Tuesday, 6 October 2015

Irish Water – It could have been different

In an earlier blog I listed ten mistakes that turned the establishment of Irish Water from a good idea into a total disaster - a disaster that created huge divisions in Irish society and placed a heavy financial burden on the Irish taxpayer. I didn’t go into much detail on the mistakes so perhaps I should elaborate.
  • Lack of meaningful debate:
At the top of my lists I suggested that a lack of meaningful debate was the prime cause. The necessary legislation was pushed through the Dáil in record time with little input from Government backbenchers or opposition TDs.
The lack of debate extended to the media which persisted in treating the matter as a black and white issue – should householders be obliged to pay water charges or should the cost of water continue to be covered by general taxation? At no time did the question of how payments would be calculated – usage or a flat rate per house – receive any media attention.
Similarly the media never questioned the argument that Irish Water should become a semi-state commercial body to allow it borrow off (the Government’s) balance sheet. However the money was borrowed, it became another liability for the Irish taxpayer.
  • Arrogance:
I have never met the then Minister for the Environment Phil Hogan but he always came across, on television and in the Dáil, as an arrogant man. He appeared dismissive of all arguments against his view. He knew what he wanted to do and was in a hurry to get it done. There is much to be said for being a man in a hurry but it is dangerous without vision, talent, knowledge and a willingness to listen.
It was no doubt Mr Hogan’s arrogance that severely curtailed the Dáil debate on Irish Water.
  • Incompetence:
Incompetence is an integral part of all the reasons I cite for the Irish Water debacle but it is at its most serious in the failure to produce a cost benefit analysis on the installation of water meters. Mr Hogan should have insisted on one. His officials should have delivered one and insisted that it be considered. If a cost benefit analysis had been prepared the question of water meters would have been abandoned immediately.
Other ministers must also accept the accusation of incompetence in allowing Mr Hogan have his way on Irish Water. This is particularly true of Brendan Howlin who, during the election campaign, was dismissive of the idea of spending money on meters before fixing the high incidence of leakage. Now as Minister for Public Expenditure and Reform he was willing to approve the expenditure of €539m on meters.
We are left to assume that little by way of a plan was in existence when Irish Water was established. There is no evidence to show that anyone had the slightest idea as to how much would be spent on consultants, on a help desk, on reading and maintaining meters. It is doubtful if there was even a goal as to what percentage of total expenditure should go on back office functions compared with the expenditure on actually delivering water and treating sewage.
  • Disconnect between politicians and public servants on the one hand, and the struggling electorate on the other hand:
Even with modest decreases in salary arising from the recession, our politicians are extremely well paid. None, except those messing in the property market, will have felt any of the pain experienced by their constituents during the economic downturn. The same is true of public servants in decision making positions.
On the other hand the majority of people who were being asked to pay water charges had either lost their job or had their salary cut; were struggling to pay mortgages or saw their social welfare payments curtailed; were forced to pay increased taxes, including VAT, and the hated Universal Social Charge; and home owners were faced with a hefty property tax irrespective of their ability to meet their mortgage repayments.
While politicians sailed through the economic downturn with only minor discomfort, most of their constituents were to some extent already suffering from financial hardship before water charges became an issue.
  • Lack of expertise among decision makers
It is glaringly obvious that few of our politicians have any expertise in running a country. That is not unusual around the world and can be compensated for by bringing in experts and having knowledgeable public servants supporting ministers. Unfortunately it seems that some of our ministers believe they know better than their advisors.
It seems obvious that if anywhere in Government there was expertise in solving known and predicted difficulties in managing water and sewage in Ireland it was largely ignored.
  • Misplaced assumptions (failure to challenge the so called “givens”)
    • It is assumed that metering will bring about a significant reduction in water throughput - it won’t.
    • It is assumed that detecting and fixing minor leaks will do likewise - it won’t.
    • It seems to be assumed that any investment in water conservation will result in a payback - a cost benefit analysis is always necessary.
    • It is assumed that using a sprinkler on a lawn is unforgiveable and must be stopped - this and other seemingly wasteful practices are of little consequence.
  • Focusing on what is done elsewhere
Too many of those who argue in favour of water meters and water charges point to the fact that all other OECD countries have gone down this road. That has no relevance whatsoever. There may indeed be a need for metering in countries such as Spain, Portugal, Italy and Greece with their low rainfall and high temperatures. There may be a need for meters in Holland with its high population and small land mass. Each country has its own reason for introducing meters, although I think some have followed the herd instinct. Ireland is quite different and should find its own solution.
  • Failing to consider issues unique to Ireland

