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Seanad Éireann debate -
Wednesday, 13 Mar 2013

Vol. 222 No. 2

Water Services Bill 2013: [Seanad Bill Amended by the Dáil] Report and Final Stages

This is a Seanad Bill which has been amended by the Dáil. In accordance with Standing Order 118, it is deemed to have passed its First, Second and Third Stages in the Seanad and is placed on the Order Paper for Report Stage. On the question "That the Bill be received for final consideration," the Minister may explain the purpose of the amendments made by the Dáil. This is looked upon as the report of the Dáil amendments to the Seanad. For Senators' convenience, I have arranged for the printing and circulation of the amendments. The Minister of State will deal separately with the subject matter of each related group of amendments. I have also circulated the proposed grouping in the House. Senators may speak only once on each grouping. The only matters which may be discussed are the amendments made by the Dáil.

Question proposed: "That the Bill be received for final consideration."

Amendment No. 1 provides that the Minister for Finance may guarantee the borrowings made by Irish Water or Bord Gáis Energy for the purposes of this Bill. It will not mean that all the company's borrowings will automatically be guaranteed. The guarantee would only be applied on a case-by-case basis after the Minister has consulted with the Minister for the Environment, Community and Local Government. The provision for guarantee of the borrowings of a semi-State company is a standard provision included in the legislation which established other State bodies. This section provides that the Minister for Finance may after consultation with the Minister for the Environment, Community and Local Government provide a guarantee of the borrowings of Bord Gáis Energy and-or Irish Water for borrowings made for the purposes of this Bill. It also provides for the Minister for Finance to seek a security from the board of subsidiary for borrowings and for the Minister to provide details for the Houses of the Oireachtas each year concerning any guarantees made under this section.

I am very pleased with the amendment. We need to ensure it comes back to the House every year because I get nervous when I hear of any establishment borrowing and we are guaranteeing. We know what borrowing, guaranteeing and loans mean to the country. It is important that it comes back each year to the House for checks and balances in order that we ensure nobody loses the run of himself or herself and borrows too much from any source. Even if the money were made available to them, we have to keep an eye on borrowings.

I welcome the Minister of State, Deputy Fergus O'Dowd, to the House. I agree with what Senator Cáit Keane has said on these amendments. Am I correct that the Minister of State said that only specific borrowings would be guaranteed?

I understand the ceiling on it is the total amount at any one time.

If, God forbid, Irish Water were to find itself running into-----

I apologise. It is not automatic; it has to be applied for. However, the maximum borrowings are €500 million at any one time.

If, God forbid, Irish Water were to find itself in serious financial difficulties, does anything in the Bill allow the Minister to bail it out?

On the cost analysis that has been done, the maximum borrowing of €500 million is more than adequate to meet any anticipated borrowings. Clearly, Irish Water will have an income from domestic and commercial water charges.

Will there be a contingency fund to deal with emergencies such as the cryptosporidium problem we had in Galway a number of years ago if, God forbid, something like that were to happen again?

In its plan of development obviously Irish Water will need to have due regard for water supplies that need to be upgraded. A number of those supplies have been identified already. I am not saying they are necessarily from cryptosporidium, but last year a number of boil notices had to be issued in cases where the EPA considered there was an issue with water quality. I am confident that no issue arises in terms of the capacity of Irish Water to have adequate funds to deal with any such issues that might arise.

In what circumstances might Irish Water have a requirement for borrowings? What might the figure be? To what purpose might it be put? Everyone accepts there is an ongoing difficulty in certain parts of the country with the infrastructure on which our water services are currently provided. There is a considerable level of leakage mainly as a result of wear and tear, and because insufficient resources were provided for investment purposes up to now. Once the board takes over the management of the utility its first major priority will be to stop the leaks because of the wastage involved.

Cuirim fáilte roimh an Aire Stáit. I agree with what Senator Cáit Keane and others have said. I hope that the borrowing will be accompanied by the Department of Public Expenditure and Reform having a much stricter regime than in the past on capital expenditure, including cost-benefit analysis not done by the promoters, but done independently. It was not just rescuing banks that got us into trouble. There was a tradition both in the banks and in the public sector of not doing proper capital investment appraisal. Based on the last troika review even with the cutbacks in capital spending we are spending approximately 4.2% of GDP against the average of 2.8% for OECD countries.

