1 / 14

The Challenges of Ensuring Security, Affordability and Equity Economic Regulation of Water

The Challenges of Ensuring Security, Affordability and Equity Economic Regulation of Water. Cathy Mannion Director Commission for Energy Regulation. Overview. Background The Emerging Model Form of Regulation Regulatory Challenges. Background.

tass
Download Presentation

The Challenges of Ensuring Security, Affordability and Equity Economic Regulation of Water

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Challenges of Ensuring Security, Affordability and EquityEconomic Regulation of Water Cathy Mannion Director Commission for Energy Regulation

  2. Overview • Background • The Emerging Model • Form of Regulation • Regulatory Challenges

  3. Background • Water services currently provided by 5 city councils and 29 county councils • Annual financing costs: €1.2bn • Opex: €715m • Capex: €500m • Non-domestic charges finance €200m • State finances the €1bn balance

  4. Background • State has invested €5bn in infrastructure over 2000 – 2012. • Rate of expenditure unlikely to decline in coming decade due to:- poor state of network – huge leakage etc.- population growth-business demands (Forfas Report 2008)-EU obligations (Water Framework Directive)

  5. Background • Room for efficiencies - Opex per connections is higher than UK by 50% - 100%- Leakage levels (41%) are double UK average (20%)- Employees per water connections/customer served are higher than in U.K.- Collection rates for non-domestics in Ireland (53%) lower than U.K. average collection rate (78%).

  6. Emerging Model • Centralised delivery of services in one utility, Irish Water • Irish Water to operate service level agreements with Local Authorities (tool for driving efficiencies in opex) • All users charged for the provision of public water services • Universal free allowance • Affordability measures • Roll out of meters by [2014] • Charging commences 2014 • Independent economic regulation of water services – CER

  7. Why Regulate Networks • Monopoly Function • Protection of Customers • Efficient Operation • Appropriate level and type of investment • Sustainable development of the network • Quality of service • Transition from Local Authority model to centralised model at lowest cost

  8. Overview of Revenue Regulation • Opex and Capex • Regulated Asset Base • Asset values, lives and depreciation profile • WACC - return on investment • Incentives • Cost reduction • Outputs • Service improvement

  9. Building blocks of the price control Allowed revenues = Depreciation Asset lives RAB + Return Cost of capital (WACC) + OPEX Opening RAB + CAPEX (+/-) Adjustments & Incentives – Depreciation – Disposals

  10. Revenue Regulation • Multi-annual revenue control framework (electricity and gas) • Provide certainty and flexibility to manage costs and gain efficiencies • Strong incentives for efficiency • Tariff revenue must be less than or equal to an approved amount, less an efficiency factor • Efficiency gains are shared with the customer • Review of historic and future expenditures and revenues • For Irish Water, the first revenue control would focus on setting the appropriate baseline and key targets for coming years standard approach when costs are known

  11. Regulation in initial period • Service Level Agreements not fully in place • Irish Water unable to make a detailed cost submission to CER • Roll out of meters incomplete • Decisions required by year end: • Universal allowance • Treatment of affordability • Level of state funding • Level of investments • Total opex • Enabling legislation • 2013, CER consults on tariff structures Tariff revenue requirement

  12. Regulation in initial period • Priorities • Consult widely on domestic tariff structures and levels for metered and unmetered supplies • Require IW to put in place a Customer Charter • Establish a dispute resolution service • Give IW incentives to maximise recovery of non-domestic charges • Review structure and level of non-domestic charges and consult on approach to harmonise charges • Establish a robust CER function for the economic regulation of water with the necessary skill set

  13. Regulatory Challenges • Examples: • A new charge in bad times • Public acceptance that water charges are required • Communicate clearly and openly • Setting of charges for unmetered supplied • Universal allowance/affordability measures • Scale and duration of continued exchequer funding • Driving efficiency during period of reformation (SLAs) • Significant capital expenditure required to bring infrastructure up to new standards

  14. Thank Youcmannion@cer.ie

More Related