The main issue unique to Ireland is the high volume of rain we are assured of every year. The fact that rain falls throughout the year and isn’t seasonal is an added advantage.
It should have been acknowledged from the outset that Ireland has more water than it needs. The problem we occasionally have to face is that it is not always in the part of the country where it is needed. Solving that problem should have been Irish Water’s first priority.

  • Subservience to EU officials
It is often claimed that the Troika, and later the European Commission, insisted that Ireland use meters as a means of conserving and charging for water. Irish ministers and public servants should have had the courage to take a stance on this and to make it very clear that water conservation is not an issue for Ireland.
  • Obsession with the word “conservation”, particularly by the Green Party who appear to have set the whole debacle in motion
This is another misplaced assumption but worthy of its own headline. The initial propaganda around the need to conserve water set the scene for the current situation. Most politicians and commentators quickly accepted that conservation was important. They failed to see the incongruity of living in probably the wettest country in Europe and at the same time advocating the need for water conservation.

Sunday, 27 September 2015

Conserving water is bad for the environment

Most of us like to believe that we are interested in the environment. We are concerned about global warming, we worry about the destruction of the rain forests, we decry the accumulation of plastic waste in the sea, we wouldn’t dream of dropping litter on the street or dumping an old television in a secluded rural area, we faithfully segregate our recyclables, we would drive an electric vehicle if we could afford it, we argue in favour of wind, wave and solar power. Unfortunately, some of us are equally passionate about the need for water conservation in the mistaken belief that that is also an environmental issue.

Of course we don’t like to see plastic bottles on our beaches, litter on our streets, or fly-tipping in the countryside but for the most part we rely on the experts to tell us what behaviour is environmentally sound and what is damaging. We couldn’t stand up in a lecture hall and explain the cause and effect of global warming; we can’t give personal assurances that our segregated recyclables won’t end up in a dump in China; and we can’t provide a cost benefit analysis of renewable power sources. We believe in what we are doing because authoritative sources say so. Sometimes, these sources are no more knowledgeable than ourselves. Some are lazy journalists who fail to ask the right questions, some are politicians whose ambitions shape their views, and some are environmental zealots who focus on a single issue without looking at the bigger picture.

Conserving water in Ireland does little or nothing positive for the environment. At best it reduces the amount of chemicals used to purify water and will contribute to an indiscernible reduction in the amount of fuel used to pump water to storage tanks and reservoirs.

Conserving water does not mean that we are leaving more of it to future generations. Whatever we do with it, used water will eventually come back as rain, replenishing our lakes and rivers and occasionally causing floods.

By trying to conserve water we are committing the sins the environmentalists normally urge us to avoid.
  • Irish Water has destroyed thousands of trees to print a series of booklets and leaflets that have been delivered to every home in the country.
  • Irish Water has consumed vast quantities of non-renewable minerals in the manufacture of water meters and fittings that serve no useful purpose.
  • Irish Water will continue to waste non-renewable oil reserves on vehicles which will drive past every water meter in the country on a quarterly basis.
  • Gullible householders will purchase plastic water butts and piping to store rainwater for their gardens without realising that the cost of the butt is greater than the amount they can ever expect to save in reduced water charges. The plastic is generally made from non-renewable petrochemicals and will ultimately end up in landfill or polluting the oceans.
  • At Irish Water’s urgings, bathroom fittings, made from non-renewable minerals, will be replaced in order to deliver a marginal reduction in water throughput.

For the thinking environmentalist, water conservation brings no benefits in Ireland. On the other hand it can be argued that measures taken to conserve water are environmentally unsound. Admittedly the environmental damage caused is minimal, in the grand scheme of things, but it adds to the argument against the use of water meters and against any significant investment in conservation measures. Investing in the repair of leaking pipes is probably the one exception.

In Ireland, water is not a “scarce resource”

Water is not a scarce resource in Ireland. Water is a valuable resource but it only becomes valuable if we actually use it.

