IRISH WATER A NEW NATIONAL UTILITY UCC: Law and the Environment Conference 2014 Integrated Approaches to Environmental Law and Regulation 3 April 2014 Orla Joyce, Solicitor Irish Water
CONTENTS 1. Government Policy & Background 2. Transfer of Functions, Assets, and Liabilities & Ministerial Direction 3. Funding of Irish Water 4. Water Charges 5. Economic Regulation 6. Transfer of Rights and Liabilities 7. Irish Water Operations 8. Planning & Strategic Investment 9. Environmental & Section 16 Licences 10. Achievements and Key Milestones 11. Conclusion 2
Government Policy on Water Reform In April 2012, the Government announced reform of public water services. There are three elements to this: 1. The creation of a public water utility, Irish Water, which will take over responsibility for delivering public water and waste water services from the Local Authorities 2. The appointment of a new economic regulator for the public water sector. The CER will be responsible for determining the cost of water services to the consumer 3. A new funding regime based on domestic water charges and raising capital on international markets, so that in the future, Irish Water will be financially selfsustaining. These measures represent one of the most ambitious reform programmes undertaken in the history of the State. In parallel, the DECLG is reviewing the structures to confirm implementation of the EU Water Framework Directive in conjunction with the EPA and Local Authorities. 3
Why Bord Gáis DECLG conducted a process to assess the benefits of setting up Irish Water within an existing semi-state company versus new state company from green field Bord Gáis participated in a process where we outlined our skills and experience and track record as a successful utility provider, which include Extensive experience of operating a full scale national utility service A track record of delivery of large scale capital projects Ongoing delivery of quality services to customers in a regulated environment Extensive expertise raising finance on international markets Implementation of change and transformation programmes Bord Gáis skills combined with the Local Authorities expertise and experience delivering water services will create a world class national water authority Irish Water is a wholly owned public utility 4
Background The first Water Services Act 2013 was commenced on the 29 th March 2013 and provided for the establishment of Irish Water as a subsidiary of Bord Gáis Éireann. This Act provided Irish Water/BGE with certain water services functions relating to the installation of water meters in domestic properties and gave it preparatory functions in relation to the establishment of Irish Water. The Water Services (No 2) Act 2013 was passed on 25 th December 2013. It provides for the transfer of water services functions and assets from the 34 water services authorities (the county and city councils) to Irish Water. This does not include the functions relating to domestic waste-water treatment systems and storm water. These functions remain with the local authorities. 5
Transfer of Functions, Assets and Liabilities
Transfer of Functions The (No.2) Act provides for the transfer of functions from water service authorities to Irish Water. On the 31 st of December 2013 the Minister for the Environment, Community and Local Government (The Minister ) issued a Statutory Instrument to facilitate the transfer of water services authorities functions from local authorities to Irish Water. This order provided that 1 January 2014 is appointed as the transfer day for the purposes of the (No.2) Act. The functions of the water services authorities transferred to Irish Water on that day. Irish Water now has the functions of a Water Services Authority. It also has certain contracts. The Water Services (No. 2) Act 2013 (Transfer Of Other Liabilities) Order 2014 gives effect to the decision of the Minister to transfer the contracts listed in the schedule to the Order from the water services authorities to Irish Water in accordance with section 14 of the Water Services (No. 2) Act 2013. 7
Transfer of Functions Further assets, contracts and commitments, leases, licences, permissions and liabilities to transfer under further Ministerial Orders. Water services functions relating to domestic waste water treatment systems and rural water services do not transfer to Irish Water. Group water schemes remain part of the group water sector. 8
Transfer of Functions By way of example the functions transferred to Irish Water include but are not restricted to the following: a) the abstraction, impoundment, treatment, purchase or supply of water for drinking or any other purpose; b) the provision, operation or maintenance of sewers and waste water collection and treatment facilities; c) the construction or maintenance, or arrangement for the construction and maintenance of, waterworks or waste water works; d) taking waterworks or waste water works provided by other persons in charge; and e) section 16 licensing. 9
