Joint Committee on Environment, Culture and the Gaeltacht debate -
Tuesday, 21 Oct 2014

Water Tariffs: Commission for Energy Regulation

Chairman

We will consider the matter of water tariff principles and proposals with representatives of the Commission for Energy Regulation, CER, from which I welcome Mr. Garrett Blaney, chairperson; Mr. Paul McGowan, commissioner; Ms Aoife MacEvilly, commissioner; Ms Cathy Mannion, director; Ms Bríd O'Donovan and Ms Aoife Crowe.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give the joint committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable. I also advise them that the opening statement and any documentation they provide for the committee may be published on its website once the meeting has concluded.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to him or her identifiable.

The issue we are discussing, the water tariffs Uisce Éireann is putting in place, is a source of serious concern for everybody in the country. People are worried about their ability to pay and the fairness of the charges being imposed. I empathise with them and hope this discussion can help to alleviate their concerns in some way. Other issues concerning Uisce Éireann have been raised in the past week. Although they are important and must be addressed, I ask members to stay within the parameters of the issue to be discussed - the water tariffs to be charged. The other issues will be addressed in due course.

We intend to invite representatives of the board of Ervia to appear before the committee in the near future to address the issues of the tariffs, governance, management within Uisce Éireann and bonuses. That is a job of work to be done, for which beidh lá eile. We will issue the invitation when the new board which will be an amalgamation of the boards of the former Bord Gáis and Uisce Éireann has been announced. We expect this to occur next month.

I now call on the Commission for Energy Regulation to deliver its opening statement.

Mr. Garrett Blaney

Gabhaim buíochas leis an gCathaoirleach, leis na Teachtaí Dála agus leis na Seanadóirí as ucht an tseans teacht anseo agus labhairt leo faoi chúrsaí agus rialáil Uisce Éireann. Má tá suim ag duine ar bith ceist a chur i nGaeilge nó i mBéarla, táimid breá sásta glacadh leis sin. Déanfaimid ár ndícheall gach ceist a fhreagairt.

Mr. Paul McGowan is our lead commissioner in the area of water and will cover the majority of the questions that arise. Ms Cathy Mannion is director of water and will help Mr. McGowan in that task. Ms Aoife MacEvilly is a new commissioner who has joined us in the past two weeks. We thought it important to have the full commission present, given the importance of the subject.

I will talk briefly about the role of the CER, of which many members of the committee are probably already aware. We will then discuss the water tariffs, the process of revenue, how we assess revenues for the water tariffs and customer protection.

The CER is the independent energy regulator. We started with the regulation of electricity prices, followed by gas prices. That started in 2000 and was very much driven by European legislation and the requirement to have independent regulation in the energy market. We have broad functions in the economic area and have also recently been given functions in safety regulations which cover the exploration for oil and gas, both onshore and offshore.

They also cover the gas network and contractors in the home for gas and electricity systems. Our functions in the area of economic regulation are set out in legislation and began earlier this year. The key function is to protect the consumer which is at the core of all our activities.

I will hand over to Mr. McGowan who will run through the specifics of Irish Water.

Mr. Paul McGowan

Our role relates to the economic regulation of the water and wastewater sectors. We have put forward to the Minister our economic regulatory framework and he has accepted it. It is based on the retail prices index minus X, RPI-X, model, a typical model used for the regulation of utilities throughout the world and one that represents good international practice. We find ourselves in a situation similar to that in 2000, when we assumed responsibility for the regulation of the electricity industry. At that stage there had been decades of under-investment, as well as a high cost base and quality and security issues associated with the electricity industry. Added to this scenario in respect of water and wastewater services in Ireland we have the establishment of a new utility. Our starting point is that Irish Water, wastewater services and the system are not fit for purpose.

We have three core areas on which we focus as an economic regulator. First, we aim to drive efficiencies in Irish Water and its cost base to ensure value is delivered to all those who receive water and wastewater services. Second, we aim to allow an economic regulatory framework to be in place to ensure Irish Water has access to capital markets and borrowing in order that it can carry out the vital and necessary investment in water and wastewater services. Third, we aim to ensure the appropriate customer services standards for those who are receiving water and wastewater services from Irish Water.

In July we consulted on a proposed water charges plan which covered a range of matters. I do not intend to go into all of them, but suffice it to say it covered domestic charges and the interim revenue review, that is, the amount of money we were willing to allow Irish Water to earn through charges and other means. In response to this consultation we received 345 comments, all of which we reviewed and assessed as part of our decision-making process. They covered a range of issues, including impaired water services such as boiled water notices, the size of allowances and discounts. Having considered all of the comments made, we issued a direction to Irish Water on 17 September on its final water charges plan. This was informed by the policy direction from the Minister, our review of Irish Water's costs and the review of all the responses to the domestic tariff and non-domestic tariff proposals. It also took on board the Government's decision on 6 May on water charges.

I will not go through in detail the slides on the Minister's policy direction because we have spoken about it before to the committee, but I will be happy to take questions. The policy direction covered the stipulation that there be no standing charges for primary households, that provision be made for customers with medical conditions, that there be a free household allowance and that effectively there be free usage for children. Furthermore, we had to make provision for circumstances where water services were impaired, allow for rebates in the event that a customer's bill was lower once he or she moved to a metered charge and for assessed charges to be a proxy for metered charges insofar as it was possible to do so.

The next slide summarises the decision on Irish Water's overall revenue. The bottom line is probably of most significance. Effectively, Irish Water asked us for €2.26 billion in revenue for the period 1 October 2014 to end December 2016. As part of our analysis, we decided to allow the company €2.08 billion, a reduction of 8%.

We made this reduction in the interests of consumers. We set what we considered to be challenging but realistic targets for Irish Water in terms of the amount of operational expenditure it would incur during the period.

We also reduced the level of capital expenditure in terms of customer charges. This was to recognise, first, that we expected Irish Water to deliver efficiencies in its capital programme and also that it had put forward a very large capital programme. We were concerned about the volume of work it had identified and its ability to have the work done in the two and a quarter year period. We made it very clear to it that if it could deliver a larger capital programme and do so efficiently, it could proceed to do so and that we would take these costs into account in the next price control stage.

The next slide sets out the charges we included in our decision on the water charges plan. Effectively, the charge, after any free allowance is used up by a household, is €4.88 per 1,000 litres in water and wastewater services. If somebody avails of only one service, he or she will only pay 50% of the charge - €2.44 per 1,000 litres.

There is no standing charge for a primary residence. For most people, the first bill they will receive will be based on an assessed charge. The next table shows the assessed charges which are based on estimated consumption in different sized households and take on board the numbers of adults and children living in them. For example, where the number of adult occupants is two and they receive water and wastewater services, the assessed charge is €278 for a full year. Where the number of adult occupants is only one and he or she receives water and wastewater services, the charge is €176. It is worth pointing out that if there were three children in either household, the assessed charge would remain at €176 or €278, respectively, because water used by children is free.

In the assessed charge it is assumed that a one person household consumes 66,000 litres of water per annum and that for every additional adult in the household the additional consumption is 21,000 litres. The estimate is based on data from Irish Water based on information from metres installed in households; it is, therefore, based on the most up-to-date data available in Ireland. It means that for every additional adult in a household the rise in the assessed charge is approximately €102, which is reflected in the table.

The key changes in our decision are as follows. Instead of a 50% discount where water is not fit for human consumption, there will be a 100% discount. The change made demonstrates that we took on board the comments received during the consultation process. In addition, there will be a cap on bills once people have a water meter installed. The original proposal was that a bill would not rise above the assessed charge and that the cap would apply for six months. We have increased the period to nine months.

The original minimum charge for non-primary or vacant homes was €180, but we have now reduced that figure to €125 or €62.50 per service. We have also improved the rebate system for customers. We have included a 60-day look-back rule in respect of the default charge or non-validation. That means that if somebody does not validate or register with Irish Water before the end of November, he or she will not lose out on free water allowances if he or she does so by the end of November.

We have confirmed that the cap on a bill will remain in place if there is a leak which qualifies under the first fix procedure.

We also confirmed that a bill cap will be put in place for customers with medical conditions that necessitate high water usage, and this is a self-declaration system. Finally, we confirmed that there will be quarterly billing and a range of flexible payment options for people making payments to Irish Water.

On the non-domestic tariff, we decided to retain the existing charging scheme used by local authorities up to 31 December 2013 and we confirmed that group water schemes would be treated as non-domestic customers for the interim control period. We established that the domestic tariff and allowances would apply to mixed-use customers from 1 October, bringing such customers in line with every domestic premises in the country and ensuring equitable treatment for all. Still on the non-domestic sector, we introduced a drinking water discount of up to 40% in the event of a boil-water notice or a drinking water restriction notice being in place. We will retain current local authority arrangements for connection charges until we have decided an enduring arrangement.

Uisce Éireann's customer handbook sets out minimum customer service standards that must be applied, and we approved it on 1 October 2014. It includes a €10 charter payment that Uisce Éireann must pay to customers when it fails to meet standards specified in the handbook. We have since reviewed and approved Uisce Éireann's code of practice, customer charter and terms and conditions for supply of water and waste water services. We have also reviewed and approved the code of practice for business customers, which covers areas such as the handling of complaints, metering, billing, customer communications and network operations.

I will now set out the next steps that we will take in terms of work we will undertake in the near future and next year, though the list is not exhaustive. Before the end of 2014 we will have consulted on a first-fix policy with a view to its kicking off in January 2015. We will consult this year on additional service charges that Uisce Éireann may apply to customers and will put in place a partial overall performance assessment, OPA - that is, a set of metrics and key performance indicators to monitor whether Uisce Éireann meets satisfactory performance levels. We will publish the timeline for putting in place enduring non-domestic charges and we intend to establish a large water users' group in recognition of the significant impact this customer group has on the overall system. In 2015 we will examine the enduring connection charging policy for all customers. A big focus will be placed on data reporting and monitoring in the next two years and the purpose of this is to help us do our job of holding Irish Water to account. In 2015 we will also kick off the first full price control, which will apply from 2017 onwards - it takes around a year and a half to carry out such work on a price control that will last six years.

Deputy Barry Cowen

I thank the witnesses for attending today. Like all committee members, I had hoped to speak to them prior to the publication of the draft document. It would have been useful if the witnesses had been in receipt of Irish Water's submission, as they were not when they met us previously, and they assured us they would speak to us about this. It is water under the bridge.

I hope my questions are relevant to the three core briefs handed down to the Commission for Energy Regulation by the Government. Those briefs relate to effectiveness from a cost base perspective, the economic framework and access to capital markets and customer service standards.

I will start where Mr. McGowan finished. I find it unbelievable that the Commission for Energy Regulation, CER, has not yet ascertained what the first-fix policy is, although charging has been ongoing since October. Was it always the CER's brief, as directed by Government, not to have that in place prior to the commencement of charging? Is that as a result of what has come out in recent days about the excessive costs of repairs, with call-out charges of €188 during office hours, €282 outside office hours and €141 per hour thereafter, as well as €220 for a pressure test?

Mr. McGowan also mentioned that the CER's brief allows it to assess and make recommendations in relation to charges Irish Water may impose on its consumers and other means of income. Is this another means of income? Is this only now coming to light against a background in which the CER has not yet clarified the first-fix policy?

To go back to the start, Mr. McGowan said the cost base was excessive to the tune of 8%. Which costs exactly does the CER find excessive? Does it find the start-up costs excessive? Does it find the ongoing operations costs excessive? Did it factor into its analysis the payment system that exists for staff? Does that fall within its remit or is it something outside its control? In relation to the economic framework and the assessment of its viability in the future and its ability to raise and access funds in capital markets, last week's budget saw a further €65 million in Government subvention through the benefits package, the fuel allowance and tax credits.

We are led to believe that up to one million people have not yet returned their packs. Based on an 80% compliance rate, the total revenue from domestic users might be in the region of €160 million. Has the CER factored a compliance rate into its assessment of Irish Water's income? If so, what was it? Was it 80%, 100% or 50%, which it might be when the dust settles? Has the CER had an opportunity to assess the impact of the increased subvention just mentioned, which has come since the charges were set in motion?