Time and again we have to listen to politicians, Irish Water executives, environmentalists, journalists, chat show hosts, and the writers of “letters to the editor” refer to water as a “scarce resource”. Sadly those whose job it is to make life difficult for our politicians, by interviewing them on radio and television, never challenge this assertion.

Water is not a scarce resource in Ireland, a look out of the window on most days will confirm that fact. If water is scarce in certain areas it is because the powers that be have failed to arrange for its movement from where it is plentiful to where it is needed. This failure is not the result of a lack of resources. Dublin’s water problems could have been resolved for generations to come with the money wasted on installing domestic water meters.
Water is a valuable resource, which is quite different from scarce. It is, however, only valuable if we use it. The Government and environmentalists should therefore be encouraging us to make good use of water. They should not be urging us to use less of it or penalising those who find ways to use it productively. They should be aware that penalising those who might be inclined to waste water will also inhibit many who have valid reason to use it.
The optional use of water is often required to:
  • Ensure we have flowers in our garden
  • Have hanging baskets and potted plants outside our homes
  • Keep house plants alive
  • Grow vegetables in allotments and back gardens
  • Ensure compost rots properly
  • Wash plastic containers, cans, jars and bottles before recycling them
  • Keep our cars clean
  • Fill children’s paddling pools
  • In my own case, I power hose my white garden wall once a year. The politicians want to penalise me for removing the traffic grime.
If we charge for water different people are going to take undesirable measures to conserve it:
  • Some will shower less often.
  • Some will fill containers of cold water while they wait for the hot water to come from the tap or shower (OK in the Australian outback but not in Ireland).
  • Some will save the water from their washing machine to water the garden.
  • Some will go to the toilet before they leave work or a shopping centre, to reduce the number of flushes at home (saw that suggested in the Web).
  • Some who would normally wash fresh fruit before eating it will instead give it a rub with a tissue.
  • Some will drive to the car wash in the mistaken belief that they are saving water and money.
  • Older people who visit the toilet frequently at night will only flush it in the morning. (On the web it was suggested that they should “pee in a bottle or chamber pot”)
  • and you can be sure that there is someone somewhere in Ireland building an old style privy in his back garden in the belief that the contents can be used to fertilise the rhubarb patch. The neighbours will love him.
It is perfectly acceptable to encourage people not to leave the tap running while brushing their teeth, to reduce the time spent in the shower, and not to overfill the kettle while making a single cup of tea. It is not acceptable, nor is it worthwhile, to penalise those who fail to comply.

The Government should go further in encouraging the use of water. It would make economic sense to offer unlimited free water to non-polluting industries which depend on a plentiful supply of clean water. The only provision should be that employment is created.

Tuesday, 8 September 2015

Irish Water – How did we get it so wrong?

Some years ago, while staying with friends in Oman, we were taken on a day-long tour in our friends’ SUV. At one point we pulled into a filling station and I was asked by one of our hosts to pay for the petrol. I thought this rather odd but went along with it and was pleasantly surprised to find that the total cost of a full tank was around €8. In fact the reason I was asked to pay was to demonstrate just how cheap petrol was in Oman.

Environmentalists will probably be horrified at this story but the point I am making is that Oman has a government which accepts that its own citizens should be the first to benefit from the country’s natural resources. Contrast that with Ireland where we have a government which sees our most plentiful natural resource as an opportunity to extract more taxes from its people.

Here in Ireland water is a free commodity, it is a plentiful commodity, often we have too much of it. We have as much water today as we had 50 years ago and we will have as much of it in 50 years’ time as we have today. If I go down the road from my house and remove a barrel of water from Lough Corrib no one will complain, no one will accuse me of damaging the environment, no one will say that I am wasting a scarce resource, and no one would dream of charging me for doing so.

If that same barrel of water is delivered to my kitchen sink the Government wants to charge me for processing the water, for delivering the water, for water meters, for software consultants, for PR consultants, for an army of people manning a call centre to deal with queries about meter readings, for debt collectors, for lawyers, for unnecessary advertising on television and radio and in newspapers, for the nationwide distribution of unwanted booklets, for 1,500 Irish Water staff in excess of requirements and for men and women in a Dublin office who know as little about delivering water as I do.

