Denis O'Donovan (Fianna Fail)
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I welcome the Minister of State to the House. Tá fáilte roimh an Aire Stáit go dtí an Teach. We will now deal with statements on Irish Water and related reforms and he has the floor.

Fergus O'Dowd (Louth, Fine Gael)
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Is mór an onóir dom bheith anseo arís chun an t-ábhar tábhachtach seo - uisce a sholáthar do gach cuid den tír - agus na ceisteanna práinneacha a bhaineann leis sin a phlé. Is rud maith é gur féidir linn tosú ar maidin ceisteanna a freagairt ó dhaoine agus go dtiocfaimid ar ais go luath chun an clár a bheidh á scaipeadh againn a scrúdú ionas go mbeidh gach duine sásta íoc as an uisce. Chun sin a chur chun cinn, caithfidh díospóireacht leathan a bheith againn.

It is important that I am here again today to talk about Irish Water and the future it will play in the economy and our community. One of the big issues with regard to water is how we rationalise - with the establishment of Irish Water - all of the services of the different local authorities. We aim to work with everybody concerned to ensure that the process is as easy as possible and to have the consent of as many people as possible.

The vision for Irish Water has been expressed in a Bord Gáis vision statement and I heartily agree with it. Bord Gáis will be the company responsible and accountable for Irish Water. Our objective is to deliver sustainable high quality and efficient water and wastewater services for the benefit of all citizens. In order to do that the following business objectives are required. Irish Water must be focused on building consumer confidence and meeting customer needs. It will build on and use the experience and expertise of local authorities, the Department of the Environment, Community and Local Government and other bodies in addition to the utility experience of Bord Gáis within a professional and competent working environment.

Irish Water will be accountable and must be seen to act with social responsibility. In that context, it is important that I am accountable and I shall continue to be accountable. I can tell the Leader that I am happy to come here, with reasonable notice, to debate and discuss all of these issues because they are fundamental to the future of the country and its economy.

How we do that in the most accountable and transparent way is an important task and I am confident the Seanad will assist me with my role in that regard. Irish Water will have an efficiency focus, harnessing the scale that will deliver efficiencies that were not possible previously. It will utilise Bord Gáis's international's financing capabilities to enable major capital expenditure to be performed at least cost. We will deliver a company with a solid governance structure working with 34 separate water service authorities to deliver exemplary customer services. Irish Water will continuously engage with the public to set out and explain the objectives and benefits of reform. That is the task of Irish Water. As Minister of State in the Department, it is my task to deliver it.

Ensuring that we have a modern, adequately resourced water services sector that will manage and deliver critical infrastructure is a key priority for the Government. The programme for Government provides for progressive and considered structural reforms of the water services sector in Ireland. While we are fortunate to have had resources to invest in the water sector in the past decade, steady State investment is required to deal with the requirements of the water framework directive and to support economic recovery by ensuring we meet the requirements of sectors with the capacity to develop and create employment. Meeting these challenges is not just about capital investment, it is also about the governance of the water sector, the most efficient form of delivery of services and ultimately ensuring that a quality service is delivered to all customers.

There are essentially three inter-related components to the Government's plan. These are to establish Irish Wateras an independent State-owned company within the Bord Gáis group; to introduce a sustainable funding model to support much needed investment in the sector, in line with the commitment in the programme for Government and the memorandum of understanding with the EU-IMF-ECB, which will include the introduction of water charges for domestic users; and to establish an independent economic regulator for water services, a function being assigned to the Commission for Energy Regulation, CER. These reforms involve fundamental change in how the delivery and funding of the water sector is organised and are necessary to equip the sector to meet the challenges of the future. These challenges include the need for investment in water and wastewater infrastructure to support economic recovery, enterprise development and job creation and to ensure that we comply with all statutory environmental and public health requirements.

