standard connection charges for water and wastewater · 1 connection charging policy: standard...

1

Connection Charging Policy:

Standard Connection Charges for

Water and Wastewater

Irish Water submission to the CRU

IW-CCPP-004

2

Contents

1. EXECUTIVE SUMMARY .................................................................................................................3

2. INTRODUCTION ............................................................................................................................6

3. PROPOSED STANDARD CONNECTION CHARGES .........................................................................8

4. WORKS COVERED UNDER STANDARD CONNECTION CHARGES .................................................9

5. HOW THE PROPOSED STANDARD CONNECTION CHARGES WERE DEVELOPED ...................... 13

6. CUSTOMER IMPACT ASSESSMENT ............................................................................................ 16

3

1. EXECUTIVE SUMMARY

________________________________________________________________________

Irish Water (IW) has been responsible for the provision of Ireland’s public water services since

1st January 2014. Since then, and in accordance with the Water Charges Plan1 approved by the

Commission for Regulation of Utilities (CRU), IW has continued to implement the Connection

charging policies and related charges formerly applied by each Local Authority (LA).

Prior to 1st January 2014, there were 34 LAs with c.57 different charging methodologies for

calculating a water or wastewater connection charge. The different methodologies resulted in

inconsistent classification of customer types; different charges for similar connections; and no

consistency in levels of connection service. In 2016, the CRU requested Irish Water to submit a

proposal for an enduring Connection Charging Policy for customers seeking a connection to the

IW network. The Policy is to be applied on a national basis and will ensure a simple, fair and

equitable charging methodology, and a consistent and timely connection service offering for all

customers seeking a water or wastewater connection.

The Connection Charging Policy2 proposed by IW establishes Standard Connection Charges for

the majority of connections3. Domestic and Non-Domestic connections are classified into

categories based on water and wastewater pipe size, and these classifications determine the

Standard Connection Charge to be applied.

The proposed Standard Connection Charges are set out in Tables 1 and 2 below, for water and

wastewater respectively.

Standard Connection Charges - Water

Category Service Pipe Size (mm) Connection Charge (€)

Single Domestic (1 Unit) 25 1,935

Domestic Development (Multiple Units)* Dependent on number of Units 1,935**

Non Domestic Small 1 25 1,935


Non Domestic Medium 1 50 18,570





Non Domestic Large >200 Quotable

Table 1: Proposed standard charges for Water connections

* Domestic Development and apartments

**Domestic Development and apartments with multiple units will incur the charge per each individual unit

1 Water Charges Plan - scheme of charges from 1st January 2017 to 31st December 2018 – available on CRU website. 2 Connection Charging Policy IW-CCPP-002 3 New or modified connections

4

Standard Connection Charges - Wastewater




Non Domestic Small 100 3,701




Table 2: Proposed standard charges for Wastewater connections



IW has developed these Standard Connection Charges using a model as illustrated in Figure 1

below. This model collated the costs of all Standard Connections and assigned a uniform

connection charge to each customer category based on pipe size and projected volumes of

connections. This standardisation of charging within categories enables the equitable

allocation of costs while ensuring cost reflectivity at an aggregate level.

Each Standard Connection Charge covers:

the provision of Service Connection Infrastructure (up to 10m in length) required to

connect a premises from its boundary to the public water mains or sewer;

for Domestic Developments and Medium Non-Domestic connections only, a Mains

Extension in the public road up to 10m in length (where required); and

a contribution to the cost of wider Network Infrastructure required to facilitate new

and modified connections.

Large Non-Domestic connections and customers with additional and/or specific connection

requirements outside of the Standard Connection Parameters will incur a quotable charge in

accordance with the Connection Charging Policy (IW-CCPP-002).

Figure 1 Charges Model Overview

•Pipe size and average flow

•Historic and forecast connection numbers

•Construction rates

•Planned network investment for growth

Inputs

•Service Connection Infrastructure

•Mains Extension Infrastructure

•Network Infrastrucutre

Model•Equitable water

connection charges

•Equitable wastewater connection charges

Charges

5

The Connection Charging Policy which is proposed by IW is based on guiding principles set out

by the CRU and will provide customers with:

equitable and non-discriminatory treatment, based on a single, clear Connection

Charging Policy;

Standard Connection Charges based on identified parameters, regardless of location;

and

a transparent end-to-end connection process, with IW as a single point of contact.

To enable a thorough Customer Impact Assessment, IW completed a like for like comparison of

the existing (LA) and proposed (IW) Connections processes, taking into account both the

service levels offered and the costs of the connection. This assessment indicates that IW’s

proposals present a more comprehensive and cost reflective connection service offering,

resulting in reduced complexity, increased transparency, and greater equity for customers.