Free allowances were significantly reduced on 1 October compared to when the CER circulated its draft document. The allowance has gone from 38,000 litres for children to 21,000 litres. From where did the relevant data come? What scientific evidence was available to back up that decision? Will the CER publicise where that information emanated from? Was any consideration given to whether people aged 18 and older who are attending college, for example, should be assessed based on an adult charge? A commitment was given to review the charges on an ongoing basis. It sounds to me as though the CER was not sure of the data available to make the assertion in the first place.

I welcome the CER's move to give an immediate refund from day 2 where a boil-water notice has been issued. What I fail to understand and what I am greatly disappointed with is that the CER saw fit to give a discount of only 40% to non-domestic users. What does that say to the commercial sector, to the tourism sector, to the licensed trade, and to restaurant proprietors in Roscommon and other places where a boil-water notice might exist? How are they expected to carry on regardless? How are their businesses expected to succeed when they are being hit with such charges? The costs are greatly excessive, given how they supply water to their customers.

On the first-fix and call-out costs, what data has the CER assessed to allow Irish Water to arrive at the prices mentioned? What analysis has it carried out of similar situations in other areas where water charges are part of the income for those providing it? If those questions are answered they might lead to others.

Mr. Paul McGowan

I will try to answer the questions in order. Under the first-fix policy Irish Water may spend €51 million. If it spends that amount of money it is important that it is accounted for properly. It has always been our intention to analyse the first-fix policy and submit it for consultation in order to ensure that it delivers value for money for all consumers. A pilot study is currently being carried out by Irish Water on first fixes, comprising 100 first fixes. The results of that, along with its proposal on what the first-fix policy will mean, will be available to us for public consultation in the first week of November, and our intention is that the first phase of the first fix will begin in January 2015, based on what we call a partial approval. We will grant it an approval on certain terms and conditions for a certain amount of money from January 2015. We will follow that with a full and final decision on the first-fix policy. We did not come to a decision in the last day or two; we have known for some time that the first-fix policy would need to be the subject of consultation to ensure that value for money is achieved.

Irish Water submitted proposals to us in its water charges plan concerning call-out charges. We expressed concern about the level of those charges. We said that we have not approved them and we will consult on what they should be. We stated quite clearly that if anybody incurred those charges he or she would receive a rebate of any charges paid over and above what we would eventually approve. We have not signed off on any call-out charges.

Ms Cathy Mannion

I will add something to that. There is no link between the first-fix policy and the call-out charges, although when I first read about them in the press they seemed to go hand-in-hand. The first-fix policy is all about how Irish Water fixes a leak at no cost to the consumer. It is very different from call-out fees, which might apply when someone wants his or her pressure tested, a meter moved or something else. As Mr. McGowan said, there will be separate consultation on that, because we were concerned about the level of those costs.

We were asked whether we had benchmarked costs from elsewhere. We have done so for gas and electricity for ESB and Bord Gáis Networks. We will do the same for Irish Water. We will ask it for a lot of detail on the wage rates of the people doing the work and the number of hours required for each piece of work. It will be quite a detailed consultation. At the end of all that, we will develop a fixed rate plus a fixed number of hours as a standard charge, which will bring clarity to the situation. The costs may be more for some people than for others.

Deputy Barry Cowen

Does the delegation think too much is expected of it? Irish Water will impose these charges. The delegation may believe they are excessive and that there will be rebates. That is exactly what I have said all along. There has been a rush to charge people without adequate preparation. The CER is not in a position to judge how adequate or otherwise the charges are, but the customer is being charged.

The commission is directed by the Government to act in the best interests of the consumer, but I am afraid that is not in the best interests of the consumer.

Mr. Paul McGowan

It is our intention to bring clarity to everybody on call out charges at the earliest opportunity, but it is important that we benchmark and analyse these costs, as well as put them out for consultation in order to ensure they are at the correct level. When I mentioned other means of income, I was merely referring to the subvention from the Government; I was not referring to anything else.

In terms of costs and the 8% reduction we applied, the Deputy asked us about three specific areas. Irish Water put forward an application for a figure of €181 million in start-up costs. We analysed its figures in detail and the Deputy may recall that we also carried out a previous analysis at a much higher level at the request of the Minister. This time we carried out a more detailed analysis and found that the majority of the €181 million in costs had been efficiently procured in line with proper procurement processes and that the costs had been efficiently incurred, with the exception of a sum of €9.1 million which we did not deem to have been efficiently incurred. As a result, we disallowed €9.1 million of the expenditure. These costs were primarily in the area of project management but there was an element of labour costs.

In regard to operational expenditure, we all accept that Irish Water's cost base is too high. The challenge for us is to put in place a regulatory framework that will bring pressure to bear on its cost base in order that it will be seen to decrease over time. For the initial two year interim revenue control period, we have attached a reduction of 7% per annum in its operating expenditure. In the first full price control process we will expect to be imposing even greater targets on Irish Water in terms of the reductions it will need to make to its cost base in order that the charges to customers will be brought down to as low a level as is reasonably possible. This is not something that can be done overnight; it is a programme. As has been seen across Europe when it comes to utility regulation, these efficiencies are achieved over time. The targets we have set for Irish Water for the interim revenue control period are challenging, but they are also realistic, that is, they are achievable for Irish Water. We will be considering more stringent operational expenditure targets in the future. We do not get into or offer opinions on payment systems for staff.

I ask Ms Mannion to address the question of how we factored in the compliance rate.

Ms Cathy Mannion

There are two aspects to the compliance rate. All businesses have a certain level of bad debts. We had to factor a level of bad debts into the calculations. In addition, as Irish Water did not have a perfect database of who everybody was and where everybody lived, we had to make allowances for names not being on the database or people having moved elsewhere. We examined a number of figures and, from memory - I will revert to the committee if I am incorrect - we used a figure of 80% in the model. That does not mean that we expect 20% not to pay, rather it was intended to cover the other two assumptions I mentioned.

Mr. Paul McGowan

In regard to the free allowances, the Deputy is correct. The original direction from the Minister mentioned 38,000 litres, or such other number based on available data. I think we have published the analysis carried out in deriving the 21,000 litre free allowance for children. We will continue to monitor this area and publish the results of our monitoring. There is no issue in that regard. The 21,000 litre figure is based on an analysis of 3,000 households in a period running from November 2013 to August 2014. We are confident that the figure is based on the best available data. We did not have that confidence in regard to the 38,000 litre figure which was based on a decade-old report based on UK consumption levels and not necessarily based on average consumption rather than the highest level of consumption for children. The 21,000 litre allowance is based on the most accurate figures available to us in terms of average consumption by children.

It is very important that we use the best available data because the policy is clear that the water used by children is free. If we had stuck with the 38,000 litres or another number, we would effectively have been imposing a cross-subsidy from adults to children or vice versa; in that situation we would not have been complying with our duty.

With regard to charging for adult students, the position is clear that the entitlement to the free allowance is based on the PPS number and the payment of child benefit. It is only those in receipt of child benefit who can claim a child allowance. That is legal position, which is reflected in the charging.

The final question was related to the 40% discount for the non-domestic sector. It is important to point out that from the start we made it clear we were addressing domestic charges first. We have a huge body of work to undertake to ascertain the situation regarding charging in the non-domestic sector. However, in the meantime we recognised that there could be a possible inequity if water was subject to a notice declaring it unfit for human consumption; therefore, we made an exception in the case of the non-domestic sector and introduced the 40% discount. If we had stuck with our original position, we would not have made any change in the case of the non-domestic sector.

Deputy Barry Cowen

When publishing the document, will the CER compare and contrast its analysis with the one that was in place, albeit from the United Kingdom and ten years old? Mr. McGowan said he had compared the two and the public would be interested to know what the comparisons and contrasts were. Also, what poverty proofing analysis information was furnished to the CER and by whom? Will Mr. McGowan also publish that information? Obviously, it helped him to formulate an opinion on what he believed to be a fair and equitable price.

Mr. Paul McGowan

Issues of affordability are matters for the Government. Our analysis would have been based purely on the level of consumption associated with adults, children and households. Yes, we will carry out a comparison.

Deputy Michelle Mulherin

I welcome the representatives of the commission. It is regrettable that we were not able to have this conversation before the CER issued the price of water. Nonetheless, considering the storm of concern among the public about water provision, charging for it, fairness, affordability and so forth, it is important that the representatives are present at this meeting. The main concern is affordability, fairness and customer protection, which Mr. McGowan mentioned, and that water customers will be looked after correctly and will not have inappropriate charges levied on them.

What is the real cost of producing water and treating wastewater, taking infrastructure into account? Mr. McGowan said the system in place was not fit for purpose, when one considered leaks, boil water notices, the lack of sewage treatment works and the array of problems in that regard. What is the cost of producing water? On the last occasion the representatives appeared before the committee I raised a concern which had been raised previously in the media that the estimated cost of the additional local authority workers - an estimated 2,000 people were moving from the local authorities to Irish Water - would be €2 billion up to 2023. Is this cost one of the factors the CER must consider and is it factored into the price it has devised? Is it being passed on in the charges arrived at by the CER?

On the cost of producing and treating water, it appears to be very neat that the cost of producing water if a person is only receiving a water supply service, as opposed to having wastewater going into the public mains, is simply half the price. It does not sound very scientific.

I would like to know the basis for the figure of €244 for receiving the water and double that amount for having it treated out. Some people are only using one of those services and I ask whether some of the cost of treating wastewater is being imposed on people who are already paying for water. In rural areas where people are already paying for water, the rate per cubic litre is less than what Irish Water is proposing to charge and the allowances are higher. In my own county the allowance is approximately 50,000 gallons, or approximately 200,000 l, for a domestic dwelling compared to the proposed 30,000 l. This is a significant figure when the cost is being passed onto people if it also includes the treatment of sewage.

I ask for clarification on the cost of and timeframe for metering. In regard to the call-out charge, surely an individual who calls out Irish Water to deal with a problem in a property is also entitled to hire a private plumber instead. I ask the witnesses to confirm that. If I report a leak in the public road to Irish Water, I presume I will not be charged for a call out. Perhaps that, too, can be clarified.

I am mindful that the Chairman has directed us to discuss water tariffs but the regulator gave us an assurance at our last meeting that only the real costs associated with the production of water would be passed on to the water consumer or customer. The regulator indicated that it would act as watchdog to ensure we get fair prices. This is aside from the debate about whether we should pay for water. The eye of the current storm is the issue of bonuses. The most ridiculous thing I have heard is that somebody who is not working well can get a bonus of up to 9% to encourage him or her to work well.

Chairman

I ask the Deputy to keep to the tariffs.

Deputy Michelle Mulherin

I was reassured by the regulator at our last meeting that there would be fairness but people do not see this as fair. I do not see how anyone can justify it as fair. There are concerns about the extent to which that can be curtailed because we already have a level of unfairness which I expected would be prevented through the regulator's objective involvement.

In regard to the big discussion on the need to build water pipes from the River Shannon to Dublin, has Irish Water made a case to the regulator on the need to move water from west to east, has this been taken into account in the company's plans and how is it being costed? Some people would like us to ask why we are charging for water if it is falling down from the sky but we know there is much more to the matter than that. It has to be treated and transported through pipes. What is the plan to bring water to Dublin to address future shortages and how much will it cost? Will that cost be passed on or is it already included in the tariff?

Mr. Paul McGowan

The Shannon scheme is still under investigation. Options and costings will be prepared but we will have to be convinced that it is needed and that the expenditure is efficiently incurred. It is too early to give the Deputy a specific answer. In the overall context, we will also be investigating other areas in which capital expenditure can be made, for example, in terms of reducing demand or fixing leaks. A project of the significance of the Shannon scheme would only proceed with our sanction based on the case made for it.

Only real costs are being passed to customers based on our analysis. We do not set specific targets for Irish Water in regard to any individual category. We set Irish Water a target and it is up to the company to decide how it will achieve the target, whether through reducing its labour costs, energy costs or consumables costs.