The approach to building a new and sustainable model must be accompanied by organisational change and underpinned by the appropriate policy and legal framework. Work is now focused on finalising an implementation strategy for the establishment of Irish Water which will provide the platform for dealing with a broad range of implementation issues during the transitional phase. The implementation strategy is being developed in collaboration with other relevant Departments, local authorities, Bord Gáis and NewERA. Once finalised, the implementation strategy will provide the basis for comprehensive public communications on the reform programme, outlining the next steps. I hope that we will have the implementation strategy in place before Christmas. I will be happy to come back to the Seanad to go through the strategy in detail with Members or to attend any Oireachtas committee and to debate the issue in the Dáil. This will only work if we can sell the message to everyone. It is our job and the job of Irish Water to communicate fundamental issues of change for all of us. The communications strategy used by Irish Water will be a core and essential part of making the public case for change.

The strategy will focus on maintaining the delivery of a critical public service during and following a restructuring process, and is therefore premised on a phased rather than a big bang approach. This will involve the establishment of programme management structures in 2012 to manage the transition process; the establishment of Irish Water on an interim basis later this year and under its own statute in mid-2013 at which stage Irish Water would acquire statutory responsibility for water services; and local authorities acting as agents of Irish Water for water services operations, based on service level agreements, for a considerable period.

Some of the critical challenges facing the sector were well articulated by the excellent and incisive report on water provision published by the Oireachtas Joint Committee on the Environment, Transport, Culture and the Gaeltacht published in June this year. It has informed the debate for me and within the Department. The report highlighted that water provision in Ireland is at a critical stage and failure to take action will have significant societal and environmental consequences. The recommendations of the committee will be taken on board to the greatest extent possible in the roll-out of the reform programme. I will return to the committee at the appropriate stage to go through the issues with members.

The legislative provisions to establish Irish Water on an interim basis and to assign regulatory functions for water services to the CER will be brought before the Houses of the Oireachtas in this session, with the comprehensive Bill to establish Irish Water likely to be published in 2013. There is a range of important aspects regarding the establishment of Irish Water which will have to be taken into consideration in drafting this Bill such as the governance and accountability of the new utility, which is absolutely critical, reflecting the intention of the Government that Irish Water will be publically owned. The legislation will address the legal name of the organisation. Tá a lán daoine tar éis scríobh chugam mar gheall ar an ainm a bhéas ar Uisce Éireann. Tá mise ag moladh go trom go mbeidh ainm Gaeilge ar an mbord. It is important that the new organisation will have a strong Irish identity and that the name will be as Gaeilge.

The legal establishment of the economic regulator will be an important step in the process of ensuring that water charges for domestic consumers will be introduced in a way that is fair and equitable. The primary and critical role of the regulator will be to act for and on behalf of the consumer. That is an important point to make. The setting of water charges by the regulator must take account of a number of factors, among them the capital and operational efficiencies that Irish Water should be expected to achieve, including through investment in leakage reduction - that is an important point if we do not address the significant issue of unaccounted for water. In some counties it can be as high as 60%, compared to Dublin where it is approximately 28%, which indicates an efficient service. We must address the issue of leakage and unaccounted for water; the future investment requirements in water and wastewater infrastructure - those who have read the EPA report on wastewater issues are aware that significant improvements must be made in a number of locations to deal with wastewater treatment and to improve capacity and it is important that investment is provided for the purpose; the level of continued Exchequer funding; the approach to implementation of the free allowance; and the support measures targeted at groups with medical need or affordability problems to avoid issues of water poverty.

One of the benefits of augmenting the water supply in the greater Dublin area will be the new centre in the midlands which will accommodate 1,000 acres of water. It will provide a reservoir of water for the greater Dublin area but it will also be a massive boost to the local economy of the midlands in terms of recreation and amenity. That will be a flagship project.

The Government believes that charging based on usage is the fairest way to charge households for water. The proposed reforms represent a major change with significant implications for local government, local authority staff, the water industry in this country and its many stakeholders. We are committed to ensuring that this change is managed well. The skills within the Bord Gáis group will be paired with the water and wastewater expertise in local authorities to build the new organisation. The service level agreements to be put in place between Irish Water and local authorities will ensure a smooth transition to the new model and guard against the loss of local expertise. It will also mean that the majority of local authority staff working in the water area will remain in the direct employment of local authorities for a considerable period, with the potential for some service level agreements to remain in place beyond the transition period ending in 2017.

