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Water Services National Training Group. 10 th Annual Conference 7 th September 2006. Water Services – Operational Affordability. Michael Roche Director of Services Offaly County Council. Affordability Challenges. Water Pricing Policy DBO Implications Water Quality Energy Costs
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Water Services National Training Group 10th Annual Conference 7th September 2006 WSNTG Annual Conference September 2006
Water Services – Operational Affordability Michael Roche Director of Services Offaly County Council WSNTG Annual Conference September 2006
Affordability Challenges • Water Pricing Policy • DBO Implications • Water Quality • Energy Costs • Legislation WSNTG Annual Conference September 2006
Analogy • Waste Management- After WMA, landfill gate prices rose from £5 to €130 per Tonne(2000%) in 6 years, now retrenching to €90 • Reason-Historic underfunding followed by drastic upgrade to meet new higher standards WSNTG Annual Conference September 2006
Thankfully the situation in Water Services is nowhere near as drastic • Nevertheless, the analogy has resonances for the sector WSNTG Annual Conference September 2006
Water Pricing Policy • Polluter Pays Principle • Only applied to Non-Domestic Sector • Full Cost Recovery • Charges to be based on meter readings • Domestic Costs to be met from Local Government Fund (LGF) WSNTG Annual Conference September 2006
Water Pricing Policy • Two principal concerns for Local Authorities • Requirements of Non-Domestic Metering policy • Recoupment of Domestic Costs WSNTG Annual Conference September 2006
Non-Domestic Metering • Non-profit • 25% Unaccounted For Water (UFW) • 95% recovery of Charges • Transparent • Operational Issues resulting WSNTG Annual Conference September 2006
Non-Domestic Metering • Combined Connections • Domestic allowance • Ability to recover charges/Power to disconnect • Charging for UFW • Recovery of Capital Costs • Bad Debts WSNTG Annual Conference September 2006
Recoupment of Domestic Costs • CCMA Survey of period from 2002-2005 • Local Government Fund WSNTG Annual Conference September 2006
Recoupment of Domestic Costs • CCMA Survey carried out in 2002 found Domestic Costs represented 32% of LGF and would rise to 66% by 2008. • Revised survey carried out in 2005 found Total operating cost up 57% from 2002 with domestic costs up 53% • 2005 survey found Domestic Costs as proportion of Local Govt Fund rose from an estimated 32% to 37% between 2002 and 2005. • Conclusion: operational costs are rising at faster rate than LGF increases. WSNTG Annual Conference September 2006
Recoupment of Domestic Costs • Survey Results WSNTG Annual Conference September 2006
Recoupment of Domestic Costs WSNTG Annual Conference September 2006
Recoupment of Domestic Costs WSNTG Annual Conference September 2006
DBO Policy • Resultant cost increase • Profit margin for Operators • Capital Replacement Fund Examples: • MONAGHAN-DBO for 3 villages, costs rose from €157,368(2003) to €203,000 in 2005 - 29% increase WSNTG Annual Conference September 2006
DBO Policy • OFFALY – Clara WWTP- 2005 O&M cost of €170,000 , up from €50,000 in 2003 (new plant with increased capacity) • OFFALY – Tullamore proposed WWTP • Doubling of Plant Capacity /Sludge treatment • Op. cost estimated at €1.8m • Existing Cost- €0.6m • Increase of 50% WSNTG Annual Conference September 2006
Clara WWTP WSNTG Annual Conference September 2006
Clara WWTP WSNTG Annual Conference September 2006
Ferbane WWTP WSNTG Annual Conference September 2006
DBO Policy • FERBANE WWTP • Previous Annual Cost-€50,000 • Current-€200,000 • SOUTH TIPPERARY • Pre DBO Operating Costs (2002)-€2.2m • Current DBO Operating Costs (2006)-€3.35m • Increase of 50% WSNTG Annual Conference September 2006
DBO Policy • CLARE • 2006 Operating Budget-€11.8m • Estimated additional cost of O&M element-€4.6m • Increase of 39% WSNTG Annual Conference September 2006
Water Quality • Drinking Water Quality • EU Drinking Water Directive • Increased sampling/analysis costs- number and skills of staff • Increased Treatment Costs e.g. Cryptosporidium WSNTG Annual Conference September 2006
Water Quality • In Offaly, costs of monitoring Drinking Water have increased from €56,000 to €160,000 per annum WSNTG Annual Conference September 2006
Water Quality • Receiving Water Quality • Water Framework Directive (WFD) requires all waters to have “good” status by 2015 WSNTG Annual Conference September 2006
Energy Costs Electricity Costs • Rising price of Oil/Gas • Deregulation of Energy Market WSNTG Annual Conference September 2006
Legislation • Water Quality • Water Services Bill - Licensing of Group Schemes, Asset Management • Health and Safety • Training • “Staff Embargo” WSNTG Annual Conference September 2006