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Reforming Water Services to Meet Ireland’s Future Economic and Environmental Needs – Hogan

Published on Tuesday, 17 Apr 2012

Reforming Water Services to Meet Ireland’s Future Economic and Environmental Needs – Hogan

17/04/12

Irish Water will be an independent state owned subsidiary of Bord Gais Eireann

No up-front charge for the water metering programme

In deciding on the establishment of Irish Water, the Government asked that detailed analysis be undertaken as to whether the public utility should be established as a new State agency or under the stewardship of an existing State agency. On foot of this analysis, the Government has today (17 April) agreed to establish Irish Water as an independent State owned subsidiary within the Bord Gáis Eireann (BGE) group.   Irish Water will be established as a wholly owned public water utility and will remain in public ownership.  

Welcoming this decision, the Minister for the Environment, Community and Local Government, Phil Hogan T.D. stated “the overarching objective of the Government’s water reform programme is to put in place structures and funding arrangements that will ensure we have a world class water and waste water infrastructure that meets all environmental and public health standards. A good quality and plentiful supply of water is needed to attract foreign direct investment and support job creation and maintenance in key sectors such as pharma-chem, IT and food and drink. Today’s decision is a very positive step forward and will allow the water reforms progress with renewed momentum”. 

In just twenty years, global demand for water will be forty percent higher than it is today so Ireland’s valuable water resources play a vital role in enhancing Ireland’s competitiveness and supporting water-dependent sectors critical to economic recovery.  It is essential, however, that key organisational and funding issues are addressed to achieve this goal. The decision to transfer water services functions from local authorities was based on a comprehensive independent assessment which examined the current system, considered international experience and best practice and took account of stakeholder soundings.  This assessment concluded that a public water utility offers the best opportunity to improve the efficiency and effectiveness of water services delivery, provide access to new funding sources, and improve strategic planning and accountability. 

Reform of the existing model is necessary to:
• Develop a sustainable funding model to meet the ongoing operational and capital costs which currently amount to about €1.2 billion per annum;
• Reduce levels of leakage which are a very significant problem. Average water leakage levels of more than 40% in Ireland are well above international standards;
• Support the development of strategically important national water services projects which will be delayed due to funding constraints if a new delivery structure and funding mechanism is not established;
• Ensure ongoing compliance with public health and environmental standards;
• Address fragmentation in the existing structures and achieve real economies of scale in delivery and operation, leading to significant reductions in the overheads in the management of water services;
• Exploit the full potential for industry standard IT systems for management of water services;
• Introduce independent economic regulation of the sector.
• As the value of water increases due to global shortages, ensure that we can use our rich water resources as a strategic asset to the Irish economy.

The Minister said “Quite simply, we are faced with a substantial investment requirement in future years. The present funding model that is not sustainable, and the current scale of operation is not efficient or effective.”

It is important to note that there will be no up-front charge for the water metering progamme and that the Regulator, who will have the best interest of the consumer in mind, will ultimately decide on the funding model.

The benefits which will accrue from establishing Irish Water include:
• The capacity to build on the expertise and commitment within the sector, but achieve a scale of operation which is more efficient and can leverage greater investment;
• The creation of 2,000 long-term construction jobs by being able to secure additional capital investment in the sector; 
• Introducing a specific focus on fixing the current leaks in the system;
• Attracting foreign investment and job creation by funding the major investments in water and sewerage services needed to support new businesses, industries and jobs;
• An ongoing focus on protecting the environment and public health.

BGE has key capabilities that can be brought to bear in the establishment of Irish Water - a track record in raising finance, experience in operating as a utility in a regulated environment, and has specific skills from its own experience of transformation, customer relations, network management, metering and utility operation that can be quickly deployed to assist in the successful establishment and operation of Irish Water.

When fully operational, Irish Water will have the capacity to raise funds on financial markets for capital investment in the same way as other Semi States such as the ESB and BGE. Other funding will come from income from domestic and non-domestic charges, as well as funding from central Government.  The funds will be used to meet Irish Waters costs including operational costs, capital costs for future investment on new infrastructure/leak repair and the repayment of borrowings. The level of capital investment, the operational cost reductions to be achieved, the level of charges and the nature, level and duration of continuing Government funding will be determined, as part of the regulatory and budgetary process.

“The skills within the Bord Gáis Group will be paired with the talent, experience, and commitment to service in local authorities and the specific water and waste water capabilities and expertise that exist in local government to build the new organisation. The overall water reform programme will bring real benefits to people and communities right around the country including through investment in new water and sewerage infrastructure which is vital to support jobs and businesses and ensure high levels of compliance with environmental and public health standards” said Fergus O’Dowd, T.D., Minister of State with responsibility for NewERA.

An implementation plan is being developed by the Department of the Environment, Community and Local Government in collaboration with other relevant Government Departments, the local authorities and NewERA and will be finalised in the coming weeks with BGE.  The plan will cover the legal, governance, organisational, human resources, financial, operations, regulatory and other issues that will need to be addressed in the establishment of Irish Water. The relationship between the public water utility and the local authorities across the range of related functions for which local government is responsible such as planning, emergency management, etc will also be dealt with in the plan.

A comprehensive Q&A is available here.

ENDS

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