New Irish Water crisis as EU raises concerns over funding

IRISH Water has been plunged into a fresh crisis after the European Commission voiced serious concerns about whether the embattled public utility can fund itself into the future.

EU officials have warned of “uncertainty” surrounding the prospect of Irish Water passing the crucial market corporation test – which will determine whether the company can be kept off the Government’s books.

Failure to pass the test, the results of which will be known in April, threaten the Government’s pledge to slash taxes and increase spending in next year’s Budget.

Senior Coalition sources believe such a “doomsday scenario” will cast serious doubt over Taoiseach Enda Kenny’s plans to allow the Government to run its full course until the spring of 2016.

The draft report, seen by the Irish Independent, warns the revised water package has “diminished” the prospect of Irish Water being self-funded.

The package, which is capped at €160 for all households, is the root cause of the commission’s concern.

“There will be no certainty about the fiscal treatment of Irish Water until April 2015,” the report states.

“The Government appears fully confident that Irish Water will pass the market test, but this will be determined ultimately by Eurostat and most likely by April 2015. The revised water package has nonetheless increased the uncertainty around Eurostat’s decision.”

Officials warn that the uncertainty surrounding the outcome of the test has increased because of lower than expected revenue collection from domestic charges and the capping of charges until 2019.

The report also says the €100 water conservation grant – which was announced amid fanfare – amounts to an “Exchequer transfer to Irish Water via households”.

The report warns that Irish Water will face “rising capital costs” when it implements its infrastructure programme.

Eurostat, the commission’s statistical arm, decides whether State-owned companies can be seen to be financially independent from governments. To meet the test, bodies must meet more than half their operating costs from income they raise from customers.

The commission says that the “independence from political influence” of the energy regulator could be at risk because the Government chose to override a water charges plan that had previously been agreed.

“The independence from political influence of the CER (Commision for Energy Regulation) in its future regulatory functions could be at risk, not only in the water sector but also in other areas that fall under its mandate,” the report says.

Planned incentives to conserve water will also be weaker than under the original plans because of the decision to cap charges, according to the report.

“The cap could effectively sever the link between consumption and charge, particularly for households with higher water consumption,” it states.

Government sources last night admitted the report is of concern but said the Department of Finance is “confident” that the matters raised can be addressed. The report is on the desks of Finance Minister Michael Noonan, Environment Minister Alan Kelly, and was also given to members of the Dail finance committee.

A Department spokesman said the department doesn’t comment on reports that “have not yet been published”.

Irish Independent

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