Transfer of Assets/Liabilities The No. 2 Act provided for the transfer of the water infrastructure property of the Local authorities to Irish Water on a designated day or days (in other words, they may not all transfer on the same day). The power to transfer is contained in the Act and is being facilitated through the use of ministerial orders. The definition of Property includes assets such as land, buildings, water services infrastructure, vehicles, pipes, sewers and moneys. Ministerial orders will provide for the transfer of rights and liabilities from local authorities to Irish Water. Contracts transferring to Irish Water will include both rights and liabilities. It is expected that the Minister will transfer all of the major assets to Irish Water by mid 2014. The transfer of contracts is currently underway. Liability is also transferred to Irish Water with respect to Transferring Assets and liabilities incurred after the Transfer Date. 10
Directions from the Minister The Act provides that the Minister may issue a direction to Irish Water, requiring it to comply with specific Government policy or policies. As a consequence Irish Water is subject to directions from the Minister. This is a standard provision for semi-state companies. New laws passed in the future relating to Irish Water functions will automatically apply to Local Authorities as they are performing those functions on behalf of IW through service level agreements. 11
Funding of Irish Water
Funding/Borrowing The No. 2 Act provides Irish Water with the power to charge all customers supplied by Irish Water. The introduction of these charges will help to create a new sustainable funding model for the delivery of water services in Ireland. The charges to be levied by Irish Water will be subject to the approval of the Commission for Energy Regulation (CER). Additionally the Minister may provide grants to Irish Water. This subvention will be provided out of moneys approved by the Oireachtas. Irish Water may also borrow money. Such borrowings are subject to the consent of: the Minister for the Environment, Community and Local Government; the Minister for Communications, Energy and Natural Resources; the Minister for Finance; and the Minister for Public Expenditure and Reform. The aggregate amount Irish Water is permitted to borrow under this section is limited to 2billion. 13
WATER CHARGES AND THE POWER TO CHARGE
Irish Water s power to charge for the provision of water services The No. 2 Act provides that Irish Water will legally be entitled to charge customers who receive water services. The charges levied by Irish Water shall be calculated in accordance with a water charges plan. Irish Water is prohibited from cutting off a water supply to a dwelling arising from nonpayment of water charges. Irish Water is empowered to disconnect a non-domestic customer where water charges remain unpaid and will also have the power to reduce the supply of water to domestic customers where charges are unpaid. The power to disconnect a customer from a water supply or to reduce a water supply to a customer will be subject to the approval of the water charges plan. Bad Debts: Where a customer fails to pay their water charge Irish Water may recover it as a simple contract debt in court. 15
Water Charges Plans Irish Water is required to prepare a water charges plan setting out the method by which water charges will be calculated and may also include the level of the tariff for each customer category. This water charges plan must be submitted to the Commission for Energy Regulator (the CER) by Irish Water and the CER has the power to approve or reject the water charges plan. Tariffs will be based on the quantity of water measured by a meter or where a meter is not installed, assessed charge. The structure of these charges will be proposed by IW to CER and the regulator will consult on this. The Act provides that water charges will apply to water supplied to a premises and waste water discharged from a premises. Unless agreed otherwise between Irish Water and a customer, the amount of wastewater discharged from a premises will be deemed to be equal to the amount of water supplied to the premises. 16
ECONOMIC REGULATION
Commission for Energy Regulation The CER is the independent regulatory body responsible for overseeing Ireland's energy supply sector. Under the Water Services (No.1) Act 2013 the remit of the CER was expanded to allow it become the independent economic regulator for the public water services sector. Under that Act the CER has become the independent body responsible for the oversight of Irish Water s capital plans, operational costs, revenue and the level of water charges. The CER will be responsible for determining the cost of water services and ensuring that efficiencies are delivered so that the cost of providing the service to the consumer is kept to a minimum. The CER will ensure that there is a framework so that water charges are fair and clear in their implementation. The CER will engage in public consultation. Relationship between IW & CER highly important. Relationship between EPA & CER both must try to co-operate in the regulation of Irish Water but not to the detriment of their existing functions. 18
