A timely reminder from the chairman of the Independent Water Review Panel [IWRP], Professor Paddy Hillyard, of the results of the recommendations contained in the two strands of his previous review of NI Water. From the BBC report
The review was set up by the assembly in 2007 after direct rule ministers advised that water services should be privatised.
Among its recommendations were that water charges should come in. [Adds – and “be clearly and separately identified on their rates bill and earmarked for Northern Ireland Water”]
“We prepared the reports and they’re still sitting on somebody’s shelf somewhere,” Professor Paddy Hillyard said.
And with the Northern Ireland OFMDFM’s two separate appointees in the latest review tasked with
[Assessing] the effectiveness of the governance arrangements and responsibilities of those involved in relation to the capacity to deal with the incident, also considering the role and responsibilities of the Minister and the Department in this respect.
…it’s worth looking again at what the IWRP Strand 2 report [published Jan 2008] – on “Management, Governance and Delivery” [pdf file] – had to say about better governance and the future business model for NI Water [added emphasis throughout]
Towards Better Governance
That the direct rule Ministers’ reform process failed to secure public confidence is due largely to a lack of openness and transparency in their decision-making and accountability processes. We have also discovered four substantial flaws in the arrangements which they put in place for accountability and regulation: they lack public confidence; clarity about roles and responsibilities; openness and inclusion; and specialised expertise. These deficiencies should be rectified immediately in order to create firm foundations for future stability. The respective roles and responsibilities of the different agencies in the governance system should be clarified and overlap minimised. Overall, the system needs positive leadership, and it must be clear to all concerned who is accountable to whom and for what.
The Minister for Regional Development should assume overall authority and responsibility for the entire water policy development process and for the political oversight of the system’s performance. He should continue to be supported by the Department for Regional Development’s (DRD’s) Water Policy Division and a separate Shareholder Unit, also in DRD.
An independent Water Advisory Panel should be established to report publicly to the Minister on the services’ strategic objectives and priorities. The Panel’s membership should comprise nominees from the business and voluntary sectors, the regulators, consumer representatives, and independent experts. It should be disbanded as soon as it has reported.
A Business Advisory Panel should also be established with the narrow and specific purpose of supporting the Minister as Shareholder in setting NI Water’s business objectives and monitoring its financial performance. This Panel should remain in existence for as long as the Minister is the majority shareholder.
We propose that the 2006 Order should be amended to clarify the powers, roles and responsibilities of the Department, the Utility Regulator and the Consumer Council, and to bring them into line with the Energy Order 2003. The future legislation should give the Consumer Council equal status with the Utility Regulator as the statutory representative of consumers’ interests. Both should be able jointly to make regulations setting out guaranteed service standards for NIW’s domestic customers. Given that privatisation is no longer an option, the Utility Regulator should no longer have to secure reasonable returns on capital from NI Water.
Finally, the desirable criteria for selection to Board level positions in NI Water and the Utility Regulator should include demonstrable knowledge, experience and understanding of the political, economic and social context in Northern Ireland.
Future Business and Financial Model
The choice of business model should secure public confidence; ensure that good services are delivered at the lowest possible cost to Northern Ireland’s users and ratepayers; and minimise any negative impacts on other areas of public expenditure.
It would be neither appropriate nor practicable to reverse the water reform process and reinstate NI Water as an executive agency within DRD. To do so would cost our public expenditure budget over £90 million per year and increasing.
We have concluded that NI Water should continue to be a government-owned company at least for the next five years, subject to the improved governance and accountability arrangements outlined above.
For beyond 2013, the Minister should consider what potential there might be for reducing bills by restructuring NI Water as a company limited by guarantee working in the interest of its customers, a model which we have called the “Customers’ Company”. We believe that such a restructuring could in the right circumstances have the potential both to reduce financing costs and to strengthen customers’ sense of community ownership. The transformation could be implemented with relatively little disruption by retaining NI Water as fully as practicable as it is but establishing the Customers’ Company with the specific purpose of taking over the Minister’s shareholding interest.
In the interim, the dividend extracted from NI Water by DRD as shareholder should be no higher than what customers would pay under a debt-financed model, and this should continue to be the case for as long as DRD retains an equity stake. The amounts received by DRD should be returned to NI Water as a contribution to its capital investment programme, thus lowering customers’ bills.
The implementation of some of those recommendations may have been attempted, but without the over-arching direction of travel agreed and understood by all those involved – resulting in further confusion about responsibilities.
As Mick argued in an earlier post
By any objective means Northern Ireland Water is far from perfect. But its biggest problem has been the political antipathy of the Minister [added link]. His poor decision in sacking a competent board and putting in its place a group of people whilst well disposed to his anti-privatisation stance nevertheless have proved useless to an inexperienced CEO in a crisis.
And further, in sacking the four non executives back in March, Conor Murphy left MacKenzie sufficiently unfettered so that he was able to cut the communications budget by some 64% with no opposition either from what was left of the Board (ie one non executive director, and the rest employees) or his own shareholder unit at DRD.
After all of this corporate vandalism and strategic drift, Murphy will struggle to convince anyone worth their salt to take on the job – that’s surely reflected in the situation where the CEO designate has no Board experience – until, one way or the other, Mr Murphy leaves the job.