Building from engagement to date with the ICTU, specific structures have been put in place to facilitate engagement with the unions and staff concerning the roll-out of the implementation stage. A joint union-management group has been established, with an independent chairperson, to provide a mechanism for regular structured dialogue, consultation and engagement on issues arising from the implementation strategy. That is a core issue which is being dealt with. The structures are in place to ensure a constructive and structured dialogue. I stress that unless we address key organisational and funding issues for the water sector we will constrain our capacity to continue to exploit this natural advantage, to attract foreign direct investment and high-end employment, and to meet the needs and demands of our existing businesses and communities for high quality water and security of supply.

Irish Water will focus on building consumer confidence and meeting customer needs. It will build upon and use the expertise of the Department, local authorities and Bord Gáis to deliver sustainable, high quality and efficient water and waste water services for the benefit of the citizens of Ireland, and, in so doing, will be accountable and act with social responsibility. The implementation strategy for Irish Water, which should be finalised in the coming weeks, will outline the next steps and the key milestones to be achieved to deliver on this ambitious programme of reform.

I look forward to hearing the views of Senators and commenting on them. I assure them it is my intention to continue to return to this House at their invitation and go through all issues as they arise for Members.

Mark Daly (Fianna Fail)
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I welcome the Minister of State to the House.

In the first instance, this process lacks the openness and transparency we would wish for in the establishment of Irish Water. There was a bypassing of the Oireachtas in terms of detail and there is obvious confusion in Cabinet about certain issues relating to charging for the water supply. Much effort has been made to establish when this project will go live. Recent reports mention 2016. Given that Irish Water was created in a rush, its detail has been far from clear and its costing has the potential to be way out of line. That is not the fault of the Minister of State but when one is going to do something one needs to have all the ducks in a row. There have been contradictory statements. The IMF sought a water charge and Fianna Fáil is putting together its own proposal in this regard. However, when a body was established without tendering, openness or transparency and given automatically to Bord Gáis, for whatever reasons, it does not inspire confidence. How much will this cost? There is talk of establishing water meters throughout the country, which may cost ¤300 million or ¤500 million, a cost ultimately borne by the consumer. There is a lack of clarity about this. We are aware, as the county manager in the city of Dublin stated, that one in three household units in Dublin cannot be metered. Apartment blocks and older houses will have issues in this regard. This is the largest urban area but two-thirds of the people there will pay and one third will not. Obviously, that will affect the figures, meaning that those who pay are supplementing those who will not. There is also the issue of job losses. The consultant PricewaterhouseCoopers stated that the future of the 4,278 people who are currently employed throughout the country in the 34 local authorities is in doubt. How will this be managed? Will these people be on the same pay and conditions if they are employed by Irish Water? These are all matters that lack clarity.

There was an announcement that the body was to be established, but we did not and still do not have the detail. It is said the first water bills will issue by the end of 2013. These reports continue but only now are we talking about who will pay for the meters. There was confusion in Government about this. When one announces something that does not contain much detail, the limited detail there is on issues about which people are concerned should at least be correct. On 15 April the Taoiseach stated there would be no installation charge, only the cost of the actual meter. On the same day an official from the Department of the Environment, Community and Local Government stated that the cost of buying and installing the meter would be passed on to the householder, not paid by the Exchequer. The Tánaiste, Deputy Eamon Gilmore, stated no decision had been made on how water meters would be paid for. That was all in one day. The following day was no better. The Taoiseach stated there would be no charge for installation and the Government set up an implementation group. The Minister for Jobs, Enterprise and Innovation, Deputy Bruton, stated that the Government was awaiting proposals on the meters and the Minister for Finance, Deputy Michael Noonan, declared he saw meters as a friend of the householder and of business in that they will prevent waste. That is correct - they will prevent waste - but what he did not say was who would pay for them. These statements issued one day after the other.