Codes of Practice / Investment Plans Irish Water is required to prepare codes of practice which will be subject to the approval of the CER. The codes of practice shall make provision for: customer service standards, billing, methods of payment of water charges, the provision of information to customers of Irish Water; and any other matters deemed necessary by the Commission. The No. 2 Act provides that Irish Water shall prepare investment plans setting out where it considers investment in infrastructure to be necessary for the effective performance of its functions, so that funding can be considered. Irish Water is further required to prepare a water services strategic plan which must be submitted to the Minister for his approval. It must set out the objectives of Irish Water in respect of the 25-year period following the approval of the plan and the means by which it proposes to achieve those objectives. This is underway. 19
TRANSFER OF RIGHTS AND CERTAIN LIABILITIES
Transfer of Rights and Certain Liabilities The No. 2 Act provides for the transfer of rights and certain liabilities associated with the property transferred from water services authorities to Irish Water. The No. 2 Act provides that the provisions of section 29 of the Water Services Act 2007 shall apply to Irish Water. This confers immunity to Irish Water and its employees from prosecutions arising from carrying out their functions under the Act. 21
Liability - Assets Water service assets i.e. treatment plants etc, are to transfer to IW by way of Ministerial Order under Section 12 of the No. 2 Act Where property is transferred under Section 12 then any contract or commitment in relation to such property also automatically transfers to IW under Section 13 of the No. 2 Act. Accordingly, liability connected with assets transferred (including contracts or commitments) will rest with IW from the relevant date of the transfer order. 22
IRISH WATER OPERATIONS
Service Level Agreements The No. 2 Act provides that Irish Water may enter into service level agreements with the local authorities in order that a local authority can provide services on behalf of Irish Water. The Minister has the power to direct Irish Water and the local authority to enter into such an agreement and to specify the functions to be included in an agreement in relation to such a direction. Such an agreement has been entered into with Local Authorities. The initial agreement between Irish Water and a local authority is subject to reviews after two years and seven years, respectively. The initial agreement shall cease to have effect 12 years after its making or earlier where there is a significant failure on the part of the local authority to provide the services under the agreement. Staff will continue to be employed by the local authority. 24
PLANNING
PLANNING
Taking in charge process Present Legal Position Under Section 180 of the Planning and Development Act 2000 subsection (4)(c): "A planning authority which is not a water services authority shall not take in charge sewers, water mains, or service connections but shall request Irish Water to do so. Therefore Irish Water is not under an obligation to take in charge such assets. Additionally Section 95 of the Water Service Act 2007 provides that Irish Water may also take in charge private assets by agreement where not fewer than two thirds of those customers concerned approve the taking in charge. Irish Water may also take Service Connections in charge pursuant to Section 43 (12) of the 2007 Water Services Act where Irish Water is of the opinion that there is a danger to public health or the environment. Irish Water may also take in charge private assets using CPO powers. Irish Water is liaising with local authorities to co-ordinate the taking in charge process. 27
Investment Plans Irish Water is required to prepare investment plans setting out where it considers investment in infrastructure is necessary for the effective performance of its functions, for funding approval purposes. In developing an investment plan, Irish Water will take account of the 25 year water services strategic plan and a range of other policy considerations including local area plans, regional planning guidelines and strategic development zones. Before preparing an investment plan, Irish Water is required to consult with the Environmental Protection Agency, regional bodies in respect of whose functional area the investment plan is likely to apply and each planning authority in respect of whose functional area the investment plan is likely to apply. The first investment plan has been prepared for the two-year period after the transfer date. Future investment plans shall be for durations to be determined by the Commission for Energy Regulation. 28
Water Services Strategic Investment Plan As part of the planning process Irish Water is required to prepare a water services strategic plan which it must submit to the Minister for his/her approval. The water services strategic plan will set out the objectives of Irish Water in respect of the 25-year period following the approval of the plan. It will also set out the means by which it proposes to achieve the following objectives: drinking water quality; prevention of risk to public health and the environment; existing and projected demand for water services; and conservation measures. 29
Water Services Strategic Investment Plan In preparing a water services strategic plan, Irish Water will also have to ensure, as far as practicable, that the plan is consistent with; the national spatial strategy; regional planning guidelines; and river basin management plans. The water services strategic plans must also have regard to a range of other policy considerations including; proper planning and sustainable development, housing strategies, strategic development zones and water quality plans. The implementation and operation of the plan must be reviewed at least every five years. 30
