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.