We still have very large capital investment and there is still the danger it could lead to a repeat of past mistakes, which the Houses of the Oireachtas are trying to correct. We need cost benefit analyses. I would back it up with a central office of project evaluation to ensure that we do not go down the road graphically illustrated by Senator Cáit Keane, whereby people get their borrowings guaranteed, it then becomes like snuff at a wake or a celebration breaks out, engineers go a little wild and spend loads of money and somebody else has to make up the balance.

I support the amendment but it, in turn, must be supported by a better way of doing business with capital spending than what we have been used to in the past.

As I missed the first part of the debate and the Minister's explanation, I apologise if I mention things that have already been dealt with. I have some questions that might not be related to the amendment. This amendment refers to the legislation which allows a subsidiary to borrow money, and the interest and the capital could end up being repaid by the Exchequer. With regard to metering and the money going to the subsidiary, do we know what metering will cost? If the taxpayer will be giving more money to the subsidiary as it is needed or if more money is needed because of the borrowings, how will the additional revenue be raised? One of my fears is that Government accountability will hide behind the Irish Water subsidiary. In the case of the HSE, for example, in many cases we do not have ministerial accountability for the HSE and I fear this subsidiary would be used in the same manner.

As some of my other concerns about this issue have already been raised by other speakers, I will not repeat them. However, perhaps the Minister would discuss metering and if the subsidiary needs additional money, how that money will be raised.

On the issue of accountability, I am cognisant of what Senator Sean D. Barrett said. Sometimes he is on the button and sometimes he is not. When he hears it is the public sector the negative statistics tend to flow. That is where he is coming from and I respect that. However, my experience with capital schemes in my area is that there tends to be an overrun of 3% to 4% allowed on any big project and spending is generally kept within that figure. My question for the Minister is similar to what Senator Sean D. Barrett asked, as I understand it. Who will be the person watching this? Obviously Irish Water will have a certain amount of money for capital projects and a certain amount of revenue. It will trade as a company, albeit in the public sphere. However, who will control it? Will it be the Minister? Will the Minister tell the company to bring in the books in order that he can look at them and see where the company is going? The Minister is pointing at us but who will it be in the real world? We know how things operate in here, in so far as the information comes in and we do what we have to do. However, in the real world, who will be watching the pennies?

To take the last point first, it is the duty of the Oireachtas to ensure that due process is carried out with regard to all annual reports brought before it. I appreciate that the Senator is talking about day-to-day expenditure, but the accountability of Irish Water under the legislation is to the Oireachtas in terms of its annual report. I have no doubt the report will be subject to annual, if not more frequent, debates. I also expect that Members of the Oireachtas will insist on the representatives of Irish Water appearing before the Oireachtas on a regular basis in order that Parliament can carry out due diligence on all the issues.

The regulator is the Commission for Energy Regulation, CER, and it will carry out the function of regulating water. On Senator Sean D. Barrett's point, there will have to be transparency and accountability from the regulator and to the regulator. In terms of the development plans, what must be improved and what will be allowed in the budget, Irish Water will present a budget for the operating costs and the plan for reducing the amount of unaccounted for water, which is very important. All of that will be put before the regulator. The regulator will have to give an indicative decision on how it proposes to deal with it and on what it thinks. Senator Sean D. Barrett's point is germane. The regulator will carry out due diligence on what the costs are and will hold Irish Water accountable for all of those. There cannot be any hidden costs and the regulator's job will be to ensure that this would be the case.

The third point is that the guarantee is not automatic. In other words, if funds must be guaranteed, the Department of Finance and the Department of the Environment, Community and Local Government will carry out due diligence on them also. There is the regulator, the Oireachtas and the Departments to ensure that the process is accountable and transparent and that there are no hidden costs.

Senator Kathryn Reilly asked about meters. We did a cost benefit analysis and an indicative cost when we put the process out to tender. As it is out to tender, it is not possible to say now what the actual cost is, because that could lead to increases rather than reductions in expenses for the taxpayer. However, when the decision is made and the meters are costed there is no reason that there should not be full accountability and transparency. Obviously, the Department did a cost benefit analysis and that would be available, as well as everything relating to that. This will only work on the basis that it is transparent and accountable, and that there is full and proper vigilance on the cost of Irish Water.

I put a number of questions to the Minister.

The Senator has spoken on the amendments already.

Yes, but I did not get a reply.

What was the Senator's question?

