Irish Water: Discussion

At the request of the broadcasting and recording services, members and visitors in the Public Gallery are requested to ensure that for the duration of the meeting, their mobile phones are turned off completely or switched to airplane, safe or flight mode depending on their devices. It is not sufficient to put phones on silent mode as it will maintain a level of interference with the broadcasting system.

No. 5 on the agenda is Irish Water's proposed move to a single utility by 2021 and the future delivery of water and sanitation services. We will have two sessions today at which we will consider the topic of Irish Water's proposed move to a single utility by 2021 and the future delivery of water and sanitation services.

On behalf of the committee, I welcome to our first session, from the Department of Housing, Planning and Local Government, Ms Maria Graham, Mr. Eamonn Waters and Mr. Martin Vaughan; from Irish Water, Mr. Jerry Grant; and from Ervia, Mr. Mike Quinn and Mr. John Dempsey.

We will not ask any of the witnesses to divulge information on their negotiating stance as it would not be appropriate. Members should please refrain from posing questions that encroach on negotiations that are under way in another forum and which are not within the remit of the committee.

Last September, I asked representatives of Irish Water to come in here to answer specific questions. Will the Chairman tell me what the status of this meeting is with regard to those questions?

I will finish reading the note and then clarify what the Deputy has asked about.

The point the Chairman raised would seem to restrict the issues to be discussed.

With regard to negotiations, there might be some things that are confidential which the witnesses are not permitted to divulge. I do not know what they are but I am sure the witnesses will know. That is all I am saying

My point is about the questions I want to ask Irish Water in the Oireachtas in an open and accountable way. That is my problem today.

The Deputy is free to openly ask any question he wants to ask and it is up to the witnesses to answer those questions or not. Is that okay?

Yes. That is clear.

Before I begin, I draw witnesses' attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they 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 they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

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 House or an official either by name or in such a way as to make him or her identifiable.

Normally members have five minutes to ask questions and then we allow our witnesses back in for five minutes. If there are follow-up questions, there is a minute leeway either way and then we move on. If questions have not been answered, we will get back to them at the end of the meeting.

I call on Ms Graham to make her opening statement.

Ms Maria Graham

I thank the Chairman and committee members for the opportunity to appear before the committee to deal with the matter of Irish Water’s proposed move to a single public utility model by 2021 and the future delivery of water services. I am joined by my two colleagues Mr. Eamonn Waters, who is principal officer in water policy and the rural water programme and Mr. Martin Vaughan, assistant principal.

The issue that is the focus of discussion today was previously raised at the committee’s meeting with the Minister on 15 November 2017 which considered the Department’s Estimates and there have been developments since then. I will provide the committee with an update on where matters currently stand and some contextual information.

The context for this discussion is the major reform of water services initiated in 2012, which saw the transfer of statutory responsibility for public water services to Irish Water. The current delivery model is based on Irish Water working with local authorities through 12-year service level agreements, SLAs, which were effective from 1 January 2014. This collaborative approach was enabled by the Water Services (No. 2) Act 2013, which also sets out the statutory protections for the terms, conditions and pensions of workers should these agreements come to an end.

Working with the local authorities through these SLAs, Irish Water has made significant progress in establishing the utility’s capability, which has included investing over €2 billion in the system to date. The Minister has gone on record many times to acknowledge the role played by local authorities and their staff in the provision of water services over this period, a period which has been at times very challenging. The ongoing commitment of water services staff to ensuring continuity of service and service improvement remains the hallmark of water services in Ireland.

Over this time, some key components of the operating environment for Irish Water have changed from that envisaged in the water sector reform implementation strategy published in December 2012. Irish Water is now reflected on the Government’s balance sheet and the funding model has changed. These changes flow from the report of the Joint Committee on the Future Funding of Domestic Water Services and the enactment of the Water Services Act 2017. Irish Water is now funded largely through the Vote of the Department of Housing, Planning and Local Government. Irish Water’s commercial debt will be replaced with State debt over time. This places new demands on Irish Water in terms of accountability, governance and delivering value for money for taxpayers. However, the central commitment to a single regulated water services utility in public ownership remains at the heart of the reform programme, a position which has been confirmed by the confidence and supply arrangement in support of the minority Government. Within this new funding environment, it is considered critical that Irish Water, which now has full statutory responsibility for the delivery of water services, is appropriately equipped to carry out its statutory functions as efficiently and effectively as possible. It was a central understanding of the report of the committee, which was approved by the Oireachtas, that the change in funding structure should not impede in any way the delivery of the requisite level of investment and operational projects in line with the Irish Water business plan.

The current business plan is the Irish Water business plan to 2021, which was published in 2015. This plan was considered by Government and was approved subject to budgetary and regulatory review. The plan sets out the priorities of the utility to 2021 and underpins the transformation plan for the water sector. During the course of 2017, Ervia examined the options to meet its regulatory and business plan targets and concluded that the public water system would benefit from greater integration of operations into a single utility. Following this consideration, the Department was informed that the Ervia board had decided in principle not to renew the SLAs beyond 2025 when they are due to end and to work with local authorities and unions to move to the integrated model within the life of the current plan.

The Government has noted this position.

Subsequently, the Minister met with the key stakeholders in the delivery of water and wastewater services, namely the County and City Management Association, the Irish Congress of Trade Unions and relevant unions, and of course Ervia and Irish Water. Following these discussions, the Minister has written to the parties, and asked them to engage with the proposals in an open and constructive manner. He has asked the parties to examine the issues in developing the appropriate national framework for the Irish Water transformation programme.

These letters have been provided to the committee for information and I will highlight a couple of key elements. First, the need for a significant programme of transformation is highlighted, as is the positive experience of other utilities such as Scottish Water from the implementation of a single way of working, both in terms of efficiency gains and opportunities for staff; second, assurance is provided that the current service level agreements, SLAs, remain in place until such time as an alternative is agreed; third, assurance is provided that no compulsory redundancies would arise as an outcome from the transformation process; and fourth, there is a recognition that the process of transformation needs to be cognisant of the potential impacts on the wider local government system to ensure that stranded costs do not arise for local authorities which would impact on other services.

In his recent correspondence with key stakeholders, the Minister also advised that he is open to considering other governance, accountability and structural changes which improve the delivery of public water services by Irish Water. Furthermore, the Water Services Act 2017 provides for the establishment of a new statutory Water Advisory Body, WAB, which will make recommendations to improve the transparency and public accountability of Irish Water and also report to the committee and the Oireachtas on the implementation of the Irish Water business plan. The process for the establishment of the WAB is now in train.

Arrangements for the process of dialogue on the transformation programme are currently being put in place and the Minister has asked the parties to provide him with an update on progress by Easter. Therefore, members will appreciate that, in addressing the committee, I do not want to prejudge what might be said in these discussions, or to predetermine the outcome on particular aspects.

The Department looks forward to open and constructive engagement between the trade unions, local authorities and Ervia-Irish Water and is of the view that these parties are best placed in the first instance to examine relevant issues in developing the appropriate national framework for the next stage in the Water Services transformation programme.

Mr. Mike Quinn

My name is Mike Quinn and I am the group chief executive officer of Ervia, the parent company of two regulated companies, Irish Water and Gas Networks Ireland. I am joined by Mr. Jerry Grant, the managing director of Irish Water and Mr. John Dempsey, who has responsibility in Irish Water for managing the continued transformation of Irish Water towards the single public utility. I thank the Chairman and the committee for the opportunity to outline our position on Irish Water’s proposed move to a single utility by 2021 and in particular, the future delivery of water and water sanitation services.

At the outset, I want to record the very considerable progress in the transformation of public water services since 2014 by Irish Water, working under service level agreements, SLAs, with the 31 local authorities. This has seen a seamless transfer of responsibility for public water services to Irish Water and delivered a major increase in investment, while also achieving over €100 million in annual operational efficiency and significant improvement in key service areas, for example in drinking water safety and in saving 89 million litres of water daily. This progress could not have been made without the dedication and commitment of the staff across Irish Water and each of the local authorities.

The challenges facing Irish Water include bringing public water and wastewater services to acceptable international benchmark standards, achieving compliance with legal obligations, meeting social and economic needs while addressing effectively the critical assets at risk of failure. Meeting these challenges requires an organisation that is truly fit for purpose, with the water services workforce, processes and systems within a single organisation structure.

The Irish Water Business Plan 2014-2021 sets an ambitious but achievable programme of objectives and targets which, if delivered, will provide this country with a radically improved service by 2021. For example, our drinking water will be safe for all consumers, we will have addressed the most critical wastewater issues causing pollution today and exposing Ireland to serious risk of large scale fines, we will have cut leakage by 10% nationally and at the same time we will have achieved annual operational savings of €250 million compared to the starting point in 2014.

The Ervia Board, its executive and the management in Irish Water have been addressing the challenge of meeting these commitments and have concluded that it requires that we now move forward with the next stage of transformation, to deliver a single national utility for water services delivery for Ireland within the lifetime of the business plan. We welcome the opportunity to outline why we have reached this conclusion.

Before doing so, I want to emphasise that this proposal has only recently been outlined to the key stakeholders, in particular the local authority managements and the staff unions. We fully recognise that extensive engagement will be needed to address all of the concerns that will arise for staff and for the future of the local government service.

Since 2014, Irish Water is making strategic investment decisions in water infrastructure on a national basis, planning for the long-term future of water services, responding to operational incidents across county borders and working to deliver a single streamlined service to all customers across the country. Through our investment and operational programmes, we have resolved the critical boil water notice issues inherited in 2014, made significant progress in reducing risk to drinking water and started to make inroads on the wastewater treatment deficit facing the country.

However, with an estimated overall infrastructure deficit in excess of €13 billion, it will take several investment cycles to bring all of the assets to the required level. In the meantime, we must make the best use of available resources through an asset management driven approach which optimises investment, operations, maintenance and asset utilisation to deliver the best outcomes for the resources available. Ultimately, our ambition is that every citizen and company connected to our networks should enjoy the same satisfactory level of service irrespective of where they are located.

With four years experience of operating under the SLAs, and recognising the progress made, we can now clearly see the limitations of this structure. I will give some examples. We are faced with multiple and varied ways of working which militate against consistent safe operation of the services, leading to avoidable service failures; we have plants operating within capacity which fail to meet service targets due to sub-optimal operation. In addition, we spend over €100 million annually on external private plants through the design build operate, DBO, operational contracts. Taken together, these factors reflect the lack of a single unified, consistent and coherent operational service capability. We cannot deliver the capability levels required in process optimisation, specialised maintenance, leakage control and incident response at county level. We suffer inconsistent customer service outcomes due to the different work practices and the lack of consistent reporting on service responses. We incur substantial costs in fragmented management and workforce structures across 32 organisations which can result in delays and operational complexity, with no clear accountability. Finally, we need to deliver a whole range of specialist services at appropriate scale, requiring central and regional structures and best use of expert resources.

Implementing the single public utility, where all water services staff would work directly for the national utility and deliver a joined-up single service, is the optimum way to manage our water and wastewater services. It is key to ensure future public confidence in our water and wastewater services. It offers the opportunity for a specialist water industry, with better supported career structures and increased investment in staff training and skills, development of true centres of excellence and the introduction of apprenticeship models to support first class service delivery.

Despite the significant progress achieved to date, the Ervia executive and its board along with Irish Water management recognised that without completing the full transformation to a single national utility organisation, it would not be possible to deliver all of the business plan objectives by 2021. The choice of the single public utility operational model was based on an analysis of the experience to date, as well as the achievements of other water utilities, notably the public utility companies Scottish Water and Northern Ireland Water, which undertook very similar transformations.

