The Water Services (No. 2) Act, 2013, which came into effect on January 1, 2014, has brought about the single biggest transformation of the water services industry in Ireland in more than a century.

From that date, responsibility for all public water and wastewater schemes in Ireland transferred from the 31 local authorities to Irish Water, a new national water utility. The process of transferring all water assets and liabilities to Irish Water also commenced. Local authorities continued to provide services on behalf of the utility, operating as agents of Irish Water under a series of 12-year Service Level Agreements (SLAs). These services included the operation and maintenance of the majority of public water and wastewater schemes in the country, including treatment plants as well as distribution and collection networks.

In Kerry, there are 60 public water supply schemes providing more than 30,000 megalitres of drinking water to 150,000 customers and two million visitors annually. In addition there are 48 wastewater treatment plants in the county treating a peak population equivalent (PE) of 190,000 annually. There are more than 2,600km of water distribution mains with associated pumping stations and reservoirs as well as more than 430km of public sewers including associated pumping stations. 10 plants (three water and seven wastewater) are operated by private contractors. All other assets in the county are operated by Kerry County Council water services staff on behalf of Irish Water under a SLA.

Transitioning to a new water industry

Prior to 2014, Kerry County Council, as with all local authorities, worked with other stakeholders, such as the Health Service Executive, the Environmental Protection Agency and the Department of the Environment to ensure the safety and reliability of drinking water and to ensure the effective treatment of wastewater before returning it to the environment. Working subsequently with Irish Water towards achieving the same ends did not pose the most significant challenge for the local authorities. The biggest challenge, in my view, was moving from a position where the local authority was in direct control of service provision to one where the service was provided on a contractual basis on behalf of the new water utility in an environment where control (for example, regulatory, financial, policy) was ceded to Irish Water. Individual local authorities adopted individual approaches in adjusting to these new arrangements, taking account of their unique circumstances. In Kerry County Council, we decided from the outset to adopt the principles of collaboration that are enshrined in the SLA, working with Irish Water to initially ensure service continuity to our customers while also influencing decision makers to provide much needed investment in infrastructure.

Relatively seamless transition

This approach has led to a relatively seamless transition (from a customer perspective) to the new working arrangements and has led to more than €100 million in investment in capital infrastructure in the county since 2014, which has incrementally improved service levels. For example, building on the work commenced by Kerry County Council prior to 2014, there has been a 90 per cent reduction in open EPA files for drinking water supplies in Kerry. However, this transition has not been without its challenges. The separation of powers from planning authorities and the new water services authority, for example, has led to unintended consequences when the decisions of either authority are taken in isolation. The continuing viability of some local authority support services (for example, laboratory services and machinery yards) may be severely impacted when water services income is removed, inadvertently impacting on other services provided by local authorities.

Greatest challenge facing the water industry

Possibly the greatest challenge facing the water industry (comprising Irish Water and the 31 local authorities) at the moment is maintaining the resilience of service to customers. Irish Water’s business plan outlines a proposed reduction in personnel working in the industry of 1,500 up to 2021, all of which is to come from local authority staff. Investment in infrastructure, intelligence systems and a new industry model will offset the impact of these reductions. The challenges posed by this objective are twofold. First, increasing service resilience through investment in infrastructure, intelligence systems and an industry model will take many years, across multiple capital investment funding cycles and certainly well beyond 2021. Not having the necessary investment in place by the time all staff reductions are made may adversely impact on services.

Second, the frontline personnel providing day-to-day services to customers are almost exclusively local authority staff. Seeking staff reductions in local authorities in a non-targeted way (for example, through a general voluntary redundancy scheme) has the potential to remove a disproportionate amount of frontline staff.

Problem may be exacerbated in an improving economy

Ironically, this problem may be exacerbated in an improving economy where opportunities for staff in other local authority departments (for example, housing or roads) or in other industry sectors is rising, while the water industry, through meeting the requirements of the Commission for the Regulation of Utilities (CRU), continues to impose downward pressure on staff numbers. The reduction in staff numbers working in the water industry over the next few years must be achieved in a manner that does not impact on the resilience of the service being provided to customers. Currently, a significant proportion of the water industry’s resilience is provided by the dedicated service provided by frontline staff, which is often done in a spirit of goodwill through an inherent understanding of the importance of the service they provide to their fellow citizens and through carrying out their duties in direct contact with the customers they serve. National decision makers would be well advised not to erode the goodwill, and by extension the resilience of services, currently provided by frontline staff. Public statements by senior figures representing the utility in recent months have, regrettably, had the opposite effect.