We do not manage Irish Water. We regulate Irish Water so we set targets and then it is up to it how it delivers on those targets.

Deputy Michelle Mulherin

Does the price of water include the cost of the additional local authority staff that have passed over?

Mr. Paul McGowan

Yes. I am sorry, Deputy, but I was working my way back to this matter. The charges that we have set include the cost of the service level agreements, SLAs, that are in place between Irish Water and the local authorities and the cost those SLAs impose on Irish Water. Nevertheless, we have set Irish Water a challenging but realistic target in terms of the savings that it has to achieve, over the next two years, right across its cost base.

Ms Mannion will answer the question on 50% of the charge.

Ms Cathy Mannion

The Deputy asked why is it 50:50 for sewage and water in. We chose 50:50 due to a lack of information. We did not know, and still do not know, the historic cost of sewage compared with water in. For now, we are going with 50:50 but we will gather information, with Irish Water, over the next number of years and, to the extent that we must, will move away from 50:50 to say 60:40 or whatever the percentage happens to be. We will do that but when we do that we will have to look at the impact on tariffs.

Chairman

Do local authorities not have that information within their gift as it is?

Ms Cathy Mannion

It is a case of gathering all of the information from local authorities and bringing it all together into one database where we can do assessments.

Chairman

When will the commission have that done?

Ms Cathy Mannion

This is part of data migration works which we are in discussions with Irish Water because it impacts on non-domestic tariffs. By the end of this year we hope to have a plan published on when we will get that information and when we can start doing the assessment.

Deputy Michelle Mulherin

I asked what is the cost, how has CER quantified or what cost is being attributed to the SLAs and to these additional local authority staff regarding the cost of water. Globally, what figure has been put on that matter? How does it translate into the cost per cubic litre?

Ms Cathy Mannion

In our assessment, as Mr. McGowan said, we looked at the totality of the costs. The Deputy is right. We found the total operating costs were higher than for comparable companies. For example, we found that they were twice the UK average at a similar point in time. I am not comparing Irish Water now with UK systems which are 20 years under regulation. We found that the costs were 20% higher than Northern Ireland and 2.6 times that of Scotland. As Mr. McGowan said, we started putting in aggressive efficiency measures to start bringing the operating costs down towards a benchmark. It is up to Irish Water how it decides to get those costs savings.

Deputy Michelle Mulherin

That does not answer my question.

Mr. Paul McGowan

I wish to say that 66% of Irish Water's operating expenditure relates to the SLA. In terms of the submission that Irish Water made to us for €1,823 million of OPEX, of that sum €1,237 million was the SLA.

Deputy Brian Stanley

I welcome the staff from the commission here today. I have questions on the issues that drive tariffs and revenue. Over the past period there have been questions on consultancy costs, start-up costs and bonuses. The latter is obviously a topic of the moment. Has the commission discussed the bonus system with Irish Water? Has the commission offered its views on the system to Irish Water? There is a question mark over whether there should be a bonus system. It is interesting to note that senior management, who will earn far higher salaries than an ordinary worker, have decided to give themselves a bonus up to 19%. That means it could be 19% of a salary of €190,000 but somebody earning €30,000 would only get 1.5%. Obviously the pay structure is a matter for Irish Water.

Chairman

We will have everybody in to discuss those issues.

Deputy Brian Stanley

Has the commission discussed the impact in terms of the culture? The culture of an organisation like this one is very important. If that is the culture that comes from the top, has the commission discussed the effects of such a culture on the organisation as a whole and in terms of costs throughout the organisation?

In regard to 2016, it is estimated that the full economic cost of providing water per household is somewhere in the region of €586 to €590. What is likely to happen in 2016, two years away?

Will the full cost be levied? Do the witnesses agree that full compliance with the EU directive on these matters will mean that the full cost will have to be recouped?

The witnesses said call-out charges were benchmarked against those of other utility companies, including the ESB and Bord Gáis, the mammy and daddy of Uisce Éireann. Have the call-out charges of other organisations and companies been taken into account? There is a charge of €282 for a call-out after 5 p.m., which suggests that we are wasting our time working in these Houses - it is staggering. The charge is €140 per hour during office hours and the initial call-out fee is €188. Have these charges been benchmarked against other companies that operate a call-out system? It seems outrageous. TV companies provide network services and Internet companies provide broadband. There is a range of such companies - how do they compare?

On the issue of protecting customers, last night a householder informed me that his phone calls to Irish Water over the past eight days had gone unanswered. In general he uses the phone every day, but his calls to the Irish Water call centre have neither been answered nor returned.

On customer costs, over 40% of all treated water is lost through leakage from the mains system. One can keep mopping the floor but it is not a productive way to spend time if one does not fix the leak. The overall cost of providing water is €1.2 billion, but 40% of this leaks into the ground. Have the witnesses discussed with Irish Water a programme to improve this? Allowance has been made for substantial capital works. The document provided by the witnesses says there will be €750 million worth of capital works for 2014 - this figure rises to €864 million for 2015 and €894 million for 2016. Over the past ten years, between €300 million and €400 million was spent per year on mains rehabilitation capital works. Substantial work was done on installing high-quality mains infrastructure in some counties, including new boreholes and so on. How much mains rehabilitation has been carried out in 2014? I cannot get an answer on this from Uisce Éireann because it sidesteps the question. Have the witnesses discussed this huge cost base issue with Irish Water? Efforts will be made to force people to pay for water that is leaking into the ground, and this concerns me greatly.

What is the plan for dwellings that cannot be metered? Many dwellings are part of a group supply scheme and some old houses have backyard supplies. This issue affects apartment complexes too, some of which house single people on low incomes. How will costs be determined in these cases?

Mr. Paul McGowan

I will answer some questions and then hand over to Ms Mannion. I will first address the plan for dwellings that cannot be metered. A million meters are due to be installed by the end of 2016. This is also relevant to a question asked by Deputy Mulherin. At the moment, 400,000 meters have been installed, and installation is proceeding at a rate of 33,000 per month. This is phase one of the metering programme, and the next phase will address apartments and places where a single supply pipe feeds a string of houses.

We need to see whether arrangements can be made for metering and what those arrangements might be. In the meantime, however, these households will continue to face an assessed charge.

Reference was made to the difficulties householders are experiencing in trying to get through to Irish Water. The company is currently taking 70,000 telephone calls per week and has acknowledged that it is challenged in this regard. Management is reviewing the resources it has applied to the area. We have discussed this issue with Irish Water and will do so again.

It is correct that the full charge, without Government subvention, is €594. As to what will happen in 2016, it is too early to say. We have to decide on the targets we will set for Irish Water in regard to operating expenditure, OPEX, and capital expenditure, CAPEX, efficiencies. Ultimately, the overall charge will be dependent on the level of Government subvention that is available. That is a matter for Government and we have no prior knowledge of what it might be.

We have not discussed the bonus system at Irish Water with the management. As I said, we regulate the company; we do not manage it. We set global targets for it to achieve, but how it decides to spend its money in order to achieve those efficiency targets is entirely a matter for management.

My colleague Ms Mannion will respond to the other questions.

Ms Cathy Mannion

Deputy Stanley referred to the leakage rate of 40% plus and asked how much mains rehabilitation was being carried out this year. I do not have an answer at this time because we are still working with Irish Water on the prioritisation of the capital programme and how it will allocate resources under its maintenance programme, which would include the fixing of mains. Management has asked for €348 million for capital maintenance over the period. We allowed that whole amount because, when we compared with other companies, we found Irish Water had proportionately less allocated to maintenance than was the case for other utilities.

We want to work with management to come up with a plan as to how it can demonstrate to us that its expenditure on maintenance is efficient and offers value for money. In the meantime, we are waiting for detailed proposals on the first-fix policy, which will itself have an impact on the level of the leaks because it will, in part, determine how much of the leakage is on the customer side of the meter and what percentage is on Irish Water's side. We will take all these factors together and sit down with management to come up with a matrix which can demonstrate how, by spending a certain amount of money, the level of leakages can be reduced. When we get to that point, we will be very happy to come back to the committee or submit information on the overall approach.

Mr. Garrett Blaney

There was a question on benchmarks. Our benchmarking process for Irish Water, as for ESB and Bord Gáis, does not involve our benchmarking these companies against each other but, rather, against best international practice. Typically, this would involve a comparison with the Scottish water company or another UK company. As Ms Mannion indicated earlier, the findings were not particularly favourable in terms of staff and labour costs, with the differential being a factor of two and a half.

Deputy Brian Stanley

My concern is that despite the amount of money that has gone across to Irish Water, priority is not being given to mains rehabilitation. I have read out the figures that are pencilled in for capital costs, which include plant, sewerage treatment, bore wells and so on, but unless somebody can show me otherwise, there seems to be no provision for mains rehabilitation. Despite travelling around the country regularly, I have seen no workers fixing mains in any location. Perhaps another member can tell me it is happening in his or her constituency, but I have not seen it. This is a huge issue given that 40% of water is leaking into the ground. However, Irish Water management has refused to answer my questions in this regard.

I have a final comment on bonuses, consultancy fees and the call centre.

Chairman

We will cover those issues with the board in due course.

Deputy Brian Stanley

The regulator needs to take these issues up with Irish Water. The company cannot have a blank cheque in those three areas. This is something that will have an impact on businesses and householders.

Deputy Robert Dowds

Cuirim fáilte roimh na finnéithe.

I will try to stick to the questions. Apart from asking Irish Water to reduce the call-out charge, I also ask the regulator to get it to have consideration for people on low incomes. Whatever about somebody on a reasonable income, for somebody on a low income the call-out charges of €188 or €282, depending on the time, are absolutely excessive.

I also want to ask about the first-fix situation. Why is Irish Water not yet doing this? To give a practical example, I have a constituent who had a water meter installed and after four weeks it was showing that his household had used 450,000 litres of water whereas his next-door neighbour had used 37,000 litres. He was told it would not do the fix for him so he decided to intervene himself and he dug up his path and installed a new water pipe. However, he cannot get Irish Water to connect it and he is still waiting for a connection, although that was on 22 August. Can the regulator give some direction to Irish Water at this stage to intervene on first fixes?

With regard to the issue of moving maintenance from local authorities to Irish Water, has the regulator considered getting county councils to look after the basic repairs, with Uisce Éireann looking after rolling out the new infrastructure?

Has the regulator made a decision on the amount of water people with serious illnesses are to get free? If so, can the witnesses explain that? If they do not know now, can they please ensure people know before Christmas?

Can the regulator influence Irish Water in regard to the issuing of bills? I understand these are to be issued in January although it is probably the worst month for bills as far as most people are concerned, given the shortage of money in their pockets after Christmas. It might be easier if it was moved back a month or two.

Are the PPS numbers really necessary? On a question Deputy Cowen asked in a slightly different way, is the timeline for the roll-out of Irish Water too short?

Mr. Paul McGowan

A pilot is currently under way with regard to the first fix and our expectation is that the scheme will kick off from January, based on interim approval of costs for Irish Water. We will settle on the final details of the scheme after that.

On the question of the role of the local authorities and Irish Water, that is entirely a matter for Irish Water. We do not direct Irish Water in terms of how it splits its workload between itself and outside contractors or local authorities.

The Deputy asked about the matter of serious illness. The decision on that is quite clear. People who have a medical condition which requires them to use above normal levels of water need to declare that on their registration. From that point forward, their charges will be capped at the assessed charge. That is the situation that is now in place.

Deputy Robert Dowds

Will Mr. McGowan explain that further?

Mr. Paul McGowan

People self-declare that they have a medical condition that requires above normal usage of water. On the basis of that self-declaration, their bill will be capped at the assessed charge.

Deputy Robert Dowds

So it will be no higher than anyone else's.

Mr. Paul McGowan

It will be no higher than the assessed charge.

Deputy Ruth Coppinger

And no lower as well.

Mr. Paul McGowan

If people are metered and their metered usage is less, then they will have that reduction shown on their bill.

