Monday 26 September 2016

Irish Water needs €300m to make up for loss of charges

Published 11/08/2016 | 02:30

Documents seen by the Irish Independent show that the Government was advised in June of the financial costs of abolishing bills, which required families to pay between €160 and €260 a year for their water (Stock photo)
Documents seen by the Irish Independent show that the Government was advised in June of the financial costs of abolishing bills, which required families to pay between €160 and €260 a year for their water (Stock photo)

Irish Water will need almost €300m in additional State funding to make up the cost of suspending water charges.

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The utility expects to be hit with a €123m cash shortfall this year, and another €125m in 2017 and €42m in 2018, even if household bills are re- introduced.

And the company also expects to have to mount a massive public relations campaign if charging comes back into force to 'convince' people of the benefits of paying.

It comes after the Government suspended charges for nine months from July 1 last until March 31 next to allow an expert commission examine the long-term funding requirements needed to operate, maintain and upgrade the network.

While the Government has already stated that the shortfall for this year will be met through increased State subvention, this is the first time that the full implications of suspending the charges can be revealed.

Documents seen by the Irish Independent show that the Government was advised in June of the financial costs of abolishing bills, which required families to pay between €160 and €260 a year for their water.

The documents prepared by Irish Water set out the shortfall for this year, and future funding requirements under two scenarios - if bills came back into force, or if charges are permanently abolished.

They show the utility expects to face a revenue shortfall of €125m in 2017 even if bills are re-instated. It expected to collect around €270m from domestic customers.

Read More: Analysis: Public will need convincing on merits of charges

Sources said this is because three months of payments for the year will be missed, assuming charges come back into force after March 31 next, coupled with the high likelihood that many households will refuse to pay. A shortfall of €42m is projected for 2018.

If billing is scrapped, the funding shortfall for 2017 amounts to €239m, with an additional €217m for 2018 - a total of almost €460m.

Sources said the "working assumption" was that the Government would make up the shortfall, but that the utility was cutting costs in the meantime. If the Dáil votes to reintroduce charges, a public information campaign would be required.

"We will have to re-engage with customers and re-tell our story," one source said. "We don't know where customer sentiment will be."

They added: "If domestic (charges) falls away, the subvention will have to increase."

Irish Water plans to spend €5.5bn upgrading the network over the coming years. Among the projects being progressed including upgrading water and wastewater treatment plants and sourcing a new drinking water supply for Dublin and the Midlands. In a statement, Irish Water said that the State remained committed to the company's business plan, but refused to comment on the financial projections.

The water regulator, the Commission for Energy Regulation (CER), is currently examining Irish Water's funding requirements for 2017 and 2018. The Department of Housing, Planning, Community and Local Government said the shortfall would be made up for 2016, but that no decision had been made for the following years.

"The revenue shortfall for Irish Water arising from the suspension of domestic water charges is currently under consideration," it said.

"The level of financial support to be provided by Government to Irish Water in 2017 and 2018 will depend on the CER's decisions on Irish Water's allowed revenue for 2017-18."

Irish Independent

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