by 2006 and the maintenance of non-charging for domestic water users. Domestic operational costs were to be met through the local government fund and capital costs through the capital programme of the Department of the Environment, Heritage and Local Government. The impact of the development levies imposed since last year has been well-documented. These are effectively a tax on house buyers, particularly first-time buyers. Will these be used to supplement funding from the Department's capital programme for water services?

In addition to public schemes, there are approximately 2,500 group schemes providing a water supply for 145,000 households nationwide. Since 1997 the National Federation of Group Water Schemes has made substantial progress in addressing the widespread water quality and distribution problems in that sector. A large number of schemes have been bundled into design-build-operate contracts in partnership with local authorities, the national federation and the groups themselves. I also acknowledge the research carried out by the Institute of Engineers of Ireland in this area. It has pinpointed key issues in the challenges facing Ireland in delivering water services at 21st century standards. High standards are essential to the economic and social well-being of the country. I agree with the institute that, in order to comply with new legislative and sustainability standards, major changes in the organisation of water services must be introduced. I agree with the institute's key objectives of the delivery of high quality water services to best international services; the reduction of leakage losses from a 2000 average of 47% to 20%; the upgrade of the water pipe network, much of which is in poor condition; and meeting the challenges of climate change.

There are approximately one million domestic and 160,000 non-domestic water consumer connections. However, the level of water use and leakage in Ireland is higher than that pertaining in Europe, including the UK. In Ireland, daily domestic consumption of water by customer is approximately 160 litres compared to 125 litres in England and Wales and 115 litres in other European countries. While the percentage of water loss in distribution through leakage in Ireland stands at 50%, it stands at 24% in England and Wales and at less than 10% in other European countries. To have a sustainable high quality water service, the need to account for the impact of global warming on rainfall patterns and water storage requirements must be recognised. Ongoing major capital investment must be introduced to meet water quality and waste water standards. The pipe network, much of which is in poor condition, must be renewed. We must ensure the environmental management of water resources in accordance with the objectives of the European water framework directive. We must ensure best value for money while recognising the need for economic and environmental regulation in order to protect the consumer.

In addressing water quality and supply, the Institute of Engineers of Ireland has stated that a comprehensive review of the organisation arrangements for delivery of water services should be carried out with the adoption of a regional approach based on river catchment. It has also recommended the establishment of local and regional water authorities for the management and delivery of water services. It has called for the establishment of a water services regulator to set standards and targets for service delivery by these water authorities and to approve water charge mechanisms and charges. Will the Minister give his views on these proposals?

The Minister has denied that this legislation will be used as a Trojan horse to introduce privatisation and water charges. While it is not a reflection on the Minister's judgment, I do not have his confidence in the Government.

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