From 2018, the majority of the cost savings and improved service performance can only be achieved through more effective asset operations by moving to regional working, implementing a single system of work, standard operating procedures, process optimisation and integrated maintenance delivery. The single public utility, once fully implemented, will free up €70 million per annum in operational savings and efficiencies, an essential part of funding our capital investment plan and through standardising operations and processes, deliver major performance benefits; allow Irish Water realise the full benefits of the investment being made in technologies such as supervisory control and data acquisition, SCADA, and telemetry; and, provide our shareholder and our regulators the single accountability for meeting our business plan commitments and in supporting public policy generally.

We have written to the Minister to inform him of the Ervia board’s intention not to renew the SLA post 2025; move to the full single public utility operations model, an integrated operations model within which Irish Water would have control of both the human resources and assets needed to efficiently and effectively deliver water services; and, work with local authorities and unions to manage this change within the period of the current business plan.

One single public utility, made up of both Irish Water and local authority staff working together in one fully integrated organisation, focused on first class service delivery to customers, is the optimum way forward.

Implementing a single utility approach to water service delivery is similar to how normal utilities such as the ESB or other water utilities have evolved and now work. The single public utility was selected as the optimum model as it will allow us to: deliver one national vision for water continuing to provide service continuity and knowledge through locally delivered work; create one connected community of water services staff; offer water industry employees more structured career paths, professional development and training opportunities; enable local workforces to deliver a consistent and standardised customer service to all consumers; allow increased preventive work to be undertaken reducing costly workarounds and reactive work; remove constraints on service and investment presented by traditional geographic boundary lines; implement a more streamlined management structure thereby bringing decision making closer to the front line; and generate incremental operational efficiencies of circa €70 million plus per annum. Achieving these efficiencies is critical to the funding of our capital investment plan.

With our proposal, local authority water services employees will continue to work in the sector and become Irish Water employees. It is important to note that their terms and conditions are protected under relevant water legislation and we are committed to honouring these conditions. While we recognise the concerns that many existing staff will have, we look forward to engaging with them on the benefits of working in a dedicated water utility which is committed to further investment in safety, equipment and developing dedicated career paths. This utility will be fully accountable through the structures and governance being established, for example, the water advisory body.

Working as the single public utility, we want a continuing, collaborative relationship with local authorities. We propose supporting this via a dedicated Irish Water local authority liaison office network. The liaison office for each local authority would act as the key relationship function for the local authority chief executive, councillors and Oireachtas Members dealing with the key strategic issues for the local authority in question, for example, economic and social development while also managing issue escalations between the local authority and Irish Water. It would ensure ongoing cooperation on areas of common interest such as storm water management, fire-flows, emergency response and environmental protection.

Implementing the single public utility will be complex and challenging and will take time. However, we have a commitment to improve how we deliver water and wastewater services and provide a first-class water utility. Our vision by 2021 is for a unified water services industry working collectively to deliver excellent customer service and safeguarding and conserving our water, our environment and our public health. This is now the right time to start taking the next step in the transformation of water services delivery. By delivering this transformation in full and by 2021, Irish Water will ensure that Ireland achieves the best possible water and wastewater services for future generations.

I welcome the representatives from Irish Water. I want to put on the record my appreciation of the excellent support provided to my constituents and I by Irish Water's hotline any time I ring it. I acknowledge the support of the chief operating officer's office in terms of the issues that arose locally. They could not have been more proactive in attempting to solve them. I also thank Mr. Grant, his team and the Department of Housing, Planning and Local Government for their good will and professionalism at all times.

Six months ago, I requested that we would bring Irish Water before the committee with regard to the huge crisis in the water supply in Drogheda last year. I regret that it has taken until now for Irish Water to come here and that the matter is not on the agenda today. This is wrong because there are serious lessons that must learned locally and nationally from that crisis. I regret that I do not have an opportunity to hear Irish Water's comments on that today. I listened to other members, particularly Deputy Casey who suggested that we should have a full day on it if necessary. I do not have a problem with that but leading it must be the national response of Irish Water to critical shortages, as occurred in Drogheda, and the disgraceful response for a few days - albeit over a weekend - where there was nobody in charge, nobody was accountable, the water supply was stopping and there were no tankers, no organisation and no plan. There was sweet damn all in place. I had to ring the Minister to express my concerns and in fairness to him, after that call, there was a response after two or three days and the situation improved as time went on. However, there is a serious failure in Irish Water with regard to planning for emergencies like that. I appreciate that I may not get the answer today given the way this was organised and I am not blaming anybody. I asked for it to be here and it is not. That is my point and I am not happy with that. I will not have it today but it is an urgent issue that we should discuss here. I want the lessons to be learned and iterated around the country so that it never happens again.

The second issue I want to address is the lack of transparency in Irish Water. In her opening statement, Ms Graham talked about the change in the Irish water sector and said "this places new demands on Irish Water in terms of accountability, governance and delivering value for money for taxpayers." The one word that was missing, and I am not implying it was intentional, is "transparency". I am failing to get transparency from Irish Water. It is subject to freedom of information, FOI, legislation and has one FOI request from me that is now being appealed to the Office of the Information Commissioner. What I am seeking are the minutes of Irish Water's management meetings in a transparent, open and accountable way. I do not believe Irish Water is actually hiding anything. It just does not want me to know what it is up to. What is going on? Why is there opposition with Irish Water to the release of minutes of meetings of management so that we can understand what the issues around the country are? It is appalling and disgraceful. I paid €25 for an internal review and I am now paying €50 to go to the Office of the Information Commissioner. I think that is wrong. There should be and must be accountability from Irish Water but there is none. As somebody who brought in the legislation relating to Irish Water, I find it unacceptable that Irish Water is not accountable and hides from people like me who are trying to get transparency.

Another issue that is fundamental and is no surprise to anybody sitting here from the Department or Irish Water is the fact that I am concerned at the presence of Ervia at this meeting. If we want a single utility, an idea I fully support, it should be a stand-alone company - Irish Water - that has nothing to do with Ervia. Ervia has many other tasks and situations with which it must deal in other companies. It is wrong to talk about a single utility that is at the same time, controlled by another organisation. When will Ervia be separated from Irish Water? When will Irish Water become a stand-alone company because it lacks transparency, accountability, management structure and clarity so that everything that happens is straight and clear? Regarding the biggest reason things went wrong with Irish Water, when we set it up, and people here know this, we were told that the total set-up cost of consultants would be less than €20 million. That is the truth. What happened? The cost was over €200 million. The company went crazy with consultants; spent money left, right and centre; left people like me who set up the company and who fully support what is being said here today about a single utility with egg on our faces; and created trouble up and down the country. People lost their seats over this. We acted in good faith but we were told untruths. What happened was just appalling. I appreciate that I am taking up time but I must put this on the record.

The former chief executive officer of Irish Water has gone, as has the former chief executive of Ervia. Is there transparency regarding their settlement figures and whatever they received when they left the companies? Reference was made to design, build and operates, DBOs, of €100 million. One of the good opportunities I had as Minister of State was to visit a DBO. I am not sure whether some people at this meeting were there at that meeting outside Limerick. It was sold to me as a very efficient and effective means of supplying water for the city of Limerick. What is Irish Water proposing to do with that because I was told it was very efficient and very well-managed, could not be bettered in terms of its engineering and capacity and Irish Water was very happy with it? Is Irish Water going to kick all these people out and put more bureaucrats in place?

Let me return to the key point, which I acknowledge others want to make. Ervia, formerly Bord Gáis, supplies services to Irish Water. What is the cost of those services? Is there competition for them? Where is the transparency in this regard? I would like to see it. I presume I will be allowed to contribute after the responses.

I thank Deputy O'Dowd. I was quite lenient with the time.

Mr. Jerry Grant

I will address a number of the points made. We have published in full on our website a very detailed report on the Staleen incident. I acknowledge again the great impact it had on the people of Drogheda and east Meath for almost a week. It involved a massive failure of a critical single-point asset. I assure the Deputy that we have most certainly learned from this in a number of areas. We have done a lot of work to identify our critical single-point-of-failure assets to try to ensure we have the technical capability to fix them. We were badly caught out by a unique type of pipe to which the fittings did not fit correctly. We certainly did not realise in time just how serious the incident was and how long the work would take. We acknowledge that fully.

The point is that Irish Water was told.

Please, Deputy.

This is critical.

I will let the Deputy back in.

I challenge that point. Irish Water did know.

We are going to allow members and witnesses to make comments and ask questions without interruption.

Mr. Jerry Grant

Lessons were most certainly learned from that incident. We have subsequently dealt with some very serious issues, including Storm Ophelia. We had a major problem in Listowel. We absolutely did learn that we need to get our crisis management team up and running earlier. This is now the case. The elected members are now the first point of contact and we value their contribution. There was not enough information early enough in Drogheda because we were not collecting it.

With regard to recent incidents, such as that requiring a boil water notice at Vartry, the Ophelia incident and the Listowel incident, and many others because we have incidents all the time, we have a much better communications arrangement. We have local liaison engineers, for example, in each local authority area for an event. There was a gap in regard to the event the Deputy raised. We closed that gap only on the Monday, which was too late. I accept that.

With regard to the emergency response, our tanker availability has improved as a result of experience. I refer to the one tonne containers that we drop around the place. We now have a plan for the use of generators. There is bottled water available to distribute.

Has that plan been published? It would be helpful.

Mr. Jerry Grant

We have published it.

Could I get a copy?

Mr. Jerry Grant

We will send that to the Deputy.

We have greatly improved our vulnerable-customer list. Having said all that, when there is a major incident in a location, we can never be aware of everybody who would be affected. I repeat that the support of elected members is crucial because they have the contacts on the ground. We really value their knowledge. Our purpose will be to try to interact and pick up that knowledge.

With regard to our national and local responses to incidents, our organisation is much improved. I am sorry that this is at the expense of the people of Drogheda and east Meath, who did suffer unfairly in the circumstances in question.

With regard to the broad question of accountability, we deal with an enormous number of freedom of information requests. I do not have the precise number. We make presentations at Oireachtas meetings and there is a lot of scrutiny. With regard to the specific example, it is not reasonable that we would publish the proceedings of the ordinary, day-to-day management meetings of the business. We will absolutely respond, however, to any request for information on a particular issue raised. If this includes the elements of minutes of meetings that relate to it, of course they will be provided without question.

With regard to the initial investment, we have reported in detail to Oireachtas committees previously. Some €173 million was invested to establish Irish Water. Those systems now underpin the utility operation. We will leverage those systems for what I hope will now be the major expansion of our organisation to accommodate all the operations. There will, of course, be additional investments. A business requires continual investments. We keep our IT systems up to date. If we take on 3,500 staff, we will have to extend IT coverage and the facilities for them. The extension will be leveraged off the initial investment, however. Last year, the operating cost was €116 million lower than the baseline cost in 2014 so the investment has long since been recovered. It does underpin what we are doing.

On the reference to DBOs, in the fragmented structure that existed prior to the establishment of Irish Water, there was no option but for large, sophisticated, complex plants to have DBO contracts. It was the only way in which the technology could be provided and operated effectively. What we are saying in our submission, and what I am saying, is that our objective is to build the capability to be able to operate the plants in the ordinary way, in so far as possible, using insourced resources. If we have the required centres of excellence and the process technologists, there is no reason the plants should not be run on a day-to-day basis by the utility itself and its own staff, with the right expertise. That, however, requires an organisation that is fully accountable, in addition to staff who are fully accountable and fully supported by the technology and expertise needed to run the plants. We are not going to terminate them overnight but we are saying this is not a model that one can continue to roll out cost-effectively to deliver the considerable upgrades that are needed.