Ms Cathy Mannion

To add to that for clarity, on the form sent out by Irish Water there is a box to tick for a priority customer. I would urge any of the Deputy's constituents to tick that box. Irish Water will then send out a form explaining the three different categories of priority customer. People should make sure to tick the "priority" box and they will then get a form.

Mr. Paul McGowan

The Deputy also mentioned billing in January. We are currently considering a request as to whether or not the validation period for Irish Water, which is currently due to end on 31 October, might be extended to the end of November.

We hope to make a decision on that this week. In the event that a decision is taken to extend the validation period, that would have a knock-on effect in terms of when the first bills issue. It would probably mean that bills would not begin to issue until the end of January, but we have not made a decision on that as yet.

The question of PPS numbers was raised. Irish Water has been given the power to request PPS numbers under legislation. It is not a matter that we would have directed.

Deputy Robert Dowds

My constituent who has installed an alternative pipe will have to wait until January to get connected.

Mr. Paul McGowan

I think the matter of connection is a separate matter from first fix. That is an issue the person should take up directly with Irish Water.

Deputy Robert Dowds

He was anxious not to waste water.

Deputy Catherine Murphy

As with the ESB and gas, one pays for what one consumes. However, this is the only utility in which one could potentially pay for something that one does not consume, because of the leakage issues. I accept that the first-fix policy is not the issue; it is what happens subsequent to that, when one has full liability. Somebody mentioned the customer side of the meter. Most meters are situated in the middle of the public footpaths in housing estates. I am not worried about the first leak but the second. If the leak is between the meter and the curtilage of one's site, a permit is required to open the footpath. In Kildare such a permit costs €120, along with a charge of €50 for repairs to the footpath. A €500 refundable bond is also required to ensure it is done, and there is also public liability. That is the position around the country; it may vary slightly, but there is a policy in each local authority. That could potentially be over and above the cost of repair if a person has a liability for that part of the footpath and if the leak happens to be there. Has the delegation discussed this issue with Irish Water?

A leak is more likely to occur outside a house when there are severe weather events, and the location of the meter then becomes an issue. Is it the case in other countries that the liability is on the outside? If one has a problem with a gas or electricity appliance one will get it repaired; the same happens if the loo or the bath is leaking. The area between the meter and the house is where there will be the greatest difficulty, with the necessity of digging up paths and so on. What is the position in other countries in respect of such issues? The location of the meters appears to be an extreme liability that will cause major problems. Who decided on the location?

In regard to commercial charges, if the shop is downstairs and the living quarters are upstairs, the charge is €250 as opposed to €488, as it is just the one charge. Is it intended to charge fully, or will there be two tariffs, a domestic tariff and a commercial tariff, which would obviously involve a substantial increase on the commercial side? The existing commercial free allowance for the house is 200,000 litres, as opposed to 30,000 litres.

That becomes an issue. They are potential significant new charges. The delegation might give us their thoughts on them.

It said it benchmarked against other countries, but I cannot but note that we have the most expensive electricity in Europe. We have a dispersed population pattern, but we also have a dispersed pattern of water mains. I am concerned that we are being asked to compare Ireland to other countries. A comparison between Ireland and other countries in regard to electricity does not produce an average cost for Ireland. Our charges are excessive.

The other issue is estates that have not been taken in charge. I presume once they are occupied there would be an obligation to sign a form in order to receive a free allowance. The developer retains control of an estate until it is taken in charge. What is the first fix policy in regard to such situations? I know of situations where shortcuts were taken underground and cheap fittings were used. Irish Water will find serious problems and shortcomings with some systems for which individuals may have to pay. The issue is not just the location of pipes, but also the quality of some of what was laid. I will revert to the delegation if I have any supplementary questions.

Mr. Paul McGowan

I will pass the question on electricity prices to Mr. Blaney. We will then take the other questions.

Mr. Garrett Blaney

To explain the position on electricity prices, a report was released in Europe last week which stated that our wholesale prices are the highest in Europe, but they are only one component of the total electricity price. If we compare the total price against other nations we find we are at the euro area average, which is higher than the total. Therefore, we are slightly higher than the overall average across Europe, but not the euro area if we compare ourselves with other nations using the same currency. There are three elements to that. There is the wholesale price-----

Deputy Catherine Murphy

I do not want to waste too much time on this. I will read the report.

Mr. Garrett Blaney

We can provide more information on that if the Deputy wishes. On the point that we only pay for the energy we consume, that is not exactly how we pay for energy. There is a standing charge for electricity and gas, something which is typical across Europe. There is also a loss and leakage equivalent in electricity and gas. The electricity losses in the system are typically around 10%, which is pretty good by international standards. Some of the gas in the gas system is used to drive compression in the system and again a proportion is lost in the process. In the case of Irish Water the loss is much too high and not at an economic level.

Mr. Paul McGowan

Leakage is and has been a factor for water utilities throughout Europe. It has taken Great Britain up to 25 years to address leakage and even at that it has not reduced leakage to zero. Leakage levels still run at, I understand, around 20% in areas where best practice has been achieved.

On commercial charges, we have introduced the domestic charge on an assessed charge basis for mixed use customers. In terms of what happens to the relationship between that and non-domestic charges, that is a programme of work we will undertake. We will put together a timeline on that which will be published this year. It is far too early for us to say what the relationship between non-domestic and domestic charges will be, but suffice to say there are a whole range of issues of which we have to take account when we examine non-domestic charging.

Deputy Murphy referred to estates not taken in charge.

Ms Cathy Mannion

I will make one last point about mixed use premises. To be clear, the business side of the mixed use premises pay no more and no less than they currently pay. It is just the introduction of a water charge on the domestic side of the premises. The business side of the mixed use premises has a much higher domestic allowance, for example, built into the charge; that will not change. We will just be introducing allowances and charges on the domestic side. There is no difference in the charge for the mixed premises on the business side. There has been some confusion about the matter in the public domain.

I do not have the answer to the question about estates not taken in charge, except to say that I know there is an issue. We have started talking to Irish Water about how best to deal with the matter. I have a feeling that more legislation will be required to deal with this one. I note what the Deputy said and I know there is an issue with those estates.

Deputy Catherine Murphy

I also asked about meters on the footpath and road opening.

Ms Cathy Mannion

It is my understanding that it was a Government decision as to where the meter was installed - that is, on the edge of the customer's property.

In terms of any work required to repair the water-in and water-out pipes, my understanding is that, based on custom and practice, Irish Water will take responsibility from the meter through to the curtilage of the property and into the property, but by law, the sewage or water-out pipe is the responsibility of the customer to the extent that if he or she has to do works on the public pathway, for example, he or she must get the appropriate permit to do that work. That is no different now from the situation last year and the year before.

Deputy Catherine Murphy

So one would have to get a permit to open the road.

Ms Cathy Mannion

Yes; that is my understanding.

Deputy Catherine Murphy

Potentially, that could cost a person hundreds more.

Ms Cathy Mannion

I do not know the cost, but the situation is no different from what it was last year.

Deputy Catherine Murphy

In what set of circumstances would one call out a person to do repairs? Does a customer have the flexibility to call someone out?

Ms Cathy Mannion

Of course one does. Somebody mentioned that people might want to call their own plumbers to do the work. Of course they can do so; it is their choice what they want to do. When we talked about additional charges it was more to do with the things that Irish Water would be asked to do, such as checking the pressure. Earlier I gave the example of changing the location of a meter. I have no idea why somebody might want to do so, but I mentioned it just in case. I meant that sort of additional charge. There is no requirement for a customer to use Irish Water. Where normally a customer would have used somebody else, he or she can continue to do so.

Deputy Catherine Murphy

I will conclude, because other members have asked the questions that I intended to ask.

Deputy James Bannon

I welcome the witnesses from the Commission for Energy Regulation to this meeting.

There is no doubt that CER has a monster on its hands in the form of Irish Water. For a long time I have felt that the establishment of Irish Water was tantamount to handing over an asset belonging to the people to a private entity, and there is no doubt that it was handed over in a very haphazard way. What was not taken into account was the huge number of people who set up group water schemes back in the 1950s, 1960s and 1970s. At that time, people paid to get a scheme up and running, which cost, in poor times, anything from €200 up to €800.

The information given to the public was very unplanned. I know people who contacted Irish Water but were told to contact their local authority to deal with a leak. People do not know exactly where they stand in this regard. We need greater clarity on the matter. The system of communications with the general public is totally ineffective. The matter needs to be addressed quickly, because people are angry, and rightly so. All we have heard about since the establishment of Irish Water is the astoundingly large amount - €180 million - invested in Irish Water, what consultants got, what bonuses have been paid, etc., which has annoyed people. That is the reason there will be great difficultly in getting people to sign up to Irish Water. On my way here today I heard that fewer than 500,000 people had returned their forms, which means that 1.5 million forms are outstanding at this juncture.

It is only right that we fully scrutinise the amounts spent on Irish Water, both internally and externally. We need greater clarity because people are not receiving the information they deserve, which is why they are so angry. I would appreciate it if the CER looked at that issue and took it on board as quickly as possible. People want to know exactly what is going on, but they do not seem to be getting answers. This annoys both rural and urban dwellers.

Another issue which is causing annoyance is the installation of water meters in areas where water is undrinkable. Does the CER believe this is right? It is a very bad policy to install meters in such places because the people living there are already angry about the poor quality of their water supply. Boil notices are in operation and a company then comes along to install water meters. This issue must be addressed as soon as possible. Clear information on fixing leaks in the system must also be provided. People want to know when major investment in water and sewerage schemes will take place. It appears that nothing will happen in this regard in the foreseeable future.

Chairman

There were two direct questions which Mr. McGowan might like to address.

Mr. Paul McGowan

Our role is to ensure we do everything transparently and publish as much data and information as we can for public consumption. We must also ensure Irish Water operates as efficiently as possible. It has proposed - we have sanctioned this - a considerable amount of capital expenditure in the next two years. We will be working with the company to determine the priority projects to be funded from that overall capital spend. If Irish Water can carry out more capital works during that period than we have sanctioned and does so efficiently, we will allow the expenditure to proceed. The company will not be limited by the sanction we have given it.

The position is that water and wastewater services are not fit for purpose. Therefore, it is important that people register in order that Irish Water can obtain the revenue required to carry out the necessary works to improve water and wastewater services.

On the issue of contacting Irish Water, the contact centre is up and running and taking calls during normal business hours about the water and wastewater systems. There is an issue about contacting Irish Water out of hours, but the company is putting together a proposal to ensure a 24 hour contact centre will be put in place in order that all customer issues, for example, leaks on the road, can be taken on board and directions issued to the relevant work team to ensure the necessary work are carried out.

I hope I have answered Deputy James Bannon's questions to his satisfaction.

Deputy James Bannon

I know of a public servant who called Irish Water at 2.15 p.m. on a working day to report a leak. He was told to contact his local authority. That is simply not good enough.

Chairman

We can raise that issue with the board of Ervia when its representatives appear before the committee.

Deputy Ruth Coppinger

I have a lot of questions, but I will begin by asking why the CER accepted the low usage figures provided by Irish Water. A comprehensive study of water usage was commissioned by Dublin City Council and carried out by Veolia Water UK and RPS in 2008 - I assume the CER accepts that the source for the study is reliable. The study found that average usage in 2007 for an individual was 148 litres per day. I will pass this information to committee members because they also need to explain why they are accepting the usage figures from Irish Water. The typical household usage figure the CER has accepted is way below the one in the Dublin City Council study, which means that when the meters start to tick, people will receive much higher bills than the CER has indicated, once the nine month cap has been lifted.

Let us take as an example a two adult household. Irish Water calculates average usage of 66,000 litres for the first adult in the household and 21,000 for the second.

For a two-adult household, Irish Water calculates an average usage of 66,000 litres for the first adult in a household and 21,000 for the next. Are they sharing the bath or what? Where is the evidence that a second adult uses a third of the water used by a first adult? I would love to hear a little bit more on that. We must be going back to the days when we were all thrown into the bath on a Saturday night. This would give 87,000 litres per year for a two-person household, or 119 litres per person per day, which is way less than the 148 litres that seems to be the average usage that was accepted in the greater Dublin area. Why is the Commission for Energy Regulation accepting those figures? For a typical household, as broken down by the commission itself, it would be much higher.