It was in the context of why there would be borrowings and whether the money would be used for investment.

The budget for water infrastructure, both capital and current, is €1.2 billion. The income from that nationwide is €200 million. That is from commercial metering. Uncollected accounts in that area amount to more than 30%, which is also a serious issue. Irish Water will start with the money it will get from the commercial rates. It will also get whatever actual cost is factored in for domestic income. Clearly, it will have an overdraft, which can be to a maximum of €500 million. The moneys it will need should be available, but will have to be accounted for in a proper, transparent way.

Group 2 is the subject matter of amendment No. 3.

The purpose of amendment No. 3 is to provide the board with powers to undertake preparatory work pending the assignment of full water services powers by future legislation. A similar provision for the Commission for Energy Regulation was included in the published Bill. This amendment will clarify the range of functions that the subsidiary, Irish Water, and the board may carry out pending the provision of full utility powers to be assigned by legislation later this year. This will allow the board and Uisce Éireann to carry out the necessary activities as it prepares for full water services powers. The amendment has been included following discussions between the Department and Bord Gáis and with the Parliamentary Counsel. It will give the board and Irish Water greater certainty as the preparations for the establishment of a full water service utility proceeds in advance of the next Bill.

I support the amendment. With regard to the preparatory work that has been done with the companies that will be carrying out the work, is that online?

I should have checked before I came down but I did not. Is there detail of the various companies to which tenders have been awarded to do the work? How far on is the work? How far on is the process for the subsidiary companies and are they listed online? What about negotiations with local authorities and the eventual transfer of staff? At what stage is the detail of how the staff will work?

The amendment indicates that the board "shall not perform a function under this section" if the Minister indicates it should not do so. Does the reverse apply? I presume it does, for example, if the Minister indicates an operation has been in train for a year and that a better idea should be applied. The positive "shall" is in the other legislation but this is a negative term, "shall not perform a function", which is good if the board is performing functions that we do not want performed.

Will the Minister of State outline the water service's functions? Are the water service's functions the same or similar to the functions of the water services authority under the 2007 Act.

I have a question along the same lines as Senator Diarmuid Wilson. What is the definition of the workings or functions of the authority? The Minister of State referred to 30% unpaid water rates in the current system. With all due respect, if 30% of €500 million in water charges is uncollected, the issue will have to be ironed out from the very start. The authority would be run to the ground very quickly if that was the case and there should be a legal function in order that this could not happen. Currently, if one is in arrears paying for water, the supply is cut, and it is somewhat archaic that local authorities are charging €1,100 to reconnect such supplies. That is not practical. If a person cannot pay water charges, how can he or she pay the reconnection charge of €1,100? Perhaps that should be tweaked by the new authority as well.

With regard to the transfer of powers, what discussions have taken place between the Department, senior engineers and representatives of water service workers? What concerns do these people have about the current and proposed governance arrangements? With current governance arrangements, what problems, if any, have been identified by the Department that it is hoped will be improved in the new service? How will the transfer of functions bring improvements? As SIPTU has concerns about the serious implications for the future of local government and its ability to respond to emergencies at a local level, will that be a problem?

I welcome the Minister of State to the House. It is good to have him here. I have a couple of points on the contractors and assignment of contracts. We had problems in Border counties with contractors doing work for the councils over the past number of years and not paying subcontractors. We must be very careful that this does not happen. When the Minister, Deputy Phil Hogan, was here the last day, it was mentioned that subcontractors must have a turnover of €400,000, which is quite significant. There are some small subcontractors that would be well capable of doing the work but do not have the €400,000 turnover. The Minister indicated that one or two subcontractors could come together and be in a position to provide the service. We should keep that in mind.

We still need to flesh out what will be the free allowance and the price. Some people's consumption could be so small that metering in order to reduce consumption would yield no return on the meter. Unless we know what economists call price elasticity, demand is impossible to calculate.

The Minister of State referred to area meters, meaning we could locate leaks to a certain part of a townland, for example. It seems plausible that we could install many meters at a significant expense but not collect anything, depending on what is the free allowance. What will be the cost of the meter and what will be the free allowance? If a little old lady is living on her own, it may be pointless to go through the exercise of installing a meter as it will not make any difference to the national consumption and we would not get back the cost of the meter. If we did the job in stages, we would know through area meters if the rate of lost water reduced substantially, and there would be no need to go after single elderly people living on their own for no great benefit.