The occupants of this same Dublin office do, however, know how to mislead the public by using phrases such as “the need for conservation”, “scarce resource”, “reducing wastage”,  “identifying leaks” and by always referring to a specific number of millions of litres of water rather than putting it in context by expressing the volume as a percentage.

The end result is that, despite Ireland having the most plentiful supply of water in the EU, those who know about these things claim that we will be asked to pay more per litre than any of our EU counterparts. They also say that, although we are one of the developed world’s wettest countries, we will be the first to have universal domestic water metering.

There are of course some variable costs associated with getting water from Lough Corrib to my house but the cost per household is so low as not to warrant the cost of a collection system.

Of much more significance are the fixed costs relating to the infrastructure required to deliver the water to our homes. These are the costs associated with the dams, pipes, pumping houses, treatment plants and sewage works, costs which have to be met irrespective of how much water is used by each individual house.

Paying for that is somewhat complicated and is worthy of debate. What we have had to date are ill-considered slogans from Government and from those opposed to water charges. Those who do try to introduce logical argument are largely ignored by the media and totally ignored by Fine Gael and Labour politicians.

The following questions need to be considered:
How much should it cost to deliver clean fresh water?
  • In the delivery of water, overheads are optional so we need to know the actual cost of delivering water to each Irish home.
  • As I have already demonstrated, water meters add to the cost of delivering water so I assume they will ultimately be abandoned. Collecting water charges also adds to the cost of water so that needs to be considered.
Where should the money come from? Options are
  • Exchequer funding as with the road infrastructure. Remember there is no relationship between motor tax and road infrastructure investment; there is no metered usage of our roads; and cyclists make use of our roads without being asked to pay for the privilege, or
  • A flat-rate water charge for domestic users.
Is there really any argument for making Irish Water a Semi-State commercial body simply to allow it borrow off balance sheet?
  • The EU imposes limits for Government borrowing for a reason. Attempting to breach these limits by creative accounting is irresponsible and adds to the cost of borrowing. The Government is behaving like a householder maxing out on credit cards, having earlier agreed a house mortgage and car finance with his or her bank manager.
If there is a case for water charges, how should they be collected?
  • I can think of only one cost-free method of collecting a domestic water charge and that method is also the most effective. There will be no additional collection costs if a fixed portion of the current property tax is earmarked for water and sewage.
Will the imposition of water charges adversely affect other Government policies or goals?
  • Water charges will add to the cost of home ownership and so fewer people will be able to purchase. That will put further pressure on the rental sector which in turn will force larger numbers to seek help from the State.
What will happen to traditional water charges?
  • Anyone building a new house is required to contribute towards the cost of services including the delivery of water. This payment should be included in any review of the cost of water delivery. This charge has an even bigger impact on the cost of home ownership.
If water charges are imposed on domestic users, how will they compare to the charges imposed on the commercial sector?
  • At no time during the ongoing debate on water charges has the Government mentioned the contribution made by the commercial sector to the overall cost of delivering water.
  • At no time has the Government revealed the percentage of processed water going to the domestic sector. I thought I had a reliable source when I was told that just 19% of processed water was consumed by domestic users. When questioned, a senior Irish Water executive claimed it was 34%. Even if this higher figure is accurate it is of huge significance in determining the relevance of water meters and in forecasting the potential savings through all conservation measure.
I started by asking “How did we get it so wrong?” and if there is one over-riding answer it is probably the lack of meaningful debate. Other contributing factors include:

  1. Arrogance (although this may be the reason for the lack of debate)
  2. Incompetence
  3. Disconnect between politicians and public servants on the one hand, and the struggling electorate on the other
  4. Lack of expertise among decision makers
  5. Misplaced assumptions (failure to challenge the so called “givens”)
  6. Focusing on what is done elsewhere
  7. Failing to consider issues unique to Ireland
  8. Subservience to EU officials
  9. Obsession with the word “conservation”, particularly by the Green Party who appear to have set the whole debacle in motion

My own view is that, after we have had this debate, Irish Water will be trimmed down and tasked to simply deliver clean water and treat sewage. I am not sure how the Government of the day will decide to cover Irish Water’s costs, but I believe the utility should have no role in collecting water charges from the domestic user.

Saturday, 15 August 2015

Water meters - Am I missing something?

