Enda Kenny (Mayo, Fine Gael) | Oireachtas source

The Deputy in his question asked me to set out "the position on the commitment in the programme for Government in regard to the Irish Water networks" and to "make a statement on the matter". I forget the phrase he used when he complained about the answer I had given. According to the programme for Government:

The new Government will create Irish Water, a new State company that will take over the water investment maintenance programmes of the 34 existing local authorities. It will supervise and accelerate the planned investments needed to upgrade the State’s inefficient and leaking water network that has proved so unreliable during the recent harsh water conditions.

That is the reference to Irish Water in the programme for Government, on which I made a statement. I am not sure whether the Deputy said he found it strange or convoluted. It seemed to be clear enough. Perhaps the waters are a little muddied.

The Deputy referred to the market corporation test.

This is one a number of tests used to determine whether an entity should be classified within the general Government sector. The market corporation test includes, but is not limited to, the following tests. First, total sales to customers, including sales to the Government must be greater than 50% of production costs, including consumption of fixed capital and interest. This is known as the quantitative test. Second, the Government subvention is less than the total billed revenue, domestic and non-domestic. This is known as the qualitative test. There are two tests: the quantitative and qualitative. The benefit arising from Irish Water being considered off-balance-sheet is that it can borrow for investment from commercial lenders in a manner similar to the ESB, Bord Gáis or other commercial State bodies such that the borrowing and the related expenditure does not impact upon the general Government deficit. Deputy Martin is aware of that. That flexibility is expected to lead to an overall increase in available funding for the water capital programme without impacting on the public finances.

In respect of the estimates and calculations regarding the qualitative aspect of the market corporation test, the domestic billed income will be €271 million for 2015 and €274 million for 2016, non-domestic billed income will be €229 million in 2015 and €240 million in 2016 and customer will be billing €505 million in 2015 and €514 million in 2016. The customer subvention, excluding the working capital loan to Irish Water, will be €399 million and €479 million. The water conservation grant is not considered to be part of a Government subvention to Irish Water in respect of these figures. The grant is made available to all eligible households, not just customers of Irish Water. Therefore, it is not just subvention to Irish Water. Households with a water supply from a group water scheme, with a private well or with a septic tank can also qualify for the grant.

This is a function of EUROSTAT, which operates completely independently. The Government listened carefully to the genuine anxieties and concerns of substantial numbers of people. As a consequence, it reduced the charge to €1.15 and €3 per week for single people and households where there are more than two adults. The Government is happy that Irish Water will pass the market corporation test but I cannot give Deputy Martin a date when it will be decided by EUROSTAT. It is a EUROSTAT function, which is independent.

I noted the comment from the European Commission post-programme surveillance report, which was done for autumn of last year. It made a comment that the €100 water conservation grant could be construed as a subvention to Irish Water. We disagree completely. The new pricing structure has created certainty for customers up to 2019 and that remains, and will remain, the position. The Government is confident the underlying funding model for Irish Water supports increased investment in the sector through an off-balance-sheet treatment of the utility while providing for water charges that are affordable, clear and certain. The Government remains confident that Irish Water will pass the market corporation test. There was nothing new in the European Commission report recently published. The European Commission briefed journalists on its position late last year also. Changes to the water tariffs do not impact on Irish Water's investment plan, which has been approved by the Commission for Energy Regulation for the regulatory period from 2014 to 2016. Key decisions and efficiency targets remain in place and the changes made by the Government relate to the general policy framework and use of public subvention, not the underlying regulation independent view on allowable cost and investment. This is all about water conservation remaining at the heart of water sector reforms. Households can still beat the capped charges when they are metered and rebates will apply when meters are installed. Meters detect leaks and the water conservation grant, which is universal, will support households in taking measures to reduce their consumption.

The analysis suggests 35% of households can beat the cap and that this could rise to 50% of households if they reduce water usage by between 10% and 15%. The grant is universal and is paid to Irish Water customers and households with private wells, septic tanks and group water schemes. It is not connected to the Irish Water revenue or expenditure levels and is not part of the funding model for the utility. It will offer operate similarly to the fuel allowance already paid by the Department of Social Protection, which does not form part of the revenue of energy companies. That answers the questions.

See this speech in context