Review of water and sewerage services
Monday, 11 June 2007Regional Development Minister, Conor Murphy, announced today the terms of reference for the review of water and sewerage services.
The Executive decided on 10 May that new annual charges for water and sewerage services would not be imposed in 2007/2008.
In a statement to the Assembly, the Minister said: “The terms of reference agreed by the Executive propose a comprehensive review of existing arrangements for the delivery of water and sewerage services led by an independent panel.
"The review will have two strands. The first strand focuses on the fundamental issues of financing these essential services and should report by Autumn 2007. This will enable budgetary arrangements to be agreed. The second strand will concentrate on wider aspects of arrangements for water and sewerage and should report by December 2007.
" It will be able to take a longer perspective and recommend any changes which may require new legislation or structural arrangements. Any recommendations on the second strand will be subject to consultation.
“In the meantime we must work within existing structures to deliver water and sewerage services and do our best to make sure that these essential services are delivered as efficiently and effectively as possible.
“In terms of scope the review panel will be tasked with identifying the level of funding needed and set out options to examine the most appropriate way of managing, governing and delivering our water and sewerage services within full public-ownership. It will make recommendations on the way forward covering governance and statutory arrangements, investment, business models and strategic plans.
“This is a wide-ranging remit with a challenging timescale. However, it is important that the Executive is able to take key decisions as soon as possible.
“I believe it is of paramount importance that there is public confidence in the conduct of the review and that the reasons for any decisions are clearly set out. I believe that the terms of reference that have been agreed provide the best way forward to achieve this. “
Asked about the composition of the review panel, the Minister said:
“I will work with my colleagues on the Executive Sub Committee to agree a review panel that meets the criteria set out in the terms of reference – that is independence, expertise and knowledge of utility operations, regulation, administration, and consumer and economic matters, both local and more widely.”
Asked about consultation on the terms of reference, the Minister said:
“These matters are of concern to everyone. We all use these essential services. I have met and discussed the review with a number of people and bodies and agreed them with the all party sub-committee set up by the Executive. This has been helpful but timescales are short and we need to press on. “
NOTES TO EDITORS:
- Terms of reference on independent review of water and sewerage reform process
Purpose
To establish an independent and comprehensive review to advise the Minister for Regional Development on the level of funding needed as well as options to manage, govern and finance our water and sewerage services for all our citizens now and in the future.
In particular, to ensure the ongoing and continued investment in our water and sewerage infrastructure needed to deliver quality, value for money services at the lowest possible cost and the highest levels of efficiency possible within a publicly-owned organization which protects the public interest.
Approach
The Executive agreed to conduct a comprehensive review of the financing of water and sewerage services on 10 May 2007. In doing so, it agreed not to impose new water charges as had been planned in 2007/08. This decision will save the average household £100 in the year ahead. The Executive also established a sub-committee to agree the terms of reference of the review for its approval.
The review is to be taken forward in an open and transparent way on behalf of the citizens as the real shareholders in our water and sewerage services. The aim of this review is to make sure that there is public trust and confidence in the arrangements for financing and delivering water and sewerage services.
Privatisation of our water and sewerage services is not an option.
The Review will comprise two distinct strands:
- Cost of water and Sewerage services and how these will be funded. This strand will be undertaken by the Independent review panel and report to the Minister for Regional Development, Executive sub-committee and the Executive.
- Management, Governance and delivery of high quality water and sewerage services within a public ownership model. This strand will also be undertaken by the independent review panel reporting to the Minister for Regional Development, Executive Sub-Committee and the Executive.
It has been agreed by the Executive that this review will be short and focused. The Minister for Regional Development will report back to the Executive as follows;
Strand 1: Final Report in Autumn 2007; and
Strand 2: Final report in December 2007, (interim report in Autumn 2007).
It is recognized that the Minister and the review panels will have to conduct their work within a short turnaround time which includes the summer holiday period. All efforts will be made to mange this effectively. The Minister for Regional Development will give monthly updates on progress against time, objectives and delivery to the Executive sub-committee and (where the sub-committee agrees it is necessary) to the Executive. The Regional Development Committee is a key stakeholder in this process and will be consulted and updated as the review progresses by the Minister for Regional Development.
