Alan Kelly (Tipperary North, Labour) | Oireachtas source

I move: "That the Bill be now read a Second Time."

I am pleased to bring the Water Services Bill 2014 before the Dáil and look forward to a healthy debate on its contents in the next two days. As I told the House on 19 November, the Government's objective is to make the new domestic water charges system simpler and fairer, providing more clarity for households and ensuring water charges are affordable for customers of Irish Water. The Government also wants to strengthen the legislative framework within which Irish Water will operate and give people certainty that Irish Water will remain in public ownership. The Bill will achieve these aims.

In advance of completion of the metering programme, it became clear that the charging regime was overly complex, not well understood by the public and had created uncertainty for customers regarding their bills in 2015 and beyond. As a result, the Government took time to reflect on the demanding reform programme being implemented to a challenging timescale. We listened to people's concerns and have responded. The changes to the charging system that will result from the Bill will ensure the system is defined by four key attributes. First, there will be certainty, as every household will know what its capped bills will be until the end of 2018. Second, there will be simplicity, as there will be only two charging structures and a water conservation grant. Third, the Bill will ensure affordability, as the absolute maximum net cost is now just over €3 per week. For households with a single adult, it will be approximately €1.15 per week, which is less than 1% of most people's income or benefits and puts our water bills among the lowest in Europe. The Bill will ensure water conservation, as metered households will have the opportunity to pay less than the capped bill and they can use the water conservation grant to make changes to avail of lower charges.

I accept that there are many people in financial difficulty and, as Minister, will insist on Irish Water distinguishing between those who want to pay but cannot do so and those who refuse to pay. Those who want to pay but are in financial difficulty will be able to avail of easy pay options and instalment plans, just like with any other utility. Those who do not register and do not pay will not be able to avail of the water conservation grant and will be liable for a late payment fee.

The Bill addresses a number of other concerns expressed by the public. It provides for a robust additional safeguard against the danger of privatisation, specifically, the will of the people. Should any future Government seek to sell Irish Water, we are ensuring the public will have to be consulted in a plebiscite.

The Bill provides for changes to strengthen Irish Water's governance, part of a wider reorganisation of the corporate governance structures of Ervia and Irish Water. The Government is putting in place a unitary board at Ervia that will also be responsible for Irish Water and the gas networks subsidiary. The new board will provide for stronger governance and the improved setting of strategic objectives for each of the component companies. Advertisements are already in place on the new public appointments website, stateboards.ie.

The proposed public water forum will ensure the voices of Irish Water's customers are heard and influential in the strategic direction of this public utility. The proposed customer dispute resolution service, to be provided by the Commission for Energy Regulation, CER, will have a legal basis and provide customers with the same access to resolution of unresolved complaints that energy customers currently enjoy. These new structures will help Irish Water to identify where its customer service needs improvement.

Many expressed concerns about Irish Water obtaining personal public service, PPS, numbers for the purposes of registration. This was a necessary underpinning of the former charging regime which was based mainly on allowances, rather than capped charges. The Government has decided that the new arrangements should be based on self-declaration and appropriate audit; therefore, PPS numbers will not be required for registration. Instead, an individual household may be asked to provide evidence in support of their occupancy declaration as part of the audit regime. The Government package announced last month also referred to a suite of measures that would apply if households did not pay. These will be brought forward in separate legislation early in the new year and the subject of extensive stakeholder engagement and pre-legislative scrutiny.

The changes provided for in the Bill do not change the fundamentals of the Government's water sector reform programme. Ireland's public water system was, and remains, in need of changes to the way it operates and the level of funding it receives. The previous system of providing water services through local authorities was not working properly, despite the best efforts of the dedicated and experienced staff involved. As local authorities were restricted in their ability to borrow, they could not invest adequately in the system. The time taken to make decisions to invest meant the system was often slow, bureaucratic and inefficient. As planning for new water services largely stopped at the county boundary, there was a limited opportunity to achieve economies of scale on a regional or national basis. We see the results of this fundamentally flawed approach in almost every city, town and county.

There are major issues around the quality of the water supply and the capacity of the existing system to supply treated water in the quantities needed by households, businesses, schools and industries. For example, more than 22,000 people on boil water notices and almost 1 million others depend on drinking water supplies that are at risk of failing the required standards. Almost half of all treated water runs off in leaks and is unaccounted for, despite that fact that water treatment comes at a significant cost. By way of example, some 22 households are leaking over 1 million litres a day into their driveways, which is enough to serve the daily requirements of a town the size of Gorey. In Dublin more than 800 km of pipes are over 100 years old, which is unsustainable, and there is insufficient supply for the greater Dublin area. Most major European cities have spare capacity of 15% to 20%, but Dublin has surplus capacity of only 1% to 4%. Put simply, within a decade there will be water shortages in Dublin. There are 42 towns, including popular seaside towns such as Cobh, Youghal and Bundoran, where largely untreated sewage runs into rivers and the sea. This cannot be allowed to continue or it will be hugely damaging to the vital tourism sector.