For a three-adult household, Irish Water calculations give 108,000 litres per year equating to 98 litres per day, so that is even lower than the other ones. A four-adult household is 129,000 litres per year equating to 88 litres per day. The more people in a family, the less water each individual will have to consume according to this. Those figures are based on the most recent studies.

Chairman

The Deputy has two minutes remaining.

Deputy Ruth Coppinger

The commission accepts the notion that a teenager uses way less water than an adult, when anyone knows that a teenager uses more water than most adults, and it has accepted the definition of a child. This makes it clear there is no free water or free allowance and the commission is perpetuating that myth that is out there.

My second question concerns the price rate that has been given. The commission has accepted €4.88 as the price. I have figures from five different local authorities, and the business price of water at the moment in Limerick City and Limerick County is €2.70. In Fingal it is €1.95, under South Dublin County Council it is €1.93 and in Dublin City it is €1.78. In all these areas, householders are paying more than businesses pay. Can the witnesses explain why they gave that price for water?

It has become clear to the 100,000 people who were on the streets and to everybody else that people fundamentally reject the bonus culture etc. We do pay for water; we always have done. The witnesses actually accept that in one part of their document. Why did they not seek that real conservation measures would be undertaken? In Britain, where there is metering, domestic water usage is 141 litres per person per day. This is not much different from Ireland. Yet since 1996 water losses in the Dublin region have been brought down from 42.5% to 28% through investment and through an actual programme where leaks were detected by teams. That would save much more money, as would dual-flush toilets, water harvesting and all of those things. No effort is being made to bring those in. In Denmark through dual-flush toilets and other educational measures they achieved a figure of 30 litres per day for sewage, whereas in Britain it is 51 litres. Huge amounts could have been saved on that. The only conclusion we can come to is that this is an austerity tax pure and simple with lots of window dressing to make it look fair. The fact that a very sick or infirm person gets no waiver or discount puts it all in perspective.

Mr. Paul McGowan

I would like to address the issue of consumption levels first of all. The analysis indicates that a one-person household consumes 66,000 litres every year. The 21,000 represents the marginal consumption that occurs when additional people are in the house. The very fact that a household exists means that there is a level of water consumption associated with that and that is the 66,000. The additional 21,000 recognises that it is marginal consumption associated with an additional adult or child. The analysis indicates that in fact the level of consumption by an adult or a child is broadly similar. That is why we have used 21,000 as the children's allowance and also as the level for each additional adult within a household. That data is based on Irish data gathered from Irish Water meters in the last 12 to 16 months.

It is the most up-to-date data available to us. As we said, we will keep this under review and require quarterly monitoring of it by Irish Water but we believe it is the best available data on water usage in Ireland.

The price of €4.88 was set based on our analysis of the cost to Irish Water of delivering water and waste water services to the domestic customer sector. We have done no analysis of the cost of providing the same services to the business sector and, thus, can offer no opinion on whether the different charges applied in different counties are correct. We publish this year a timetable for carrying out this analysis of the non-domestic tariff programme.

Ms Cathy Mannion

Just to add one thing to what Mr. McGowan said, he is correct on the work that will be carried out next year but it is worth bearing in mind that non-domestic customers pay a standing charge. The higher the standing charge, the lower the volume metric charge will be. Part of our work will be examining this on a like-for-like basis. An assumption was made on the level of revenue that will be recovered from non-domestic customers so this was taken off the total allowable revenue for Irish Water and the remainder was recovered from domestic customers. When we examine the issue of non-domestic customers next year we will look at standing charges, volume metric charges and the relationship between the domestic and non-domestic sectors in terms of recovering the total allowable Irish Water revenue.

Deputy Ruth Coppinger

Can I ask a follow-up question?

Chairman

I have already given Deputy Coppinger eight and a half minutes.

Deputy Ruth Coppinger

The question is in regard to cost per person. The figures given relate to the cost per head - they are per capita. Page 11 shows that the witnesses have come up with studies carried out in Dublin showing that a second person will use one third of the water a first person uses.

Ms Cathy Mannion

I suggest that if Deputy Coppinger gives us the information we will come back later with a response.

Deputy Ruth Coppinger

It is here on page 11 - I refer to a study carried out by the Department of the Environment, Community and Local Government.

Chairman

Deputy Coppinger may pass it on.

Deputy Ruth Coppinger

No, it is hugely important because people are being fleeced - what they will actually pay has been underestimated.

Chairman

Deputy Coppinger may pass the information on to the Commission for Energy Regulation.

Deputy Joe Higgins

It is incredible that the CER does not have this information from a major study by the Department of the Environment, Community and Local Government.

Deputy Kieran O'Donnell

I thank the Chairman for allowing me to speak. It appears from the proposal supplied that in the initial submission the witnesses allowed the rate proposed to remain as the rate to be used - I refer to the rate of €244. Notwithstanding this, the witnesses have referred to a figure of 8.2% in efficiencies. Can they reconcile all this? I would have thought that if cost reductions were sought the same should apply to a reduction in charges.

Given that 80% of water meters are to be installed by the end of 2016 was a model considered that would continue to apply a capped assessed charge or maximum charge until the end of 2016? This strikes me as a consistent approach to take as it would allow meters to be installed - in other words, by the time charges are to be applied based solely on meters, 80% of them would already be installed. As things stand the system is already in operation and a very small proportion of meters are installed. The witnesses might let me know what percentage of meters have been installed to this point.

Was the creation of an ombudsman in this area considered given that the witnesses and the CER are dealing with these queries? Is there a danger that we are putting the cart before the horse? Should we seek a model that works for people? The biggest issue facing the people we in these Houses represent is the level of uncertainty around the charge.

The key question is whether CER has considered leaving the capped charge in place up to the end of December 2016, by which time 80% of the meters will be installed. What was the basis for seeking the 8.2% reduction in costs? Were bonuses to staff included when due diligence was carried out on the efficiencies?

Chairman

Before I call Senator Naughton, I remind the witnesses that they have two and a half minutes each.

Mr. Paul McGowan

The charges to which the Deputy refers are the figures of €244 and €488 which we published in July. These were based on the amount of revenue we were willing to allow Irish Water after making the efficiency reduction of 8.2%. That efficiency reduction had been identified before we went out to public consultation.

Let me outline the process we have gone through with regard to the charges. We have looked in detail at both OPEX and CAPEX figures for Irish Water. We have compared the Irish Water charges with those of equivalent water companies in Northern Ireland, Scotland and Great Britain.

Deputy Kieran O'Donnell

Is it not correct that Irish Water charges are twice the UK average, 25% higher than the charges in Northern Ireland and 61% higher than those in Scotland?

Mr. Paul McGowan

That is correct. Irish Water's cost base is higher than those of the water utilities in the countries mentioned. Those water companies have been subjected to incentive-based regulation for a longer period. That is why we have imposed on Irish Water a 7% reduction per annum in its operating expenditure, and when it comes to the next full price control, which will run for six years from 2017, we will be looking at imposing higher efficiency targets on Irish Water.

Deputy Kieran O'Donnell

Given that 80% of water meters will have been installed by the end of 2016, was a model considered under which a capped assessed charge or maximum charge would continue to apply until that time?

Mr. Paul McGowan

The financial model as it currently stands is that the revenues of Irish Water, based on the current assessed charge, would be recovered if we had nothing but an assessed charge.

Deputy Kieran O'Donnell

Will Mr. McGowan repeat that, please?

Mr. Paul McGowan

The assessed charge, as it currently stands, would recover the level of revenue that Irish Water-----

Deputy Kieran O'Donnell

If the CER were to go with the assessed charge up to 31 December 2016, would the financial model of capped charges that is to remain in place until 1 July cover the costs?

Ms Cathy Mannion

The issue would be that those on meters whose charges were lower than the assessed charge would rightfully be expecting a rebate. One could not do one and not do the other. Hence, we decided to give everybody the opportunity of a nine-month cap.

Deputy Kieran O'Donnell

But if people use less water in this nine-month period than the amount capped, will they get a rebate?

Ms Cathy Mannion

Yes, they will get a rebate.

Deputy Kieran O'Donnell

Did CER do a sensitivity analysis to run that model up to the end of 2016?

Ms Cathy Mannion

The model assumes that anybody who gets a meter between now and the 2016 will get the nine-month cap. It is not nine months from 1 October 2014.

Deputy Kieran O'Donnell

With due respect, some people had their meters installed a long time ago and they are getting it. If their meter was installed six months ago, they will be able to avail of this model up to 1 July 2015.

Ms Cathy Mannion

They will be able to avail of it for nine months from 1 October 2014, but if somebody has a meter installed in the middle of 2015, they will get their charges capped for a period of nine months from that date.

Deputy Kieran O'Donnell

I accept that, but given that the CER knows the rate at which meters will be installed, did it consider extending the current model up to 31 December 2016?

Mr. Paul McGowan

We did not look at that specific model.

Deputy Kieran O'Donnell

Why not?

Mr. Paul McGowan

Because water meters are being rolled out, metering is of itself a water conservation measure, and that should be the primary basis for charges. Assessed charges were to be put in place as a proxy for meter charges. The policy intent is very clear.

Deputy Kieran O'Donnell

I have a very short question. Did CER consider allowing the current model to run for everyone for longer?

Up to the end of 2015 or the end of 2016, people would have their charges capped based on the model that has been put in place. It is a very straightforward thing. People would have absolute certainty about what they pay up to the end of 2016. At that point, 80% of the meters would be installed. There is a high level of uncertainty among the public at the moment. Can the CER examine whether the current financial construct of Irish Water would work if that model were extended to the end of 2015 or 2016?

Mr. Paul McGowan

We can certainly check that.

Ms. Cathy Mannion

It does raise an issue for those on a meter who would pay less.

Deputy Kieran O'Donnell

No; let me be specific on this. What I am saying is that between now and the end of 2015 - or, ideally, the end of 2016 - people would know that the absolute maximum they could pay would be the cap that has been put in place, and if their meter reading was less, they would pay the smaller amount.

Ms. Cathy Mannion

We have not modelled that. We have not assumed that those who pay less get a rebate and those who pay more are capped.

Deputy Kieran O'Donnell

That is in place up to 1 July.

Ms. Cathy Mannion

For nine months.

Deputy Kieran O'Donnell

Correct. I want the CER to look at extending this to the end of 2015 or the end of 2016. It would take away all uncertainty.

Chairman

We have to move on.

Senator Hildegarde Naughton

It is my understanding - I think this was stated earlier - that the CER has no role in setting the actual salary packages in Irish Water. However, it does set the level of costs, and salary plays a part in that. How can the CER, in the public interest, ensure that the utility is paying the appropriate levels of remuneration and getting value for money for the salaries it pays? It seems to me that the CER is looking at it on a macro level. The at-risk salary model is being used at Bord Gáis. Does the commission look at the salaries there with regard to getting value for money? That is important, because it is certainly an issue of public interest and concern at the moment.

In relation to the call-out charges of €188 for the first hour, €282 for out-of-hours call-outs, €142 for any additional hours and €220 to test water pressure, the CER has stated - and I would like to hear it confirmed - that it has not approved those figures. Could the witnesses give a timescale for approval of the figures? Those figures are excessive when we take into account that the weekly dole payment is €188. That is the cost of the first hour alone.

The ESB is responsible for maintenance up to the electricity meter, which is on the side of the house. In the case of Irish Water, the meters are often out on the road or a couple of yards from the house. If the network fails, in this case the customer would be responsible for the network beyond his or her house. If the customer was at fault or it was damage caused by the customer, in most cases a repair would be needed on the network. Are there any plans to review this? It differs from the situation with ESB or Eircom with regard to the network and the point at which the customer is liable.

