Irish Water Rising to the Challenges Presentation to IBEC Conference 10th October 2012 Bord Gáis has a Vision for Irish Water “To deliver sustainable, high-quality and efficient water and wastewater services for the benefit of the citizens of Ireland.” Delivery requires: • Build consumer confidence and meet customer needs • Use the experience and expertise of the Local Authorities and the Department, and other bodies in addition to Bord Gáis utility experience • Have an efficiency focus harnessing the scale • Utilise Bord Gáis’ international financing capabilities to enable major capital expenditure to be performed at least cost • Build a solid governance structure and deliver exemplary customer service • It must engage with the public and explain the objectives and the benefits of reform Delivering the Government Objectives Irish Water Programme 3 Our Programme will work within the Industry Reform Programme 4 Project Overviews The Irish Water programme has been divided into five key sub programmes of activity. Each sub programme has a number of projects within it. Programme Management Programme Management is responsible for running the overall programme, establishing the governance model, managing the PMO office, engaging with key internal and external stakeholders and providing guidance and direction to the rest of the sub programmes. Company Establishment Company Establishment is responsible for all projects focused on the frameworks that need to be in place to establish Irish Water as a company. The projects included here include: Finance, Governance Regulation & Industry Model, Fact Finding, Commercial & SLA Approach, and Customer Engagement & Brand Management, and Facilities Business Capability Establishment Business Capability establishment is focused on the delivery of the capabilities (people, processes, systems & data) that are required for a water utility to effectively deliver a service to their customers. This following projects are included here: Customer Capability, Work & Asset Management, Support Services and IT Infrastructure Organisation Establishment Organisation Establishment is responsible for all projects that relate to the people elements of the organisation. It incudes the following projects: Organisation Design & Development, Employee Relations, Transition & Integration and Pensions Irish Water Functions Establishment Irish Water Functions establishment is responsible for establishing strategic functions which must delivered as part of the programme for the enduring organisation. It includes: Metering, Capital Investment Programme, Delivery of Efficiencies, and Strategic Plan for Irish Water 5 Blueprint for Irish Water • • As part of the 12 week mobilisation phase that commenced in April 2012, Bord Gáis has developed • a blueprint for the Irish Water organisation. This blueprint will form the foundation for the detailed design of the Irish Water organisation including detailed business process design, detailed organisation design and detailed systems design. Three important dimensions of the Operating Model that have been designed to date are: 1. Functional Operating Model 2. Functional Organisation Design 3. Systems Landscape 1 The Irish Water organisation will be established via a phased approach with key milestones to develop and transition the Operating Model, Organisation Structure and Systems Landscape to the end state. 3 2 6 Bord Gáis Values Acceptance Values Acceptance 2008 - 2012 Safety Performing Honesty & Integrity 90 88 86 85 83 85 79 76 75 71 69 2008 2009 Empathetic Proactive 90 89 88 86 83 81 79 84 BGE has received significant international customer service awards – we will extend these standards to Irish Water 2010 7 2011 Jun-12 Activities to June 2013 By End Quarter 4 2012 • • • • • • • • • • • By End Quarter 2 2013 • • Finalisation and approval of implementation plan Preparation of metering procurement strategy Drafting of interim legislation Programme Management structures put in place Consultative Forum with unions established – progress made Early due diligence commenced Communications strategy underway Interim legislation to give powers to Bord Gáis and CER enacted Government decisions on free allowance and approach to affordability measures Procurement processes and surveying for metering programme underway Drafting of comprehensive Bill to establish Irish Water Tasks advancing under 13 work-streams to implement water sector reforms e.g. developing legislation, financial model, service level agreements, HR and staffing issues, capital programme transfer plan etc Senior tier of management for Irish Water in place Irish Water Programme Key Implementation Milestones & Challenges The Irish Water programme will focus on delivering a number of key milestones May 2013 Launch Day 1: Launch of a campaign to inform customers on vision for the reform programme and the benefits of establishing Irish Water July 2013 Launch Day 2: Launch of a campaign to confirm customer details and commencement of meter rollout programme Q1 2014 Billing Day 1: Irish Water starts sending bills to domestic customers. Capability required: – Bill c. 1.4m customers, process payments and manage credit and collections – Customer database established – Provide customer support through established customer contact centre by May 2013 – Testing and validation of meter reads – Work and Asset Management System to support these functions operational by July 2013 Irish Water Programme – Key Implementation Milestones & Challenges Q1 2014 Operations Day 1: Irish Water begins to assume ownership of assets, responsibility for asset strategy and investment management. Local Authorities continue management and operations of assets through SLA’s with Irish Water. Capability required: – Service Level Agreements in place with Local Authorities in relation to operation of assets, allowing for efficiency gains, use of technology, and robust enough to last up to 2017 and possibly