Price changes will cost Irish Water €141m in lost revenue each year

IRISH Water’s new reduced pricing structure will cost the company at least €74m, and eventually as much as €141m every year, the Irish Mail on Sunday can reveal.

Environment Minister Alan Kelly announced revised water charges on Wednesday aimed at quelling the public’s anger, which has rocked the Government in recent weeks.

The Labour deputy leader revealed that bills would be slashed to €160 for people living alone and €260 for homes with two or more adults.

Bills will be capped at this level until January 2019 – significantly longer than the original plan of capping bills for just nine months.

It is not yet certain that the new package will be sanctioned by Eurostat, allowing the Government to keep Irish Water ‘off balance sheet’.

However, while the announcement may have succeeded in winning over some of the public, it has not come without cost.

An analysis of the figures by this newspaper has revealed that Irish Water will lose a hefty €141m every year under the new regime.

Our conclusions have been backed by journalist and financial expert Cormac Lucey and Professor Ray Kinsella of UCD has described our analysis as ‘a robust and sensible model’.

The original charges were based on the number of adults living in a household. For example, a home with one adult would have been charged €176 per year; two adults would have paid €278, rising to €381 for three adults, €483 for four and €586 for five.

However, the maximum these homes will now be charged is €260 – resulting in a €74m loss.

Worse still, when compared to the income it would have received when full metering was rolled out under the old system – originally due to begin next year – Irish Water will now lose €141m per year.

‘The only viable way out is to raise prices’

Our calculations were arrived at using figures from Irish Water’s own research into water consumption, released under a Freedom of Information request.

These figures were then compared with the most up-todate figures on the number of each type of household in the country from the Central Statistics Office, and modified on a pro-rata basis.

For example, there are 480,038 people living alone in the country. If these people all pay €160, then Irish Water will take €56.2m (adjusted pro-rata because the population is 1.65 million but Irish Water’s customer base is only 1.35 million) – almost €13m less than the €69m Irish Water would have taken under the old caps.

The loss of income is most striking on households with a large number of adults.

Under the old regime, a house with four adults would have paid a charge capped at €484, while five adults would pay €586.

However, under the new charges these homes will simply pay €260, which effectively slashes Irish Water’s income in half.

Professor Ray Kinsella of UCD said Irish Water had made a mistake in failing to factor in those who can’t pay – and those who won’t pay.

‘The single most important thing in an economic model is how the consumer feels,’ he said, saying the loss of revenue in the new package would deter potential investors and predicting that the semi-State would quickly need to increase charges. ‘How will they claw back what they’ve lost in revenue? The only viable way is to increase prices down the line,’ he said.

The EU Commission and the Troika both expressed concern about the effect of the U-turn on the country’s budget. Eurostat will analyse the new structure next year to see if more than half of the company’s costs come from State aid. The Taoiseach says he is confident Irish Water will pass the test.

ben.haugh@mailonsunday.ie