I agree that the CER should look at establishing a capped or assessed charge until all the meters are in place so that people have certainty about what they are paying. This is a very important factor. There is a lot of fear out there at the moment for customers, and that would provide clarity and allay a lot of the concerns that the public have.

Chairman

Before Mr. McGowan answers, I might add that when people do not actually have a utility bill - they cannot sit down and read something - it is harder to visualise it. It is out there in the ether, and there is a lot of uncertainty. Allied to one of the questions that Senator Naughton has asked, if somebody is, for example, on a basic social welfare payment or jobseeker's rate of €188, what in the name of all that is good are they going to do about paying the call-out charge? Someone like that just will not be able to afford it. Those cases may be extreme, but it is inevitable that somebody will be in that situation in which they cannot afford to entertain the notion of putting a call through to Uisce Éireann asking for someone to come out and fix a pipe.

People might not be in those circumstances today but could find themselves in that situation next week or next month. Has this issue been factored into the delegates' considerations? I realise no definitive decision has been made on call charges, but has the plight of people in the circumstances I have described permeated their thinking in terms of the likely costs?

Mr. Paul McGowan

In regard to our role in setting costs for Irish Water, we have looked at various cost categories. As my colleague noted earlier, we have identified the company's cost of labour as high compared with that of other utilities. Our role is to set global efficiency targets for Irish Water and we are very clear about that. It is up to the company to determine how it delivers those efficiencies, whether through its management of consumables, how it uses energy or how it utilises its labour. As I explained, we do not manage Irish Water; we regulate it. We set parameters for the company but it is entirely up to management as to how it achieves those efficiency targets. We do not direct it in any way as to what salary levels should be or anything else to do with that. It would not be good practice for economic regulation. We set global targets and it is up to management to determine how it achieves those targets.

Senator Hildegarde Naughton

Have the delegates indicated to management that the company's cost of labour is high?

Mr. Paul McGowan

Yes. That analysis is contained within the documents we have published and management is aware of it. The targets we set for Irish Water are challenging but realistic. The 7% per annum reduction we have set for operating expenditure, OPEX, is the start of the process. We will look at setting more stringent OPEX reduction targets under the first full price control exercise, which will run from 2017.

In terms of Irish Water's responsibility versus the customer's liability in the context of location of meters and so on, this is a matter of law and not something we would review. The legal situation that prevails is that the customer is liable up to the mains which, in many cases, runs down the middle of the road. Irish Water, in accordance with custom and practice, has taken responsibility for the water service pipe up to the boundary of the property. The legal situation the company is dealing with is no different from that which prevailed under the local authorities. That is a matter for Government and not something over which we have control.

In terms of the cap and the assessed charges, we have recognised that people may be in a situation where they are facing a meter charge and do not know what it will be. That is why we have specifically moved from a six-month to a nine-month cap on charges. Once people have a meter installed, they will see what their bill would have been if it had not been capped. This will afford customers the opportunity to change their consumption patterns, if they are able to do so, in order to manage their bills.

In general, our objective is to set charges that reflect the efficient cost of carrying out a piece of work. We do not have the legal remit to take affordability into account. That is a matter for Government, and it applies to people's ability to pay their water charges. It is not an area in which we have a legal remit. We try to set water charges that represent the efficient level of costs. In regard to the level of call-out charges specifically, we have not approved anything in that regard. We will consult on that issue and our expectation is that-----

Chairman

Will there be a public consultation process?

Mr. Paul McGowan

Yes.

Ms Cathy Mannion

It is important to note that only a small percentage of the population will need to request a call-out from Irish Water. In the case of gas and electricity, to illustrate, most domestic customers do not require the providers to come out to their property and do something. Generally, if something needs to be done on the company side of the network, it must be done at a cost to the company. A customer might call to notify a network fault but he or she will not be charged to fix that fault. It would be an unusual thing for a domestic customer to incur an additional charge.

Chairman

Is Ms Mannion saying that Irish Water will largely follow the ESB and Bord Gáis model in this regard?

Ms Cathy Mannion

To the extent that where there are certain things that need to be done - it might be developers doing something in a housing estate - there has to be a standard rate of charge. That keeps it simple for everybody, but most domestic customers will not have a need to call Irish Water. It is very different from the first fix phase. When that is in place, the customer will not pay for the repair of the leakage, however it is defined. It will be recovered by Irish Water.

Senator Hildegarde Naughton

What will be the timeline in respect of approval for the call-out charges that will apply when the consultation period has ended?

Ms Cathy Mannion

Let us assume that we receive the correct information from Irish Water. In such circumstances, our expectation is that we will receive the relevant detail from the company this year and we intend to have the consultation this year. If one or two months are allocated in respect of the consultation and taking into account the time required to consider responses and making decisions, then I imagine it will happen in quarter 1 or quarter 2 of next year.

Mr. Paul McGowan

I do not have a definitive date for the Senator but that is indicative. That is all I can say at this point.

Chairman

We will now take questions from the two non-members of the committee, Deputies Naughten and Ó Cuív.

Deputy Denis Naughten

I wish to pose a number of questions. First, I want to focus on a comment Ms Mannion made earlier to the effect that people with higher levels of water usage can actually tick a box in respect of self-declaration. It must be remembered that we are dealing here with those with disabilities or older people in general. I completed a number of these forms on people's behalf. I was obliged to read the form approximately ten times before I realised where to tick the box in respect of self-declaration. The box appears beside question No. 16, which states "If you would like to request registration forms and information for special and priority services, please tick the box" and "You can nominate a carer or another person to deal with your bill and your correspondence." It is also stated that if a person ticks the box to indicate that he or she wants to avail of these services, Irish Water will send him or her an information booklet and registration form. There is no mention of additional water usage in question No. 16, the box attaching to which is supposed to be the one people should tick if they have extra water demands. Can any of our guests explain in plain English how this can be deciphered in such a way that it means that a person with higher water usage should tick the relevant box? The latter is not what is stated in the double-Dutch question beside which people are supposed to place a tick if their water usage is higher than normal. It is both wrong and misleading to state that people can make self-declarations. What has happened here today is deceptive, particularly in the context of some of the most vulnerable water users in the country.

In the context of the submission I made to the regulator in respect of boil water notices, our guests will be aware that I live in Roscommon and that I am an expert when it comes to such notices. What is the justification for allowing for a 40% discount for commercial users in respect of boil water notices? Let us consider the position of a restaurant, the owner of which will be obliged to foot the additional costs relating to supplying both bottled water and ice and to absorb the hit from a loss of business due to the fact that some customers will not frequent his or her premises if they are obliged to buy bottled water. There is also the negative publicity attaching to the community or town in which that restaurant is located. People will not even visit such a location in the first instance if there are boil water notices in place. The regulator has stated that there will be a 40% reduction for commercial customers affected by boil water notices when the impact on their businesses - particularly those relating to restaurants - could be devastating. Why is there are 100% discount for water in for domestic users who are affected by boil water notices and only a 40% discount for commercial users?

In my submission, I made the point that there should be a 100% discount for both water in and water out. As our guests are aware, Irish Water is of the view that if a boil water notice is going to last for 12 months or less, it will not put in place a temporary treatment facility. In reality, this means that people are being stuck with boil water notices for 18 months. Does the regulator not have a responsibility to ensure that such notices are lifted as soon as possible? The best way to achieve the latter is to put in place financial disincentives for Irish Water and, in fact, to penalise it in respect of water in and water out.

The third point I raised in my submission relates to the position with regard to other water quality issues. There are many other instances in which water quality does not meet the EU standard relating to potable domestic drinking water. No discount or recognition has been provided in the regulations or in the cost structure in respect of this matter. If we are not penalising Irish Water by imposing charges, what incentive is there for the company to ensure that those water supplies which do not meet the EU standard are brought up to scratch?

In the context of the cost structure, our guests made the point that Irish Water does not have an incentive-based efficiency target such as that which obtains in the UK and that, as a result, its cost base is higher. If that is the case, why is it that the cost base relating to group water schemes in this country is 35% lower than that of local authorities?

That is based on a study by Professor Nick Gray of Trinity College Dublin that was published in March of this year. We are told that the full economic cost of water is €594, which works out at €6.82 per 1,000 litres of water. Forty percent of that is leakage, so customers are paying €2.73 per 1,000 litres for leaked water which will not actually come out through their taps. What incentive is there for Irish Water to clean up its act in relation to the leakage?

The cost base that the regulator has set for the domestic water charges is 31%. If that is based on an overall cost of €594, then householders should be charged an average of €184 per annum. Instead of that, the average cost is €225, which is 71% of the overall cost base. Why has 71% of the overall cost base been used, rather than 31% as per the presentation given earlier?

Deputy Éamon Ó Cuív

Tuigim go bhfuil Gaeilge ag duine de na finnéithe. Cé mhéad airgead a cheadaíodh le haghaidh cúrsaí tuarastail agus riaracháin ar Uisce Éireann, san iomlán? Caithfidh go raibh figiúr éigin i gceist a bhí inghlactha mar bharrchostas riaracháin ar Uisce Éireann.

Is í an dara cheist atá agam ná nuair a bhíothas ag cur isteach na méadair, cén fáth nár úsáideadh méadair a thabharfadh eolas do dhaoine ina gcistineach féin ar an méid uisce atá in úsaid, sa chaoi nach bhfaighidís taom croí tar éis trí mhí nuair a léifí an méadar, nó nach gcaithfidís dul amach chun é a léamh? "Telemetrics", sílim, a thugtar air.

Cé leis an méadar? Má bhriseann sé, cé leis é? De réir mar a thuig mé ó fhreagra a thugadh ar ball, dá ndéanfaí dochar don phíopa amuigh faoin mbóthar poiblí, d'fhéadfadh úinéir an tí a bheith freagrach as íoc as Uisce Éireann teacht agus an píopa sin a dheisiú má tá sé taobh istigh den áit a thagann an píopa ón bpríomhphíopa atá ag dul ar an mbóthar. An bhféadfadh na finnéithe deimhniú go bhféadfadh seo bheith taobh istigh den mhéadar agus go bhféadfaí bheith freagrach as píosa den phíopa taobh istigh den mhéadar atá faoin mbóthar nó faoin gcosán poiblí? Glacaim leis go bhfuil daoine freagrach as an bpíopa atá ar a gcuid talún féin.

San áit go bhfuiltear ar ghrúpscéim uisce agus go bhfuil an grúpscéim ag fáil an uisce ón soláthar poiblí, mar a tharlaíonn go minic ar fud na tíre, cén bunús a bheas ann leis na táillí a ghearrfar - agus glacaim leis go ngearrfar táillí ar an ngrúpscéim uisce as ucht an uisce a cheannach - agus an mbeidh na liúntais in aghaidh an tí ar fáil don ghrúpscéim? Ní raibh mé in ann soiléiriú a fháil ar sin ó Uisce Éireann. Dá mba rud é nach raibh an Rialtas ag íoc €500 milliún le hUisce Éireann, cé mhéad de tháillí uisce a bheadh i gceist in aghaidh an mhéadair ciúbach?

Ba mhaith liom tacú leis an bpointe a rinne an Teachta O'Donnell agus ba bhreá liom freagra na ceiste seo. Ceapaim go mba cúnamh agus faoiseamh mór é dá mba rud é gur cheap daoine nach bhféadfaí níos mó ná méid áirithe a ghearradh díobh is cuma cén tubaiste a bhainfeadh dóibh, ag glacadh leis nach gcuirfear uisce amú, as seo go 2016 nó 2017. Má tá na figúirí atá ag na finnéithe réasúnach le haghaidh an táille seasta shílfeá go mbeadh gach aon duine beagnach in ann teacht faoi sin agus gur beag a thiocfadh os a chionn.

Tá an-chaint ar uisce isteach agus uisce amach.