Process for Investment Planning Interplay between 25 Year and 6 Year Investment Plans Environmental Regulator - EPA Irish Water Strategic Investment Plans Financial Regulator - CER Water Services Strategic Plan (25 Year) This will inform / be supported by: Corporate Business Plan Technical Plans e.g. Water Resources Management Plan Climate Change & Adaption Strategy Price Control Period Investment Plans DECLG Operations: SLA Costs DBO Costs Supply Chain Other Fixed Costs Capital: Major Projects Small Capital Capital Maintenance Surveys & Studies Stakeholders: LA s, Regional Authorities, Customers/Citizens 31
Amendments to the Water Services Act 2007 The No. 2 Act provides for amendments to be made to the Water Services Act 2007 (the WSA ) arising from the transfer of functions from the water services authorities to Irish Water. The WSA conferred various function, powers and obligations on the local authorities as water services authorities. It also conferred many powers on the Minister (e.g. to make regulations, give directions, impose obligations or require certain information etc.) The Amendments effected by the Act to the WSA are primarily housekeeping in nature; Cuts out Local Authority based language. For example references to the functional area of the authority are deleted from the WSA;. 32
ENVIRONMENTAL
Section 16 Licences The licensing of trade effluent discharges that will enter Irish Water's system will be a function of Irish Water. Therefore, control over what is actually entering the system will be achieved by the imposition of conditions in Trade Effluent Discharge Licences. IW will have the power of enforcement and prosecution relative to discharge licences granted under section 16 of the Water Pollution Acts 1977-1990. The power to grant Section 16 discharge licences has also been given to Irish Water, appeals still go to An Bord Pleanala. Irish Water can appoint its own Authorised Persons and/or use existing Authorised Persons. 34
Environmental Protection Agency memorandum with the CER The EPA has a wide range of functions to protect the environment with particular responsibilities for water. It can be considered Irish Water s Environmental Regulator. As a consequence Irish Water will have an important relationship with the EPA in a broad number of areas such as licencing, pollution, drinking water quality and wastewater quality. A key challenge for Irish Water will be managing the expectations of the CER and the EPA. Useful provision in the No. 2 Act which requires the CER to enter into an arrangement with the EPA for the purposes of administrative co-operation. 35
Achievements and Key Milestones
Key Achievements to Date Incorporation of Irish Water and convening of the inaugural Irish Water Board Launch of the Customer Contact Centre in July Launch of the Irish Water brand and website in July Appointment of the Regional Contractors for the Metering Programme Successful delivery of systems, people and processes to start and deliver the Metering Installation Programme August 2013 to date Successful delivery of systems, people and processes to enable Irish Water to take responsibility for water services Successful delivery of SLAs 37 37
Domestic metering Roll out of national meter programme: July 2013 to Dec 2016 1.05 million meters (circa 27,000 meters per month) Meters fitted with radio units to enable digital meter reading Scale unprecedented Thames Water Overall costs estimated at 450 million (Pre-tender) IW is committed to retaining existing commercial meters Job creation on nationwide basis: 25% of contractors workforce drawn from SMEs, Individuals on unemployment register, apprentices, graduates or school leavers 38
Priorities for future investment Drinking Water Quality: Ensuring safe drinking water for all Drinking Water Capacity: Reducing leakage and conserving water Wastewater Treatment Compliance: Including a sufficient capacity for wastewater treatment and ensuring compliance with environmental standards Wastewater Capacity : Ensuring long-term sustainable capacity Planned Asset Improvement Schemes: Reducing running costs through improved efficiencies and upgraded assets Development Capacity Schemes: Enabling new development and connections 39
Key Milestones for 2014 / 2015 Qtr 1 2014 Qtr 2 2014 Qtr 4 2014 Qtr 1 2015 Irish Water assumes responsibility for Water Services WSSP, Capital Plan and Approach to Conservation Maximo Implementation CER IPC, Tariff Structures, Connections Policy Water Charges Plan Liability for Domestic water charges begins Domestic billing commences 40
Conclusion The transitioning of water services to Irish Water is a major challenge, as well as presenting a major opportunity. The success of the transition will depend on adequate funding, and good cooperation between key stakeholders - in particular, Irish Water, DECLG, the EPA, the CER, the local authorities, interested environmental groups and the public. Within Irish Water we are working hard to seek to make the change a success for all. Thank you 41
Q&A
Thank you