Ms Maria Graham

I will address two of the questions. The Deputy said I did not mention transparency. In that context, I was highlighting particular issues that had arisen and that were reflected back to the parties following the Minister's conversations with them. The water advisory body I mentioned, specifically set up under the 2017 legislation, has a specific role, flowing from the confidence and supply agreement, to consider measures needed to improve the transparency and accountability of Irish Water and to advise the Minister accordingly. That is reflected in section 44 of the Water Services Act. Transparency, accountability and good governance are part and parcel of Irish Water.

On the issue of the stand alone utility, as raised by the Deputy, the Government decided in 2012 to ask what was then Bord Gáis, now Ervia, to establish Irish Water as a company within its group structure. This has been reflected in water services legislation. This approach was based on the advantages of leveraging the utility experience of the group with the experiences and capability of local authorities in order to build the new organisation.

Securing the benefits, efficiencies and synergies from that common utility approach to water and gas business remains an important dimension of Ervia's functions. Irish Water produces separate accounts. It is separately regulated by the Commission for Regulation of Utilities. The documentation that goes to the regulator very clearly outlines our group services costs and shared costs. These are commented on and considered by the regulator. Therefore, there is transparency regarding the services that the group and shared services give to Ervia. At the same time, there has been an understanding from the outset of the establishment that flexibility would need to be maintained should the Government decide at a future date that Irish Water should be a stand-alone public utility. That is reflected in the shareholder expectation letter to Ervia and influences matters that I have mentioned, such as the corporate structure, accountability and financial reporting. Any decision to separate the two would be based on an assessment of what was is the best strategic interest in respect of water and gas. The Government has not considered separation to date.

I will let Deputy O'Dowd back in for one minute.

I thank the Chairman. The advice I was given was that the utility should be a stand-alone company. It should never have been, and it was never intended that it would be, part of another. Bord Gáis, in helping to set it up, was saying it would not cost more than €20 million and that it would be a stand-alone company. It is not a stand-alone company and it does not look like it will ever be.

I detect a lack of transparency in the comments of Mr. Grant. He says he will not release details of management meetings. This is what freedom of information guidelines require him to do. A comparable body, called the HSE, releases details. If a company wants to hide matters, it should not release details but it must be accountable. It is now up to the Office of the Information Commissioner to hold Irish Water accountable. Mr. Grant has great personal credibility but if Irish Water, as an entity, expects to have credibility in carrying on as it has done, it is utterly unacceptable.

My question on the financial settlements to the former chief executives of Ervia and Irish Water was not answered. What is the position regarding these?

Mr. Jerry Grant

They were published in full in the accounts. They are absolutely explicit in the annual accounts of Ervia and Irish Water.

What were they?

Mr. Jerry Grant

They are published. I cannot give the figures off the top of my head.

Will Mr. Grant get them for me?

Mr. Mike Quinn

In the case of the CEO of Ervia there was no settlement because he had no defined benefit. The benefit to the managing director of Irish Water was explicitly set out in the annual report.

There was commentary about a dispute on payments.

Mr. Jerry Grant

There is no dispute now. There was a matter to be resolved and that matter is resolved.

It is resolved.

Mr. Jerry Grant

Yes.

I thank the witnesses for coming in today. I have major concerns and I agree with the Deputy O'Dowd. There is a feeling that Irish Water is a stand-alone company and that it is not with other bodies. This is a concern for me. Originally a 12-year service level agreement, to 2025, was agreed with the local authorities. Now Irish Water wants to change this. I am concerned about this. Taking Carlow as an example, 50 staff there work with Irish Water. Of these, 30 are outdoor and 20 are in the offices. My concern is these local jobs would be taken away. We have local staff who know every pipe and system, but the talk is that Irish Water will group together various areas. Will there be local offices, as there are in local authorities, so staff can work from them? There is major concern among the 50 staff in Carlow because they do not know where they are going. Originally they were told it would be 12 years. This needs to be looked at because now Irish Water wants to bring it to seven years. This is unacceptable and I do not accept it.

Where will the funding come from? We are looking at building a new technological university. Our capacity with regard to sewerage is massive. Unless we get funding for all of this who will decide which area gets funding? That will be crucial.

Originally Irish Water went with the Scotland and England plan and this has been mentioned several times. The English plan had to change because there were massive issues in 2012. I could give the witnesses 20 plans from my local authority because I have every one of them. Going back to older houses built 50 years ago, 40 of them could be on the same line. This means if one is blocked it will block 20 more. This is a massive issue. In 2012, England had to change its entire scheme because of this and the fact there were so many older estates. I can name five estates in Carlow with 40 houses on one line. In another estate, 30 houses are on the same line. We are told Irish Water is not looking at this but it is an issue. I have contacted Irish Water several times and it has got back to me. I will not say it has not got back to me because it has. The biggest issue for Irish Water is that sewerage lines are going through the middle of houses, gardens and backyards because they are old. Unless a plan is put in place to sort this it will be a major issue. The money has to be there and it has to be distributed fairly to each local authority. Every local authority should be left with Irish Water because people know their own area.

There are too many contractors. Recently we had a problem where someone from Irish Water went to a house and said he was there to deal with a problem with pressure. The lady rang Irish Water who told her it did not know the man and that he did not work for them. She called the Garda. With that, Irish Water came back and said he was a contractor but it did not realise he was in the area on that day and that it was sorry. This is unacceptable. Irish Water is stating it provides a service that is better than that of the local authority and better value for money. It is absolutely not. This old lady rang the Garda because when she rang Irish Water it did not know who the man was. This is unacceptable. A service cannot be provided unless the company knows exactly what it is doing. I have massive concerns. The only thing I will say is when I ring Irish Water about a problem it comes back fairly quickly and follows up. I would like answers to these questions.

Mr. Jerry Grant

The biggest question, and the one I want to address first is why now, and why the 12-year service level agreements are being reviewed as being no longer optimal for the service. In 2012 and 2013 the focus was on transition and stability. Local knowledge and all of those benefits were recognised. I acknowledge again, as Mr. Quinn did in his opening statement, that the service level agreement has provided a seamless transition of service. It has allowed us to deliver significant benefits nationally in terms of investment and operation, and there is no question about this. It has allowed us to do all of this without a single day lost to industrial relations. This is a tribute to the staff, the unions and management of Irish Water and local authorities. What we are recognising, and what has been set out in our submission, is we have a real challenge to bring our costs into line with the benchmark costs of a similar utility. If we continue as we are and we sacrifice the €70 million a year saving potential which is there it is €70 million less to invest. This is a significant part of our overall plan. At the same time, in terms of standard operating procedures, we have different operating procedures throughout the country. With regard to how we can respond on customer services, or how we can address national issues such as leakage on a regional basis or the operation of modern wastewater plans, we simply cannot have centres of excellence in every local authority area. It is not possible or cost effective to do this and there are not enough people to do so. It is all about equity of service throughout the country. There has to be accountability to the management of Irish Water, which has full responsibility. We have absolutely all of the responsibility and we accept all of the responsibility. This has to be matched with accountability.

With regard to local knowledge, in 2013 and 2014 it was important. Over the past four years we have built information systems that capture this information into geographic information systems and our workflow systems. We are now in a very strong position in terms of objective data on many other assets. The trouble with local knowledge is sometimes it is not correct and it cannot be verified. This is not the basis on which a national utility can be run or on which investment decisions made.

The Senator mentioned a number of specific items, including the concerns of staff. At this point we are at the very outset of this process. We believe many staff in local authorities would welcome the opportunity to come into the utility because it offers the opportunity for a water services sector and a place where they can develop their career and expand it. We believe that when we can get out and talk in detail about the benefits of working for the utility, better working conditions, safer working conditions, upskilling and apprenticeship we will have an awful lot to offer that will be very attractive to the committed staff in local authorities to work for us. However, this is a process that involves serious engagement and we want to engage on it. Before we get to that point we must go through processes, and we are working through certain principles at the top level to get to that point.

Specifically on backyard services, which is the issue the Senator has raised, it is an issue we have been addressing since day one. Today is no different to when the local authorities were in charge. Backyard services are private services. They are private drains and not public sewers. They present enormous difficulties. If they were handed over to us tomorrow morning we would need tens of millions of euro and crews of people specifically to deal with them. In the vast majority of cases these issues can be addressed by the residents themselves by simply clearing blockages. Of course, there is the question of being responsible about what goes down the sewer. Since the issue arose in 2014, we have been back to local authorities to ask them please to continue doing what they always did. I believe we have responded where there is a public health issue or where there are elderly or vulnerable people, and we will always do so. My ask of local authority operational staff is that they always respond and fix the problem if they can, but it is on the basis that we respond in this way recognising that private drains are the responsibility of householders. I hope we have improved on this point considerably.

With regard to the call-out, what the Senator reported was a Joe Duffy conversation and, frankly, he got it completely wrong, as very often happens on Joe Duffy. We provided a free-----

Mr. Jerry Grant

We have had a few examples this week where he was completely and utterly wrong. For me to respond to a Joe Duffy call is, frankly, pointless, other than to say that was a free first fix we gave.

There was a misunderstanding by the person in the house, it was not the householder. The free first fix was offered and given and that lady no longer has a leak.

Ms Maria Graham

I want to confirm the legislative background on the back yard services which were mentioned is as set out from the time that local authorities had statutory responsibility. As Mr. Grant said, we have focused on the area to ensure that the service is appropriate in terms of what local authorities did. It might be useful to clarify that. Senator Murnane O'Connor referred to investment. A huge amount of investment is going into the area of water services, and will continue in the future. The national development plan earmarks some €8.5 billion, as Mr. Quinn set out. That is organised in a strategic national way. Opportunities are embedded in the water services legislation, when the investment plans are being developed by Irish Water they must engage with local authorities. As I understand it, the current engagement is around the methodology so those priorities can be identified across all the spheres. The investment is increasing. What local authorities are delivering through the service level agreements is the operational staff. They are paid for payroll, pension costs and overheads. The investment decisions across the country are now being made by Irish Water but they are not being made in isolation from a process that stands apart from the service level agreement. That is reflected in the legislation. I wanted to assure members about that component.

Does Senator Murnane O'Connor want any clarifications?

One must take responsibility when something happens. There must be clarification on everything and responsibility. There are issues. The witnesses said it was not possible to have local offices everywhere. Every time Irish Water spoke today, it was all about local authorities. Local authorities are the backbone of our society. The next thing that will happen is that they will take over the ESB. We are removing so many functions from local authorities which do a good job once they have been given the proper funding. Proper funding is what it is about. I hope that whatever happens, Carlow will get its fair share. We have massive issues with sewerage. Irish Water should keep local offices. It would be detrimental not to. That is what has happened to everything that is a single utility. They work from Dublin or the bigger cities and local character goes. The information goes and it does not work.

Does Mr. Grant wish to clarify anything?

Mr. Jerry Grant

I should have pointed out that as part of our proposed structure, there would be a permanent water liaison office with every local authority. We agree that it is critical that we have a channel of communications around planning issues and concerns and the issues around growth, housing and so on. That would also ensure co-operation on environmental matters, fire-flows and all the things common to Irish Water and the local authorities. Ultimately, the organisation of the utility workflow requires an organisation that is as lean and efficient as it can be because it now costs taxpayers an additional €70 million which we believe we could get rid of it in a short number of years.