Tá 500,000 teach sa tír seo a bhfuil a gcuid córais séarachais príobháideacha féin acu. Ar ámharaí an tsaoil, oibríodh amach - tá súil agam go heolaíoch - go gcosnaíonn sé díreach an rud ceannan céanna an t-uisce a thabhairt go dtí an teach agus a chosnaíonn sé é a thógáil ón teach. Tá cineál barúil agamsa go bhfuil sé i bhfad Éireann níos chostasaí i dtéarmaí caipitil agus i dtéarmaí déileáil leis an bhfuíoll an t-uisce a thógáil ón teach ná mar atá sé é a thógáil go dtí an teach. Cén bunús ar a shocraíodh go raibh an costas díreach mar a chéile agus sa gcás nach bhfuil an dara seirbhís ag daoine go bhfuil orthu fós leath an táille a íoc nuair go mb'fhéidir nach gcosnaíonn sé ach aon tríú den lánchostas é a thabhairt chomh fada leo. Thuigfeadh aon duine a bhíonn ag plé le scéimeanna séarachais agus scéimeanna uisce go bhfuil sé i bhfad níos saoire é a thabhairt ann ná mar atá sé a thabhairt as.

Senator Hildegarde Naughton took the Chair.

Deputy Richard Boyd Barrett

Could the CER clarify its role in the area of water conservation? Some of us do not believe that Irish Water has got anything to do with water conservation at all and that it is just another money-grab that is going to cost people a fortune. I would like to ask the witnesses what precisely they consider their role to be in the area of water conservation and how they are going to act to ensure that is actually of some priority to Irish Water. Reports are circulating - I wonder if the witnesses have heard this - that the actual installation of meters is leading to more leakage. In the aftermath of sticking in these meters, which frankly I think is an extraordinary waste of money because it does not conserve any water - it is €500 million that could have gone into conserving water - as if that irony is not great enough there are now considerable reports that the act of putting in the meter is leading to leakage and that people are reporting leaks afterwards. It is not entirely clear to me looking at the terms and conditions for the customer - perhaps the witnesses could clarify this too - whether customers could actually end up paying the bill for leakages if they are on the wrong side of the boundary between Irish Water's responsibility to maintain the pipes and the customer's responsibility. Is it possible that the customer will end up paying for the leaks caused by putting in the meters?

Staying with the issue of conservation, the CER is setting a price of €2.44 per 1,000 litres for single service, €4.88 for double service. At the same time, it is requiring Irish Water to generate a certain amount of revenue from billing customers, if I understand it correctly. They have to meet a target for billing. Does that not mean that if people reduce their water usage, but Irish Water is still required to meet certain targets in terms of revenue, inevitably as people conserve more water the price per litre has to increase? It seems to me that that has to be the case if there is a set target for what Irish Water has to generate in terms of revenue. I did not hear the answer earlier on the issue of full cost recovery and the need for Irish Water to move towards full cost recovery. I would appreciate if the witness could repeat this. The assessed charge is currently €2.48 per household but what about the requirement to get to full cost recovery?

What about full cost recovery and the requirement to get to that? Does this not inevitably mean that whatever the price is now - which is unaffordable for many people - it will rise and continue to move towards full cost recovery?

Can a person opt out of Irish Water and can people say "No", that they do not want its services? Is it true that if people do that, they will be told they must pay a fee to opt out? That is what I have been told by somebody who phoned Irish Water and said he wanted to opt out of the Irish Water service. Incredibly, he was told he would have to pay a fee to opt out of the service. I saw a fantastic placard at the weekend which stated: "I will pay for water when God sends me a bill." That would be my attitude also, but as I do not believe God exists, I will never get a bill I intend to pay for water.

If we must pay for "water in" and "water out", does this mean we will pay for the water from the sky? This is what has happened in Bolivia and Detroit. I am not talking about the water that comes in through the system, the treated water, but for the water that comes down from the sky. Will we end up paying for that?

Mr. Garrett Blaney

Déanfaidh mé mo dhícheall freagra a thabhairt as Gaeilge. Rachaidh mé ar dtús go dtí an cheist dheireannach, faoi uisce isteach agus uisce amach. Mura bhfuil ach uisce isteach nó amach le híoc, íocann an duine leath. Tá sin bunaithe ar cad atá againn sa legislation, mar bhí orainn sin a úsáid. De réir costais - labhair Ms Mannion faoi seo níos luaithe - rinne muid idirdhealú agus cinneadh go mbeadh sé leath ar leath toisc nach bhfuil fíricí cinnte againn ag an bpointe seo. Má bhíonn fíricí níos fearr le fáil as seo amach, rachaidh muid leis na fíricí nua sin, ach níl na fíricí sin le fáil i láthair na huaire. Mar sin, leath ar leath an dóigh is fearr ar thig linn tomhas a chur air ag an bpointe seo.

Deputy Éamon Ó Cuív

Ar chuir an reachtaíocht iallach ar an gcoimisiún é a dhéanamh leath agus leath?

Mr. Garrett Blaney

Sin an dóigh atá ag teacht air anois.

Deputy Éamon Ó Cuív

Faoin reachtaíocht, an féidir é a bhunú ar an gcostas isteach agus ar an gcostas amach?

Mr. Garrett Blaney

Níl fíricí againn le figiúrí ar bith eile. Ní féidir 40% nó 60% a thoghadh.

Deputy Éamon Ó Cuív

Dá mbeadh na figiúirí ag an gcoimisiún, an bhféadfaí é a dhéanamh? Dá mbeadh an t-eolas ag an gcoimisiún, an bhfuil cosc sa reachtaíocht ar é a bhunú ar na fíorchostais?

Mr. Garrett Blaney

Níl na costais againn le taispeáint go bhfuil fíricí níos fearr ann ná mar atá againn.

Deputy Éamon Ó Cuív

Dá mbeadh na costais ann -----

Mr. Garrett Blaney

Dá mbeadh na costais ann, bheadh muid in ann é sin a dhéanamh. Táimid ag iarraidh é a dhéanamh sa dóigh agus go bhfuil na costais ag dul leis na costais a thabharfar dúinn. Má fhaigheann muid an t-eolas sin as seo amach agus más 40% agus 60% na figúirí ceart, glacfaimid leo agus cuirfidh muid na figiúirí eile sin i bhfeidhm.

Ardaíodh ceist eile faoin bhliain 2016, agus ar chóir cap a chur i bhfeidhm go dtí an pointe sin. Caithfimid teacht ar ais ar an gceist sin. Mar a luaigh Mr. McGowan, caithfimid dul isteach sa scéal de réir mar atá ag tarlú mura bhfuil an méadar i gceist. D'íoc an córas as an méadar a chur isteach ach ní bheidh sé in úsáid i gceart, mar nach mbeidh na figúirí cearta ag dul tríd an gcóras, mar go bhfuil an "cap" i gceist. Tá costais le sin, mar níl incentive ann don duine atá ag úsáid an uisce níos lú uisce a úsáid. Mar a dúirt an Deputy, tá sin an-tábhachtach de réir an chostais iomláin a choinneáil síos sa chóras. Níor mhaith linn sin a chailliúint. Má chailleann muid sin, níl sin go maith don chóras iomlán.

De réir na gcostas atá curtha isteach ag an Rialtas, is é €238 an mheán ag an bpointe seo. Gan an costas ón Rialtas, tá sé cor agus a bheith €600. Sílim gur €594 an costas iomlán atá i gceist, gan an t-airgead ag teacht isteach go díreach ón Rialtas.

Is cinneadh don Rialtas é an méid airgid a bhfuil sé chun cur isteach agus an méid airgid atá ag dul isteach go díreach go dtí an bille. Níl scéal ar bith le cur isteach ar duine sa scéal sin. Maidir le group schemes, baineann na táillí atá ag baint leo siúd leis na rátaí tráchtála atá ann. Tá siad ag ceannach uisce ó Uisce Éireann cosúil le duine ar bith eile sa chóras sin. Níl go leor fíricí againn chun é sin a athrú. Tá sé bunaithe i láthair na huaire ar na figúirí atá ann sa lá atá inniu ann. Nílimid chun é sin a athrú go dtí go bhfuil na fíricí uilig againn.

Deputy Éamon Ó Cuív

Chun é sin a shoiléiriú, má tá mise i ngrúpscéim, agus chuile duine sa seomra ag dul ag crú ag an uisce, caithfidh an ghrúpscéim iomlán costais an uisce a íoc agus ní bheidh an 30,000 lítear ar fáil ag an ngrúpscéim in aisce - agus i gcás go bhfuil gasúir ann, an 20,000 nó an fuílleach ar fáil acu siúd - le baint as na billí.

Mr. Garrett Blaney

Tá sé sin fíor. Níl sé sin acu.

Deputy Éamon Ó Cuív

Perhaps we might repeat this in English. What is being said to us is that if all of the people in this room were in a group scheme, it would have to buy water at the commercial bulk rate and sell it to all of us, with none of us getting the 30,000 graces from the State, plus the free water child allowance. Is that what we are being told?

Ms. Cathy Mannion

Currently, group water schemes are considered to have non-domestic charging arrangements in place. On whether their customers will receive allowances, I am not sure that they do because they are not considered to be domestic customers. When Irish Water takes over a scheme, to the extent that they will then become domestic consumers, they will receive all of the domestic allowances.

Deputy Éamon Ó Cuív

Will they continue to receive grants from the county councils?

Ms. Cathy Mannion

Whatever they receive currently will continue because the charging arrangements are not changing for non-domestic customers or group schemes.

Mr. Garrett Blaney

An bhfuil ceist ar bith eile?

Deputy Éamon Ó Cuív

I will continue with trí cheist eile. Cé leis an méadar?

Mr. Garrett Blaney

Is le hUisce Éireann an méadar.

Deputy Éamon Ó Cuív

Cé a bheidh freagrach as an bpíosa pípe ón méadar chomh fada-----

Mr. Garrett Blaney

Idir an méadar agus an taobh talún atá ag an duine, tá Uisce Éireann freagrach as sin fosta.

Deputy Éamon Ó Cuív

Níl freagracht ar Uisce Éireann ó theorainn talún mé féin go dtí an teach.

Mr. Garrett Blaney

Mar a dúirt Ms. Mannion, maidir le huisce salach ag teacht amach, níl an cás céanna i gceist. Ní le hUisce Éireann é go dtí go bhfuil sé istigh sa chóras iomlán. Tá difríocht ann idir uisce salach ag teacht amach agus uisce glan ag dul isteach.

Deputy Éamon Ó Cuív

Uisce ag dul isteach-----

Mr. Garrett Blaney

Tosnaíonn sé ó theorainn talún an duine.

Deputy Éamon Ó Cuív

Aon duine ag glaoch amach ar Uisce Éireann le rud ar bith a dheisiú, agus iadsan as a meabhair uilig, tá sé nó sí freagrach as an bpíopa ag dul amach, fiú má tá sé faoin mbóthar, go dtí go gceanglóinn sé isteach sa phríomhphíopa.

Mr. Garrett Blaney

Sin é.

Deputy Éamon Ó Cuív

Céard a tharlaíonn má bhriseann duine atá ag obair ar an mbóthar píopa an duine?

Mr. Garrett Blaney

Ar an gcéad dul síos, is é mo bharúil go bhfuil an freagracht ar an duine a bhris an píopa an píopa a athchóiriú.

Deputy Michael McCarthy resumed the Chair.

Chairman

Can we get to the answers to the other questions now put by Deputies Denis Naughten and Richard Boyd Barrett.

Deputy Éamon Ó Cuív

Tá ceist amháin eile agam.

Chairman

The Deputy has had-----

Deputy Éamon Ó Cuív

Níl aon mhaitheas an cheist a chur gan freagra a fháil. Cuirfidh mé an cheist go han-simplí. Táimid in aois an eolais. Cén fáth nár úsáideadh an telemetrics le go bhféadfadh daoine fios a bheith acu ina gcisteanach - mar is féidir a dhéanamh le leictreachas - ar an méid uisce atá á úsáid in aghaidh an lae agus sa chás sin, dá mbeadh uisce ag sceitheadh, bheadh a fhios acu ar an bpointe? Ní chaithfidís fanacht trí mhí.

Mr. Garrett Blaney

Leis an dóigh ina bhfuil sé bunaithe anois, beidh ar an duine sin dul amach go dtí an méadar ar an mbóthar.