I remind my Labour Party colleagues that according to its manifesto of 2011 their party does not favour water charges. The Minister for Public Expenditure and Reform, Deputy Brendan Howlin, stated on 18 February 2011 that he was against water charging and that water was a necessity. I can agree with the second comment but the first was stated also by the Tánaiste in The Irish Times on 28 June 2010. That is merely an example of the lack of clarity, at a time when households are concerned about a proposed property tax. Moody's issued a report today stating that one in five mortgage holders will be in default, not just in arrears, this time next year. Lack of clarity is adding to the weight of trouble, as is the lack of transparency in the establishment of the body. We have set up another quango, and although my understanding was that we were trying to get rid of them under the programme for Government, this does not seem to be the case.

I realise the Minister of State may have to come back to me on my final question, which is about water fluoridation, as raised by a number of people. Is the Government going to examine this issue in regard to the new system of Irish Water? A number of European countries, after research and examination, decided they would no longer put fluoride into water because they had concerns about it. Some American states have banned water fluoridation but we are still doing it. In a time of renewal and review, when we are changing the way we supply water and how it is provided, is there a proposal by Irish Water to consider this issue? There is a cost involved in putting fluoride into water - does it really benefit the health of the nation? There are people who have concerns that it does not do so and is actually detrimental to health. Will Irish Water in its overall review ask this fundamental question? When it supplies water, how will it do so, what is it treating it with and is this the right thing to do and the best practice going forward?

I have left some questions there for the Minister of State. The Minister for Transport, Tourism and Sport, Deputy Leo Varadkar, stated on "The Week in Politics" that some 20% of older houses and apartments would not be able to pay for meters in the normal way. That affects the budgeting for Irish Water and how it will run its system. If one in five houses throughout the country cannot be metered, how is it possible to supply water to these houses in a fair and equitable way? Will they have a standard charge? I presume that will happen but how will that be set as a benchmark so that those who have to pay for metered water do not feel that the guy down the road is paying a flat charge of ¤100 while they may have to pay the same amount per month?

The lack of clarity is the biggest problem. I do not blame the Minister of State for this. When the system was announced, much more thought should have been put into what was to be done or not to be done. One would hope that in a new Government, promises of a new way of governing would be fulfilled and that we would stop building quangos. The new empire of Irish Water was simply announced and then basically told to go away and get on with it. Then, when it does things the Government does not like, it is blamed. That is not good government. We should take control of Irish Water and manage it. We should have insisted we know everything about what it is to do before launching it. I am concerned that we will not meet the timeframes as outlined, that the figures relating to its establishment are too low, that the costs of running it are underestimated and, ultimately, that the users of the service, the citizens of Ireland, will not be served by the process of its establishment.

Another concern is that the Government estimated that 1.05 million households were on public water supplies out of a total of 1.3 million. This was about 40,000 off target based on the 2011 census figures. If the figure for the number of households is out by thousands, and if we are saying we are down ¤250 a year per household based on that, we are talking about billions of euro if we start calculating from figures that should have been right from day one when Irish Water was being established. If these are not right, all the figures will be off and politicians will be left carrying the can for Irish Water, which can say the Government gave it the wrong figures at the outset and as a result it has to charge more for metering. This should have been a matter of Government policy. Installation is the responsibility of Irish Water and it should have been clarified at the outset whether there was to be a monthly charge for metering. That was a fundamental issue. Should it not have been clarified at the outset? We have now given the decision to Irish Water and the Government will have to deal with the political consequences. The Government should have decided whether Irish Water would supply the meters, pay for their installation and charge for the water in a fair and equitable manner, but now we have another quango deciding how much it should cost. We are commissioning out responsibility to quangos, which is not the way we should do Government business. It appears we want to put it at arm's length and not make decisions on basic issues such as the meter, its installation and how the price will be set. We are allowing the energy regulator to set the price, and we have all seen that when the energy regulator sets the price it keeps increasing without any control. That is not a good way for this new water authority to be established, and abdicating responsibility to a quango is not the way to do the business of government.

Tony Mulcahy (Fine Gael)
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I thank the Minister of State for coming to the House today and giving me the opportunity to speak about Irish Water. I want to address some of Senator Daly's remarks. The Health Service Executive was a classic example of giving responsibility to someone else. It was set up and allowed to take responsibility for whatever was said. We will spend the coming years trying to unravel that. We have already unravelled about ¤2.5 billion of it and we will try to unravel more.

