The establishment of Irish Water is an integral component of the Government’s water sector reform strategy and involves major organisational change. The establishment of a high performance utility will lead to lower costs and improved services in the future, providing much better outcomes for customers and the environment.
In advance of the enactment of the Water Services (No.2) Act 2013, the Commission for Energy Regulation (CER) did not have full economic regulatory powers in relation to the water sector, but did have powers to provide advice to the Minister. In that context on 22 October 2013, my predecessor approved a request from the Department to seek advice from CER on new costs arising in establishing Irish Water, which were to be funded by the Company. The purpose in seeking this advice was to ensure that the costs were of benefit to customers in the long-term and that forecast expenditure was reasonable. In relation to the establishment costs, the request included broad headings for expenditure of €150m plus a contingency of €31m, but did not distinguish between in-house and external provision.
The CER reviewed the establishment costs and in their decision confirmed today, they have indicated that have allowed Irish Water the vast bulk - some €172.8 million - of the costs proposed. I understand from Irish Water that some €83.8m million has been expended on external service providers in relation to the establishment of the company. Full details of the proposed expenditure on external providers was outlined by Irish Water to the Joint Oireachtas Committee on the Environment, Culture and the Gaeltacht on 14 January 2014 and this document is available at
www.water.ie.
Costs incurred by my Department and Local Authorities in relation to the Water Sector Reform Programme have been met from the Departmental Vote. These costs amounted to €15.5m in 2013. The majority of this expenditure related to the domestic metering programme (€7.7m) and the local authority staffing costs of the Water Services Transition Office (€5.7m), which was put in place to ensure appropriate arrangements for engagement with the local authority sector during the reform process. In addition, Departmental costs which included the staffing of the Water Sector reform Project Management Office in my Department, amounted to some €1.3m in 2013.
The balance of the costs incurred in 2013 includes €0.76m paid to the Commission for Energy Regulation in respect of their expanded functions in becoming the independent economic regulator for the public water sector and €55,000 paid to the Economic and Social Research Institute in respect of providing research and advice on affordability issues associated with the introduction of domestic water charges. Expenditure totalling some €179,000 was also incurred by my Department in 2012 in respect of the independent assessment carried out by PWC.
It is estimated that some €2m will be spent on my Department’s Programme Management office and the Transition Office during 2014. It is also expected that some €5m will be recouped to local authorities in connection with road-opening licence work associated with the national domestic metering programme.