The review will be serviced by an independent secretariat.
The review panel will have full access to all relevant documentation in support of its work. It will also invite expertise, evidence and analysis from others as required including the statutory partners, namely the shareholder (DRD), the undertaker (NIW), the regulator (NIAUR) and the consumer representative body (CCNI), the Regional Development Committee, DFP, HMT, advisors, analysts and consultants involved to date, as well as other interested parties as identified by the review panel.
Implementation
The review panel will make any recommendations arising in Strand 1 of the review by the autumn. Any recommendations arising from Strand 2 of the review will be made within the context of a 2-3 year implementation period to allow for changes which would take longer to implement. The output from Strand 2 will be subject to a 12 week consultation period from January to March 2008.
Cost
Resources must be identified to conduct this review as decided by the Executive on 10 May 2007 in order to deliver this review in the timescale outlined above.
Strand 1: Cost of Water and Sewerage Services and how these will be funded
Scope
There is a need to address the funding of water and sewerage services in the shorter term and therefore this strand of the review must report by Autumn 2007 to advise the funding decisions by the Assembly and the Executive.
The review will address the following questions;
- what the real cost of providing water and sewerage services is; and
- how these costs should be met.
In particular, two key aspects of public concern and interest must be considered;
Paying twice: - the review needs to ascertain how much people already contribute through the regional rate as a starting point as the public should not be expected to pay twice for this service.
Under-investment: - the review must establish the costs of rectifying the legacy of under investment that has occurred and to make the case for securing a contribution towards past underinvestment.
(The review will take into consideration the DFP Rating Review)
Strand 2: management, Governance and delivery of high quality water and sewerage services within a public-ownership model.
Scope
This review will be conducted by the fully independent review panel and serviced by an independent secretariat. The review panel will be tasked with identifying the level of funding needed and set out options to examine the most appropriate way of managing, governing and delivering our water and sewerage services within full public-ownership. It will make recommendations on the way forward.
This review will examine the following:
1. Legislation, license, articles of association and governance letter
Do these arrangements sufficiently support and meet the needs of a publicy-owned business model? What amendments or additions would be recommended?
2. Governance
Are the governance arrangements suitable and appropriate? Do the arrangements sufficiently take account of and support the restoration of the new Assembly and the decision to keep in public ownership?
3. Investment Programme
The Panel will review the scale, structure and phasing of investment planned to meet requirements. The Panel will also assess whether current arrangements are sufficient for identifying the appropriate level of funding needed over the next 20 years to meet our requirements and that of EU legislation. The Panel will also identify what element of funding need relates to legacy costs due to past underinvestment or maintenance needs, and what element are future development costs.
4. Business Model
Is the Go-Co, including arrangements with third parties, the best and most appropriate model to meet the purposes as defined above and within public ownership? What option or options would be best to consider and/or implement e.g. Scottish and Welsh business model
5. Strategic Business plan and financial Model (SoS/HMT)
Is the business and financial model appropriate for a public ownership water and sewerage service? Is the policy for example on dividend, cost of capital, etc appropriate and in the best interest of the public as the main shareholder? Does the efficiency model ensure value for money at minimum cost?
Membership
It is essential that the review panel is independent to reflect the open and transparent approach to establish the best way forward. The review panel will consist of a chairperson and two members and should as far as possible collectively reflect the following elements;
- Independence
- Expertise and knowledge drawn locally and further a field e.g. England, Scotland, Wales, South of Ireland, etc.
- Public Administration
- Regulatory and operational/management experience in water and other utilities
- Economic and academic experience and expertise
- Public and Consumer interest
Process
The Independent Review Panel will provide advice and identify options for consideration by the Minister for Regional Development. The Minister will present monthly updates and the Panel’s advice to the Executive Sub-Committee with recommendations where this is appropriate. The Minister for Regional Development will put firm proposals for future action to the Executive once these have been agreed by the Executive Sub-Committee.
- Media queries to: Anne Armstrong, Department for Regional Development, Press Office, Tel: 028 9054 0004
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