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Dáil Éireann debate -
Wednesday, 22 Mar 2006

Vol. 616 No. 5

Adjournment Debate (Resumed).

Water and Sewerage Schemes.

I thank the Minister of State for taking this Adjournment matter; he is covering a lot of ground this evening. This matter relates to the water services pricing policy, its implementation throughout the country and the inequality in that policy. I draw to the Minister's attention a Department of the Environment, Heritage and Local Heritage circular to local county and city managers which deals with the assistance a Department gives to local authorities with regard to water pricing policy. It states this assistance is invariably qualified with a commitment that circumstances, where policy implementation leads to a perverse or distorted result that penalises particular sectors or customers, would be considered by the water services policy unit with a view to finding an equitable solution. In effect, the Department's guidance is applicable in almost all circumstances but does not preclude adjustment or refinement where consistency and equity do not pertain. Even within the Department's circular there is an acceptance that there may be exceptions and an inequality may exist on how this pricing policy works.

Under the pricing policy, the Exchequer covers 100% of the price of the capital cost for existing domestic users. The operating costs are recovered through the local government fund. The marginal cost of schemes relates to the full costs associated with commercial users of water and sewerage schemes and for new residential developments. The costs can be recovered in three ways which are outlined in the circular: development contributions or levies, water services charges and capacity agreements with non-domestic users. For existing schemes that are being upgraded, such as that in Castlebar, this system works reasonably well. However, where a scheme is put in place with very few commercial users, it will take a very long time for the local authority to recover the marginal cost of schemes. A small town in County Mayo would have very few commercial users in comparison with a busy town on the outskirts of Dublin, yet the pricing policy is identical in both cases.

The new schemes are of greater concern. The Department's circular specifies that county and city managers highlighted difficulties with a new scheme where no network exists. The circular states that the managers indicate that difficulties are being experienced by authorities in the determination of marginal capital costs on new water service schemes. It also describes the methodologies for this purpose as exceptionally onerous. An example of this is in Achill Sound in County Mayo where there was no pipe network for the new sewerage scheme. In other cases 100% of the capital cost for existing domestic users was covered by the Department, but no network was in place.

The Achill Sound scheme was approved by the Department at all stages, hitting only one stumbling block. It was costed at €9 million, but Mayo County Council worked out the marginal cost at €1.2 million. This was rejected by the Department which felt that the marginal cost of a scheme to cater for 2,000 people should be around €4 million. To recover €4 million from an area of 2,000 people and with almost no commercial business and mostly small residential developments is impossible. The Department asked the council to reduce the capacity of the scheme to a population equivalent of 1,200. Several spurs that were added to assist the development of tourism had to be removed. The overall cost of the scheme was reduced to €6.5 million.

This scheme highlights the inequality that exists. Where no network exists, the pricing policy is prohibitive in the context of the development of tourism and other opportunities and constitutes a penalty because these marginal costs must be recovered. The recovery can only be made in three ways, as mentioned earlier. Using the mechanism of development levies in rural areas, Mayo County Council has imposed a significant development levy and this has been passed on to the buyers of houses in new developments. In County Mayo, one may have to pay a planning levy of €2,500 for a new house, but one will also be burdened with an additional €4,000, which is €6,500 for the cost of a new house for a first-time buyer. The circular indicates that the Department seems to accept that a perverse situation sometimes exists, but when I spoke to my local authority I discovered that the Department does not make any exceptions, despite the fact that there is a provision in its own regulation for such an exception.

There cannot be one solution for the whole country, especially given the level of commercial users in a rural area like County Mayo in comparison with towns on the outskirts of Dublin. One size does not fit all and the Department should recognise this when carrying out its assessment of new schemes. I appreciate that this is a bit technical and I know the Minister of State will have a prepared answer from the Department, but he should ask someone to examine it. Rather than giving me a reply which states that we can spread the cost out on a county-wide basis, the reality is that no county with an existing scheme paid for ten years ago wants to pay a development levy to install a sewerage scheme in a small village 100 miles away.

I thank the Deputy for raising this matter. The national water services pricing policy framework provides for the recovery by sanitary authorities of the cost of providing water services from the users of those services while respecting the statutory prohibition on charging for water services provided to householders. The framework also requires full recovery of the cost of providing water services to the non-domestic sector by means of a meter-based volumetric charge and the metering of this sector.

The pricing policy framework has been fully and successfully applied in respect of all schemes in the water services investment programme since 2000. The capital contribution for non-domestic use is related only to the marginal cost of providing additional capacity. The major part of the capital cost element of water services schemes is therefore domestic and is funded in full by the Exchequer through the water services investment programme. The marginal capital costs are then recovered from non-domestic users on a consolidated county-wide basis over a period of up to 20 years.

A fair and transparent mechanism is used in determining the appropriate level of non-domestic capital costs to be applied to water services projects. This is identified by sanitary authorities scheme by scheme with the methodology used and the resultant outcome closely monitored by the Department of the Environment, Heritage and Local Government to ensure equity in the application of this element of the policy nationally. The determination of marginal capital costs is a matter for agreement between the Department and the local authority and the Department will continue to facilitate and assist authorities in agreeing these costs.

With regard to County Mayo schemes in the water services investment programme, I cannot accept the Deputy's assertion that the water services pricing policy treats rural communities unfairly or discriminately. We should ensure equity in the treatment of all water services projects and non-domestic marginal capital costs should be applied evenly on all projects and to all sanitary authorities in the national programme. There seems to be a mistaken impression that local businesses must pay directly for the capital costs of new water services projects in their area. This is not the case. Marginal capital costs will be recovered from all non-domestic users in County Mayo as part of a county-wide, consolidated, metered charge that includes capital, operational and administrative costs and not as a ring-fenced charge on local businesses served by a particular scheme.

I do not believe that the pricing policy is having an adverse effect on the buyers of new homes, especially given that up to 40% of the cost of providing water services infrastructure for future housing development is provided under the strategic land initiative of the water services investment programme. I acknowledge that there has been some contention about the unit cost of certain schemes in planning. A balance must be struck between the environmental benefits, economic benefits and unit costs on all water services schemes. However, it would be wrong to approve water services projects with an inordinately high unit cost for domestic water services provision that cannot achieve reasonable value for money criteria. Any such projects should be reviewed and sanitary authorities should consider the option for their reconfiguration or modification. The water services pricing policy is designed to achieve equity, fairness and transparency and the Department of the Environment, Heritage and Local Government will continue to ensure that these objectives are maintained.

The Dáil adjourned at 9.30 p.m. until 10.30 a.m. on Thursday, 23 March 2006.
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