6

2. INTRODUCTION

________________________________________________________________________

IW has been responsible for the provision of Ireland’s public water services since 1st January

2014. Since then, and in accordance with the Water Charges Plan4 approved by the CRU, IW

has continued to implement the connection charging policies and related charges formerly

applied by each LA.

Prior to 1st January 2014, there were 34 LAs with c.57 different charging methodologies for

calculating a water or wastewater connection charge. The different methodologies resulted in

inconsistent classification of customer types; different charges for similar connections; and no

consistency in levels of connection service. In 2016, the CRU requested Irish Water to submit a

proposal for an enduring national Connection Charging Policy. To guide the development of the

Policy, the CRU provided IW with the following charging Principles:

1. Cost Reflectivity: Charges should be reflective of the costs associated with providing a

Connection service to a Customer.

2. Efficient Use of assets: The policy should promote efficient use of existing assets and

minimise the risk of stranding assets.

3. Equity and non-discrimination: Charges should be equitable and not unduly

discriminate between customers.

4. Stability: Charges should be designed to ensure charge level volatility is kept to a

minimum.

5. Simplicity: Connection charges and the charging policy should be clear, transparent and

easy to understand.

6. Cost recovery: The policy should ensure that the utility can recover the efficiently

incurred costs in providing new Connections.

The CRU did not set out a priority for any principle but it did acknowledge that ‘at times conflict

and trade-offs can exist between charging principles and it may be necessary for Irish Water to

strike an appropriate balance between the different principle objectives as necessary’.

IW has sought to strike this balance in the Connection Charging Policy which has been

proposed. The proposed Policy will be applied on a national basis and will ensure cost recovery

while delivering simple, fair and equitable charges for customers seeking a water or

wastewater connection.

Standard Connection Charges, based on pipe size, will apply to the majority of customers

requiring a connection. This standardisation of charging within categories enables the equitable

allocation of costs while ensuring cost reflectivity at an aggregate level.

4 Water Charges Plan - scheme of charges from 1st January 2017 to 31st December 2018 – available on CRU website.

7



accordance with the Connection Charging Policy.

This document sets out the Standard Connection Charges, the works which are covered and

those which will incur additional costs. A description of how the Standard Connection Charges

were developed and an assessment of how they impact on customers in comparison to the

previous LA charging methodologies is also included.

This document should be read in conjunction with the related Connection Charging documents:

Connection Charging Policy5: IW-CCPP-002

Connection Charging Policy Explanatory Document: IW-CCPP-003

5 Includes a glossary of defined terms.

8

3. PROPOSED STANDARD CONNECTION CHARGES

________________________________________________________________________

The proposed Standard Connection Charges are set out in Tables 3 and 4 below, for water and

wastewater respectively.

Standard Connection Charges - Water












Table 3: Proposed Standard Connection Charges for Water



Standard Connection Charges - Wastewater




Non Domestic Small 100 3,701




Table 4: Proposed Standard Connection Charges for Wastewater





accordance with the Connection Charging Policy.

9

4. WORKS COVERED UNDER PROPOSED STANDARD CONNECTION CHARGES

________________________________________________________________________

Figure 2 below sets out a graphical illustration of the three major infrastructural components of

a new connection for a single dwelling or multi-unit development:

1. Service Connection Infrastructure – Infrastructure required to connect a premises to the

public water mains or sewer;

2. Mains Extension Infrastructure – Infrastructure required to extend the public water

main or sewer main in the public road; and

3. Network Infrastructure – the network infrastructure required to provide potable water

and collect wastewater. This includes investment which is planned to facilitate growth.

Figure 2: Infrastructural requirements of a new connection

The extent to which IW provision of each of these components is covered under the Standard

Connection Charges is set out below at a summary level. Further detail is provided in the

Connection Charging Policy document (IW-CCPP-002).

