I welcome this Bill to the House today. The Bill provides for the establishment of Uisce Éireann/Irish Water as a subsidiary company of Bord Gáis Éireann (the “Board”). It confers the power to the Board and Irish Water to install water meters in all domestic properties. The Bill also amends the Water Services Act 2007. In addition, it provides the Commission for Energy Regulation with a function to advise the Government on developing policy on regulating the provision of water services and empowers it to prepare for the performance of water regulatory functions under any future enactment.
One of The biggest issues facing the government is the provision of good-quality water in sufficient quantities. It’s not just about meeting household requirements; it’s also about jobs and those much-coveted foreign direct investors who come with an insatiable demand for assured, sustainable supplies of high-quality water.
The Government proposes to transfer water responsibilities from the 34 local authorities to a new national utility, Irish Water, a new regulator and to develop a fair funding model that incentives water conservation and ensures cost recovery. This change as I understand it is a compulsory stipulation of the memorandum of understanding with the EU and IMF, and the Government must comply or there will be monetary sanctions.
The efficient, clean and cost effective delivery of water services is a very important policy area which poses specific challenges for policy makers. In Ireland, a number of particular factors are present. There has been “historic under-investment in water” and “ageing and poor quality infrastructure” exists in some areas. Ireland, as an EU Member State, has certain obligations arising from the need to comply with the Water Framework Directive (WFD), including financial ones. In addition, the current economic climate and its implications for Exchequer resources also form part of the context within which funding of essential services such as water provision need to be considered.
It is estimated that an average of €600 million a year will be needed to comply with the EU Water Framework Directive. The Government has identified four ‟key drivers‟ which underpin the case for increased investment in water and waste water services; enterprise, climate change, population increase and the Water Framework Directive.
In terms of climate change, some climate change models suggest that Ireland may experience weather conditions in future that could jeopardise security of our water supplies. The CSO estimate that Ireland’s population could, in the highest scenario, rise by nearly 1.5 million up to2021. This along with the Water Framework Directive which requires that European Union Member States introduce a river basin approach for the management of water and the achievement of a good ecological status by 2015 are important drivers in water investment increases and require that the appropriate modifications be made to the delivery of water services in Ireland.
I proposed in my submission that I made on behalf of the Fine Gael group to the Joint Oireachtas Committee on the Environment last April that water facility/company will to be a national resource and remain a public utility and a public resource. The Government is adamant that Irish Water is to remain in public ownership and will be accountable to the Oireachtas. This was outlined in The Department’s Water Sector Reform Implementation Strategy in October which includes a section which addresses the Joint Committee’s 2012 Report on Water Provision.
It was also stated in the Implementation strategy that all profits from Irish Water should be ring-fenced and reinvested to generate a sustainable clean water supply and waste infrastructure that is highly regulated to guarantee excellent quality for the consumer which is commendable and will signal a positive step in the development of our water provision as a nation.
I think the Government must be credited for honouring a commitment made in the Programme for Government to establishing a new Water utility. This reflects the Government’s stated intention to take a national approach to water provision whilst pursuing a number of broad policy objectives. Such broad policy objectives in the water sector have been referenced in a number of documents and include ensuring compliance with statutory quality standards; improving the quality of service increasing the cost efficiency associated with water provision and conserving water as a resource;
In addition policy is focused around protecting and improving water resources and water dependent ecosystems; providing water services infrastructure to support sustainable growth and environmental protection; introducing new governance and pricing arrangements for the delivery and management of water services.
The decision to reorganise the delivery and funding of the water sector, including through the establishment of a new Irish water utility, can be traced to a number of key policy documents. The Programme of Financial Support for Ireland with European Union / International Monetary Fund / European Central Bank (the ‘Troika’) includes a commitment to undertake an independent assessment of the transfer of responsibility for water services provision from local authorities to a water utility, and prepare proposals for implementation, as appropriate with a view to start charging in 2013.
The Government has taken a pro-active and responsible policy position in this area by recognising and acting upon a need to reform and modernise the water sector. A study carried out on behalf of the government by PWC found that – the current water sector had no consistent policies, no standards, no consumer protection and no economic regulation; that it suffered from fragmented leadership, poor co-ordination and duplication of management; that there was an abysmal 52 per cent collection rate, on average, for nondomestic water charges; and that operational expenditure was “unusually high” by UK benchmarks.
It noted that “unaccounted-for water” – leakage on both the customer and distribution side that’s said still to amount to a staggering 36 per cent of total usage – “is a very significant problem and well above international standards”. And, unsurprisingly, it also highlighted the difficulties of implementing river-basin management and of rationalising the use of water sources when numerous local authorities were fighting solely for their own interests. The Government has taken all of these findings on board and responded by introducing a policy that will transform the way the sector operates and delivered.
The PWC study recommended that in terms of company structure, it recommended the establishment of a public water utility in its report having also considered the option of an agency model (or variants of those forms).
The second phase of work will involve the development of a detailed implementation plan for the transition of water services functions from the city and county councils to the new public water utility (DECLG, 2012) and Minister if you could restate that local authority expertise & workforce with be retained and central to this. The Government “has also decided to embark on the rollout of a universal water metering programme”.
There is no economic regulation of the water sector in Ireland at present. Currently, water charges for non-domestic use are set by the 34 individual local authorities with the rates charged varying significantly between them; from €1.75 per metre in Kildare to €3.04 per metre in Wicklow.
