I thank committee members for giving me the opportunity to discuss this most important topic today. We have a brief presentation, which I assume will come up as we go through it. I have two comments to make which summarise what we will say about water in the next ten to 15 minutes. First, local government has played a pivotal and proud role in the provision of water services in Ireland over recent decades. The records speak for themselves. The performance levels have been very high, and incidents such as last year's freeze showed the value of having a responsive local government system working in this area. Second, funding for water services has been playing catch-up. In spite of significant investment over the past ten years, which began to bridge the gap, we have been coming from a very low base by European standards and we still have a long way to go before we could claim to be at a First World standard of water services.
Local authorities play a pivotal role as water services authorities. There has been chronic underinvestment, with significant improvement over recent years. A capital investment lag of €600 million has been identified by the Department, but we believe it is significantly in excess of that because the Department only lists the readily identifiable schemes that need to be done. The quality of water in the public supply is excellent overall. Considering the treatment plants we have and the background I have outlined, that is a very good performance. The efficient and responsive delivery by local government is well known.
We have 950 public supplies producing 1.6 billion litres of water for a network of 25,000 km of pipes, so that is a very large network. That figure is interesting because that is much larger than the per capita European norm. In other words, we have many small supplies in Ireland producing our water. There are 1 million domestic and 160,000 non-domestic water consumer connections. The majority of drinking water comes from surface water in Ireland - the rivers and lakes are very important to us - and of the remainder, 10% comes from ground water and 8% from springs. Again, that is a bit lower than the norm across Europe.
We have no domestic water charges at the moment, but we do charge non-domestic customers and that substantially covers the cost of provision, although there would be a gap in the area of waste water. Current expenditure on the provision of water services is not sufficient. It takes a lot more money to run water plants because they take higher levels of skill, the provision of chemicals and so on. We reckon there was a deficit of €453 million in 2010 on current expenditure, and this has been accepted by the Department. We get that by taking it from our local government fund, which we would like to use for many other purposes at local level. That is where the money that keeps our system going comes from. A total of €600 million is provided annually in capital investment, including €100 million for the rural water programme. We put up €100 million of that €600 million ourselves. We will look at the sources of that in a moment. Development contributions have been the major source of our contribution to capital investment, but unfortunately these have been greatly reduced from previous levels.
In summary, our income comes from development levies, non-domestic water charges, significant water user contributions, loans with the approval of the Department, and rates. Over recent years, we have had to borrow huge sums of money, and this is increasing every year, to fund the capital investment in water, whereas in previous years, development levies covered a significant amount of that.
This slide shows the summary of the capital investment, with the major figures in black between 2000 and 2010, during which €4.2 billion was invested by the Government. The rural water programme received €990 million, so about €5.2 billion was invested by Ireland Inc., which is very significant.
The next slide shows the figures for the water and waste water increases in population served. There has been a huge increase in the pink line, which is essentially the waste water investment. This signals that a huge amount of investment has gone into waste water, which is on foot of European Court of Justice judgments to which we have had to respond. The bottom blue line represents the gradual increase in water supply investment and the populations being served. That is another positive story.
On the financial difficulties, under the water services investment programme, WSIP, we must come up with a share, which is up to 40% in some cases. That is a near impossibility because of development levies, unless one gets loans. However, one must repay them over several years so one is putting off the evil day to a degree.
There is an investment backlog of approximately €1 million to which I alluded earlier. The costs of compliance are increasing significantly because, for example, new wastewater licences are being issued by the EPA. An amount of work must be done even on good existing plants. We have a figure of €17,000 associated with each of these licences as an additional cost, so there are major financial challenges to be addressed concerning water.
I do not want to go through the whole legislative framework with the committee but members will be aware of the pivotal role local authorities play in producing high quality water services. Local authority officials can potentially have a criminal liability for anything that goes wrong with water, so it is an onerous task for the individuals and corporate bodies involved.
The EPA has significant powers and we interact regularly with it. It can give us enforceable directions to do something and once the EPA says something must be done we then respond. The oversight of actions taken by water services authorities continues to meet the relevant water standards. They keep an eye on everything we do. The monitoring we carry out is overseen by the EPA. The audits are increasingly onerous but are being done in a satisfactory manner. In addition, the EPA gives us guidance to assist with compliance and therefore has a pivotal role.
The compliance performance is satisfactory. The EPA reports every year on the results of water quality monitoring. The key figure is that compliance with chemical standards was extremely high at 99.2%. That is a very high compliance and the few non-compliances would largely concern relatively insignificant issues.
The next slide shows the number of non-compliances which shows a positive drop in water supplies where E.coli was detected at least once. When E.coli is detected it does not necessarily mean there is a problem with the water, although it is a rough indicator. The graph shows the improvement in quality between 2004 and 2009.
Members are familiar with this slide which shows the whole water cycle. The collection rates for commercial water charges have fallen from 66% in 2006 to 53% in 2009. There are various reasons for that but it is largely due to the introduction of metering, coming from a fixed charge situation to a per-use one. Due to the economic recession there is huge pressure on businesses at the moment. Being close to the customer, local authorities have to deal with that challenge in a sympathetic and sensitive way.