Mark Daly (Fianna Fail)
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We will not talk about last night's debate on the motion of confidence in the Minister for Health.

Tony Mulcahy (Fine Gael)
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Regarding responsibility-----

Mark Daly (Fianna Fail)
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There was a lack of what I would call a chorus-----

Tony Mulcahy (Fine Gael)
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-----I learned a long time ago that if one doorsteps half a dozen Ministers or Oireachtas Members one will get half a dozen answers-----

Mark Daly (Fianna Fail)
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Not on the Government announcements issued.

Tony Mulcahy (Fine Gael)
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-----but we have the boss here today, in essence, who will give us the answers we need. The reason he is in the House is to answer all the questions the Senator raised. I have every confidence that we will not end up in the mess created by some of the other agencies set up here.

In January I had the opportunity to speak in the House on this issue. I am pleased to see the Minister of State back in the House today to make other statements on Irish Water. As I said then, water is an essential life resource. We cannot live without water. Every day we consume vast quantities of it washing ourselves and our clothes, preparing food, flushing toilets, washing our cars and drinking it. In industry it is a key ingredient in the production process. Irish people use approximately 150 litres of water each day. Importantly, there is no new water available on earth and therefore we must mind what we have.

The establishment of Irish Water has its origins in Fine Gael's new economy and recovery authority, the NewERA investment proposal, which was formulated in 2009. Subsequent to the general election in February 2011, the programme for Government was agreed between the coalition parties and that provided for the establishment of Irish Water, which is to be a State-owned national water authority.

In June 2011, the Minister for the Environment, Community and Local Government, Deputy Phil Hogan, through his Department, appointed consultants PricewaterhouseCoopers to carry out an independent review of international models for a water and wastewater service. The aim of that review was to identify a model that could be structured for the State to enable the most cost-effective delivery of water and water services for the end user. Following on from that report, which was presented to the Government in January 2012, and further consultations with relevant stakeholders, a decision was announced in April 2012 that Bord Gáis Éireann would be the body to take over the role, currently handled by the 34 local authorities, of providing and treating water and wastewater. Regulation of the industry is to be the function of the communications and energy regulator.

We must get real about the way we manage our water resources and finance our water infrastructure. The model we have, with 34 authorities, many layers of administration and no economies of scale, is costing too much. We must see all stakeholders brought on board, be it the unions that represent those working for the local authorities who are worried about their futures, the local authorities which have invested taxpayers' money in infrastructure, the managers of those local authorities, or, importantly, the end users who will ultimately have to pay for the water they consume. I welcome the Minister's earlier statement today that the consultation process with the management and unions is under way. It is the right way to proceed.

As of 2010 the State spent ¤1.2 billion on water services. Operational costs amounted to some ¤715 million, with capital expenditure of over ¤500 million. The provision of water services in Ireland is double the cost of water services in Scotland. That cannot continue. The population of Scotland was 5.2 million people in 2010 in an area of approximately 78,000 square kilometres, while we had a population of 4.6 million in 2011 in an area of approximately 70,000 square kilometres. We have a smaller area in which to maintain a pipe structure and a smaller customer base, yet it costs us twice as much as it costs Scotland to provide water. We must find ways of addressing that anomaly. The creation of a single unitary body instead of the current 34 bodies is a major step in the right direction.

A major problem with the current model is that an average of 40% of the clean water produced is lost through leakage and waste in some local authority areas, while the percentage is even higher in others. That equates to hundreds of millions of euro worth of water a year simply flowing away. In these days when every euro counts, the taxpayer cannot afford for that to continue. A recent example was in July 2012 when a 15-inch water main that flows from the Drumcliff reservoir outside Ennis in County Clare ruptured and 4.5 million litres of good quality drinking water was lost in the space of a few hours. If one were to go into one's local shop and buy that amount of bottled water it would cost millions of euro. This is happening not just in local authority controlled infrastructure but on private land where underground leaks have not been detected because many people do not have meters outside properties to monitor consumption and thus identify excessive water flow rates.

As part of the many onerous conditions of the EU-IMF-ECB programme negotiated by the previous Government, we must introduce water charges during this programme period. That is not something the Government wants to impose on householders but we have no choice in the matter.

