Stephen Donnelly (Wicklow, Independent)
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373. To ask the Minister for Environment, Community and Local Government the projected costs for the establishment of Irish Water; if he will use the borrowing provisions of the Water Services Act 2013 to repay the full establishment costs of Irish Water into the local government fund; and if he will make a statement on the matter. [6364/14]

Stephen Donnelly (Wicklow, Independent)
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374. To ask the Minister for Environment, Community and Local Government if the annual costs of water provision, in addition to the establishment costs of Irish Water, are to be paid out of the local government fund in 2014; if this represents a double payment for water services by local authorities and local communities; and if he will make a statement on the matter. [6365/14]

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I propose to take Question Nos 373 and 374 together.

The establishment of Irish Water in 2013 was an integral component of the Government’s water sector reform strategy and involves major organisational change, an entirely new funding structure governed by economic regulation, the introduction of domestic water charges based on usage and the roll-out of a national domestic metering programme. Bord Gáis Éireann (BGE) had responsibility for most of the deliverables under the Government water sector reform implementation strategy. BGE developed a detailed programme initiation document within the framework of this strategy, which outlined all of the tasks required to establish a fully functioning integrated public water utility and provided this to my Department in August 2012. They also provided an associated budget to my Department which outlined the costs involved in each area of activity, totalling €150m, plus €30m contingency, and reflecting both the use of BGE and external resources. The budget reflected the range of tasks to be undertaken from financial, governance, regulatory business capability, systems, brand management and customer engagement perspectives. In addition, Irish Water has progressed the domestic water metering programme, the full cost of which is €539m excluding VAT.

All costs incurred by Irish Water in 2013 were financed by a loan from the National Pensions Reserve Fund (NPRF), with the exception of a grant of €0.57m for a pilot metering study funded by the Department. No other Exchequer funds or voted Department expenditure was provided to Irish Water in 2013.

The establishment costs will be included in the overall funding model for Irish Water; accordingly, they will also be examined by the Commission for Energy Regulation as an integral element of the independent economic regulation of Irish Water. I also expect that establishment costs and metering costs will be included in the regulatory asset base for Irish Water.

In 2014, Irish Water, which now has statutory responsibility for water services, will receive €240m in equity from the Minister for Finance and almost €490m from the Local Government Fund but no other funding from the Department’s Vote. It is anticipated that Irish Water will finance other costs from borrowing and this will be the subject of appropriate Ministerial consents in due course. The subvention to Irish Water from the Local Government Fund in 2014 will fund water related expenditures incurred heretofore by local authorities; operational costs of providing water services, estimated at just under €723 million, have been removed from the local government sector in 2014. These expenditures were previously met by local authorities from their own resources and general purpose grants from the Fund.

The level of State subvention to Irish Water from the Fund in 2014 reflects the fact that the costs of operating water services now have to be met by Irish Water and that there will not be revenue from domestic water charges in 2014, as first bills will not issue until 2015. Therefore there is no question of double payment by either local authorities or local communities for water services in 2014.