Water services cost over €1.2 billion to run in 2010, leaving a resulting funding gap of around €1 billion after revenues from non-domestic charges had been taken into account. At the same time, Ireland is unusual among members of the OECD in not charging households directly for the water they consume. It is in this context, that the Government plans to introduce water charges and water metering in Ireland. Charging by volume of water used is considered by some commentators to be one of the fairest approaches to charging. This, however, requires the installation of water meters. The introduction of water metering will provide the means by which water consumption can be measured and subsequently charged for, and at the same time ensuring to protect the most vulnerable, the sick, and those genuinely unable to pay. Metering it has been demonstrated encourages conservation by making customers aware of their usage.
The principal themes of the Bill will each be discussed in turn the subsidiary company – Irish Water the Installation of water meters and miscellaneous provisions. Part one of the Bill deals with the terms and the title. Part 2 of the Bill deals with the subsidiary company. Section 4 provides for the formation, by the Board, of a private company limited by shares under the Companies Acts (the “subsidiary”). This will follow consultation with three ministers (namely the Minister for the Environment, Community and Local Government, the Minister for Communications, Energy and Natural Resources and the Minster for Public Expenditure and Reform). The subsidiary will be known as Uisce Éireann/ Irish Water. In fact, I suggested that the company be known as Uisce Éireann in my submission that I made to the Joint committee in April & here in the Seanad & I am pleased that this is now the case.
In relation to share capital, The Minister for the Environment, Community and Local Government must approve the share capital set out in the memorandum of association of the subsidiary with the consent of the Minister for Finance and the Minister for Public Expenditure and Reform. Section 5(4) facilitates State ownership of the subsidiary by providing one share in the company to Bord Gáis Éireann (the Board) and issuing 50% of the remaining shares to both the Minister for the Environment, Community and Local Government and the Minster for Finance. The Ministers‟ shares are non-voting shares (section 5(5)). The Board cannot dispose of its share without the consent of the two Ministers (section 5(6)).
The Bill provides for the protection of the share capital by the state in the interest of maintaining the utility as public property. Section 6 deals with the memorandum and articles of association of the subsidiary. Conditions will apply to the memorandum and articles of association of the subsidiary and both must be approved by the Minister for the Environment, Community and Local Government with the consent of the Minister for Communications, Energy and Natural Resources and the Minster for Public Expenditure and Reform (sections 6(1) and 6(2) respectively). The Minster must give prior approval for any changes made to the memorandum or articles of association to be valid and effectual and the Minister for the Environment, Community and Local Government and the Minster for Public Expenditure and Reform must give their consent (section 6(3)).
The subsidiary may also borrow money according to the same criterion from appropriate persons other than the Board (section 12(1b)). Aggregate borrowings of both the Board and the subsidiary may not exceed €500,000,000 (section 12(1c)). The Board may lend money to the subsidiary out of money it borrows under section 12(1a) (section 12(3)). The borrowing limit applicable to Bord Gáis Éireann under this section is additional to the limits specified in section 23 of the Gas Act 1976.
The PwC assessment (2011, page105) has recommended that the statutory powers of the Board of the new Irish water utility should have all the characteristics of a commercial body. It should have the power to borrow, to enter into Public Private Partnerships and joint ventures and to set up subsidiaries. As a comparison, Electric Ireland (formerly Electricity Supply Board), an existing utility company, has the power to borrow. I agree that the board should be able to borrow but think it is wise that there are limits and controls on this ability and that is very important.
In respect of Accounts and auditing, Section 15(1) provides that the subsidiary keep proper accounts of all money received or expended by it in a form approved by the Minister for the Environment, Community and Local Government with the consent of the Minister for Communications, Energy and Natural Resources and the Minster for Public Expenditure and Reform. The subsidiary is also required to keep all special accounts in such form as the Minister may direct with the consent of the Minister for Communications, Energy and Natural Resources and the Minster for Public Expenditure and Reform. Accounts of the subsidiary must be submitted for audit within six months of the end of the financial year and the accounts will be laid before the Oireachtas (section 15(2)). The fees paid to the auditor for this purpose will be approved by the Minister for the Environment, Community and Local Government with the consent of the Minister for Communications, Energy and Natural Resources and the Minster for Public Expenditure and Reform (section 15(3)). This will make the board accountable for its finances and is welcome.
Another question I have for the Minister is in relation to freedom of information. It remains to be seen if, under the proposed new Freedom of Information (Amendment) Bill, the subsidiary will be subject to the FoI. The Joint Committee, in its report, recommended that “the new Irish water utility, while recognising certain commercial sensitivities, must be open and transparent to consumers and must be covered by Freedom of Information legislation. Can the Minister tell me if the subsidiary will be subject to freedom of information requests?
As a conclusion I want to state that overall, I support the introduction of the provisions of this Bill. It will have positive implications for the governance of the water sector in Ireland. The changes being brought forward in the water sector are to be introduced on a phased basis and the proposed legislation addresses the commitment of Ireland to introduce water meters and centralise the provision of water services. The intention to ensure a sound financial footing for water services and a current funding gap (which is largely met by the Exchequer) of an estimated €1 billion for water services form an important part of the background to these policy initiatives in the water sector.
Posted under Environment
This post was written by on June 25, 2013