Mark Daly (Fianna Fail)
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I thought it was in the NewERA document.

Tony Mulcahy (Fine Gael)
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That proposal was to provide a new structure for providing water. In addition, this has been EU policy since Directive 2000/60/EC, also known as the EU water framework directive, which was adopted in October 2000.

An article in the June 2012 edition of Public Affairs Ireland Journal dealt with the water framework directive and many of the issues facing Irish Water today. The article was by Alice Whittaker, head of the environment and climate group of Philip Lee Solicitors, which advises local authorities, as well as Irish and multinational companies, operating in the water and wastewater sectors. The article states that the directive

sets out a legal framework for the improvement of water quality on a ?River Basin District? basis throughout Europe. Member states are required under the Directive to carry out an economic analysis of water use for each River Basin District. This analysis is required to include all costs, not limited to the cost of supplying drinking water and providing waste water treatment services. In relation to managing the cost of water, article 9(1) of the Directive requires member states to ?take account of the principle of recovery of the costs of water services, including environmental and resource costs, having regard to the economic analysis conducted according to Annex III of the directive and in accordance in particular with the polluter pays principle."

The Directive also requires that, from 2010 onwards, water pricing policies should provide incentives to use water efficiently and ensure an adequate contribution by different water users desegregated at least into industry, agriculture and households. Ireland is the only OECD country which does not currently charge households directly for water use, save for the approximately 8% of the population comprising group water schemes. Additionally, commercial water rates have been levied for years. Since the installation of water meters in commercial premises, businesses are becoming more aware of the amount of water they consume. In April this year the Local Government Audit Service reported that ¤160 million was owed to local authorities in unpaid water charges. That is money that, if collected and ring-fenced, could have been used to repair many miles of obsolete water pipes. The relevant point is that partnering with an existing utility service provider gives us that basis. It is already collecting quite a large amount of money throughout the country. It is a shared services model that I believe will work.

When the new body has been established, the issue relating to water meters will have to be addressed. Ennis Town Council employed a contractor to install meters in recent years. Unfortunately, almost 500 of these meters had to be replaced due to problems of one kind or another. The reasons for this may relate to the two severe winters we experienced in 2009 and 2010, the depth at which the meters were laid or the fact that they were just not fit for purpose. There is a need for a national specification with regard to the type of meter and the method of installation to be used. I firmly believe that the current system whereby 34 individual local authorities and many district water schemes are installing different types of meters is not working. In Shannon, the town in which I live, meters were installed six inches below ground. When I raised this issue I was informed that meters are supposed to be installed a minimum of 1 m below ground. In some of the Nordic countries, meters are actually installed up to four or five feet underground.

I agree with certain aspects of what Senator Daly stated. In that context, it is critical that a standard type of meter should be installed throughout the country and that such meters should be installed to a standard depth. This would help us avoid the fiasco that occurred during the two bad winters we experienced in recent years when meters throughout the country failed and pipes burst. The latter resulted in massive levels of water loss.

Since the establishment of the new body was announced a number of months ago, issues have been flagged by experts in the field of engineering. For example, engineers who work for Dublin City Council indicated that up to one third of properties in the capital are not suitable for meters. This is as a result of the fact that such properties operate off shared supplies. The Government believes that the figure is more likely to be closer to 20%. Even then, it should stop the roll-out of meters. Methods will have to be devised that are fair to both consumers and the suppliers of water to the properties to which I refer. This may well be an issue that will arise in other large urban areas. If we are going to become involved in partnerships with particular companies or bodies, then the latter must identify solutions to problems such as those to which I refer. Finding such solutions is their job, not the job of Government.