"It makes no sense to spend hundreds of millions of euro metering a leaky system" - Brendan Howlin 2011 (before he became Minister for Public Expenditure & Reform) 

Like most people in the developed world we have become mesmerised by the word “conservation”. Unfortunately, here in Ireland, we have applied it to water with the same enthusiasm as others have applied it to endangered species, oil reserves, tropical forests and to water resources in California. 

When it comes to water conservation, we are transfixed to the point where most people fail to apply any rational thought to the reasons for conserving, the consequences of conserving, the ‘benefits’ of conserving, or the cost of conserving. 
Of course water conservation is a good thing, even here in Ireland. However, the only reason we have in Ireland for limiting water usage is to save money. That reason has either been forgotten or there is a misplaced assumption that whatever we spend on conservation measures will be recovered by savings resulting from processing less water. 

Probably the only expenditure which might reduce the cost of water processing is the repair of leaks. Water meters certainly do not qualify. Consider the following facts: 
  • The water meters currently being installed will only impact the 34% of water processed for domestic use. (Irish Water never acknowledges this fact and so most commentators seem to be unaware of it.)
  • Irish Water expects meters to reduce consumption by up to 10%. That amounts to just 3.4% of the total water currently being processed.
  • The Energy Regulator thinks this claim is over ambitious and that 6% is a more realistic figure. This reduces the potential reduction in the total volume of water processed to just 2.04%. 
Based on the above, even before we look at the cost implications, it is obvious that water conservation in the domestic sector is of marginal importance.

I have tried to determine the value of the possible savings resulting from water conservation and, while I cannot claim the following figures are accurate, they are close enough to demonstrate the futility of investing in any serious water conservation measures. 

In 2012 Ireland spent €1.5bn on the provision of water to homes and businesses across the country. Irish Water will agree that 90% of this figure is fixed cost. That means that the actual cost of processing all water is €150m per year and it is only this figure that can be reduced through water conservation. If Irish Water is correct in its assumption on the savings to be made through metering, the actual value is €5.1m per year. If the Energy Regulator is closer to the mark then the potential savings are just €3.06m. 

Once meters are in place they will require maintenance. They will have to be read on a quarterly basis and the readings will have to be processed. They will require a call centre to deal with queries. This will result in ongoing expenditure which will far exceed any potential savings to be achieved through reduced consumption. I haven’t even mentioned the €539m cost of meter installation or the unknown millions being spent on gardaí and private security when installers are confronted by protesters. 

Government Ministers and Irish Water have given other reasons for installing meters but none stands up to scrutiny.
  • “Consumers should only be asked to pay for the water they use”. Each consumer requires the same infrastructure to deliver water to his or her home. The “the pay for what you use” argument, therefore, only applies to the 10% of Irish Water’s costs which are variable. Massive investment for such fine tuning of water bills cannot be justified.
  • “Meters help in detecting leaks”. I was amazed at how excited Irish Water was about this unexpected bonus – the potential to reduce water processing by 2%. At the same time Irish Water has shown little interest in reducing the known 49% currently being wasted through leakage. As has frequently been pointed out, area metering costs less and offers much greater potential for reducing losses through leakage. (NB. Irish Water prefers to speak about the number of litres saved rather than the percentage. It is, however, misleading to talk of 46 million litres if this is just 2.75%).
  • “Metering, by reducing usage, will delay or eliminate future infrastructure investment”. Irish Water has not attempted to put a figure on this. Instead it is proceeding to plan for a €600m-plus investment to expand the Dublin water supply. In theory the elimination of leaks in Dublin should delay such investment for decades. In any case the potential savings to be achieved through metering the domestic sector will play an insignificant role in future investment decisions.
  • “All other OECD countries do it”. I can only say that those politicians who use this argument should consider a career change. 
There will be those who argue that as we now we have meters in place we should take advantage of them. The problem is that there is nothing to take advantage of. It will cost less to deliver water to Irish homes by ignoring the installed meters than by reading and maintaining them.

With almost all commentators, journalists, politicians and environmentalists accepting the importance of water conservation, I keep asking myself “Am I missing something?”. As I can’t think what it might be, I am left to suspect that none of the said commentators, journalists, politicians and environmentalists has asked his or her self the question “Have I thought this through?”