McDonnell, Thomas --- "Residential water charges in Ireland: policy objectives and funding models" [2017] ELECD 334; in Chaisse, Julien (ed), "Charting the Water Regulatory Future" (Edward Elgar Publishing, 2017) 297

Book Title: Charting the Water Regulatory Future

Editor(s): Chaisse, Julien

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781785366710

Section: Chapter 14

Section Title: Residential water charges in Ireland: policy objectives and funding models

Author(s): McDonnell, Thomas

Number of pages: 24

Abstract/Description:

Clean water is an economic good. It is not costless. Water is heavy and difficult to transport, and the provision of water and wastewater services requires the construction, operation, maintenance and improvement of expensive network infrastructure. Such costs must be financed through present or future taxation, through tariffs, or through a combination of both. In Ireland, the provision of water and wastewater services has mainly been funded through general taxation with an additional contribution from non-domestic rates. A government commissioned assessment of water services delivery in Ireland reviewed the strengths and weaknesses of the delivery of water services through the then 34 local authorities, and concluded that there was a lack of co-ordination, an aging and poor quality network, and problems in achieving economies of scale and delivering projects of national importance. The report also argued that the best way to improve the efficiency and effectiveness of operations, to increase capital investment, and to access new finances for the water sector, was to combine Irish water and wastewater services into a single public utility. The market for water and wastewater services is a natural monopoly in the sense that a single provider of the service is the most efficient market structure. Natural monopolies are characterised by network infrastructure, large fixed costs, economies of scope and scale and low or zero marginal cost. A lack of competition in these markets will tend to drive a propensity to market failure and economic inefficiency in the absence of robust regulatory measures. On 1 January 2014, responsibility for water and wastewater services to homes and businesses was transferred from the then 34 local authorities to a new national water service authority called Irish Water. Statutory responsibility for the economic regulation of the water sector and protection of the interests of customers was given to the Commission for Energy Regulation (CER) with the mandate to ensure operational efficiency is achieved across the sector.