There are those who are extremely opposed to the introduction of water charges. These people are entitled to their opinion. However, I have yet to hear them state how they propose we should pay for the new reservoirs, wastewater treatment plants and pipes that will be required if we are to conform to EU obligations. The Government was not responsible for breaking the country's economy. Rather, it was elected to sort out the mess that was left by others. Those who are of the view that we can simply make the billions of euro required to upgrade our water systems appear, as if by magic, are not being honest with taxpayers. As a result of the fact that the finances of the country have collapsed, we will be obliged to carry out the work to which I refer with much less. Capital investment in 2011 was ¤435 million and in the current year it will be ¤371 million. It is predicted that it will have fallen to ¤296 million by 2014. If previous Governments had implemented the provisions of the water framework directive during the boom, then many of the issues that have arisen would already have been addressed. Those who were in government previously do not want to hear that but it is the grim reality.

I firmly believe that Irish Water will, under the direction of Bord Gáis, create a water services industry of which this country will be proud. Regardless of how much we might wish it were so, this will not happen overnight. However, it will happen and we will be left with a quality water services industry. A critical matter in the context of metering relates to building code regulations. As stated, all new meters must be a standard model and they must be installed to a particular standard. Those that are already in place will have to be retrofitted because we will otherwise run into more difficulties if we experience further extremely cold winters in the future.

Sean Barrett (Independent)
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I welcome the Minister of State. I always look forward to his visits here, particularly in the context of the wide range of topics he is prepared to discuss with us.

It is going to be necessary for further information to be produced in order that some of the gaps to which Senator Daly refers might be filled in and I am of the view that a regulatory impact analysis is now required. We have discussed many of the principles but there is a need to get down to brass tacks. In view of the summer we have just had, one is prompted to ask why there is a problem with regard to water in Ireland. The OECD continually issues reports stating that water is scarce and that it must be properly priced and rationed. However, a great deal of it fell on Ireland during the summer months. If Ireland is the only country in the OECD which does not ration water, there might be a good reason for that. The problem in this country is that there has been a surplus of water in places such as Cork city, Glanmire and Dunboyne in recent years and this has led to flooding.

Some of the thinking relating to the Irish situation in respect of this matter is that little old ladies, widows, etc., take far too many baths, drink loads of water and are generally wasting large volumes of it. The evidence points to the contrary, however. If one removes the 60% for which the engineers are responsible - a great deal of which disappears out of the system - then it appears that there is no problem. There is plenty of water in this country but we do not always collect or trap it properly. This is what leads to flooding. I read an article in the Irish Examiner which was written by a retired engineer who questioned the entire rationale behind both metering and pricing. Single people, little old ladies and retired individuals do not consume much water. It is going to cost a great deal of money to install meters. People are going to receive a certain amount of water free of charge and I understand an announcement is due in that regard. Consumption will not be reduced because people do not actually use that much water. There have been indications that the State was going to order the most expensive meters. At the same time, people have been informed that they can save on up to 80% of the cost of having a meter installed simply by going to their local hardware shop.

Is the Minister of State in a position to indicate that the State will not be stung for millions of euro in respect of ordering meters of a particular type? Will he also indicate the level of price elasticity in respect of this matter? What will be the allowance with regard to free water? Have we targeted the wrong people? Would it not be better to leave the vast majority of homes without meters and not impose a charge on them because, in fact, there is no return to be had? In other words, has any consideration been given to allowing people to opt out of metering in view of the fact that there will be no return from it? Has an economic calculation been carried out in this regard? We are trying to change people's behaviour but there is no guarantee that we will be successful in this regard. I am concerned that this is an experiment which is going to cost a great deal to conduct.

When the Minister for Public Expenditure and Reform, Deputy Howlin, who served as Minister for the Environment in the 1990s, came before the House to discuss other topics, he stated that engineers were always willing to design huge projects but were never willing to address leaks in the system. Now it is being stated that water loss is being caused by retired people washing too much or drinking too much water. Perhaps this is a stereotype which we should abandon.

The Minister of State referred to the Commission for Energy Regulation, CER, the performance of which was discussed at the Kenmare conference approximately two or three years ago. The majority of the economists present at the conference indicated they were not very impressed by the CER's performance. At the time, electricity prices were extremely high and the regulator failed to challenge the large level of low productivity and the high cost base which obtained in what was then the ESB. We do not want a recurrence of what took place in the area of energy regulation in this instance. There is a need for a genuine counterweight in respect of any regulator.