I will address my questions to Mr. Grant. Has the agenda to privatise water gone away? The anti-water charge movement succeeded in knocking it back and I think that it has been delayed but that the agenda has not gone away. It can be seen in recent comments by the Taoiseach, when he indicated his views on Deputy Joan Collins's Bill to keep water in public ownership. We also see it in the moves towards the single utility.

My understanding of the service level agreements with the councils for the council staff is that they were due to run to 2025. Now I see it is to be brought forward to 2021. I hear what the representatives of Irish Water are saying, that the staff who are currently there will have their wages, conditions and pensions respected but that does not really answer the question. The key question is what will be the position for new staff. Will newly-hired staff have the same wages, conditions and pension rights? Is Mr. Grant willing to give a commitment to the committee today that the wages, conditions and pension rights of newly-hired staff will be at least equal to what current staff have?

We have seen it in other utilities. It is part of the privatisation agenda when they start to recruit on lower rates. Then redundancies come on the agenda. I hear what is being said about there being no compulsory redundancies but we have heard that before. There are ways of manufacturing redundancies in a company and there is a vested interest in doing so when there is a two-tier workforce of people on lower wages and conditions and those on higher wages and conditions. Over time, the old staff are disposed of and the new staff mean a lower paid workforce, which is part of making a company ripe for privatisation. Will Mr. Grant give the commitment that new hires and staff will be on at least the same wages, conditions and pensions as existing staff?

Many members of the committee, myself included, believe the excessive use charge being introduced next year is the first step on the road to trying to introduce water charges by the back door. I want to be clear that if there are attempts to introduce water charges by the back door, they will be resisted, not only by political parties such as my own but more importantly by communities throughout the country. My question is how on earth will Irish Water introduce these excessive use charges next year when 42% of the country is unmetered and will remain so, since any attempt to meter the communities I represent will stand against it. They know it is part of an agenda of charging and privatisation down the road. I am interested to hear his response because I put it to Mr. Grant that Irish Water cannot do it.

There has been controversy recently over the €17 call-out charge which Irish Water intends to introduce next year for households that query bills for excessive use. According to reports, where someone calls them out and the query is correct there is no charge and where the query is not proven to be correct the charge will rise to €100. That is blatant discrimination against low-income families, households and communities. Of course the more affluent people will feel confident about querying a bill. How can a low-income household feel confident about querying a bill when there is a threat of a €100 penalty over their heads? It is blatant discrimination and I challenge Mr. Grant to say otherwise.

We have received reports of households and communities faced with issues which were illustrated most recently by our councillor Michael O'Brien who represents the Beaumont-Donaghmede ward in Dublin. Councillor O'Brien reported there was a terrace of nine houses where there was serious leakage in the wastewater system. The leakage does not take place in the mains which runs down the middle of the road or on the householder's pipe in the area between the garden wall and the house, but in the area of the offshoot pipe between the wall and the mains that runs down the middle of the road.

In the past, the practice was that the local authorities fixed such leaks. Here, what is happening is that the local authority says it is Irish Water's responsibility and, contrary to Mr. Grant's assertion that Irish Water always responds, it is saying that it is not the responsibility of Irish Water but of the householders who must fix it themselves. In this case fixing it involves opening the road at a cost of €20,000 to €30,000. In this case, and others like it that will inevitably arise, in effect Irish Water is saying householders must put themselves to enormous expense or otherwise the wastewater piping system degrades after a period at the risk of a public health hazard.

That is unacceptable. The old position should apply in the way that local authorities fixed it in the past. If Irish Water is in charge, it should fix it. That is what needs to be done in the interests of public health. I ask Mr. Grant to comment on that case.

I thank Deputy Barry. I wish to disassociate myself from one comment the Deputy made referring to "many of us here". As someone who sat on the committee, and based my decisions on evidence before me about excessive charges being a way of charging people through the back door, I want to disassociate myself from that remark.

Mr. Jerry Grant

In respect of the proposal for a single public utility, everything we are doing and have been doing is consistent with Government policy, which is to establish a public water utility. Whatever its status is, it should be efficient, capable of doing the job and have the right capabilities and expertise to do the job. It is essential we proceed to put the organisation on a footing where it can deliver the best possible service to everybody.

Deputy Barry rightly pointed out that all terms and conditions current staff enjoy are protected by legislation and we intend to honour that. In respect of new hires, whether in Irish Water or any other part of Ervia for that matter, the salaries, terms and conditions are competitive and consistent with public sector salaries. Nothing we have done regarding the people we have employed or their terms and conditions would suggest anything to the contrary and, in fact, running a business like ours needs the best and most highly qualified people. What we want to see is-----

There are no commitments to maintain wages, conditions and pensions?

Deputy Barry, as we have with others, we are going to allow Mr. Grant to finish without interruption. I will bring the Deputy back in.

Mr. Jerry Grant

We do not have exactly the same pay model but it is consistent with the public sector pay model. We could not succeed in our objectives unless we were committed to paying fully competitive terms and conditions for new staff.

In regard to the excess use charge, I will make little comment on this today because the Commission for Regulation of Utilities, CRU, is considering implementation. It will be consulting on it and, frankly, we do not have all of the terms and conditions that will apply. In broad terms, in the meter readings to date, we have notified about 80,000 people who have indicative leaks on their services. As an example, I refer to 4,000 houses with which we are in direct contact. Each of those houses uses, on average, the same as 35 houses. The impact is on their neighbours who suffer low pressure. There are practical rational reasons we are pursuing leakage on the customer side, just as we are on the public side. We follow up similar leaks in houses that do not have meters in the same way.

On the calibration issue, we have invested a huge amount of money, €465 million, to provide almost 900,000 meters across the country. These are new meters. Historically, water metering invariably reads low. We have very little experience on our non-domestic or domestic side of any possibility of reading high. The position is simple. If we had to calibrate meters on a continuous basis for householders it would cost a huge amount of money. We are absolutely confident, in the event of a query, our meters will be accurate or perhaps on the low side because that tends to be where they are. In order not to expend our limited budget, we have a charge for calibrations requested by customers.

I refer to the specific issue of a problem with a sewer in the public realm, which is in the footpath. The legal position is exactly as it was pre-Irish Water. The local authority did not have responsibility for that. It was a private drain to the point of connection to the sewer. However, we have given instructions that in the public realm, all such problems will be repaired by Irish Water and our local authority partners. If that is not happening, I will follow it up because that should be the case. I agree entirely with Deputy Barry. It is not reasonable that a private householder should have to dig holes in the public realm to deal with a private drain. We will deal with it.

Ms Maria Graham

I reiterate the point I made in my opening statement that a central component of water sector reform is to retain water services in public ownership. I draw the committee's attention to the letter issued to the Irish Congress of Trade Unions, ICTU. The Minister, Deputy Eoghan Murphy, set out the existing protections reflected in water services legislation and indicated that, notwithstanding this, he is willing to facilitate the holding of a referendum. He acknowledges there is a Bill before this committee and there are issues around the timing of that and the challenge in framing the wording. However, he outlined his commitment to working with this committee over the coming months to address those matters. I thought it was important to put that on the record.

Deputy Barry has a minute to come back in.

Briefly, on the issue of the public realm, I welcome what has been said but there is a difference between what is being said and what is being practiced on the ground. It is important people are not thrown from Billy to Jack, with the local authority saying Irish Water will do it and Irish Water saying the local authority will do it. We will hold Mr. Grant to his comments and proceed with that case.

I asked for a commitment that new hires would have the same wages, conditions and pensions as current staff. I note that commitment was not given but instead Mr. Grant said they would not have exactly the same pay model. In a way, Mr. Grant has answered the question but I will give him one more opportunity to say the wage, conditions and pensions will not be any less, just to be sure to be sure.

Mr. Jerry Grant

It would be irresponsible for me to try to predict what the future pay model might be for a workforce with which we have not even started discussions. However, I am satisfied what I said is correct. A first-class utility must have first-class people and must pay them properly. The reality now is new hires in the public sector are not paid the same as people on previous arrangements for things like the defined benefit pension for example. I cannot be certain how those things will pan out in future. I will say, however, that we will pay competitive salaries to hire and retain the best people.

I thank the Chair and Irish Water and Ervia for the presentations so far. The proposal to bring forward the end of the service level agreement, albeit negotiated, and to move to what Irish Water calls a single utility model has profound implications not just for the workforce but also for the delivery of services. I have a series of questions, none of which have to do with the industrial relations elements. That is a matter between Irish Water, the local authorities and the unions and their members. However, this is not just an issue for them. It is also an issue for local authorities and the public who access water services. It is in that context that my concerns are raised.

The original service level agreement indicated there could be future service level agreements. I think "one of many" was one of the phrases included at the time. My first question for Irish Water and the Department was whether, to address some of the issues motivating the proposed change, an alternative service level agreement or a different type of service level agreement was considered. I refer in particular to addressing issues such as management practices, operational practices and efficiencies etc.

Mr. Quinn mentioned the ESB as an example of a freestanding public utility. It is a public utility that has a very strong public service ethos and strong public support. It is also a non-commercial semi-State company and very different to the model for Irish Water and its location in Ervia. Did the Department of Housing, Planning and Local Government and Irish Water look at transforming the utility from a commercial semi-State entity located in Ervia to a non-commercial semi-State body on the model of the ESB both for the obvious benefits it would have for workers and the utility and to build public confidence?

Can the witnesses confirm that at the centre of this proposal is a desire to reduce the total number of full-time equivalent staff currently employed in the delivery of water and sanitation services from 4,300 to approximately 3,300? Effectively, there would be 1,000 fewer full-time equivalents working directly in water and sanitation services. In addition to confirming that, can the witnesses also outline what the impact of that would be on the ability of the utility to deliver those services? I ask in the context of an increased capital investment programme and increased use of local authority staff to deal with a whole range of issues, some of which have already been outlined.

In addition, we have a growing population. The national development plan and the national planning framework refer to about a million more people in the State over the next 20 years. At a time when there is going to be more demand for Irish Water's services, how will it cope with having 1,000 fewer full-time equivalents?

Obviously if staff are taken out of the direct delivery of services, there will be more reliance on contractors, particularly in relation to the capital investment end of the services. As such, they are not savings in some senses. Is it not the case that Irish Water is simply transferring certain areas of work, which are currently conducted by operational staff employed by the local authorities, to capital investment accounting funded by contractors? Therefore, is the figure of €70 million really the full account of that saving? It is really a smaller figure.

Mr. Grant mentioned €70 million in savings to the taxpayer. There are no compulsory redundancies. That is very clear in the proposition. That means that the 1,000 full-time equivalents taken out of the delivery of water services could end up still employed by local authorities. Therefore there is not a saving of €70 million to the taxpayer. The true situation is that Irish Water does not have to pay that €70 million and central Government will have to pay it to continue, whether the number of staff concerned is 1,000, 800 or 500. Has the Department of Housing, Planning and Local Government examined this issue? The Department has to come up with the money for an extra 1,000 staff members in local authorities, including some pretty senior-level managerial staff. How have officials worked that out? Those two questions suggest that the net savings to the taxpayer could be much lower than the €70 million. Is there any detail on that?

This is a question for the Department. Local authorities have been stripped of a range of services, domestic waste and bin collection obviously being the most recent. What would be the impact on local authorities and their functioning if all of the staff of what had traditionally been core services were sucked out of the local authorities and transferred into a single utility? Has the Department looked at the impact on the overall local government model and the viability of the local authorities as we currently understand them? Has that been part of the Department's considerations?

