Friday 30 September 2016

Utility has no hope of winning public acceptance without investment

Published 14/05/2016 | 02:30

It currently costs around €1bn to operate the Irish Water network on a day-to-day basis
It currently costs around €1bn to operate the Irish Water network on a day-to-day basis

Given the uncertainty surrounding the question of water, the commitment by the Government to ring-fence the €5.5bn needed to upgrade the network is welcomed.

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But the bigger question is how, and when, that money will be allocated.

The water regulator, the Commission for Energy Regulation (CER), is considering Irish Water's capital investment plan, which sets out almost 340 projects across the State which it says are in need of major upgrades.

The projects range from a new supply for Dublin, to wastewater treatment plants to prevent the scandal of raw sewage being discharged into waters.

There are smaller plant upgrades and new drinking water plants. Crucially, there's also minor works needed to keep the system ticking over until the next investment cycle.

The regulator is not concerned about how those works are funded. It can only look at Irish Water's investment plan, and decide if the works are beneficial and represent the best interests of consumers.

But, of course, the question of funding is crucial.

As of now, there is no funding for 2017. That's not to suggest that there won't be money made available, but the amount provided will tell the story.

It currently costs around €1bn to operate the network on a day-to-day basis. That is funded through a combination of government subvention and commercial and domestic water charges.

The most recent figures show that Irish Water collected around €110m in the first nine months of charging, and more up-to-date figures will be published shortly.

The utility expected to collect €270m this year. But with bills only being applied for the period from January to March, it means that at least nine months of revenue - possibly more if the suspension is extended - will be lost.

There is yet no clarity on whether the €205m forecast loss from domestic charges will be made up. No doubt the new Cabinet will have a lively discussion on where the money should come from.

The capital investment programme is somewhat different.

Irish Water has borrowed €800m to date, and has another €500m secured, but the loss of charges means its ability to borrow may be somewhat curtailed.

The reliance on Government funding, coupled with the loss of a major revenue stream, could deter international funders from approving additional borrowings.

The Government intended for the utility to become self-financing over time. That will take more time than originally expected.

Clarity on all these areas are needed, and soon. If the Government is committed to retaining a national utility, and maintaining any hope of public acceptance in the Irish Water model over the longer-term, it cannot allow investment to suffer.

Irish Independent

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