beyond – Strategic planning and capital programme capability built up in Irish Water, utilising existing expertise in Local Government Sector – Asset Management Structure and Support Services capability in place in Irish Water Q3 2014 Billing Day 2: Irish Water commences take on for billing of non-domestic customers on a region by region basis Q1 2015 Operations Day 2: Irish Water assumes responsibility for all operations relating to Ireland’s water assets, including work planning, management & execution, and day to day network operations on a phased basis: – Irish Water structure established and populated – – Post 2017 Full Work and Asset Management System operational and active through the SLA’s Ability to plan manage and execute work with field force mobility End State: Irish Water operating model and capabilities are fully operational and in place 10 Funding and Funding Migration – Water Services Existing Funding Structure Proposed Funding Structure Business Customers Domestic Customers Business Customers DECLG External Funding 2016 + DCELG 2015 2014 Water Services Funding today provided by a combination of central exchequer and business customers Water Services Funding in the future from a more diverse range of funding sources …. key requirements • Asset Base (RAV) • Economic Regulatory structure • Predicable revenue stream • Credit rating Challenges in Funding To fully realise its potential to reduce industry funding costs, Bord Gáis Éireann needs the co-operation of the Local Authorities to manage the uncertainty and risk Significant new funding requirements High level of uncertainty for investors Higher water charges • Significant capital investment in the water industry is required over the next few years • To transition funding away from the taxpayer, financing must be raised from private investors • As a new enterprise Irish Water carries a high level of uncertainty for investors: – Level of required capex is not fully known – Cashflows from domestic billing may be volatile in initial period – No view on future replacement cost liabilities can be made as the current water and wastewater asset base is not understood • The greater the uncertainty carried within an investment, the higher the cost of borrowing the capital needed • This raises water charges for everyone With its Energy and Networks background BGÉ has a proven track record of securing private sector funding against Utility operations However to minimise the financing costs for Irish Water and subsequent water bill increases, it is critical that we work closely with the Local Authorities to reduce the uncertainty and financing risk 12 The Metering Project will be delivered by a Joint Approach ... Joint Approach from DECLG, Local Authorities Irish Water • Survey domestic water connections - Local Authorities using forms developed by DECLG • Establish regional frameworks of SME contractors/crews - DECLG • Initiate procurement of boundary boxes - DECLG (Irish Water to award contract) • Customer Communications – Irish Water • Installation of boundary boxes - Management Contractors • Installation of water meters - Management Contractors 13 Metering Programme Principles Safely - Efficiently - Timely - Least Disruption - Customer Information The Customer • The customer will be informed of the purpose and benefits of the proposed metering programme • The customer will be notified in advance of the proposed installation timing & nature of the works and support service availability/access • Support services will consist of on site local information and central call centre • Real-time field updates leveraging BGN Workflow Capability will enable provision of seamless customer service Timeline and Productivity • A planned programme of work will ensure highest sustainable level of installation productivity - the programme will be adjusted following ramp up phase to secure optimum/smooth installation levels • Installation planning will include customer notification to provide an organised & controlled programme which delivers a positive service experience to customers Using Irish Resource • The project will utilise competent, experienced resources from the existing industry • The project will assure standards, coordinated installation delivery by planning, scheduling, dispatching and returning all work via BGN leveraged work management systems & processes Programme Efficiency • The programme will be procured, scheduled and managed to ensure installation value for money. 14 Domestic Billing • Earliest commencement Q1 2014 • Commencing on “assessed” basis for households initially – “Assessed” robust design and implementation critical as it is expected to endure in respect of substantial number of customers for substantial period into the future – Credible, engaging communication of “assessed” basis critical for the same reason • Transitioning to “metered” basis commencing from Q4 2014 • Initial “assessed”, subsequent “metered”, transition protocols and “assessed” / “metered” tariff elements all subject to CER consultation & decision • Initial “assessed” tariff approach needs to be determined in advance of customer certification / validation process (July ‘13) – Customers need to know what they are signing up for – Customers need to appreciate relevance / importance of requested information – Benefits campaign to engage customers must be able to demonstrate reasonableness and broad equality of treatment Conclusion Bord Gáis is ready meet the challenge to deliver one of the largest reform projects in the history of the State • Has a detailed implementation plan in place • Irish Water Implementation Project Team working with industry experts, DECLG, local authorities and NewERA to deliver plan • Entering a new ‘action’ phase in coming weeks – period of significant activity commencing with procurement (boundary boxes, contractors, meters) & draft legislation • Communications activity to be accelerated to support overall project.