Regulator says Irish Water must cut costs by 20%
Irish Water has been told to reduce its costs by 20% because they are "significantly higher" than those in comparable utility companies, according to the country’s water regulator, the Commission for Energy Regulation (CER).
The watchdog has reduced the amount of money IW can spend by €156m for 2017 and 2018, and says the involvement of local authorities in day-to-day operations could be "impeding" the utility's ability to reduce costs.CER said it would allow Irish Water to collect €1.852bn to operate and upgrade the network over the next two years. The utility had requested €156m more.
On capital expenditure, used to fund upgrades of treatment plants and reduce leakage rates, some €1.287bn will be allowed. On the operations side, Irish Water sought €1.523bn, and was allowed €1.395bn.
The regulator noted that the water network was previously operated by the country's local authorities who still had a role under so-called Service Level Agreements (SLAs) negotiated between the councils and the utility.
"This operating model may impede Irish Water's ability to deliver cost reductions in the short term as it will take time to implement a unified approach and common systems and processes," the regulator noted.
The watchdog concluded that: "Irish Water's costs, inclusive of SLA costs, are significantly higher than those of established utilities in other jurisdictions. The CER expects Irish Water to drive efficiencies at a level that is broadly comparable to those achieved by other utilities elsewhere."
The regulator said it expected Irish Water to deliver “efficiencies of circa 20%
within its base controllable operating expenditure over the period from the start of 2015 to the end of 2018."