10

Standard Connection Parameters – Water

Category

Service Pipe Size

(mm)

Service Connection

Infrastructure

Mains Extension Infrastructure

Network Infrastructure

Single Domestic (1 unit) 25 To max. of 10m Not included Included

Domestic Development (Multiple units)

Dependent on number

of units To max. of 10m To max. of 10m Included

Non Domestic Small 1 25 To max. of 10m Not included Included

Non Domestic Small 2 32 To max. of 10m Not included Included

Non Domestic Medium 1 50 To max. of 10m To max. of 10m Included





Non Domestic Large >200 Quotable Quotable Quotable

Table 5: Works Coverage of Proposed Standard Connection Parameters for Water connections

Standard Connection Parameters - Wastewater

Category

Service Pipe Size

(mm)

Service Connection

Infrastructure



Domestic (1 Unit ) 100 To max. of 10m Not included Included

Domestic Development (Multiple units)

Dependent on number

of units To max. of 10m To max. of 10m Included

Non Domestic Small 100 To max. of 10m Not included Included



Non Domestic Large >225 Quotable Quotable Quotable

Table 6: Works Coverage of Proposed Standard Connection Parameters for Wastewater connections

A detailed description of the works provided under each infrastructure component is set out

below. In accordance with the Connection Charging Policy, each of these components will be

quotable for Large Non-Domestic connections and for connections with additional and/or

specific connection requirements outside of the Standard Connection Parameters.

11

Service Connection Infrastructure

Description Infrastructure required to connect a premises to the public water mains or sewer – up to 10m included in Standard Connection Charges

Works included in Standard Connection Charges

Construction and management of works required for connection to the distribution or trunk water main/ main sewer

Excavation in all surface categories

Materials required to complete the connection

Temporary and permanent reinstatement in all surface categories

Commissioning and testing

Traffic Management

Meter and Meter Fit ( Water only )

Chamber ( Waste only)

Road Opening Licence

Liaison with local authorities and agencies

Works not included in Standard Connection Charges

A quotable charge will apply for all Service Connection Infrastructure above 10m in length

Table 7: Service Connection Infrastructure Components


Description Infrastructure required for a Mains Extension in Public Road – up to 10m included in Standard Connections Charges for Domestic Developments and Medium Non-Domestic connections only


Excavation in all surface categories

Materials required to complete the extension

Temporary and permanent reinstatement in all surface categories

Works required for connection to the distribution or trunk water main/ main sewer

Traffic Management



For single Domestic Units and Small Non-Domestic Connections, a quotable charge will apply for all Mains Extensions

For Domestic Developments and Medium Non-Domestic Connections, a quotable charge will apply for Mains Extensions above 10m in length

Table 8: Mains Extension Infrastructure Components

12


Description The network infrastructure required to provide potable water and collect wastewater. This includes investment which is planned to facilitate growth


Contribution included in Standard Connections Charges based on planned network infrastructure or upgrades to facilitate growth


Unplanned investment related to the connection

Table 9: Network Infrastructure

13

5. HOW THE PROPOSED STANDARD CONNECTION CHARGES WERE DEVELOPED

________________________________________________________________________

The standard charges were developed using a model which collated the costs of all Standard

Connections and assigned a uniform connection charge to each customer category based on

pipe size and projected volumes of connections.

The figure below illustrates how the proposed charges were developed. This is followed by a

description of each of the model inputs and a high level summary of the model methodology.

Figure 3 Charges Model Overview:

The inputs to the model are:

1. Pipe size and average flow

2. Historic and forecast connection numbers

3. Construction rates

4. Planned network investment for growth

Pipe size and average flow

The size of a water supply Service Connection to a customer premises is governed by the

requirement that there should be adequate water supply to meet the customer needs at

adequate pressure, while ensuring that water quality is not compromised through the use of

oversized pipes.

The size of a wastewater Service Connection to a customer premises is governed by the

requirement to ensure that there is adequate capacity available in the collection system to

accommodate wastewater flows and that this system is not subject to blockages.

Pipe sizes for water supply and wastewater collection pipework to Domestic and Non-Domestic

customer categories are outlined in the following Technical Documents, which are available on

the Irish Water website at www.water.ie/connections/:

•Pipe size and average flow

•Historic and forecast connection numbers

•Construction rates

•Planned network investment for growth

Inputs

•Service Connection Infrastructure

•Mains Extension Infrastructure

•Network Infrastructure

Model•Equitable water

connection charges

•Equitable wastewater connection charges

Charges

http://www.water.ie/connections/

14

Water Infrastructure Standard Details (Document Number: IW-CDS-5020-01);

Wastewater Infrastructure Standard Details (Document Number: IW-CDS-5030-01);

Code of Practice for Water Infrastructure (Document Number: IW-CDS-5020-03 ); and

Code of Practice for Wastewater Infrastructure (Document Number IW-CDS-5030-03).

Historic and forecast connection numbers

Historic applications were reviewed over a two and a half year period from Q3 2014 to Q4

2016. These were then categorised into Domestic and Non-Domestic applications and further

segmented on the basis of pipe size.