Deputy Éamon Ó Cuív

Cén fáth nach bhfuil sé sa chistin?

Mr. Garrett Blaney

Táimid ag amharc isteach sa scéal sin agus ag scrúdú an féidir é sin a dhéanamh. Níl an eolaíocht sin le fáil don duine atá sa teach i láthair na huaire. Táimid ag iarraidh ar Uisce Éireann rud éigin a dhéanamh as seo amach, más féidir. Is trua é nach bhfuil sé seo le fáil ag an bpointe seo.

Deputy Éamon Ó Cuív

Tá daoine in ann fóin a úsáid chun na soilse ina dtithe a lasadh míle uathu.

Chairman

We must move on. I ask our guests to deal with Deputy Boyd Barrett's questions.

Mr. Paul McGowan

On boil-water notices and the non-domestic sector, as stated earlier, our focus has been on charges relating to domestic supplies. Nevertheless, we recognised that a situation arose in respect of non-domestic customers. The then position was that there were no discounts in respect of them. We are not proposing to carry out the full review and determination of non-domestic costs until next year. We will be publishing a timeframe in respect of that matter. However, we recognised that there was a potential issue in the context of the discounts. We applied a discount of 40% where none had existed before and when we had no plans to introduce any discount. What we need to do is to carry out an analysis, because some of these non-domestic customers are extremely large and, with the exception of a small number, they do not use water for the purposes of food preparation. Until we have carried out a full analysis in respect of the non-domestic sector, we will not be in a position to move beyond the 40% discount we have already identified. As already stated, there previously had been no discount.

Deputy Denis Naughten inquired why the discount is not being applied in respect of water in and water out. The initial proposal was that there would be a 50% discount in respect of water in, and we have increased this to 100%. At the same time, however, we recognise that Irish Water has a job to do and that it must be able to take in sufficient revenue in order that it might make the necessary capital investments to ensure that supplies of water in and treatment of water out both meet the requisite quality standards. We have reached a position at which the water that comes into a premises will be free in circumstances in which a boil-water notice is in place. However, we recognise that all water out from that premises will still need to be treated and that there are costs associated with this. It is important that we get the balance right in terms of ensuring people are treated fairly with regard to the services they receive from Irish Water while also ensuring that the company has sufficient revenue to allow it to fix any problems that arise.

Deputy Denis Naughten

So people must pay for bottled water coming in and then they must pay also for it to be treated after it leaves the premises. The problem is that they will be paying for it on the double.

Mr. Paul McGowan

The information to hand indicates that the vast majority of water that goes into houses is not actually consumed. Approximately 10% or so is consumed and the remainder is used for other purposes. All of that water must be treated after leaving the premises. We took the view, therefore, that there would be a 100% discount in respect of supplies of water in but there would not be one in respect of water out. We believe this is a reasonable balance in terms of consumer interests.

Deputy Denis Naughten

A child having a bath might consume some of the water.

Chairman

There should be no interruptions when witnesses are providing answers. We must move on.

Deputy Denis Naughten

What is the position with regard to people who are immunocompromised using showers?

Chairman

The Deputy has been given plenty of latitude. We must proceed.

Ms Cathy Mannion

The cost of treating sewage is quite sizeable and some would argue that it is more than half the cost of the overall service. While a rebate is being given in respect of water in, there is a rationale for continuing to charge for water out because people will still use the service.

Deputy Denis Naughten

But they will still be paying for water in because they will be obliged to buy bottled water or boil water, both of which involve a cost.

Chairman

There should be no further interruptions from the Deputy. I want to wrap this up.

Mr. Paul McGowan

Deputy Naughten also referred to other water quality issues and the fact that there is no discount. I wish to make it clear that if water is deemed unfit for human consumption, the 100% discount will apply. We are aware of other issues such as that relating to hard water. The advice is that such water does not represent a health risk to people and, therefore, no discount will apply in respect of it. The basic position is that if water is deemed and declared unfit for human consumption, then discounts will apply.

The Deputy stated that group water schemes have lower cost bases.

We do not regulate the group water schemes. Our job is to ensure that the costs Irish Water incurs are as efficient as possible. Our role is to drive those costs down. We have imposed 7% per annum reductions on the company in the first cycle and in the second cycle we will be looking at imposing even more stringent cost reductions.

There was a question about the incentive to reduce leaks. We have a function in respect of the conservation of water resources. The greatest area of water conservation is reducing leaks. This is why we will be examining Irish Water's investment priorities for capital maintenance and so forth, which includes leakages, but we will also examine other investment priorities. For example, raw effluent is still being discharged in some locations throughout the country. The incentive to bring about the reduction of leaks stems from the fact that if Irish Water reduces leaks, it will reduce costs, and if it reduces its costs, then it will be in a better position to meet its targets. Under the regulatory model we have imposed, the company will be incentivised to reduce leaks. We will be looking at further specific incentives relating to leakage rates once we have the associated data. One of the things we need to do in the coming years is gather a vast amount of data that are simply not available at the moment.

There was a question on whether it follows that if there is reduced usage the price will go up. That is not necessarily the case because many factors go into the determination of the price of water. For example, if water usage goes down then certain operational expenditure efficiencies could be associated which, in turn, would lead to lower prices. As well as that, we will be continuing-----

Deputy Richard Boyd Barrett

What is that?

Mr. Paul McGowan

There may be efficiencies associated with that possibility. If less water is being lost then the company has less water to treat and so forth. Reduced usage of itself reduces costs. As well as that, we are continuing to impose operational expenditure efficiencies on Irish Water. As I have said, we impose a 7% per annum reduction on the company at the moment and we will be looking at that in terms of a full price-----

Deputy Richard Boyd Barrett

Surely the costs are fixed for all these things, for maintenance and so on?

Mr. Paul McGowan

No, the point is that the level of costs Irish Water is incurring at the moment is too high and they need to be reduced. Our role is to identify the reductions that we require the company to make and we will continue to do that. If there was a reduction in water usage there is also a chance that this may lead to the deferment of capital expenditure investment which, of itself, would save money as well. It does not necessarily follow directly that if people start to conserve water, their bills will suddenly go up. There are many factors that feed into it. A major determinant of future prices is the level of capital investment that must be carried out to make the overall water and wastewater system fit-for-purpose. There is a massive capital investment programme to be carried out.

We have no role in the need to move to full cost recovery. It is purely a matter for Government in respect of how and whether it continues to subvent Irish Water and we have no role in that regard. Our role is to analyse the full cost base and then we take account of any Government subsidy.

Deputy Richard Boyd Barrett

Is it not-----

Chairman

We have been 25 minutes on this segment. We are now dealing with non-committee members. I have given you treble the time that I said I would give you.

Deputy Denis Naughten

I want an answer to the question I asked on why domestic customers are charged for 71% of the commercial cost.

Chairman

I want to conclude on this.

Mr. Paul McGowan

Can Deputy Naughten clarify the question, please? I was not absolutely clear on it.

Deputy Denis Naughten

The unsubvented average cost of water for two adults is €425. Mr. McGowan is suggesting that the commercial cost of producing water is €594. Government and private commercial users make up 69% of the total cost base for Irish Water, based on the CER presentation.

Chairman

Ask a question, please.

Deputy Denis Naughten

That means 31% is made up from domestic user charges. Some 31% of €594 is €184. If that is the cost base, why are domestic customers being charged €425?

Mr. Paul McGowan

The €425 is not the unsubvented cost. It is the default charge in the event that somebody does not declare or register with Irish Water. If we remove the allowances and assume it is a two-person household we get €425. The actual unsubvented cost of producing water, on average, is €594. There is no direct relationship between those two numbers. The default charge has been set on the basis of a two-adult household with no free allowances. It is not an unsubvented cost.

Deputy Denis Naughten

No, but the point I am making is that domestic users should be paying 31% of the cost of producing water, which is €594-----

Chairman

I ask the Deputy to make no more interruptions. Can we allow the witnesses to answer the questions, please? There are a number of other questions from Deputy Naughten that need to be addressed and we are going to hear the answers.

Deputy Denis Naughten

-----not a bigger figure, as is the case at the moment.

Chairman

No more interruptions, please. Allow the witnesses to answer the questions so that we can conclude.

Mr. Paul McGowan

I am not sure what I can add to that answer.

Ms Cathy Mannion

We can send the Deputy a calculation if he wishes. At a high level, it is the total cost, which is just under €600 million, less the Government subvention and adding in the value of the allowances. Taking all those together and subtracting the allowances and the subvention brings us down to the average we have, which is €238. We can send Deputy Naughten the calculations if he would like that.

Deputy Denis Naughten

That would be the best thing to do.

Ms Cathy Mannion

On Deputy Boyd Barrett's question of opting in or out, it is for everyone to decide when they fill in the form or ring Irish Water to validate, whatever it is. They say whether they have one service, two services or no service, so they have the opportunity to say one, two or none. I have not heard of any fee for saying one does not want any services. It has to be a truthful declaration; to say that the service is not wanted and then to continue to take the service is a different matter. But if someone has his or her own well----

Deputy Richard Boyd Barrett

What if someone does not want one?

Ms Cathy Mannion

Is the person asking for the service to be disconnected? There needs to be clarity around what that customer is asking for.

Deputy Richard Boyd Barrett

I think that is what they were asking for.

Ms Cathy Mannion

If the customer was asking for the service to be disconnected, I would need to see whether that is covered in the additional charges, which would have to be checked, or whether it is a requirement for Irish Water to go out at no cost and actually disconnect that customer.

Deputy Richard Boyd Barrett

So Ms Mannion does not know whether there is a fee.

Mr. Paul McGowan

We will respond separately to Deputy Boyd Barrett on that.

Ms Cathy Mannion

I do not know the precise details of the Deputy's query.

Chairman

Deputy O'Donnell has 30 seconds to ask his questions.

Deputy Richard Boyd Barrett

I had one other question that was not answered.

Mr. Paul McGowan

It related to storm water. Storm water is a completely separate matter, and I think it remains the responsibility of the local authorities.

Ms Cathy Mannion

All our calculations are calculations of the metered amounts. Whether there are drainage costs or not, customers are charged on the basis of their metered amount in, which is set to be equal to the amount out. The volume of the rain does not matter.

Chairman

Deputy O'Donnell has 30 seconds to ask his question, with 30 seconds for the reply.

Deputy Kieran O'Donnell

There is a thing in there called a 60-day look-back rule. Does that mean people have up to 30 December to file their returns and get all the allowances rather than 31 October?

I ask the CER to publish a sensitivity analysis on the question of extending the capped charge period from 1 July 2015 to the end of December 2015 or 2016. I am amazed that such an analysis has not already been done. I ask that this be done immediately.

Mr. Paul McGowan

The 60-day look-back is something that we asked for. It means that people who register with Irish Water by the end of November will get their full free allowance.

Deputy Kieran O'Donnell

At the end of November or December?

Mr. Paul McGowan

At the end of November, 60 days from 1 October.

Deputy Kieran O'Donnell

That means that in practical terms the filing date is actually 30 November rather than 31 October.

Mr. Paul McGowan

We are actually looking at whether we should be redefining the final date for registration with Irish Water to the end of November, and we are also-----

Deputy Kieran O'Donnell

As it stands, if people do not complete a return until 30 November, do they hold their allowances?

Mr. Paul McGowan

They hold their allowances. The only caveat is that if they do it online or by phone it goes directly into the system, but if they do it by post there is no guarantee that the allowances will be reflected in their first bill. However, they will get them.

Deputy Kieran O'Donnell

The public is not aware of that. Can I get a commitment from the CER to do the sensitivity analysis on the prospect of retaining the cap for a two-year period up to the end of 2016?

Will the witnesses commit to doing this and to publishing it?

Mr. Paul McGowan

We can carry out that analysis, absolutely and we will publish it. It is not an issue.

Chairman

I thank the witnesses for their exchanges and I thank all the members including the non-committee members who were so patient in waiting to be called in.

The joint committee adjourned at 5.30 p.m. until 2.15 p.m. on Tuesday, 4 November 2014.