The European Commission has decided to investigate the Northern Ireland Executive's policy that domestic customers of Northern Ireland Water should pay no specific charges to the utility. Business customers are charged directly. However, the NIE pays £280 million a year to NI Water to meet some of the cost of domestic water supply.
Under European Union (EU) rules water customers are meant to be charged for water use. In Northern Ireland the administration claims domestic customers do because they pay a regional rate. The Commission has opened a so-called "pilot case" to look at the issue. Essentially, this is a way for the commission to establish whether EU rules are being correctly applied.
It allows for the commission and member states to resolve any conflicts without resorting to infringement proceedings.
The Department of Agriculture Environment and Rural Affairs (DAERA) said it could not comment on the detail of the case.
"It is the subject of a confidential dialogue with the Commission and the release of further details could potentially prejudice the outcome of those discussions," said the department.