Richard Curran: It will take more than a hosepipe ban to fix the funding model for Irish Water

In Ireland the leakage rate is now down from 47pc to 45pc – this is still an enormous waste of water and it will take a very long time to fix
In Ireland the leakage rate is now down from 47pc to 45pc – this is still an enormous waste of water and it will take a very long time to fix

A decision on the future of Irish Water, taken at Cabinet last week, has been hailed as the beginning of a new consensus emerging in the previously toxic politics of water. In truth, any meeting of minds on the future of Irish Water is just common sense for slow learners.

The Government is to strip out Irish Water from its parent company, Ervia, and have it as a standalone public entity responsible for delivering a fit-for-purpose water system in Ireland.

Ervia is essentially a holding company that also looks after the Irish gas network. Separating Irish Water from Ervia is not a major move, but it will require the creation of a new board.

More significant was the decision to finish, ahead of schedule, the service-level agreements that Irish Water has with local authorities.

Basically, when it was set up Irish Water was supposed to own, manage and operate the Irish water system. But, instead, it had to pay around €230m a year to local authorities to operate the system.

This meant the same staff reported to the same local authority bosses in the same local authorities as before. It was perpetuating an inefficient, costly and failed system.

Creating a single national utility should have delivered lots of efficiencies. But you cannot really be efficient if you place the new entity on top of the old structure. It made no financial sense to build a new state behemoth, with centralised staff, a new board, bonuses and millions spent on consultants, and add it on to the old system.

At least the utility company has been given the all-clear to take over the operations directly. Irish Water believes around 1,000 redundancies are needed from a workforce of 3,000 across 34 local authorities. It believes the savings could be €70m a year.

However, the service agreements will remain in place until 2023. If Irish Water’s savings estimates are correct, taxpayers will fund an extra €350m that is paying for jobs the company says are not necessary, at a time when billions is needed to fix our creaking water system.

The long lead-in time is most likely to cover the tortuous negotiations that will take place regarding the transfer of 3,000 staff from local authorities to a single state body (Irish Water) and the terms of any redundancies that will most likely arise.

The water system is broken, but it is being fixed. Because of the omni-shambles of water charges and the political cowardice that accompanied it, the funding model for Irish Water still isn’t totally bullet proof.

It receives nearly €250m a year from businesses which pay for water. The rest will have to come directly from the exchequer. This doesn’t seem too worrying while the economy is firing on all cylinders, but what happens if the economy and tax revenues slow? There is every reason to believe that funding for water infrastructure could once again be pushed further to the back of the queue.

Bear in mind that when it came to domestic water charges the Government pulled the plug on what were set to be the lowest charges in Europe. It refunded those who paid, but didn’t claim back the “grants” given to households for water conservation.

This was after spending over €500m installing water meters that are now practically useless.

The 800,000 water meters cannot do much but help provide statistics which show that people in posh Dublin 6 are using a lot more water per household than those in Co Cavan. Fascinating, but hardly worth €500m.

There are plans to start charging for excessive use of water, which will rely on meters to determine how much is being used. It is very hard to see this concept taking hold. Homes without meters cannot be charged.

It is extremely difficult to get people to conserve water when they don’t have to pay for it. Even if the charge is modest, it creates psychological pressure to conserve.

The challenges facing Irish Water are enormous. Since its inception, Irish Water has been reducing numbers on boil notices and the number of water schemes on some form of remedial action. It has had some successes, but it is a slow and costly process.

The company estimates that repairing defective water pipes in the Dublin area (totalling 8,000 kms) would cost around €5bn. The water network can supply 623 million litres and the typical daily requirement is 540 million. In the Dublin area the buffer is just 2pc.

And the population of the wider Dublin and Eastern region is expected to grow by 500,000 in the next 20 years.

In response, Irish Water is planning to build a huge new pipeline from the Parteen Basin at the River Shannon, all the way to Dublin, which would bolster supply to the wider Midlands along the way. It is a €1.2bn project.

Critics say there wouldn’t be a need to bring all this water to Dublin if leaks in the pipes were fixed. According to Irish Water this would cost four times as much as the new pipeline.

State subvention to Irish Water shot up in 2016, to €652m from €399m. This was to offset the loss of domestic charges in its financial model. It has been spending money to fix leaks and invest in the network. It has got the leakage rate down from 47pc to 45pc.

This is still an enormous waste of water and it will take a very long time to fix. In Australia, where they deal with problems of drought and water shortages very effectively, the leakage rate is around 20pc. In the UK, where people pay a fortune to highly-profitable private companies for water, the national leakage rate is still around 20pc.

So Irish Water will require an enormous amount of investment just to reach levels where one fifth of all the water produced in the system spills out.

Where will this money come from? The Government says it is committed to funding it. The State utility might hope to get some money from excessive usage charges on homes, but I doubt it will yield anything significant.

Businesses, which already contribute nearly a quarter of a billion euro per year, yet still suffer from water usage restrictions, are a prime target.

Irish Water is trying to change the fee structure for developers and others who want to connect to the water system. When it took over responsibility for water it inherited 57 different connection-charging regimes from the 34 local authorities and over 900 different connection charges.

This is precisely the kind of area where it believes it can streamline the process, and by moving away from the local authorities it can become more efficient.

When it comes to water our politicians cannot have it every way. Water isn’t free. It comes at a price – and that has to be paid by somebody and some time.

A CSO survey found that the highest water usage per household in the country was in better-off areas of Dublin. Water usage in places like Ranelagh and Rathgar was 45pc higher than in Co Cavan.

Right now, nobody pays, so in effect everybody is paying irrespective of usage, income or location. It’s funny that this wasn’t something the left-wing parties shouted about when insisting that water charges be scrapped.

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