Setting up Irish Water is one of the biggest reform agendas undertaken in the public sector and involves moving from 34 Local Authorities providing water services to a single national water authority. Critically, it has to deal with a legacy of underinvestment in the sector and finding more efficient ways of delivering the service.

In 2011 the total cost (capital and operational) of delivering water services was €1.2 billion. Building the fourth utility established since the foundation of the state necessitates an up-front investment in establishment costs. Costs of €100m to date represent less than 1% of the cost of providing water services over the next ten years under the current model.

The utility has to have systems to handle hundreds of millions of euro on operational spend each year – almost €800m per annum. It has to have systems and processes to handle an asset base with a value of €11bn including 2,000 water and wastewater treatment plants. It has to have customer and billing systems to deal with 1.8m customers (largest number of customers of any utility currently). Approximately 50% of the set up costs are being incurred on specialist service providers. This includes systems development and implementation e.g. work and asset management, customer care and billing, financial management including procurement systems.

By utilising the specialist services and creating the appropriate operating model for Irish Water generates an enormous pay back for the state and ultimately the Irish Water customer. In the period to 2021, between increased income and efficiencies in operation and capital investment, Irish Water can save the state over €2bn.

All costs will be examined by the Commission for Regulation of Utilities (CRU). The CRU has confirmed that efficiently incurred establishment costs should be added to the opening Regulated Asset Base of Irish Water – meaning such establishment costs will produce an asset in themselves and can be depreciated over a period of up to 10 years.

Setting up a utility on the scale of Irish Water is a significant undertaking and there are costs involved in this. The approach taken to establishing Irish Water within Bord Gais is most cost efficient.

All external contracts were subject to a competitive tender process to ensure best value for money.
 

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