We are talking here about the desire to transfer staff and operations from local authorities. I note that €100 million is in design-build, DB, and design-build-operate, DBO, contracts. Does it not make sense to try to bring forward the end of those contracts, particularly when they are not on the scale of the Ringsend plant, to try to fully incorporate them into the public utility? Given that some of those design-build or design-build-operate contracts arguably have some issues around breach or delays of contracts which should raise penalties and potentially terminate the contracts, is that something Irish Water is pursuing? Perhaps Mr. Grant would give us his personal view on the very large number of DBs and DBOs that are in the system, and whether he thinks that is an efficient use of public money.

I am very concerned about the impact of all of this on service and the members of the community. There has been a tendency for Government to centralise the delivery of services. Two examples are the operation of the medical cards through the primary care reimbursement service, PCRS, and the transfer of responsibility for grants for third-level education from local authorities to Student Universal Support Ireland, SUSI. We have seen real problems. In both of those instances we were told that the change would create efficiencies and make the service faster or more effective. In fact there are still huge problems with the medical card system , despite the fact that it has been in operation for some time. While SUSI had a large number of problems at the start, not all of those problems have been transferred. I wish to direct this question at the Department in particular, but it also concerns Irish Water. How can the witnesses reassure us that the types of efficiencies they are talking about will really deliver better quality service, given the poor track record of the State in other areas?

Lastly, Deputy Barry raised the issue of the constitutional protection of the public water system. If it is not an unfair question, I am interested in Mr. Grant's personal view as to whether a constitutional protection of the public water system would be reassuring to the people with whom he is negotiating with and to the public. Could the fears that many of us have around potential privatisation, whether by this Government or a future Government, be allayed? Does Mr. Grant think that would be a good thing for us to have?

Finally, I will very briefly raise two unrelated questions. I will not ask supplementary questions on these topics. Can we have a very quick update from the Department on the European Court of Justice legal action on wastewater treatment plans, and from Irish Water on the work ongoing to upgrade those plants? The Shannon to Dublin water pipeline consultation was meant to conclude with the publication of the preferred option last summer. Planning permission was meant to be pursued in September or October. This has not happened. Can the witnesses give us a brief update on that?

Ms Maria Graham

In overall terms, the Irish Water business plan talks about €1.1 billion in operational efficiencies, of which this proposal is one element. From our perspective, this must mean efficiencies to the State. When we talk about savings, our expectation is that the savings that are made by Irish Water are not made by placing costs on local authorities. We are looking at it from the State's perspective. A claim of a saving of €70 million per annum therefore means a €70 million saving to the State and the Exchequer. I mentioned in my opening statement that as this process moves forward we are conscious of the impact of the proposals on local authorities. Obviously if they are left with stranded costs in areas that currently funded, that would impact on other local government sectors. Throughout this process we have consistently tried to ensure that when water services were transferred from local authorities, their costs were met by Irish Water. Irish Water is fully meeting payroll costs, pension costs and a contribution to our overheads. Costs we are consistently meeting include loans taken out by local authorities before Irish Water, non-commercial loans, the cost of asset transfer, and funding offices for local authorities' water services transition offices. We have brought back commercial rates under the Water Services (No. 2) Act 2013, but the local authorities have received compensation. We have been trying to ensure that there is a level playing-field on this issue.

Our examination of other options was mentioned. A member asked about the assessment process. The speaker is correct in that when the service-level agreements, SLAs, were initially negotiated, the idea came from the independent assessment, which recommended a shorter period for the SLAs. In 2013, the period of commitment became 12 years. That was reflected in the Water Services (No. 2) Act 2013, which gives the potential for them to be renewed and also provides for some review mechanism. With all that has been happening in this are over the last several years, that has been under ongoing review. In regard to the models that have been examined, Mr. Grant and Quinn will talk more about their experience of the SLA. The experience from both sides is pertinent. Obviously there are two parties to the SLAs. They are contracts.

I made reference to a stand-alone company. The Government has not decided to separate, but we have consistently ensured that any decisions do not pre-empt that happening at some point in the future, if that was in the best strategic interests of both water and gas. From the outset it was very important to show that we were leveraging the experience of a utility, because a new utility from the gas sector was a big thing to set up. People have been working very well in that regard.

In regard to the local government sector I have spoken about the financial aspect. Certain functions were taken from local authorities in 2013. That came from an independent assessment. It looked at a range of issues and models and recommended that there should be a single utility. That is what we have implemented in the Water Services (No. 2) Act 2013. As I said, the SLAs were recommended as a transition mechanism within the independent assessment, but they evolved throughout the process. This process is not about taking functions away from local authorities, because statutory responsibility rests now with Irish Water from beginning to end. That is irrespective of the fact that Irish Water has service-level agreements with local authorities and local authority staff are operating on the ground. The operation from the beginning to the end is the legal responsibility of Irish Water. Within the accountability which was described at the outset of this meeting, when something goes wrong or people are not happy with the service, the Oireachtas and the Department expect to direct their questions at Irish Water. The transformation and evolution of the utility does not really take a function away from local authorities. It is about determining the best mechanisms for Irish water to deliver on its statutory responsibilities in the future.

Mr. John Dempsey

In response to Deputy Ó Broin's point, the €70 million per annum in operational efficiencies that Mr. Quinn referenced earlier refers to payroll and related savings in overhead costs which we project will arise from an operational headcount reduction of approximately 850 staff. To explain how we arrived at that number, there was the equivalent of roughly 4,300 staff working in water services at the end of 2017. That was the total of both Irish Water and local authority staff. That figure breaks down into 3,500 local authority staff and just under 800 Irish Water staff. That 4,300 staff equivalent represents approximately 5,000 people because quite a number of people in local government work on water services part of the time and work in other service areas for the rest. There are in the region of 1,200 to 1,300 people who do not spend all their time working on water.

The Deputy is right; once we fully implement the single public utility we expect to be able to operate with a reduced workforce of 3,300. However, that would be after a number of years. This is a complex project which must be carried out on a managed phased basis. Part of managing that transition is making sure that the people who will be working in water services will be better supported in how they do their work. Their work will be reorganised to better effect in order to take advantage of scale and consistency but people will also be better supported in terms of training and equipment. It is a reduction of 1,000 from where we are today, but it will happen over a period of time and it will be managed.

It is important to restate what Mr. Grant and Mr. Quinn have said. There will be no compulsory redundancies. We are not talking about job losses. We see that we can achieve this reduction over a number of years. Factors like retirement, normal staff turnover, voluntary redundancy and redeployment to other local authority service areas which have resourcing requirements will come into play. These are all quite realistic and tangible benefits over the time period we are talking about. It can be seen materialising. As I said, 850 of the 1,000 reduction in staff numbers is on the operational headcount side. That will generate the €70 million per annum in operational efficiencies.

There were one or two other questions. The Deputy asked whether any element of this reduction related to a change in how we account for payroll costs. The short answer is "no". From our establishment in 2014, we have been following international financial reporting standards and they are very black and white as to what constitutes operational expenditure as opposed to capital expenditure. We will be continuing with that. The Deputy queried whether there would be any impact on customer service. Perhaps Mr. Grant will want to comment on that in more detail, but we believe there will not be because there will be an improvement in service through the different mechanisms we talked about. This is not being done only for the benefit of customer service. It is also absolutely essential to meeting the objectives of the national development plan and to being able to meet the demands of a growing economy. I believe they were all the questions I was going to cover.

Mr. Jerry Grant

I will come in on a couple of points. The business plan was adopted in late 2015. In 2016 and 2017 we did a good bit of work on potential options under regional service level agreements and that type of structure. There were many legal, implementation and structural barriers to those which suggested that the complexity of such an organisation would not result in significant benefits. That ultimately led us to the conclusion that the track that had been followed by Scottish Water and Northern Ireland Water was the only real option to get the kind of integration of service delivery that is needed both for the performance efficiencies and the cost efficiencies.

On service, it is important to emphasise that utilities deliver the best outcomes through what is called the asset management approach to managing services. That means that the day on which one invests in something is the day on which one commits to maintaining it and operating it optimally. The best way to do that is to have the two services integrated. That was one of the big gaps previously. We have tried to close that gap but it is impossible to close it fully without having control over both services. One must also develop the expertise required on a regional basis to support local operations. That is why services will improve and have to improve under that kind of a regime. There are also lessons to be learned from many of the incidents which we have had around the country in terms of the avoidance of issues, the management of critical assets and so on and these lessons will improve service. Of course, we have a long way to go with our assets and we will continue to have incidents.

As I said, the "design, build, operate", DBO, model was brought in for the purposes of delivering these sophisticated plans and maintaining them in the absence of the utility capability. We will not exit the DBO contracts overnight or immediately. All of our new DBO contracts are short-term operational contracts so they are very flexible. Many of the older ones have very limited break clause capacity or no break clauses at all, so there could be significant commercial implications in seeking to terminate them. At the same time, it is important to say that we need to develop the mature capability of the utility before we will be in a position to take them over. However, as I have said, we have very flexible arrangements in all of the new contracts whereby we can take them back into direct operation relatively easily.

On the European Court of Justice case, there are still 37 schemes on the list involved in the case. We are working through a programme in that regard and it is going according to plan. Ringsend is the single biggest example of that and it is still on track for 2021. It is our ambition for those schemes to be compliant by 2021. Obviously we pass information in that regard on to Government which passes it on to Europe.

On the Shannon water supply project, the imperative for that project grows more acute by the day. The growth of demand in the greater Dublin area and issues in the midlands, such as the serious drought issues in Mullingar last year, make a compelling case for that project to be delivered at the earliest possible date. We now have a preferred scheme. We are very clear on that. In April we will publish a report on the consultation process and all of the very valuable feedback we have received. Some recent articles have been very misleading and misinterpret an awful lot of information. Some 40% of the water resources of the Liffey currently go towards meeting the needs of the greater Dublin area. It is at its sustainable limit. If we had a critical dry period the greater Dublin area would be in serious trouble.

Our demand profiles are now aligned with the national planning framework. We have to meet them. We have laid out the peak and headroom allowances which any normal utility would have in order to ensure that it can deliver service. We have nowhere near that level of margin at the moment. We are on a very tight leash as far as that area is concerned.

There has also been some very misleading information or misinterpreted data circulated on leakage. Leakage in the greater Dublin area is at a rate of approximately 36% or 37%. That is about 200 million litres. That is a massive challenge. To save 40 million to 45 million litres of that leakage will require a massive effort. We are committed to that. We are working through programmes which include replacing 70 km of mains in the greater Dublin area. We are also looking to develop a very intensive find and fix programme. We have already implemented pressure management to the limit of what can be done without compromising service to customers in the greater Dublin area. Getting that 40 million to 45 million litres net saving at the plant will mean fixing two, or even three, times that amount of leaks because an awful lot of it goes back to suppressed demand and other leakage. Obviously the natural increase in the rate of leakage is quite significant in an old network.

There is no quick way out of this other than to build a new scheme that will secure the future supply. That is the Shannon scheme, based on water being abstracted at Parteen and piped to Dublin. The timing of that scheme is contingent on us being able to provide the planning documentation to An Bord Pleanála. The updating of the abstraction legislation is being addressed. We would like to be able to make the planning application in the context of that new legislation. We aim to make that submission in early to mid-2019. We are then looking at as fast a programme as possible in order to get work started on site by 2021 and to begin delivering water to the greater Dublin area and midlands by 2025 at the latest.

Ms Maria Graham

I forgot to answer the Deputy's question on the European Court of Justice. I apologise for that. Mr. Grant has mentioned working through the programme. In terms of the case itself, we have been referred to the court. We do not have a timeline or date for that case but we have submitted our defence. We are also finalising the river basin management plans, because compliance with waste water legislation is a particular component of that matter.