Based on the historic applications dataset, the number of historic connections per application

was analysed to determine an average number of connections per application for each

category. This analysis determined a reference historic data set.

To determine forecast connections, 2016 was taken as the base year and an annual growth rate

of 10% was applied for the period 2017-2021.

Construction rates

In 2016, IW ran a Public Procurement Process to put in place a framework of eight regional

contactors across Ireland. IW will complete all connections in the public road and to the IW

Assets via our eight regional contractors and Local Authority partners. This strategy will

transform the existing connection delivery mechanisms into a safer, more efficient and

customer focused process which will ensure:

A dedicated end to end connections service to all customers; and

Improved consistency and quality of delivery of connection works in line with IW

standards and codes of practice.

The average construction rates from the eight appointed regional contractors were used to

calculate the cost of delivering a:

Service Connection, and;

Mains Extension.

Planned network investment for growth

The Standard Connection Charges are designed to recover a contribution to the cost of

Network Infrastructure. The IW Capital Investment Plan (CIP; 2017-2021) was used to

determine the costs of planned network investment required to facilitate incremental growth

in the network. The cost portion benefiting all connections is recovered through the Standard

Connection Charges6.

6 Network Infrastructure costs recovered through Connection Charges are netted off the Regulatory Asset Base – this ensures that there is no

‘double recovery’.

15

Summary of Model Methodology

Using the inputs outlined above, the proposed Standard Connection Charges were modelled

using a bottom-up methodology to reflect the total cost to Irish Water of implementing

Domestic and Non-Domestic water and wastewater connections in Ireland over the five year

forecast period (2017 – 2021):

The average cost of construction rates under the contractor framework process was

used to determine a ‘per connection’ charge for the provision of Service Connection

Infrastructure and Mains Extension Infrastructure under each category of pipe size.

The forecast connection numbers were multiplied by the ‘per connection’ construction

rates of the relevant pipe size category, providing the total cost of Service Connection

and Mains Extension provision over the forecast period.

An equitable distribution of the Network Infrastructure contribution was achieved

based on a network usage based weighting. Network usage was derived on the basis of

average daily flow (m3/day) per pipe size as detailed in the model inputs. Forecast

connection numbers were used to calculate a total average daily flow per connection

category over the forecast period. A percentage of the total Network Infrastructure

contribution was then apportioned based on this network usage weighting.

The total cost of the three infrastructure components i) Service Connection, ii) Mains

Extension, and iii) Network Infrastructure was calculated for each pipe size category.

The 25mm water connection category includes all Domestic water connections and the

majority of Small Non-Domestic water connections. A uniform per unit cost for 25mm

water connections and Domestic Development water connections was calculated on the

basis of connection numbers and the total category charge. A similar harmonised

calculation was used for 100mm wastewater connections and Domestic Development

wastewater connections.

Standard Connection Charges for all other categories were calculated using the total

charge per connection category and forecast connection numbers.

16

6. CUSTOMER IMPACT ASSESSMENT

________________________________________________________________________

In accordance with the Water Charges Plan approved by the CRU, IW has thus far continued to

apply the connections charges which were in place in each LA prior to 1st January 2014.

These charging regimes (c.57) are complex and were influenced by differing considerations in

each LA at the time of their development. The current connection charges typically consist of

the elements and various methodologies set out in the table below:

Methods of Calculating Current Charges

Works fee

Standard minimum charge

Standard maximum charge

Bespoke charge based on case by case basis

Infrastructure Fee A per unit charge, regardless of floor area

A per m2 charge, based on total floor area

A per unit charge based on a range/range of floor area (range/bands of floor areas

A per unit charge up to a maximum floor area, plus a per m2 charge above maximum floor area

Some LAs give an exemption up to a minimum floor area and charge/range or m2 thereafter.

Supplemental Fee Same as Infrastructure Fee if applicable

Table 10: Typical Methods of Calculating Current Connection Charges

Currently the Infrastructure Fee element accounts for c.80% of the current connection cost. It is

typically based on the square area of the property, as set out in the planning permission. In

such cases, this charge does not reflect the customer’s water services need or the burden

placed on the IW network.

In addition to the current connection charges outlined above, and depending on local practices

in the individual LA, customers may also need to complete additional works and incur

associated costs to complete the connections process.

It is clear that the current Connections Charging practice is complex, inconsistent, and results in

inequitable treatment of customers across the country. In contrast, the Connection Charging

Policy which is proposed by IW is based on the guiding principles set out by the CRU and will

provide customers with:

equitable and non-discriminatory treatment, based on a single, clear Connection

Charging Policy;

Standard Connection Charges based on identified parameters and regardless of

location; and

a transparent end-to-end connection process, with IW as a single point of contact.

