Saturday 27 December 2014

Water charges: now it's €100 before you even turn on the tap

Households to pay a third of annual bill at fixed rate

Fionnan Sheahan and Paul Melia

Published 14/04/2014 | 02:30

HOUSEHOLDERS will have to pay a basic water charge of up to €100 even before they turn on a tap.

Irish Water wants to apply a standing charge of one-third of the expected average €300 water bill just for having the supply come into your home, the Irish Independent has learnt.

The 33pc rate is high compared to charges in other countries and is likely to be controversial as it will act as less of an incentive to conserve water, making water charges look even more like a tax.

However, it would give the new state company, tasked with running the water system, a guaranteed income stream, regardless of levels of water use.

The proposal to have such a large percentage of the bill made up by the standing charge is contained in Irish Water's submission to the Commission for Energy Regulation.

As with electricity and gas bills, the water bill standing charge is designed to cover the cost of the meter, providing the supply and customer services.

Irish Water's submission does not give its view on how much should be charged to domestic users for water.

But even after every home's free allowance is factored in, the average bill is expected to come in at €300 per annum – with the first €100 or so in a fixed standing charge and the remainder based on how much water is used.

The size of the free allowance and the setting of the tariff – or price per litre – has not yet been decided by the regulator.

The Irish Water submission focuses on the structures to be put in place and how the system will operate.

The only view expressed by Irish Water on the cost is to seek a high standing charge of 33pc of the average bill.

The size of the standing charge is surprising as it can be as low as 10pc in other countries.

Irish Water needs to have certainty around its funding levels as it prepares to borrow funds on the market to pay for the development of infrastructure.

The company also says it will accept payment of bills in a variety of ways, including the post office, to make payment as simple as possible.

"Irish Water's submission is about the structure – not what the tariff will be," a source told the Irish Independent.

When introducing meters in the commercial sector, the Department of the Environment said that for reasons of water conservation, it was "appropriate" to allocate the bulk of charges based on volume used as it gave customers "greater freedom" to control their usage.

The standing charge was to cover the cost of the meter and customer services.

"The higher the standing charge, the better from the Irish Water perspective. But you are not going to be encouraging people to conserve water when they see it fixed," a source said.

Standing charges are already in place for commercial customers, but differ by county – it's €60 a year in Leitrim, and €93 in Laois.

Commercial customers with a home attached to the business, for example a farm, receive a free allowance of around 225,000 litres a year – 616 litres a day.

In Britain, standing charges vary for domestic customers – South East Water charges to cover the cost of reading the meter and sending the bill.

STRAIN

Wessex Water charges £14 (€17) per year for drinking water and wastewater, but the charge does not apply to metered customers. Southern Water charges £75 (€90).

Irish Water will have to borrow money to fund its operations.

A guaranteed flow of income from a standing charge of €100 a year from 1.65 million customers would give the markets some comfort to loan money.

Irish Water has previously expressed concerns about accessing funding to upgrade the network.

Documents show that that parent company Bord Gais' "debt covenants" will be "placed under strain" until it begins generating revenue.

It also says that the Department of the Environment is expected to fund the company until it can do so from external sources.

The Government can guarantee borrowings incurred by Irish Water under the law setting up the company.

The Commission for Energy Regulation also says that Irish Water will require direct financial support from the State, through loans from the NTMA or others or in the form of direct payments.

"While state support for IW will be very important in the initial stages, the CER believes that a plan needs to be put in place where over a defined period IW becomes less reliant on state support and can fund its activities from customer charges and the international debt markets", it says.

It also notes: "Obviously the more certainty IW has with respect to its funding the better it will be able to plan its investments and the sooner it will be able to find other sources of funding."

Irish Independent

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