The Commission for Regulation of Utilities (CRU) has today published a consultation on the first five year Revenue Control which sets out the total allowed revenue that Irish Water can receive, through Government subvention and from customers, to cover its efficiently incurred costs during the period 2020 – 2024.
The revenue control process involves the CRU reviewing Irish Water’s plans in terms of what it intends to deliver and benchmarking and comparing its proposed costs against other comparable water and wastewater utilities in other jurisdictions.
Since the CRU began regulating Irish Water, it has periodically reviewed costs and set allowed revenues for Irish Water through short interim revenue controls. The first of these covered the period October 2014 – December 2016, with the second revenue control covered 2017 – 2018 and was subsequently extended to 2019, due to changes in the funding model for Irish Water introduced by the Water Services Act 2017.
Revenue Control 3
In November 2018, Irish Water submitted business plans for their operating costs and capital costs for the period 2020-2024. The CRU reviewed Irish Water’s submissions to challenge the utility to deliver continued efficiencies without reducing the quality of its services to its customers.
In this revenue control the CRU set out the outcomes that are expected from Irish Water to deliver over the five years. Tied to these outcomes are an extensive and detailed set of outputs, covering projects and programmes across water and wastewater, that Irish Water will be required to deliver.
The high-level outcomes that Irish Water are required to deliver in this Revenue Control period are:
- High quality customer service and customer satisfaction;
- Providing a high quality of service for water supply, including security of supply;
- A reliable service to remove and treat wastewater:
- Efficient delivery of services, i.e. value for money
- Achieve compliance with public health and environmental standards
- Environmental performance (for example, a good quality water environment).
Irish Water requested a total of €3,719m operational expenditure for the period 2020-2024. The CRU proposes that Irish Water reduce its operating costs by €346m relative to Irish Water’s request over the period. This represents an efficiency challenge of 2%, rising to 6% annual reduction in Irish Water’s controllable operating costs over the period.
A five-year Capital Investment Plan (CIP) for the Revenue Control 3 period was submitted by Irish Water. While the CRU considers that Irish Water has adopted an appropriate approach to
the development of its CIP with a good mix of investment in projects to address capacity issues, environment issues and leakage among others, the CRU considers that Irish Water should be challenged to deliver the outputs and outcomes of its proposed investment plan more efficiently in terms of its capital expenditure.
The Irish Water CIP has proposed a total of €5,257m capital expenditure for the period 2020 – 2024. Based on the submission by Irish Water, the CRU proposes to allow €5,163m, a net cut of €94m.
Under the Capital costs allowance, €846m has been allocated to the Water Supply Project for the East and Midlands Region and the Greater Dublin Drainage Project.
The CRU has proposed to allow the funding for these projects, but due to their scale and importance and the likelihood of changes to their scope and/or timing, the CRU will monitor the progress of these projects during the Revenue Control 3 period.
The CRU will also engage with Department of Housing, Planning and Local Government on an annual basis to determine whether the funding should be provided, depending on the progress made in relation to these projects.
Commenting on the consultation Laura Brien, CRU Director of Water and Compliance said: “While this third revenue control has a much broader scope in terms of the period of time and the number of capital projects it will cover as the utility continues to mature, the CRU believes it is important that Irish Water is appropriately challenged to deliver customer centric outcomes at the most efficient cost possible.”