It should be noted that the 53% figure is more of an accounting term than the real measure of collection, which is higher. Under accrual accounting there are certain rules. We carry over many deficits and arrears from earlier years, which go into that calculation every year. It is therefore an unfair reflection because, in effect, the collection rate is higher than that. Ireland's water charges are some of the lowest in Europe. A number of years ago, a Forfás report illustrated that point. Some countries have more than twice the Irish rate for water charges.
The bullet points refer to the unprecedented pressure we are under, especially concerning the business environment. We are also trying to reduce business costs at all times. We are pulled in two directions: one is the increased cost of water provision, while the second concerns the pressures that businesses experience locally.
We must balance the efficient collection of charges against the real economic challenge out there. We have many links with business organisations including DETI, IBEC, Chambers Ireland and the Irish Hotels Federation. We interact with them in an ongoing dialogue to try to hear their side of the story. We then respond and try to explain many facts. For example, one thing that always surprises businesses when we meet them is that we have such a low cost compared to Europe although some business elements, such as hotels, are particularly hit.
From this slide, members can see the range of water charges across Ireland. Our charges are lower than those in the UK, but not significantly different. One can see that there is a good range in Ireland between the minimum charges of 90 cent to a maximum of €1.50 for water. There are various reasons for that, including the fact that an enlarged conglomeration can have one or two plants with low running costs compared to a small county with many different plants producing water. It just takes more money to produce per cubic metre. Even the cost of €1.50 is relatively cheap by European standards. Likewise, with waste water, one can see a similar pattern emerging. Wastewater charges may need to be raised to get to the economic cost if we get to that level.
We call leakage "unaccounted for water". The current level in Ireland is 41%, which is high by international standards. Members might remember an earlier slide which showed major investment going into waste water. It is only in recent years that Ireland has started to put significant resources into addressing leakage. In that regard, there are three phases in any wastewater conservation programme. Most counties fund the first two phases, which are about establishing where the network is, getting it metered and getting all the measurements done. It is a slow and methodical process. We now find that the figures are starting to fall as we get into phase three, which is effectively the replacement of mains. Dublin went down that road several years ago and its leakage rates are in the 20% range. Mr. John Tierney will give us the exact figures on that.
The picture is improving significantly. This figure includes leakages on the customer side. In our experience, there is significant leakage on the customer side. We argue that it is as much as one finds in the public mains. Obviously, if water metering was introduced it would focus people's minds on the amount of water that - totally unknown to them - is disappearing underground. We have no way of knowing that at the moment. While the overall figure of 41% may appear high, when one looks at all the elements involved the situation is improving.
We find that the level of investment is improving. The other issues include per capita consumption figures, industrial demand profiles, the urban demographic profile and the length of the pipe network. All those things have pushed that figure up a little bit.
Most members of the committee, especially those from rural Ireland, will be familiar with the great role that group water schemes have played in water provision. They have a close relationship with local authorities which oversee their work and monitor their performance. The quality of group water schemes was the subject of European Court of Justice cases against Ireland. A huge investment has been made in a co-ordinated way. An efficient delivery has taken place and many of the schemes were bundled together. The compliance rates for group schemes are now improving rapidly. I guess that within two or three years they will be approaching public water supply levels. That is a good news story because it came from a low and unacceptable base.
We have been designated as the supervisory authority in respect of private water supply schemes, which include group water schemes. We can now issue directions to water suppliers to prepare and implement action programmes. In the same way as the EPA can direct us, we can direct group schemes to do certain actions. Likewise, we may issue directions to secure compliance with the relevant water standards.
These slides show the old and the new. That was a scene members might have seen more frequently some years ago. That is where we have come from - a small hut on the side of the road with basic chlorination of the water supply. One chlorine pump was the norm, with no stand-by. It was a simple and cheap supply of water. Those were the days when our raw water was perhaps better than it is now, but also the standards were not as high as they currently are. We have now moved to a very different level. The slide, dated 2011, shows an example of a modern plant with three slow sand filters. It shows what has become the new picture of water services in Ireland. Another slide shows the type of technology we are now dealing with. Very complex, high-skilled work is taking place in these areas and it involves instrumentation and rapid gravity filters. I refer also to other modern plants in Kerry.
Water services in Ireland require significant capital and revenue investment. While I am saying this in a time of great shortages, this is the reality.
Local government performance has been very good. I worked in the private sector for approximately ten years before entering local government and can put my hand on my heart and state that local government's performance in water services has been really good. We work very closely with the private sector. It is not like other countries where all the work may be done by the public sector. We work hand in hand with consulting engineers and private sector contractors and we engage in public private partnerships. The two sectors are very aligned in the delivery of water services.
The status quo is not viable. We cannot remain as we are in terms of water provision because things change so much and standards increase. In particular, investment needs must be met.
The County and City Managers Association, which we represent today, looks forward to continuing to work closely with central government to manage whatever changes will inevitably come down the tracks to face us.
