Government and Irish Water express confidence in it passing ‘market test’

The Government and Irish Water have both expressed strong confidence that the new water utility will pass the “market test” in April that upholds its status as a separate entity from the State.

A leaked report from the European Commission stated that the reduced water charges arrangement announced in November had created uncertainty over the independence of Irish Water. To remain off the Government balance sheet, such a body needs to show that at least half of its funding comes from non-State sources.

The report from the Directorate-General on Economics and Finance focused particular attention on the water conservation grant of €100 per household which is said could be construed as a direct transfer from the Exchequer to Irish Water via households.

But the Minister of State at the Department of the Environment Paudie Coffey yesterday challenged this view saying the conservation grant had nothing to do with the market test. He said he was fully confident the funding model for Irish Water would pass the test which will be carried out by the EU's statistical body Eurostat in April.

Mr Coffee said that hypothetical arguments were being put out before the test was conducted. He also said that detailed analysis of the revised charging system had been carried out by the Department of finance.

For its part, Irish Water said its long term funding plan was progressing well, and would underpin its ability to fund its significant investment programme.

In a statement, the utility said that changes announced last November “have had no net impact Irish Water’s total income”.

“As a result, Irish Water’s cash flow projections for the future are unaffected and Irish Water’s ability to borrow is similarly unaffected.”

One of the grounds of the EU Commission’s concerns was that the net income from households to Irish Water would fall by €21 million as a result of the changes. It also questioned if the Commission for Energy Regulation’s independence had been compromised by the decision of Government to “override” the charging plan it had already set out.

“Irish Water has a funding plan in place which sees initial external funding secured from Irish and international banks. Good progress is being made in this regard. In the medium term the funding plan sees Irish Water achieving investment grade metrics, thereby facilitating borrowing from the international bond markets.

“We remain confident in relation to the outcome of Eurostat’s deliberations, but clearly we must wait their final determination.”

In response to the Commission’s finding there would be little incentive for households to conserve water, the utility said its analysis showed that 35 per cent of metered customers would have bills below the charging cap.

Opposition spokespeople echoed the Commission's sense of uncertainty. Fianna Fáil Environment spokesman Barry Cowen said it raised the prospect of the scheme failing the so-called market corporation test.

“If it now fails the market corporation test, which was the whole point of this costly exercise, the Government’s future will have to come under serious scrutiny.”

Sinn Féin spokesman on the Environment Brian Stanley confirmed doubts already expressed by him on the funding model for Irish Water. He said it was a "sleight of hand" and Irish Water would be unable to raise sufficient funds to finance its operations for at least three years.

Cllr Mick Barry of the Anti Austerity Alliance said the latest disclosure cast doubt not only over the survival of Irish Water but also of the Government.