Nationally, the population is increasing; the economy is growing and the climate is changing. These realities bring new demands and challenges for the water system; realities that a single national utility is best equipped to manage. Ireland's water challenges are not unique. Water demand is rising; supply is becoming less secure in many jurisdictions and, by 2030, the world is expected to need 40% more water than will be available. We are distinct from most countries owing to the level of fresh water available, which is a benefit we can turn to our advantage by creating a world-class water sector that can attract water intensive industries such as information and communications technology, ICT, pharma-chem and agri-food companies to Ireland. These industries combined already sustain well over 200,000 jobs in Ireland.

By 2030, our river basin management plans will have been reviewed on a further three occasions and the quality of water bodies will have to have been improved. Rivers, lakes and other water bodies need greater protection, not just for the protection of public health and the natural environment but also to ensure the thriving tourism industry can continue to prosper under the banner of Ireland's image as a clean, green country. Environmental and economic regulation of water services must be inter-linked. The Government's water sector reforms are coherent responses to all of these demands on the public water system. They are aimed at ensuring the country has security of supply of clean and reliable water and adequate wastewater treatment in order that communities, the economy and the environment are served by a public water system that is fit for the 21st century.

Irish Water was established in July 2013 and assumed responsibility for water services functions on 1 January 2014.

It has already shown the difference a single national utility can make in making services more efficient, cost-effective and national-minded. For example, it has adopted a new approach to asset management which has resulted in a significant change of approach to infrastructural delivery. Central strategic planning is now based on accurate asset performance data and full control of all investment decisions. The utility is now planning investment consistently across the asset base rather than on the basis of large-scale one-off investments, as was the case before. One example of this is the story of the Ringsend wastewater treatment plant. The plant had not been upgraded. An alternative approach to a treatment plant extension which had been proposed did not proceed, but Irish Water came on board and saved extensively on the project to the tune of €170 million. That is the value of having one utility to deliver water services. The greater economies of scale possible from having one national utility rather than 31 separate local authorities has resulted in €12 million in procurement savings alone in the company's first year. In the area of electricity supply, a major cost in the production of water, Irish Water's current renewable and efficient energy initiatives aim to reduce costs by 33% by 2020.

In April, Irish Water became the main contact point for customer queries and reports regarding water supply outages and water quality through its customer call centre. This development was another milestone along the road to achieving a single standardised national service throughout the country, with a greater focus on those who use public services. Such progress would not have been possible without strong co-operation between Irish Water and local authorities, which have decades of experience in providing water and wastewater services with great care and dedication. The 12-year service level agreements, now almost a year in existence, have proven to be a strong partnership between the expertise of local authorities in operations and the considerable network and utility management experience within the Ervia group. This was most evident during Storm Darwin in February this year, when the two parties collaborated effectively to address emergency situations and maintain clear lines of communication with each other and the public during a time of pressure on the public water system.

The service level agreements between the local authorities and Irish Water contain specific measures to support the move to a utility model by the end of 2017 and to support continuous improvement in the system. An example of this is the new standardised digital approaches towards work and asset management, procurement and inventory management capability. Irish Water and the water services transition office, which represents the interests of local authorities in the reform programme, recently agreed on a transformation plan for 2014-17, which contains initiatives and measures to standardise and improve operations, asset management, customer service, procurement improvement and asset data intelligence. This, too, marks progress. A key component of domestic water charges is metering, and this is central to the new funding model. Without metering we cannot have usage-based charging, which the OECD, among others, has agreed is the fairest form of charging. As well as facilitating usage-based charging, the metering programme is detecting customer-side leakage, which accounts for about 10% of the national leakage level of approximately 49%. The presence of meters is helping Irish Water identify leakage that can be fixed through the first fix free scheme, which will cover leaks from the boundary of a property to a point as close as possible to the dwelling, but will not include leaks internal to the dwelling or other buildings on the property. Meters will help customers to identify leaks for which they are responsible and will help Irish Water identify leakage in the water network. Over time, metering will help to reduce domestic usage significantly, providing environmental benefits and a reduction in national water demand. The scale of the roll-out of the metering programme has been particularly impressive and, by any measurement, the domestic metering programme has been a success.

