CRU's Decision on Irish Water's Non-Domestic Tariff Framework
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CRU’s Decision on Irish Water’s Non-Domestic Tariff Framework Irish Water Customer Information Paper NDTFR_IW_010 July 3rd 2019 1 Contents 1. Introduction ................................................................................................................................ 3 2. CRU Decision ........................................................................................................................... 6 3. Enduring Tariffs reflecting the CRU’s Decision ................................................................. 11 4. Customer Bill Impact .............................................................................................................. 14 5. Customer Communication .................................................................................................... 40 6. Water Conservation ............................................................................................................... 42 7. International Price Comparison Analysis ............................................................................ 43 8. Next Steps ............................................................................................................................... 60 2 1. Introduction Irish Water assumed responsibility for water and wastewater services on 1st January 2014. Current water supply and wastewater collection tariff arrangements are set out in the Water Charges Plan (WCP)1. Section 3 of the WCP provides for the application of non-domestic tariffs in accordance with the structures and arrangements in place prior to 1st January 2014. Specifically, each customer is currently charged in line with non-domestic tariff levels and arrangements as applied by their relevant Local Authority (LA) on 31st December 2013. Across the 31 LAs, there are large variations, with 44 distinct charging methodologies and over 500 different tariffs. Recognising the inequity and complexity of the current arrangements, the Commission for Regulation of Utilities (CRU) requested Irish Water to prepare a submission setting out tariff design options and a proposal for an enduring Tariff Framework for non-domestic customers. The CRU provided Irish Water with a set of regulatory tariff principles to guide the design of the new Non- Domestic Tariff Framework. On 20th June 2018, the CRU published a suite of papers submitted by Irish Water on the Non- Domestic Tariff Framework. The papers were2: Tariff Design Proposals – a technical paper, which sets out Irish Water’s proposed tariff design for the enduring Non-Domestic Tariff Framework, including proposals on the geographical basis for charging customers, customer classification, cost allocation, and tariff structure; Transitional Arrangements Proposals – a technical paper, which sets out Irish Water’s proposed approach to implementing the new tariff arrangements, including customer transition arrangements where appropriate; Summary of current tariff arrangements, a technical paper, which provides an outline of the current non-domestic tariff arrangements across each LA; and A summary paper – which sets out Irish Water’s proposals (on both tariff design and implementation) in a simple, non-technical, manner, to be easily accessible by all customers. The CRU sought views from the public on each of Irish Water’s proposals during a 10 week public consultation concluding on 29th August 2018. The CRU considered the responses to the public consultation before reaching a Proposed Decision on the tariff design and transitional arrangements of the new Framework. The CRU sought views from the public on its Proposed Decision during a 5 week public consultation which concluded on 20th May 2019. The CRU considered the responses to this second round of public consultation before reaching a Decision on the tariff design and transitional arrangements for the new Framework. The CRU’s Decision is consistent with its Proposed Decision on each aspect of the Framework (tariff design, transitional arrangements and tariff rates)3. 1 Updated Water Charges Plan 1st April 2019. 2 All papers are available here. 3 The CRU’s Non-Domestic Tariff Design and Transitional Arrangements Proposed Decision is available here. 3 Respondents’ comments during the CRU consultation process indicated a requirement for a further supporting document that outlines the key aspects of the CRU’s Decision and how they impact Irish Water’s non-domestic customers. The CRU and Irish Water agreed that a Customer Information paper to complement the CRU’s Decision is appropriate and should include: i. The CRU’s Decision on key aspects of the Framework; ii. The non-domestic tariffs reflecting the CRU’s Decision; iii. Customer bill impact – an illustration of how customers will be impacted by the Decision on enduring tariffs and transitional arrangements; iv. Customer communication – an outline of how and when Irish Water intends to communicate tariff changes to individual customers; v. Water conservation – an outline of the supports Irish Water is making available to non-domestic customers to facilitate water conservation; vi. International price comparison analysis; and vii. Next steps – the remaining work to be completed by Irish Water and CRU in advance of the new Framework being implemented. The CRU has now published its Decision. The purpose of this Customer Information paper is to help non-domestic customers and stakeholders understand the impact of the CRU’s Decision. Rationale for each element of the Decision can be found in the CRU’s Decision paper and in Irish Water’s tariff design4 and transitional arrangements5 proposal papers. 1.1 Structure of the paper This paper is structured as follows: section 2 summarises the CRU’s principal decisions on the tariff design and transitional arrangements of the new Framework; section 3 sets out the final tariffs reflecting the CRU’s Decision. These tariffs are used in the analysis in sections 4 and 7 and in appendix 2 of this paper; section 4 considers the impact of the CRU’s Decision on non-domestic customer bills. This section assesses the impact of the tariffs and the role of transitional tariffs in mitigating the impact; section 5 sets out the approach to communicating tariff changes to non-domestic customers; section 6 outlines the supports Irish Water is making available to non-domestic customers to facilitate water conservation; section 7 assesses how the annual charges faced by non-domestic customers compare internationally; and section 8 sets out the next steps in the process following the CRU’s Decision on tariff design, transitional arrangements and tariff rates. 4 Irish Water’s Non-Domestic Tariff Design proposals are available here. 5 Irish Water’s Non-Domestic Transitional Arrangements proposals are available here. 4 1.2 Scope of the CRU’s Decision The scope of Irish Water’s proposals and the CRU’s Decision covers the design of the new tariff Framework for non-domestic customers. It extends to water supply and wastewater collection tariffs only, excluding Trade Effluent. Trade Effluent refers to wastewater with a higher strength than ‘normal’ wastewater. Separate charges for Trade Effluent are generally applied by water services utilities on the basis that it is more costly to treat. Such charges are typically calculated based on both the volume and the strength of pollutants in the wastewater. While such Trade Effluent charging arrangements currently exist in some LA areas, they are not applied consistently throughout the country. Irish Water intends to implement an enduring Trade Effluent charging arrangement once the necessary national monitoring and sampling programme is in place, and following approval by the CRU. Irish Water is currently gathering information on Trade Effluent practices to enable us to prepare a submission to the CRU on these issues in 2020. Irish Water’s submission will be subject to public consultation followed by a CRU decision prior to the implementation of enduring Trade Effluent charging arrangements. In line with the CRU’s direction, Irish Water continues to apply the existing Local Authority Trade Effluent charging arrangements which were in place on 31st December 2013. 5 2. CRU Decision The following summarises the CRU’s Decision on Irish Water’s Non-Domestic Tariff Framework. This section is structured as follows: section 2.1 outlines the geographical basis for charging; section 2.2 outlines how customers are classified into different tariff classes; section 2.3 outlines how the costs of providing water and wastewater services are allocated to the different classes; section 2.4 outlines how the tariffs are structured; and section 2.5 outlines how customers will transition to final tariffs. 2.1 The geographical basis for charging (national versus regional charging) Non-domestic tariffs for both metered and unmetered connections will apply on a national basis. 2.2 How to classify customers into different tariff classes Four separate tariff classes will apply to metered connections (Band 1, Band 2, Band 3 and Band 4). These metered tariff classes will be differentiated by annual usage as set out in Table 2.1 below. Table 2.1 Customer Classes Water and Wastewater Customer Classes Tariff Class Annual Usage (m3) Band 1 Less than 1,000m3 Band 2 Between 1,000m3 and 19,999m3 Band 3 Between 20,000m3 and 249,999m3 Band 4 Equal to or greater than 250,000m3 A customer’s classification will be reviewed annually based on the most recent usage data. For each metered tariff class, there will be a separate charge for water