Towards an enduring water industry

The current 12-year SLA between Irish Water and the local authorities is due to run until the end of 2025. Thereafter, Irish Water has indicated its intention to move to an enduring model for the water industry of a single public utility delivering all of the water services for the state. In fact, Irish Water has signalled its intention to accelerate the migration to a single utility model and to achieve its full implementation by 2021, citing the fact that its ability to deliver further efficiencies in the water industry is severely constrained by the current SLA model. Irish Water contends that further streamlining of customer services and ways of working are more achievable through a single organisation and that some services are more efficiently delivered on a regional rather than county basis. The government has noted the position of Irish Water and has asked for meaningful dialogue with the representative unions, which represent about 3,500 local authority employees. The unions have commenced engagement with this process and have set out their preference for a continuation of the SLA model beyond 2025 as offering the optimum means of delivering the service.

Possibility of a new ‘non-commercial’ state entity

They have also proposed the possibility of a new ‘non-commercial’ state entity to take responsibility for the water industry as opposed to a public utility, in addition to their request for a referendum on public ownership of water services in the state. They have expressed reservations about the proposed utility model as it is unclear to them what problems a public utility is trying to address, and they see difficulty with the implementation of the model proposed by Ervia and Irish Water as it envisages the forced transfer of staff to another company, for which there is no appetite. Anecdotally at least, the appetite among local authority staff to move to a semi-state utility from the public sector appears low. This may yet prove a critical challenge when negotiations enter a more detailed phase. Local government is obliged to implement the policy of central government and therefore the scope of local authority management to express an opinion on continuing discussions on a model that has a direct impact on their employees is limited. Conducting negotiations without the employer playing a central role will pose challenges for a successful outcome and may inadvertently impact on other services provided by local authorities in areas such as laboratories and machinery yards as previously mentioned.

As the industry as a whole enters the critical phase of discussions around how it should be structured, operated and governed into the future, there are, I believe, some fundamental questions that need to be answered:

1.) Given the recent enactment of the Water Services Act 2017, where Irish Water is now fully funded through the exchequer, does a public utility model remain the best option for the water industry in Ireland?

2.) What are the implications for Irish Water now that it is fully funded by the exchequer? For example, what are the implications of now being subject to the public spending code for its business planning and capital investment programmes?

3.) Has the recent and strident public opinion expressed a desire to retain the public service element of the industry in preference to a commodity-based utility?

Whatever the outcome of the negotiations and whatever ends up as the agreed approach for the future of the water industry in Ireland, strong leadership will be required on all sides to deliver it. Key to this will be the recognition of the loss that staff will experience if they move to a new employer. Irish Water has indicated that there will be no loss to current terms and conditions of employment, but addressing financial loss is only part of it. The loss of identity and loyalty to current employers and their public service ethos, while intangible, is significant. This is most manifest in the highly valued service currently provided by frontline staff and its significant contribution to the resilience of the service as mentioned previously. This, coupled with the fear and uncertainty faced by many local authority employees working in the water industry, may pose challenges to service continuity during any future transition to a new employer. In meeting these challenges, I feel it is necessary that we collectively learn from past mistakes. For example, the reason the introduction of domestic water charges failed was because of a failure to adequately communicate to the public the level of dissatisfaction with the existing condition of the service. For this reason, I believe it is vitally important to adequately communicate with local authority staff of the need for a single public utility and to offer a compelling argument as to why it offers the best option for the future of the industry.

Necessary to critically examine timelines for delivery

I also feel it is necessary to critically examine the timelines for delivery proposed by Irish Water to ensure they are adequate. The initial objective was to complete the transition to Irish Water by the end of 2017, and currently, by the end of 2021. Looking to international comparisons, it took Scottish Water 10 years to deliver a national water utility and that was without having to deal with the thorny issue of domestic water charges. It may yet transpire that a similar timeline will be required in Ireland and the full term of the SLAs may be required to secure the enduring model for the water industry here. While I believe it is important to set out the challenges currently facing the industry, as I see them, as it embarks on its final journey of transition, I also believe it is important to offer a few optimistic concluding remarks. Since antiquity, civilisations have always required water services for health, hygiene, industry and commerce. This will not change, irrespective of the outcome of negotiations on the future of the water industry in Ireland. The need for this vital service for our citizens will continue and staff will always be required to deliver this service, in whatever structure or model evolves. Furthermore, government is committed to investing in water infrastructure, to redress underinvestment in the industry going back many years. This will provide opportunities in the industry, especially for engineers, albeit in a much-changed working environment. Finally, those of us working in the water industry over the past five years have worked collectively and effectively to manage a significant period of change, during a period of severe economic retrenchment, with no loss in service to customers. There is no reason why we can’t continue this work in an improving economy.

Author: John Kennelly, BA, BAI, CEng, MIEI, head of Water Services Department, Kerry County Council