Unparalleled anywhere in scale or ambition, Irish Water has installed more than 513,000 meters in a little over 16 months. On average, a meter is installed somewhere in Ireland every 30 seconds. The utility has already surpassed its end-of-year target six weeks ahead of schedule and is delivering a programme that is sustaining approximately 1,300 jobs throughout the country, providing the kind of economic stimulus we need. Approximately 84% of these jobs have gone to people in one of three social inclusion categories - namely, the unemployed, employees of SMEs and graduates, school leavers or apprentices. This far exceeds the Government's original target of 25%. I am not suggesting that Irish Water has not had its problems; far from it. However, it is only fair to acknowledge what it has achieved and what it has done well in such a short period. These achievements should set the bar for the other parts of the company which have not yet matched public expectations, and I have said as much clearly.

The new funding model for water services, including the introduction of domestic water charges, has seen progress through Irish Water's moves towards accessing third-party funding as well as the Government's decisions on subvention. The model is designed to ensure Irish Water is classified as a market corporation, thereby allowing the utility's expenditure to be classified as off-balance-sheet. This is critical to ensuring Irish Water can access the level of third party funding needed to increase investment in water infrastructure from the circa €300 million invested last year to the €600 million per annum that is required. Access to external funding from capital markets will help to pave the way for sustainable investment in our public water system. This is important to address the deficiencies concerning leakage, quality, supply and waste treatment to which I referred earlier.

Independent economic regulation is central to a well-functioning public utility model. It is essential if we are to ensure water customers are protected and that the new utility delivers value for money. The Commission for Energy Regulation has already made several major decisions relating to the regulation of Irish Water, decisions underpinned by public consultation. In September, the CER approved an overall allowed revenue for Irish Water of €2.078 billion for the period from 1 October 2014 to the end of 2016. This equates to an 8.2% reduction in Irish Water's proposed costs for the period. The reductions included a 13.5% reduction in operational costs by the end of 2016 through a 7% annual efficiency challenge, as well as a 7% annual capital efficiency challenge to non-committed capital costs. These expenditure controls and efficiency targets are essential if we are to reduce the cost of delivering water services. Beyond the first interim revenue control period of 2014-16, Irish Water will continue to submit its costs and capital plans to the CER in future in order that the regulator can set the overall allowed revenue and approved capital investment levels. The regulator has also made decisions about customer protection through the publication of the customer handbook and is due to announce a timeline for the establishment of an enduring tariff framework for non-domestic customers before the end of the year. This will provide greater clarity to the non-domestic sector on the future of tariffs.

There has been substantial progress towards creating a modern, fit-for-purpose water sector. The Bill marks another step along the journey to a full utility model and a sustainable financial model for water services. Before I set out the provisions, I wish to address some matters that are not provided for in the Bill. The Government package announced last month referred to a suite of measures which would apply if households did not pay. These will be brought forward in separate legislation early in the new year and will the subject of stakeholder engagement. I am considering several amendments to some sections and will introduce these on Committee Stage next week.

I will now outline the purpose and operation of each section. Section 1 sets out the definitions of terms used in the Bill. Section 2 provides for a plebiscite on the ownership of Irish Water. It provides that where a government proposes to initiate legislation to amend the existing legislation that sets out the ownership of shares in Irish Water, such a proposal cannot be initiated without a resolution from both Houses of the Oireachtas. Subject to such resolutions being passed, the Government would then be required to submit the proposal to a plebiscite of all people eligible to vote in a referendum on a proposal for an amendment to the Constitution. The Government is absolutely committed to retaining Irish Water in public ownership and has already provided a statutory prohibition on its disposal. This section will ensure that the people will have to be consulted if at some stage in future a government is minded to try to dispose of Irish Water.

While I sincerely believe that would not happen, the section is designed to protect against all eventualities.

Section 3 provides for amendments to the charges applying to domestic customers of Irish Water and the requirement for Irish Water to amend its water charges plan to address these amendments. The section also provides that Irish Water may not commence charges for water services to domestic customers before 1 January 2015. Arrangements for the charging of non-domestic customers and charges for connections as reflected in the water charges plan approved by the Commission for Energy Regulation are not affected by this change. The provisions of section 3 will be deemed to be part of the charges plan approved by the Commission for Energy Regulation on 30 September 2014. The section also provides for Irish Water to submit any consequential amendments, such as the reflection of provisions in quarterly bills, to the Commission for Energy Regulation for approval.