We might have an opportunity to discuss that with the committee on a separate date. That also deals with functions that local authorities retain in the wider water environment area, which we are supporting, particularly through a local authority water communities office. There are areas within the water space where the roles of local authorities are evolving, changing and expanding.

I have some quick supplementary questions. Ms Graham said it was clear the understanding was that whatever savings accrued would be for the Exchequer and, therefore, there would not be costs left behind. Does that mean her understanding is that if a portion of the 1,000 full-time equivalents remains in local authorities or is redeployed to other functions in local authorities, the funding would have to come from existing allocations to local authorities and there would be no new money provided to fill the gap?

The witness is right and the independent assessment recommended a single utility but that did not consider the impact of transferring those functions to the single utility on local government, which is Ms Graham's responsibility. Does she have any concerns, not only given that functions have been transferred but staff have also been transferred, about the separate impact on local government. The expectation is a reduction in 1,000 full-time equivalents and 850 were from the operational side. Where would the rest be? How many people make up the 1,000 full-time equivalents? Do the old design, build and operate contracts represent value for money for the taxpayer? My question on the constitutional referendum was definitely evaded so I will press the witness on that.

Ms Maria Graham

The first question concerned the savings and the balance. If local authorities have to bear a cost, they need to have a source of funding for that expenditure. If that is currently being met by Irish Water, there would be a shift. I gave the example of rates expenditure, where we gave it compensation and Irish Water was not paying commercial rates. We have changed that in water services legislation but local authorities would have been down around €47 million as a consequence, with the Department giving the €47 million in extra funding. That is what I was referring to with respect to a level playing pitch. I am assuming any costs incurred with local authorities would lead to them expecting to get a new source of revenue from that. Either we or Irish Water would fund it.

This is important. The witness used the phrase "not leaving costs behind in local authorities".

Ms Maria Graham

Yes.

Hypothetically, if 500 full-time equivalents of the 1,000 full-time equivalents remained working in local authorities after the single utility is established, there would be a cost for local authorities to fund because Irish Water is not funding it any more. Is the witness saying it will not be funded by central government? The first answer seemed to suggest the answer was "No" but it now seems to suggest it is "Yes".

Ms Maria Graham

Perhaps I had two different issues in my head. I will clarify the matter. There are some costs raised with us that Irish Water is currently funding, such as pension costs of past water services staff. If the service level agreements come to an end, the question of who pays for that must be addressed. It would potentially be a switching of funding and be cost-neutral. It is an area we will look at and it has been raised by local authorities.

We are at an early stage with respect to staffing. There is a process outlined in the legislation that mentions staff being designated and the protection of worker terms and conditions, as we alluded to. The framework agreement we have with the trade unions indicates that notwithstanding that legislative protection and process, the parties can agree alternative arrangements. In the context of agreeing alternative arrangements, which could be redeployment, as the Deputy suggests, the issues of cost and impact would arise.

They would be a matter for negotiation.

Ms Maria Graham

It would be premature for me to speculate on that point at this stage.

There were three other questions.

Mr. John Dempsey

There would be a reduction in the capital head count. Currently, there are approximately 500 people working on the capital side and we see that reducing over the long term to approximately 360. There was also a question about how many people would relate to the reduction of 1,000 full-time equivalent positions. I cannot be definitive at this stage and it will only be when we get into the implementation and we see the position on the ground that I could give a proper answer. It would probably be of the order of 1,300 people. That is subject to qualification.

Is it agreed to extend the meeting to approximately 12.30 p.m. or even closer to 1 p.m.? There are five people who wish to ask questions and we still have a second session to get through. Agreed.

I welcome our guests, particularly Mr. Quinn, and I congratulate him on his appointment. I wish him every success and I worked closely with him when he was with Bord na Móna. I hope we can continue that relationship. A long and arduous process, as the witnesses know all too well, was put in place to deal with the unfortunate period that saw the setting up of Irish Water and the implementation of water charges. There was a compromise initiated during the process to facilitate the formation of government, and from my party's perspective, this involved the retention of Irish Water itself. How it was funded and how it is to be funded in future was subsequently addressed, following Oireachtas approval and special committee recommendations. From here we seek to move forward.

I note what the Department and Minister have said in the presentation laid before the committee this morning. I also note the commitment to the capital development programme and maintenance programme, which has been reaffirmed. As other speakers have alluded to, in the context of the national planning framework and development plan there is an unaltered and uncompromised commitment, which I welcome. There are improved accountability measures as a result of the process I mentioned, and Irish Water will be obliged to adhere to those in future. That is welcome and it compares favourably to the position of some years ago. The forum will improve accountability and transparency and Irish Water will have to provide greater accountability to Oireachtas scrutiny. Will the Department elaborate on the progress being made in setting up that board, when it is expected to be completed and when it will be operational. It is important the public sees it up and running and representing their interests, as well as those of everyone else.

I further appreciate the contention from Irish Water that there could be potential improvements in a renegotiation of the service level agreement and that it can deliver greater efficiencies or bang for one's buck, as well as improvements to services for consumers. That contention will be investigated and negotiated in discussions involving the relevant stakeholders. Nobody here should pre-empt that process or look to solve impending questions that will no doubt come to light during the process. I welcome that those negotiations are due to commence.

I hope, expect and acknowledge that everyone will go into the talks in good faith and with the intention of representing their interests and those of their sector as well as the greater good of the taxpayer. I welcome the comments of the Minister as mentioned by the Department in regard to assurances having been given from that quarter that service level agreements currently in place will remain so until amendment thereto is agreed by all parties. Assurance is also given that no compulsory redundancies will result from the transformation process. As regards the point alluded to by Ms Graham regarding costs that may accrue to local authorities resultant from possible changes, a commitment and guarantee has been given that those will not be borne by ratepayers but will be funded by the Department as is its obligation in regard to the Vote it provides for this area.

As regards the impending discussions and negotiations, it was mentioned that party to them will be the County and City Management Association and the Irish Congress of Trade Unions, which I presume represents all workers affected by the negotiations and any agreement thereafter. I trust and expect that the unions will serve the interests of their staff well and will be cognisant of staff who may be taken on in the future and that the rights associated with such employments will also be best represented by the unions.

I am nervous in regard to there being no direct role for local authority members in the process. I would have hoped for their participation, considering they are the most accountable to their electorate in regard to the provision of services on the ground, in conjunction with local authorities and Irish Water in recent times by virtue of the service level agreements and, more historically, solely with local authorities. As other members have mentioned, local authority members are at the coalface and have the expertise and local knowledge regarding the historical significance of the provision of that service. They are greatly cognisant that they wish that to be maintained and improved and should have a role in ensuring they can stand over any new service level agreement based on their experience and in their capacity as public representatives. Do the witnesses think it would be wise to consider a representative body of councillors being privy to the negotiations and discussions in order to ensure wholesale support and approval for any process or agreement that emanates from them?

Ms Maria Graham

Deputy Cowen's first question was in regard to the Water Advisory Body, which I have begun to refer to as the WAB. I am not sure whether that is going to catch on.

I dislike such acronyms.

Ms Maria Graham

At present, funding is being provided through the Department Vote. A small amount was allocated in the Estimates this year to fund the secretariat of that committee, and that will be provided by the Department. The secretariat is now in place. It is a five-member body, with three ex officio members made up of representatives of the Commission for the Regulation of Utilities, the Environmental Protection Agency and An Fóram Uisce, the stakeholder forum on water. Those bodies will be asked to nominate their members within the coming week and the other two members will be appointed through the Public Appointments Service, PAS, State boards process. In the short term, one of the three ex officio members may be asked by the Minister to chair the secretariat in order to get the process up and running.

As Deputy Cowen is aware, I mentioned the function in regard to advice to the Minister on transparency and accountability but the other key responsibility is reporting to this committee on a quarterly basis in terms of performance against the business plan across five real metrics: infrastructure delivery and leakage reductions; cost reduction and efficiency improvements; improvements in water quality, including boil water notices; procurement, remuneration and staffing policies; and responsiveness to the needs of communities and enterprise. We hope that the body, which is expected to be up and running in the coming weeks, will be able to produce at least one report before the summer recess with which the committee can engage and that is the timeline to which we are currently working.

I note the Deputy's comments in regard to elected members. They are of vital importance and that is part of the ongoing information component. The service level agreement, SLA, was signed with the chief executives but they are acutely aware of their responsibility to their elected councils and that any change to the agreement would have to be discussed by those councils. However, I take the point that even if local authority members are directly involved in the contractual discussion, the broader view and strategic component of local government is critical to elected members. I will pass on those comments to the Minister and I am sure that Irish Water will take them on board in its ongoing engagement.

Mr. Mike Quinn

I thank the Deputy for the welcome extended to Ervia. As regards local authorities, local representatives are key to the progression of the process. We have an ongoing rolling clinic around the country with local authorities but Mr. Grant and I have committed that, once we get into negotiations, we will go to all 31 local authorities and seek the input of councillors into the process. I am happy to keep everyone informed of progress in that regard as we visit the 31 council chambers.

I acknowledge and appreciate that but, as Ms Graham said, I hope that the Minister might reflect on her position that it might be helpful to the entire process and its successful conclusion if there was a role for public representatives in the real negotiations.

I will be as brief as possible because many of my questions have already been answered. Now that we have representatives of the Department, Irish Water and Ervia before the committee, I wish to acknowledge on the record the massive progress that has been made in the short time that they have been in situ, which can be seen in communities across the country in terms of the boil notices that have been removed, the ongoing challenge in addressing leakages in the system and the new treatment plants that have been established. In my county, we now have blue flag beaches every year, which we did not for many years, because of the treatment plants that were put in on the Waterford coastline by Irish Water. That said, I also recognise that there are outstanding challenges in terms of major reform, which is never easy. This involves the establishment of a national utility and the subsequent reform of the system that delivers on that utility. It is never easy but it is very necessary and something to which I wish to give my full support.

As I have stated previously, as a person who has worked for a national utility for over 20 years, that being ESB Networks, I have seen at first hand the critical necessity of asset management, which was mentioned by Mr. Grant. Although I acknowledge the role of local authorities over many years in doing their best to maintain the water systems and to deal with the huge leakage and lack of investment in those networks over many years, unfortunately, it was not managed in a sustainable way as an asset. There has been fragmentation, lack of investment, duplication and no asset management systems in that regard. Irish Water is going in the right direction in terms of sustaining our network to meet the critical need and in the national interest but, unfortunately, as we have seen, politics sometimes gets in the way of that. As Irish Water moves towards the next step of transformation and reform in terms of how we manage our water networks, political interests should step aside and leave it to the unions and Irish Water management to engage in good faith, as others have said, in a comprehensive way to try to structure the steps forward for how Irish Water will deliver for our citizens and economy. I wish the witnesses well in that regard. It is not for this committee to predetermine those negotiations, which will be complex and difficult, but, if Irish Water, the local authorities and the unions approach them in good faith, I am confident we can achieve a very balanced outcome that will work in the national interest.

The delegates mentioned the operational savings. I think they said savings of €250 million had been achieved to date. Within the reform projections, do they see further strong savings in that regard? I presume they will be looking for efficiencies in streamlining the management of the utility. Is there any indication of what the projected savings might be? Ultimately, they will be to the consumer or the citizen. We need to acknowledge the efficiencies that have been achieved, while asking if there are further efficiencies to be achieved.

I note why the design, build, operate, DBO, contracts were necessary. Expertise was needed for the design, build and operation of various wastewater treatment plants in Waterford and other areas, some of which I have mentioned. The delegates mentioned that there were contracts in the order of €100 million. Where do they lie in the future plans of Irish Water? Is it planned to continue with them to their natural end or to try to renegotiate them?