We need to fill in some of the blanks, including how much is the free allowance. I have heard that described as generous but I do not know if we yet have a quantification of "generous". What will be the cost per unit of consumption?

There are a couple of issues. This amendment was thrown up when we examined how the transfer would come about from what was a traditional local authority function to Irish Water. I raised the issue on Committee Stage as there will be a difficulty in a number of areas where local long-standing agreements have given local authorities access to private land in order that they could check lake, borehole and river intake sources. This was done on an agreed basis with landowners. The Minister of State's response the last time was that way leave does not apply to water, as water pipes are laid on public roads. If a service is required to go across private land, the way leave legislation only applies to the ESB and will not allow local authorities or Irish Water to cross such lands without due permission or cost. Have those issues been dealt with through this amendment?

Some reference has been made to the staff. Much good work has been done on this issue and I know from speaking to a former colleague in South Tipperary County Council that a unit has been set up there this week that will pull together all the information required. I welcome the fact that this has been done through proper industrial relations mechanisms, with staff volunteering for the work. The individual to whom I was speaking was very happy and excited about the opportunity to get into a new challenge in his life and career as a public servant. He is my age.

I welcome all this work, but I am concerned about outstanding issues which I flagged on Committee Stage. The Minister of State gave some comfort in his words at that stage but it was not really the answer I wanted to hear. I am still asking for an answer rather than comfort.

Far be it from me to offer Senator Denis Landy anything but comfort, given the problems we have to deal with. There have been many questions and if I do not answer some, I will be happy to deal with them if Senators give me notice. The next Bill will address all the issues raised by the Senator, including the legal and important technical points which must be resolved.

What the Bill is doing is setting up the body called Irish Water, Uisce Éireann and the amendment gives it powers to do certain works and not to do other works. That is just as an interim measure. In order words, the power to instruct or not to instruct, will be in place only temporarily. When the full Bill is enacted there will be no need for ministerial intervention. We are establishing Irish Water and giving certain powers to the regulator in advance of full powers being given. The second piece of legislation will give powers to the regulator but we are allowing it to commence its work. Issues in regard to how Irish Water will operate will be dealt with in the next Bill before the end of the year.

Metering will complement conservation. Senator Sean D. Barrett asked about the advantage of metering. It is a fact that a person living on his or her own in a flat uses very little water compared with a household of three or four. One could argue that one person in an apartment or whatever would use less water than anybody else but that will not always be the case. The first advantage of metering is that when the meter is being installed, any unaccounted for water on the customer side will be detected. I was speaking to people in County Mayo two weeks ago who told me that by metering a group water scheme they reduced unaccounted for water by 60%. In order words, it detected a 60% leakage on the customer side, not water on the main road or outside the property of the people in the scheme. As I understand it, a scheme in Cavan-Monaghan which had upwards of 80% unaccounted for water has now been resolved. It has saved that amount of water by metering. The best supporters of metering are the group water schemes all over the country, some of which I am meeting this evening. Metering actually works. A cost benefit analysis has been done and in individual cases it makes much sense. I accept that the extensive district metering will reduce leakage to a particular geographic location but it will not identify the street or road. From this point on, where there is significant leakage, metering will help find it. The level of the free allowance has not yet been decided. That is a matter for the Government to decide and will be announced in due course by the Minister, Deputy Phil Hogan.

A question was asked about the number of contractors involved. As the country has been split into eight areas, there could be up to eight regional contractors. After that, depending on the size of the area, one can tender for local contractors. If a regional contractor wants to install 20,000 meters in a particular town or area, it can choose from the list, which will be transparent, and will be published. In respect of everyone named on the list there will be transparency as to who they are and they must be eligible. If a person is not eligible, the contractor has a right to query that as it is entitled to have the information. A small contractor who has a JCB would not have the turnover as an SME. Obviously, local contractors could then be involved with the local people who are appointed to do the work. That is the important point. The legal liability that attaches to the regional contractor will attach to the local contractor and people it may bring in locally to do the work. Standards will have to be set in order that cowboys do not get involved. There will have to be total accountability back up the line as well as down the line.

Quality standards will be regulated. The quality of water will be set by the EPA and the HSE. It is important that the quality of water is improved. While the vast majority of water in the public mains is fantastic there are problems with group water schemes that have to be dealt with. The EPA will be the regulator. We want to be in a position to attract into areas, water intensive industries, such as pharmaceuticals, agriculture, ICT and so on. If we improve the quality and supply of water, Ireland could be a European centre for water intensive industries, whereas some parts of the UK have a water shortage.