The main aspects of the amendments to charges are as follows. There will be a capped maximum charge of €160 for a dwelling occupied by not more than one adult; a capped maximum charge of €260 for an unoccupied dwelling or a dwelling occupied by two or more adults; a provision that only 50% of the maximum charge may be applied where a dwelling receives only one service from Irish Water - that is, only a water supply or only a sewerage service; the automatic application of a charge of €260 to any dwelling that has not registered as a customer of Irish Water by a prescribed date; and the setting of a maximum volumetric charge of not more than €1.85 per 1,000 litres of water or €3.70 for each 1,000 litres of water and sewerage services provided. These volumetric charges will apply up to the capped maximum charges I outlined earlier.

In light of the approach of reduced volumetric charge and maximum charges, there will be a removal of the household water allowance previously provided for and confirmation that the child allowance provided under the approved water charges plan shall apply to all persons under the age of 18. Section 3 provides that the amended charges shall apply for the period 1 January 2015 to 31 December 2018. It also provides that the Minister may, following consultation with the Minister for Public Expenditure and Reform, set by order maximum charges for periods after 31 December 2018.

Section 4 of the Bill provides that where a customer has not paid water charges and has not entered into a payment plan with Irish Water, Irish Water shall charge a late payment fee for each year the arrears remain unpaid. The late payment fees that will apply are €30 for a dwelling occupied by not more than one adult or €60 for an unoccupied dwelling or a dwelling occupied by two or more adults. These fees will apply for each year that arrears remain unpaid.

Section 5 of the Bill provides for eligible householders to be paid an annual water conservation grant, which they can use to assist with water conservation in their homes. The Government has decided that the annual grant should be €100 per household. The estimated cost of this grant in 2015 is €130 million. Section 5 further provides that to be eligible for a grant in 2015 a household shall have provided information on the water supply to their dwelling to Irish Water and any necessary information required by the Minister for Social Protection. The section provides for the Minister for the Environment, Community and Local Government to prescribe a date by which householders should register water supply and wastewater treatment details with Irish Water. The section also provides that a person resident in a nursing home or other residential care facility shall be eligible to claim the grant in respect of his or her own house, provided the house is not rented to another person.

Section 6 of the Bill provides for a prohibition on the reduction of supply to a domestic dwelling. This is an amendment to the Water Services (No. 2) Act 2013 and provides that Irish Water shall be prohibited from either disconnecting or reducing the supply of water to a dwelling because of an unpaid bill. Section 7 of the Bill provides for the establishment of a public water forum by the Commission for Energy Regulation. It is proposed that the forum will have at least 12 and no more than 60 members, who shall be representative of the interests of all customers of Irish Water. The forum will have a broad role in reviewing and commenting on the various strategies and plans of Irish Water, including investment plans and water charge plans. There is provision for the Minister to make regulations in respect of the composition of the forum.

Section 8 of the Bill provides for statutory powers for the Commission for Energy Regulation to provide a dispute resolution service for unresolved complaints from customers of Irish Water. The service would be similar to that operated by the commission for customers in the energy sector. It also provides that the commission shall prepare an annual report on the number and types of complaints made under the section and, more generally, the service levels provided by Irish Water.

Section 9 of the Bill provides for a number of technical amendments to the superannuation provisions contained in the Water Services (No. 2) Act 2013 and the Gas Act 1976. These amendments are necessary to clarify that Irish Water does not have financial liability for the past service of officers of the Minister or local authorities other than the net effect of any increase in pensionable remuneration due to service with Irish Water. A separate scheme will cover the past service of such employees and this will remain funded by the State.

Section 10 of the Bill provides for loans relating to property transferred to Irish Water to remain with water services authorities. It provides that where the Minister makes an order to provide that a water services property be transferred from a local authority to Irish Water, any financial loans associated with the property are not automatically transferred to Irish Water. Section 14 of the Water Services (No. 2) 2013 Act allows for liabilities to be separately transferred. The section also provides that any transfer of property by the Minister shall not be treated as a disposal of property by a local authority. This is to ensure there is no adverse impact on the financial standing of local authorities from the transfer of assets to Irish Water.

Intensive work has been under way during 2014 in preparing for asset and liability transfer, and through this process the need for flexibility in separating the two elements of the transfer has been highlighted. It is important to stress that local authorities will not be left to carry financial loans as a result of this. My Department is working with the Department of Finance and other stakeholders, including local authorities, to develop an approach to deal with all water-services-related loans taken out by the local authorities.

Section 11 of the Bill provides for the abolition of the power of Irish Water to require the PPS numbers of its customers. The purpose of this section is to provide that Irish Water shall no longer have the power to request PPS numbers.

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