On the recently announced Ireland 2040 plan which is a very ambitious plan for Ireland with strong aspirations for growth in population and economic demand, are the delegates confident that they have made adequate provision in capital projects to meet the demands of Ireland 2040, citizens and the economy? I would like them to indicate where we stand in that regard.

Mr. Jerry Grant

The business plan sets out a target figure of €1.1 billion for total operational savings, with capital savings of €500 million to be achieved between 2014 and 2021. We are on track to deliver on the target for capital savings. On operational savings, our ambition is to deliver on the target, but we believe it is contingent on the movement to the single public utility within the timeframe. There is significant cost tied up in it, as Mr. Dempsey explained.

On DBO contracts, we have a strong commercial management team overseeing them. Many of them are 20-year contracts and we may well have difficulty if we did want to terminate them. We are really not in a position to do so now. It becomes very complicated if we have to introduce change or upgrade a plant in the middle of an operating contract. That is where issues of value can arise. As I said, we have a strong commercial management focus on them which has yielded savings in certain areas. We have terminated one contract recently, purely on value terms. We have to look at the individual contract in every single case and the cost of termination. I have no doubt that there will be situations where we will proceed in that way. Having said that, they are performing well. They are good contractors which are delivering good services. It is purely a question of whether we are continuing to achieve the best value we can.

On the Ireland 2040 plan, there is no question that meeting the needs of social and economic growth and progress presents a big challenge. There are two levels at which it is being addressed. In the areas where housing and economic pressures are greatest, the cities and larger urban centres, we are working with the local authorities to prioritise areas for development in order that we will be able to facilitate housing development, in particular. We are doing a reasonable job in that regard. There are times when we have to indicate that certain developments cannot be in service for 18 months or two years if there is significant infrastructure to be built. We have a major programme to get rid of bottlenecks in sewers, for example. We are working with the development community sector such as the larger housing developers. We have a liaison engineer working with each of the larger developers to try to ensure our plans will be kept in line with their timing requirements. It is not easy, but we are working hard to ensure that will happen. It can be more challenging in smaller communities where we do not have planned upgrades included in our programme. We are working to make minor capital improvements in some cases, particularly at sewage treatment plants, to try to get an extra 10% to 15% out of them. That has been very successful, but it is a challenge.

We will take a very important step during the summer when we publish the national water resources plan for Ireland. It will set out a strategy for sustainable drinking water production. It will examine the many abstractions that are probably unsustainable in terms of quality and the capacity to abstract in a dry period. We will look at how we will rationalise the system over time in order that we will get to a sensible number of schemes, going from 1,000 odd to something like 300 or 350. The plan will set out a proposition, subject to a strategic environmental assessment, in order that we will examine how we can ensure there will be sustainable, adequate water supplies everywhere across the country. I have touched on the position in the greater Dublin area and the midlands. Clearly, the strategy needs to be national. We will put it out for a public consultation process mid-year.

On customer service and engagement, a lot of the work done by Irish Water seeks to build public confidence. Mr. Grant mentioned communities. Whether it is a small water treatment plant where river water quality is improving or beaches are improving, or whatever else, the work in itself is raising the level of public confidence. There is still an issue, however, with the brand of Irish Water and its engagement with customers. I acknowledge the hotline, as I call it, through which public representatives have access to advice when issues arise. It is working very well.

ESB Networks developed a very strong customer service brand owing to the resilience of the workforce. I think I am right in saying the delegates want to achieve a similar strong brand in managing water services. It is built over years of an improved culture of management and of customer responses, engagement and service. Irish Water is getting there. What other plans does it have to build in the element of customer engagement and service? The delegates have mentioned some of them.

Mr. Jerry Grant

I acknowledge the complimentary feedback I have received from many elected Members on the telephone lines and how they are working. The call centre handles about 160,000 pieces of correspondence every month, with 40,000 telephone calls, as well as emails and letters. That is the level of activity at the centre. About a year ago we put in a senior engineer there to help improve the technical capability to deal with complex questions. Many of the questions asked are complex as the services provided are complex. That has made a difference. Nevertheless, we are never satisfied that we have reached the point to which we want to get. What is really crucial is connectivity with the call centre. People blame it, but very often the problem is the with lines back into our organisation or the local authority operational service. The service is only as good as the loop which is closed. We use hand-held technology in a lot of our activities, which means that we have the loop closed in feeding back into the system. Part of the reform is having the same response in every part of the country and every operational activity. That is what will get us to the level of performance we want to see in customer service. I agree 100% that there is no quick way to build brand recognition and credibility. It can only be done by hard work and providing a service.

The reform proposals Irish Water is working towards will improve the level of customer engagement because there will be a more consistent response across the various regions. There will not be the fragmentation it inherited to some degree.

Mr. Jerry Grant

That is correct.

I will follow on from what Senator Paudie Coffey said.

Mr. Grant addressed in particular communities and the public interest. Because there is a history with the brand of Irish Water, I emphasise that whatever financial efficiencies are being made throughout the company, resources must be put into ensuring the public will receive every service possible. I understand the hotline is working very well, which is welcome, but the delegates might look at other ways of engaging with the public, particularly in rural communities. Organisations such as An Taisce have road shows at schools and in communities in order to provide information. I ask the delegates take a creative approach. Water is a vital resource. It is one of the services that really agitates the public because of the history of the brand.

Therefore, every resource should be put into ensuring that the public is informed of the move towards this single utility and that it is up to date on what is happening. This reflects back on what Deputy O'Dowd said about transparency. There must be full transparency. The worst thing for us as a nation are the people's grievances. As public representatives, we hear these grievances.

The Green Party has received many calls with regard to the Shannon-Dublin project. In particular, there is a question about the data that are being used. There have been many efficiencies achieved as a result of the first fix scheme but our information is that Irish Water is using data from before the leakages were fixed. There may, therefore, be a question over the actual demand in the greater Dublin area. The level of demand may be such that it is not necessary to take water from the Shannon and transport it across the midlands into the Dublin area. I am relaying what we are hearing. There was a request to invite representatives of Irish Water again to deal with some of these issues. I want to bring to the witnesses' attention, however, that there are public concerns about this particular scheme and that the data being used by Irish Water is not necessarily the relevant data.

In his response to Senator Murnane O'Connor, Mr. Grant referred to benchmarking. Against what companies or other utilities is Irish Water being benchmarked?

Mr. Mike Quinn

On the issue of engagement with the public, I totally respect rural communities. In my past role in Bord na Móna I operated in the midlands. I, therefore, totally understand the issue. We have a schools and communities programme and have appointed regional communications officers. They go around to schools as part of our green schools programme. I am well aware of the excellent An Taisce programme and that is our intent as well.

We plan in the next six to eight weeks to launch five metrics on which Irish Water's success will be based and we will publish those every six months. Those five metrics include drinking water quality, as measured by the EPA, and it will be based on the 44 locations where raw sewage was pumped into the lakes, rivers and sea and our progress towards eliminating that by 2021. We will also publish the current and prior six month leakage rates by county in order to show the improvement we have made in each of those local authorities. We will speak about our capital delivery programme, which is ramping up significantly over the next number of years, as well as headroom around the country. We will publish the headroom for every county, on a county by county basis, in support of economic development. Those five metrics will be published every six months and we will be publishing the plan with targets over the next five years. That should aid the public in understanding where Irish Water is progressing.

I do not think that we have done a good job engaging with the public on the challenges facing Irish Water. For information, we ran a survey in the fourth quarter of last year which showed that 72% of people in Dublin believe the water services are either good or excellent. There is a complete lack of knowledge around the state of the infrastructure that provides those services. We have a job of work to do this year, which I will be leading, to ensure that the reason we are spending the amount of money we are spending to improve the water infrastructure is understood by the public.

We recognise that a lot of interest in the water supply project has come to the surface over the past number of months. We will be holding an open day for elected representatives next month to take everyone through the project at a detailed level so that they are up to speed on exactly where the project is at and our plans out to 2025.

Mr. Jerry Grant

I will refer to one point. The first fix savings would not be reflected in overall savings at regional level. The bulk of those savings went into what is called suppressed demand, that is, there was better service to customers who were suffering low pressure because of the fact there was a major leak next door, etc. The problem is that we cannot aggregate leaks fixed on the ground and expect to see the full saving at the plant. There is a huge dynamic in the system. The data that we are using to support the project is absolutely real time data, which we update practically daily, for the greater Dublin area.

It is hoped the roadshow which Mr. Quinn spoke about and the consultation will give us the opportunity to go through the scheme in a lot of detail. I would reiterate that it is critically urgent in terms of delivering the necessary security of supply for the greater Dublin area and the midlands.

On benchmarking, the regulatory process involves benchmarking every time we go back to the regulator on our funding plans and the benchmarking is against comparable utilities, particularly the likes of Scottish Water, where there is a lot of similar dynamics in the system. Equally, it reflects the fact that we are in the early stages of a journey. We are not expected to be at the point of a mature utility. Nevertheless, we are driven along that track by the regulatory process and we have been taking 7% reductions annually since we were set up. This is a very demanding efficiency rate but we have managed to achieve it so far.

On providing information to the public, it is really good when graphics, video, etc., are used as they are easily accessible by everyone, the young and the older.

I will be brief because most matters have already been addressed. Mr. Grant said lessons were learned from last summer and I acknowledge that as so in terms of the recent water incident in Vartry. Getting the information out to the public straight away and informing them alleviated an awful lot of problems and concerns and I appreciate the fact that public representatives were included in the process.

Equally, public education is still required. There is still a blame game as to who is responsible and whether it is the local authority or Irish Water which is why there is a need for a single utility. There should be only one person responsible. I appreciate that that is the way we are heading.

I wish to make a few points around the fast-tracking of the service level agreement from 2025 to 2021. Irish Water wants to terminate it and does not want to enter another service level agreement. Currently, the local authority staff are employed. After the service level agreement finishes, will all those employees, who are now working on behalf of Irish Water, be transferred to Irish Water? What exactly is the situation when the service level agreement comes to an end? Who will employ them?

It is obvious today that there might be a need for another meeting to deal with more operational and technical issues but I want to hit on a few of them now. Sewage connections in back gardens were mentioned. If the connections for four or five houses are in one's garden, one is responsible for them. I understand this situation has been inherited and that is the way it is. Moving forward and planning for the future, however, is it now ensured when planning permissions are granted that each household connects directly to the public sewer and that there are no collective connections into a private garden which is then connected to the public sewer?

There are 31 or 32 different rates for connection fees and development levies. What progress has been made towards bringing all that into one? I will also mention the matter of commercial water. How close are we to harmonising commercial water rates?

On local authorities, the word on the ground is that there are some blockages to large scale developments. I might have a chat with the witnesses later on about the liaison officers they identified earlier.

Mr. Jerry Grant

The objective is to bring all the staff within Irish Water and that is a big part of the discussion to be had. I would like to leave it at that, but the process by which we approach it, how we engage with it and how it happens are all a matter for negotiation.

In terms of operational issues, I acknowledge the challenges around common drains. The Deputy is right that we insist in our new connection standards on a single connection from a house directly to the public sewer.

In our new connection standards, we insist on a single connection from a house directly to the public sewer. It is frankly a shame that that did not happen much sooner. It was a huge issue. The consultation period for the new connection charge regime is ongoing. There is about another month in that. That will be a massive improvement for us because it means that every single house will be charged €1,900 for a water connection, assuming the figure is confirmed by the Commission for Regulation of Utilities, CRU. Every sewer will cost approximately €3,500. It is roughly €5,000 between the two.