Given the diversity of connection charging methodologies across the country, it is inevitable

that the move to a single, national Connection Charging Policy will result in both positive and

17

negative comparisons with the current connection charges. To enable a comprehensive

Customer Impact Assessment, IW completed a like for like comparison of the existing and

proposed Connections processes, taking into account both the service levels offered and the

costs of the connection.

Service Comparison

A standard connection service encompasses a broad scope of connection elements as outlined

in the table below. Under IW’s proposed Connection Charging Policy, a Standard Connection

Charge will cover this full standard scope of works for a connecting customer.

Service Activity Service Element

Administration and Operations

Initial Survey

Stakeholder Engagement re. Planned outages

Communications re. planned outages

Operational Shutdowns

As constructed drawings and records

Supervision of Works Supervision of Works Completed

Reinstatement Sign-Off

Tie-In Tie-In Physical Connection

Tie-In Testing

Materials Material Procurement

Civil Works Civil Works Excavation

Civil Works Reinstatement


Road Opening Licence Application

Road Opening Bonds/Deposits

Road Opening Close-out

Traffic Management Traffic Management Set Up

Traffic Management Plan and Risk Assessment

Table 11: Scope of a standard connection service

IW’s analysis indicates that the current scope of LA service provision varies widely for a

standard connection charge. Any service element required by the customer which is not

provided by the LA must be borne directly by the customer, adding further costs.

The table below shows the number of the LAs providing various levels of connection service

offerings7, banded into percentages of the full service covered under IW’s proposed Standard

Connection Charges (100%).

7 Based on analysis of a Single Domestic 1 Unit connection – IW analysis indicates that other connection categories are not materially different.

18

No. of Services <25% >25% - <50% >50% - <75% >75% - <100% 100%

Water 2 12 9 5 3

Wastewater 5 17 3 4 2

Table 11: Current LA provision of IW’s proposed service elements

Of the 31 charging regimes surveyed, only three provide a full service offering for water

connections, and two for wastewater connections.

14 of 31 LAs provide a water service offering of less than 50% of the IW service offering;

22 of 31 LAs provide a wastewater service offering of less than 50% of the IW service

offering;

Under IW’s proposed Connection Charging Policy, a Standard Connection Charge will

provide the full standard scope of works for a connecting customer.

Cost Comparison

For a range8 of customer connection scenarios, the tables below compare IW’s proposed

Standard Connection Charges against the median, average, highest and lowest of the current

costs9 for water and wastewater.

Water Single

Domestic 1 Unit

Domestic Developments

25 Units


200 Units

Non Domestic Small 1

Non Domestic Medium 2

Current Cost - Median €4,305 €52,382 €353,131 €4,141 €29,786

Current Cost - Average €4,211 €55,518 €381,710 €4,187 €35,605

Current Cost - Highest €6,753 €163,554 €779,355 €7,762 €81,838

Current Cost - Lowest €1,853 €14,989 €26,835 €1,573 €7,564

Proposed Standard Charge €1,935 €48,375 €387,000 €1,935 €30,084

Table 12: Cost Comparison Summary – Water

Wastewater Single

Domestic 1 Unit


25 Units


200 Units

Non Domestic

Small

Non Domestic Medium 1

Current Cost - Median €5,604 €62,286 €402,046 €5,411 €39,054

Current Cost - Average €5,586 €65,379 €429,358 €5,253 €43,836

Current Cost - Highest €8,570 €174,873 €1,327,598 €8,231 €95,244

Current Cost - Lowest €1,651 €18,345 €43,688 €991 €8,626

Proposed Standard Charge €3,701 €92,525 €740,200 €3,701 €22,274

Table 13: Cost Comparison Summary - Wastewater

8 Range represents majority of connection scenarios on basis of data available to IW 9 ‘Like for like’ service basis – total cost borne by the customer to receive the full IW connection service offering.

19

For water connections, IW’s proposed Standard Connection Charges are less than both

the current average and median costs in four cases, and marginally higher in one.

For wastewater connections, IW’s proposed Standard Connection Charges are less than

the current median and average costs in three cases, and higher in two.

For all cases in both water and wastewater, IW’s proposed Standard Connection

Charges are substantially less than the highest cost currently incurred by customers.

In summary, when taking both service level and cost impacts into account, IW’s proposals

presents a more comprehensive and cost reflective connection service offering, resulting in

reduced complexity, increased transparency, and greater equity for customers.