The relationship between local authorities and Irish Water is critical. I acknowledge the fantastic work of local authorities, staff, engineers, plumbers and so on who have the capacity, ability and commitment to improve the infrastructure. To ensure that continues there will be service level agreements between local authorities and Irish Water in order that those working for local authorities will continue to provide that service up to at least 2017. If any person has an offer of employment in Irish Water, that is fine. There will be some voluntary transfers of people in that capacity. I do not know if I have answered all the questions but if I have omitted any please come back to me.

There was a question on-----

The Senator has contributed already.

I was responding to the Minister of State's kind invitation to the question whether he had answered all the questions. I was going to ask if he had any idea on the price? I thank the Cathaoirleach for his indulgence.

I will speak with the Minister of State again regarding functions.

We are awaiting a reply on the functions of Irish Water.

Where a local authority carries out any activity in respect of water services, the same powers will attach to Irish Water in the context that it must negotiate with the local authority before proceeding to carry out works. It will have the same powers as a local authority. Legally, it has the same statutory powers to ensure the water supply is safe and to carry out whatever works are needed and work that a local authority would do. There will be extra works that a local authority will do in terms of flood relief. There are many other activities which are not transferring to Irish Water, such as the emergency response teams.

I have a brief question.

Senator Sean D. Barrett's question remains to be answered.

I do not know the cost. The regulator will do due diligence on all of that area. All costs submitted will have to be transparent and will be transparently decided. Nothing will be hidden.

I was asking about the price to the consumer? Is it known what the consumer will pay per litre?

No. The average commercial charge for water across all counties is €2.52 per 1,000 litres. In Denmark one will get three quarters of a bottle of water for €1. That is an indication of how expensive water is there. That is very expensive water compared with ours. The actual cost will be determined by the regulator. I do not know if that is helpful. People will know the cost well in advance. They will know their water usage and can predict what they will probably use.

Go raibh maith agat a Aire Stáit.

My comment is in the context of the transfer of functions and what the Minister of State has said about functions. Since the 2007 Act, local authorities have increasingly taken over private water schemes within local authority areas. Will the transfer of the functions include a continuation of the taking over of private water schemes by the new water services authority?

I think that is presently the arrangement between all group water schemes. In other words, whatever arrangement is in place with the group water scheme will not change as a result of this. Clearly, issues arise with group water schemes. The experience in County Mayo is that one cannot cost the voluntary effort that goes in.

I hope the voluntary effort that the community puts in to make efficient and effective group water schemes would continue. Irish Water will not be trying to take that power away from anybody, but whatever relationship one has with one's local authority will continue and will not change. That is the position as I understand it.

Essentially, it is about the current extension of town schemes which, inevitably, take over the group water schemes outside of the town boundaries. I am wondering whether that policy will continue with Irish Water. Will it continue to do that?

As the Senator correctly points out, it is a local authority that is making the decision in terms of its development plan to do something in a particular area. That is part of the local authority's planning process, etc. I cannot say here that a particular group water scheme will come into public ownership as a result of Irish Water. That would be a local matter for them to negotiate.

I am trying to establish whether the policy of the takeover of group schemes will continue.

To be fair and honest on this one, in the next Bill the policy must be clarified, in other words, how one resolves the issue, should the situation arise, as I am sure it will, of the powers as between those of a local authority that wants to do action X and Irish Water that does not want to do it.

There is also the question of planning. If a local authority, town council or city decides to develop water infrastructure at location X in its development plan, there is the question of whether the funding will be provided for that, and if not, how does one resolve that issue?

Those are important issues which we will resolve in the second piece of legislation. It is a critical part that Irish Water have due regard for local development plans and the IDA Ireland and Enterprise Ireland plans for industry and how a conflict, if one arises, is resolved. That all must be done in the next piece of legislation. Until then, there is no issue of conflict or change.

I call the Minister of State on amendment No. 4.

Amendment No. 4 is a grammatical change to section 24 and does not change the purpose or meaning of subsection (1) of section 24.

Question put and agreed to.
Question, "That the Bill do now pass," put and agreed to.
Sitting suspended at 1.45 p.m. and resumed at 5.30 p.m.