Competition And Regulated Markets Update - March 2012

Author:Mr Gary Rice, Eoghan Ó HArgáin and Judy Goldman

Water and Competition—Consultation on the Establishment of a Public Water Utility Why is this in the news?

In February 2012 the Competition Authority made a submission in response to the Minister for the Environment, Community and Local Government's consultation on the reform of the water sector. The Competition Authority believes that competition can play a key role in achieving the most effective assignment of functions and structural arrangements for delivering high quality competitively priced water services to customers (domestic and non-domestic) and for infrastructure provision. It makes a number of main submissions.

Why is it important?

The Competition Authority agrees that the establishment of a public water utility monopoly, Irish Water, though not an ideal outcome from a competition perspective, is the most feasible option in the short term. It submits that a public utility is likely to be the best way to put in place all that is required so that a functioning water market exists, (i.e. installing water meters, transfer of staff from local authorities, investment in water infrastructure). Once this new structure is in place, it believes that the introduction of competition where possible could further improve the delivery and efficiency of water services.

The Authority believes that it is important that the new monopoly water company is not created with expectations that such a model may continue indefinitely. It believes that setting out medium and long-term goals involving increased competition would help to manage any such expectations and would also reassure households and businesses. It submits that the Department, when setting up Irish Water, should avoid putting anything in place that could prevent the emergence of competition in the future (e.g. tying the pensions of Irish Water employees to the assets of the company could make it excessively costly to separate out more contestable assets in the future).

The Authority submits that competition has the potential to bring many benefits to the Irish water sector including:

the efficient use of water; value for money; effective regulation; the avoidance of over-spending and inappropriate assets, and; cost competitiveness for all businesses in Ireland. How is it relevant?

The Competition Authority's submission provides more support in favour of the establishment of a public water utility monopoly, Irish Water. This option envisages the use of competition solely by means of outsourcing and competitive tendering for the design, build and operation of new water facilities, as already currently...

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