Is that with the regulator?

Mr. Jerry Grant

That is with the regulator at the moment. I am not pre-judging what the regulator will do with that. We will have a single set of charges across the country which will be an enormous help. Our hope and expectation is that those charges will be in place before the end of this year. It will greatly improve and simplify the process of even issuing connections. At the moment, we have to calculate them using square metres, areas and all kinds of things which are very complex. The harmonisation of commercial charges is ongoing but it is not as advanced. It is very complicated, as members can imagine, and it will take quite a few years to bring them all to harmonisation because some of the differences are stark. Charges in the Deputy's own county are double those of the one next door. It is untenable for that to continue but the discussions about that process are happening this year and it will be next year before there is a final determination. That will happen.

On development, every town is different. Blessington is an area on which I am very focused at the moment to try to get some extra capacity in. We can deal with a very strong housing growth area. We are in very good shape in some places and there is more work to be done in some places. We are very conscious of the need to keep ahead of demand and not impede the implementation of housing development.

I am not a member of the committee but I appreciate the witnesses' time. I want to try to tease out two things. One is the question of local authority workers who are the subject of the service-level agreement, SLA. The unions will be in later to talk to us about it. The witnesses say they will save €70 million a year by streamlining this. That would be €280 million for the four years that they are trying to cut short the SLA by, yet, at the same time, they are using many contractors. Our experience as public representatives has been that the cost of those contractors has been very high. The contracting out of metering, for example, cost in the region of €600 million. There was much controversy at the time about the cost of that and how those contracts were awarded, etc.

I would like to tease out how the witnesses balance the use of contractors against the cutting short of the service-level agreement. One of my best friends is one of the most senior people in Dublin City Council's water department and he knows the system inside-out, back-to-front and upside-down. When he goes, much very important knowledge, information and experience will go with him. I know he will not move across to Irish Water because he is like most of those workers who are terrified that their permanency as public servants, their pensions, etc., will not be carried over with them. They have every reason to be worried about that, particularly since the Government does not seem to be giving us a referendum on the question of keeping water in public hands.

I recently had cause to go in-depth into the question of what the witnesses were talking about there, getting the support of elected Members. I had a visit to my office from a contractor with Irish Water asking me if our locally elected representatives, both councillors and Deputies, involved in the campaign about water charges, would be willing to co-operate with Irish Water in an attempt to install meters for all the homes in a certain district metering area, DMA, in Crumlin, to detect leaks. He went into detail, showed me plans and so on. My argument to him, which I would like to put to Mr. Grant, is as follows. If one wants to win the confidence of public representatives and to work with people to change the nature of how we treat water in this country and work with each other to ensure this precious resource is protected, to stop the leaks etc., would it not be wise in the first place for Irish Water to fix all the leaks that it can which exist outside of people's homes, not those at their homes? That would include leaks across the network, including under main roads. Mr. Grant mentioned a figure of 70 km of mains. I do not know if that is for Dublin or everywhere. Would it not be wise to fix those first and then go to the public to point out the marvellous job done. Instead of 36% leaking as it is currently, Irish Water could reduce it to 7% which is, according to its own statistics, roughly the amount of leakage that it relates to household use.

Instead of that, Irish Water is coming into areas, fixing big leaks on Bangor Road and Aughavanagh Road and, at the same time, asking us as public representatives to work with communities to say that it is okay for Irish Water to put a meter outside houses for ten days to suss out if there is a leakage in the house or not. What do the witnesses think ordinary people will immediately perceive as being attempted here? The attempt here is not just to accept the leaks, which I accept is bona fide, but also to try to establish who can be billed for excessive usage when Irish Water starts billing them next year. There is a problem.

The Water Services Act, which informs what Irish Water determines is excessive usage, is deliberately ambiguous. It is deliberately ambiguously designed so that we do not know or cannot determine what excessive usage is or how Irish Water will determine who has excessive usage. A programme such as Irish Water is proposing for Crumlin would absolutely not get people's trust. I suggest that Irish Water needs to get the trust of the people and their elected representatives before it embarks on trying to meter homes again. That is lethal and it will certainly not win the hearts and minds of people in bigger communities, certainly in Dublin. I imagine it is the same in Cork.

This is a dangerous road to go down. I know we are here to talk about SLAs but I know that local authority workers will not install meters. They just refuse to do it. I ask the witnesses to answer me honestly. Do they want to cut short the SLA because, if it is taken from the local authority employees, local authorities will then have to implement the metering programme that Irish Water wants to deliver rather than something more sensible? I know the meters will not stay in the ground but, while they are in the ground, they will be used to detect what Irish Water or the Minister describe as excessive usage, which is very ambiguous for ordinary people.

Mr. Jerry Grant

I have a couple of comments on that. On the staff in local authorities, what is done internally and what is contracted, there are, broadly speaking, similar arrangements in all local authorities with regard to the work that is insourced and the work that is traditionally outsourced. It can vary from local authority to local authority. Our intention is to remain consistent and true to that. If anything, our ambition would be to be able to insource more work through the development of the capabilities we have talked about. Contractors are used for two purposes, including delivering on one-off capital projects and major capital programmes, and for delivering specialist maintenance. We are currently also using design-build-operate, DBO, contracts, but in the fullness of time, I hope we will not need that to the same extent. There is no question of substituting what is currently insourced, done by public sector staff, with contractors. That will not happen. That will be integral to the discussions we will have and we will have no difficulty in giving those assurances in those discussions.

I have talked about the question of personal knowledge. We hugely value the local knowledge that people have of the network. Equally, it is not a consistent and reliable basis on which to run a business or to plan investments and we have put a huge amount of work in. A significant part of the investment was to have the capability to gather information on the networks, all the incidents that happened, and so on, and to build that. When we come to replace 70 km of pipe in the Dublin area, that is on the back of information we have about burst frequency, service levels and all those kinds of things.

In relation to our current work, we are not currently carrying out any active metering of domestic properties. We are doing critical work under our current programmes to replace backyard lead services. This is a critical public health issue which everyone should be focused on. We currently have between 25,000 and 30,000 people fed from old backyard lead services which are almost guaranteed not to comply with the lead in drinking water standard, which is a serious health issue for young babies and infants in the womb. We have brought much focus to this since we came in. It has gone under the radar a lot. The second thing about those backyard services is that they invariably leak enormously. They are now under patios, extensions and so on.

A critical part of the programme of work we have is to put in individual services to the front of the houses, with stopcocks, which provide individual new non-lead services to those properties. Equally, we are replacing public side lead services in parts of the country. That is the programme of work that is ongoing at present. At times it has met with resistance because people confuse it with the metering work and in those cases we have engaged with and do engage with local elected representatives to help us to explain the purposes of what we are doing. We would see that as an important support.

As regards leakage, reducing leakage is a massive problem wherever it is. The leakage rate of 36% in the greater Dublin area will be reduced over time, towards the figure of 20%. We will never get below a leakage rate of 20% based on the best that has been achieved in the UK or Northern Ireland water systems, simply because of the nature of the assets and the average pipe age, which in Dublin is about 85 years. Frankly, much of the cast iron, which people regard as old and decrepit is actually better than a lot of the asbestos and PVC pipes laid in the 1960s, 1970s and even into the 1980s. Our job in reducing the level of leakage is enormous. People will see a significant increase in the number of holes in the ground related to repairs we will be carrying out.

Our focus on customer side leakage is usually driven by customer complaints, about pressure and lack of service. The vast bulk of the work we do, particularly around large leaks, is related to getting those leaks fixed and as many are on the customer's property, we engage with them and we offer a first fix, if that is appropriate. That work is ongoing.

As far as the excess use charge is concerned, there is no point in me speculating on how that might operate because that is a matter for the regulator to consider in the context of the legislation. Our job will be simply to respond to whatever is finally set out there but our primary purpose is to ensure proper service to customers, adequate pressure and that leaks are repaired. I mentioned earlier that currently we are directly speaking to 4,000 householders about leaks that are averaging 12.5 tonnes of water every day each, which is equivalent to the water consumption of 35 houses. Those leaks are causing damage on those properties or to a neighbour's property. As well as the householder in question, these leaks are certainly impacting on the water pressure and the water services to their neighbours. There is a significant benefit in getting those leaks fixed and having that service restored.

I totally agree with Mr. Grant that there is a significant benefit in getting the leaks fixed and I think that should be the primary objective of Irish Water, particularly as there is still a leakage rate of 36% in Dublin. My point relates to the way Irish Water is going about it, if meters are being installed, albeit for ten to 12 days outside homes in Crumlin and Ballyfermot and so on, Irish Water will not win the trust of the public. If Mr. Grant is saying that the objective is to fix the lead piping, one would need to do it in every house and therefore one would not need meters installed on a temporary basis. The public is automatically going to be suspicious that those meters will give Irish Water and the State an indication of what is called excessive use. We still do not know because of the deliberate ambiguity in the law what that amounts to. Fixing the leaks should be absolutely our priority. I was shocked to learn that we will never get below a 20% leakage rate in Dublin. Let me emphasise strongly that Mr. Grant is going about the task of winning the support of the public in the wrong way. Mr. Grant does not have my support for doing so in the manner that it is being done. According to the contractor I met, meters are going to go into the ground. Mr. Grant is saying that the meters will not go into the ground, but somebody is not getting it right here. I have been told that they will go into the ground on a temporary basis to detect leaks.

Mr. Jerry Grant

To clarify, in every situation where we renew pipe services, we put in a stopcock. All of our stopcocks have the capacity to take a meter. They are the only type of stopcocks that we use. At present we have not been putting in metering but we are obliged under the provisions of the legislation to put in meters on new buildings and on the refurbishment of a building in the fullness of time. In the case of specific leaks or specific demand, putting in a temporary meter is probably the only way to quantify what is going on. It can be a very valuable way of tracing leaks. I do not know what is happening in any specific contract area but what I can say is that anybody who has old lead services, if we are there to repair, it is a tremendous service and should be supported because it is critical to the health issue around lead. The lead standard is coming down, not going up. The World Health Organization rates all the health issues we have to address, and beyond boil water notices, lead in drinking water is the most serious.

I thank Mr. Grant. Deputy Casey has one issue on which he seeks clarification.

I spoke to Mr. Grant last week specifically on the Arklow wastewater treatment plant and the progress it is making. When Project Ireland 2040 national development plan was launched on Friday, there was no mention of Arklow in that document. I seek confirmation that Arklow wastewater treatment plant is not forgotten, and will not be delayed and will happen on time. It just did not make Ireland's 2040 hit list.

Mr. Jerry Grant

The Arklow wastewater treatment plant is a central part of the strategic investment plan, SIP. We want to get to the planning permission stage later this year. It is probably the one we are most concerned about to try to keep to the timeline because it has had to go through the whole process. Our absolute ambition is that it be built and working by 2021.

As it did not make the top priority in the launch last Friday, I became a little concerned.

The Deputy is being parochial.

Ms Maria Graham

May I just mention that the list is only a sample, a very small sample list in the national development plan.

As Arklow has been polluting for 20 years, I thought it would have been a priority.

Ms Maria Graham

It is.

On behalf of the joint committee, I thank all the witnesses for attending and for the long, robust dialogue that we have had in the past three hours. We look forward to the ongoing engagement with our witnesses.

Members should note that we have postponed our meeting with the Irish Congress of Trade Unions because it would be a very rushed meeting. It would be unfair to do that to them, so we will reschedule that meeting at a later date. I thank members of the committee and the witnesses for their attendance today.

The joint committee adjourned at 12.27 p.m. until 9.30 a.m. on Thursday, 8 March 2018.