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Government outlines free allowance for water and funding for Irish Water

6th May 2014 - Ken Gaughran

– Free allowance of 30,000 litres per household,
– Additional allowance to cover normal water consumption of children under 18 – effectively, water charges will not apply to children
– Funding to Irish Water should allow for an average water charges bill of €240 per year; charging regime to remain fixed until end of 2016
– Free first fix scheme announced for households
– Charges to be capped for people with high water usage due to certain medical conditions
– No standing charge
– Accelerated metering programme

The Minister for the Environment, Community and Local Government, Phil Hogan, T.D., has confirmed that the Government agreed at its meeting today (06 May 2014) that Irish Water’s subvention in 2015 and 2016 will be conditional on the average domestic water charge per household not exceeding €240 per year, subject to final assessment of Irish Water costs by the Commission for Energy Regulation (CER). The CER is expected to determine the level of water charges in August.

The Government’s decisions today include:

· Irish Water will receive Government subvention in 2015 and 2016, conditional on the average domestic water charge not exceeding €240 per year;

· Free Allowances
o Each household will receive an annual free allowance of 30,000 litres of water (and a corresponding allowance for waste water) per year;
o Households will receive an additional free allowance for every child under 18 to cover a child’s normal consumption of water supplied and waste water treated – (this will be up to 38,000 litres per annum- the level of consumption underpinning this allowance to be verified from actual metering data provided to the CER); effectively, water charges will only apply to adults.

· The Minister intends using his powers under the Water Services (No. 2) Act 2013, to issue a policy direction to the Commission for Energy Regulation (CER) requiring:
o the domestic water tariff to remain fixed until end 2016;
o there will be no standing charge for domestic customers for social and environmental reasons (a minimum charge may be applied to properties that are not permanently occupied – e.g. holiday homes);
o Assessed charges will be based primarily on occupancy (and will possibly be refined based on data from metered usage) to ensure that they are as close a proxy for metered usage as possible;
o the CER to ensure provision for retrospective adjustment of charges, including a rebate (above a reasonable threshold), in the context of transitional arrangements for people moving from assessed to metered charges;
o Charges to be capped for people with high water usage due to certain medical conditions (these conditions to be determined in consultation with the Minister for Health); and
o Irish Water to take account of the quality of services provided to customers, including circumstances where services are reduced or restricted (e.g. due to boil water notices);

· An additional €200 million over 2 years for Irish Water’s capital investment – to include a free first fix scheme, providing each household with a free fix of the first leak on a customer’s water supply pipe. Irish Water will be outlining its proposed capital programme, subject to CER approval, in the coming weeks;

· Adjustment of the Government subsidy of group water schemes to align subvention with the free allowance approach towards households on public water supplies to – ensure households in this sector receive equivalent support, while allowing for any transitional issues, to sustain improvements in quality in the group water sector.

· An accelerated Metering Programme with programme completion likely to be ahead of the target (mid 2016 rather than end 2016). In addition, a programme will be finalised in the coming weeks to allow customers to “opt-in” (i.e. where the householders themselves know/identify the connection points). The Department is also exploring with Irish Water the potential to include a new phase of metering of some 48,000 apartments, which can be easily metered as part of a separate procurement.

Commenting on the Government’s decision, Minister Hogan said:
“I welcome Government approval of this generous free allowance for every household. The Government has structured the free allowance in a way that reflects variations in household size and supports affordability. In particular, households with large families, or single occupants – two groups highlighted by the work of an inter-Departmental group on affordability measures and the ESRI as potentially vulnerable to affordability issues – are being protected. I also intend to use my powers to issue directions to the Regulator under the Water Services (No. 2 Act) 2013, on policy matters, to ensure that water charges are capped for people with high water usage due to certain medical conditions. This will include people on home kidney dialysis, and further work is underway to define other qualifying conditions.”

“The Regulator will finalise water charges in August but with these decisions, the conditions attached to the funding of Irish Water regarding the average annual water charge, and the fixing of charges to end of 2016, households now have high visibility in good time, as promised, of the likely level of charges. This is well in advance of billing, which will start in January 2015. The Government has honoured its commitment to provide a generous free allowance, with charging based on usage above this allowance. The CER has commenced public consultation on the structure of tariffs and will be closely examining Irish Water costs, to ensure that only efficiently incurred expenditure will be passed on to customers.”

Minister Hogan added: “At the heart of the Government’s programme of establishing Irish Water is fixing a system that is not fit for purpose: 23,500 people are on boil water notices; 40% of our water supply is lost on leakage; 16% of our water supplies are at risk, affecting over 1 million people; one-third of secondary waste water treatment plants had inadequate effluent standards in 2012; and there is virtually no spare supply capacity in Dublin.”

“With a single new utility – rather than 34 – providing water services more cost effectively, we can address these challenges, manage the €11 billion asset base more efficiently and provide the security of water supply that can attract water-intensive industries such as ICT, pharma-chem and agri-food at a time when a growing number of economies are experiencing water shortages. Irish Water will be able to begin the process of increasing water infrastructure annual investment from about €300 million to around €600 million in the years ahead. This investment could not be funded alternatively without major cuts to public services such as health and education.”

The Minister also announced that Irish Water will introduce a free first fix scheme: “This scheme will help households tackle customer-side leakage in a speedy manner. It will help people reduce their bills as well as overall leakage in the water network, which is unacceptably high at 40%.”

Minister Hogan also welcomed the fact that Irish Water has signalled its intention to introduce a range of payment options for customers, including an easy payment option for customers who wish to make regular payments of not less than €10 per transaction.

The Minister of State with Responsibility for NewERA, Fergus O’Dowd, T.D., also welcomed Government approval for an additional €100 million per annum in capital funding in 2015 and 2016, increasing Irish Water’s core capital investment in water services infrastructure. “This additional funding will result in an increase in capital investment in water and waste water infrastructure, from approximately €300 million in 2013 to €410 million in 2015 and 2016 respectively, a welcome move towards the level of investment required,” he said.

“With this investment, Irish Water can expedite its programme of works to improve drinking water quality, address deficiencies in urban waste water capacity and standards, and improve asset management systems to make services more efficient and investment decisions more evidence based. This additional funding could also create up to 1,000-1,500 additional jobs in construction-related sectors, which is also welcome.”

Minister Hogan also acknowledged the role of local authorities. “In tandem with Irish Water becoming the contact point for issues concerning water supply and quality, it’s important to highlight the smooth transition of responsibility for water services from local authorities to Irish Water. Through service level arrangements we have an effective partnership between on the one hand the knowledge and expertise of local authority staff combined on the other with the network and utility management experience available to Irish Water. These SLAs will be reviewed annually and there will be annual service plans, containing performance targets. If there is significant under-performance, the SLAs will be terminated.”

In concluding, Minister Hogan stated: “The Government are united in their objective to ensure that water charges are as fair and equitable as possible for households. We have taken our time in recent weeks to get these decisions right, and the decisions we have taken today give a clear indication to households of the likely level of charges they will pay, whilst striking a balance between protecting vulnerable groups and incentivising reduced water consumption. The introduction of water charges and the resulting increase in water services investment are necessary if we are to ensure security of quality water supply for communities and industry, aid economic recovery and protect our environment.” 

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