Belfast Telegraph

Wednesday 20 August 2014

The future of NI Water doesn't need to become a private affair

Queues for water at Christmas after the big freeze and burst pipes caused a crisis for NI Water

Regional Development Minister Conor Murphy now needs to plan a non-controversial and constructive future for NI Water.

Consumer confidence was shaken and needs to be strengthened.

NI Water must be an efficient organisation monitored by the regulator and minimising the calls on the Northern Ireland Exchequer funding.

These goals can be achieved without needing to privatise the company.

The most critical part of the rebuilding process is to agree trading arrangements that contain incentives for efficiency.

It also needs a 'hands-off' relationship between ministerial policy influence and day-to-day operational performance criteria.

Those who recall the performance of the former Northern Ireland Water Service as a part of the civil service have little doubt that the former arrangements were inefficient and unduly expensive.

In parallel, there is little dispute that the possible privatisation of the water company does not at present command adequate political consensus.

The investigations into the recent performance of NI Water give a good basis for an overview of future management and policy making for water and sewerage services.

The external review concluded 'NIW is not a failing water company. It has made considerable progress and appears to have competent managers and staff who know their jobs well' [para 3.12].

The regulator concluded that 'the restoration of water supply given the extraordinary circumstances was well handled, communications with customers was not' [page 129].

The failures in NI Water during the Christmas freeze and thaw have been identified. They were an organisational failure in one major part of a complex matrix of problems and that failure has been highlighted by the report from the regulator.

He says: "The board and executive committee were not operating as a single entity on a common mission.

"Legacy issues dominated the board agenda and the chief executive's leadership style was not succeeding with his executive team" [page 129].

The reports by the special review teams illustrate two critical issues.

First, for the future, NI Water needs a well-defined operational role with built-in performance measures.

The government department (Department for Regional Development) already has a satisfactory oversight and monitoring role and this should be kept distinct from operational issues.

Second, with a hybrid go-co structure (which is necessary whilst there is a mixture of revenue from business tariffs and alternative public sector allocations) the role of an independent regulator is a necessity.

That regulator, or regulatory role, should not be subsumed or distorted by attempts to blur the line between regulatory duties and political ministerial preferences. Critically, the politicians who oppose privatisation need to be shown that a stand-alone trading NI Water can be maintained, which is motivated by consumer service provided with incentives to efficiency.

Having done the hard work of creating a government-owned trading organisation, with high regulatory standards and set performance standards, the effort needs to be made to reassure the DRD minister (whoever it may be after the election) that the balance of standards, efficiency and accountability do not point towards re-nationalisation.

The recent legislative proposals from DRD, which would have opened the way to either neutralise the role of the Regulator or build a potential conflict of interest with the minister, should now be withdrawn.

To handicap or abolish the regulatory function would be to take the monitoring of the performance of NI Water backwards.

Now that there is a go-co which can function successfully along with an established regulatory team, this is an investment to be developed rather than destroyed or damaged.

To maintain the present arrangements unless, or until, better funding arrangements can be agreed, is the route to a degree of stability.

For the minister, or his successor, the immediate priority is to give NI Water clarity and organisational certainty.

A new board is now overdue.

The recruitment of a new chief executive should not be delayed.

The debate about charges, mutuality and commercial finance still remains to be concluded.

However, it can wait for political resolution. In the period ahead, organisational improvements are possible with minimum disruption.

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