As the Minister of State is aware, the relevant literature is full of information on cases of so-called regulatory capture where the customer is powerless and cannot really influence the regulator. There is no doubt that regulators are "captured" by producers. The term "independent regulator" is almost an oxymoron in the Irish case. The former Minister for Transport, Mr. Noel Dempsey, ordered the airport regulator to increase charges by 41%. He had to do this because the regulator was totally under the thumb of those it was meant to be regulating. This was an instance where the regulator was certainly not independent. The Health Insurance Authority, which is charged with regulating health insurance, is an in-house branch of the Department of Health. One of the Minister of State's colleagues established the Qualifications and Quality Assurance Authority of Ireland in the area of education. There are nine or ten people on the board of this authority, all of whom are appointed by the relevant Minister. In light of the fact that most universities have approximately 70 departments, when the legislation relating to establishing the authority was being debated we inquired as to how those nine or ten people were going to be in a position to regulate the research and other activities of those charged with teaching those 70 subjects.

I am concerned that part of the political incentive to set up new quangos and regulators is that this is basically another form of Government patronage. When the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, came before the House to debate the competition legislation, we asked whether the Competition Authority should not have power to say that particular regulators - particularly those which pass on price increases or whatever of 41% - are useless. We have a problem in this regard because we assume that regulators are independent when it is clear they are not. Typically, the consumer gets a bad deal as a result. When it comes to the regulator for the area under discussion, we do not want to make the same mistake that we have made on so many occasions in the past.

Reference was made to the fluoridation of water. As Members of the Oireachtas, we receive quite a number of representations on this matter. I have spoken to individuals from the dental schools in Trinity College and University College Cork and I am aware that, historically, this is a very strong health measure. Fluoridation of water supplies has been associated with great improvements in Irish people's dental health and led to the so-called decayed, missing and filled teeth index falling dramatically. Researchers found that fluoride was naturally present in water in Rathkeale, County Limerick, and that people in the area have very healthy and strong teeth.

If there is new research which casts doubts on the established wisdom, it should be examined. I certainly recall previous research which indicated that one would have to consume gallons of fluoridated water before experiencing any adverse health effects. Moreover, fluoridation has proven dental health benefits. Dentists are always telling us that it helps to reduce dental bills, even though cutting their bills is not something which one might expect any professional to favour. Perhaps the new authority will take it upon itself to re-examine the issue of fluoridation.

As to whether the new system will lead to cost savings, we will need to see the proof. The Minister of State indicated that the majority of staff at the new authority will remain in the direct employment of local authorities for a considerable period. That is a matter of concern given the finding in the McLaughlin report of substantial layers of superfluous management in local authorities. In addition, we do not yet know what the pricing model will be in respect of water charges. There must be a clear quantification, in advance of the establishment of the new authority, of the costs associated with the new system and the benefits that will arise from it. In particular, given the generally unsatisfactory experience with regulators in this country, measures must be put in place to ensure the new authority is not captured by the sector it is appointed to regulate in the wider public interest.

Maurice Cummins (Fine Gael)
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I thank the Minister of State for coming to the House to facilitate this discussion. It never ceases to amaze me when, after repeated requests on the Order of Business for a Minister to come to the House to debate a particular issue, the Chamber is not filled to capacity. Today is no different, with only two Members in the Chamber for the beginning of the Minister of State's speech and some half dozen as I speak. I apologise to the Minister of State for the poor attendance.

This is a very important discussion. Water is life and without it we cannot exist. While we have an abundance of rainfall in this country - this summer being a notable example - the challenge is in the harvesting and management of our water to ensure a safe, reliable supply for the population. The Minister of State referred to a communications strategy for Irish Water. It is vital that the new body communicates its message effectively in order that every household in the country knows what is involved. I welcome the indication that there will be a strong emphasis on this aspect of its work.

Local authorities throughout the country have significant expertise in the area of water management. As such, I welcome the Department's proposal that they be allowed to enter into agreements with Irish Water by way of which they will act as agents for the authority in the management of services for a considerable period. There has been a concern in local authorities that their expertise in this area would be lost.

Denis O'Donovan (Fianna Fail)
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I apologise for interrupting the Leader in order to welcome a visiting delegation.