The Cabinet has agreed to introduce legislation to implement the recommendations of the Oireachtas committee on domestic water charges, which will provide refunds for householders who have already paid the charge.

Government sources say that a referendum on public ownership of water will require separate legislation which is being examined by the Attorney General’s office*. The Government has already allowed the early stages of a bill providing for a referendum to pass, but has said it is likely to amend the terms of the legislation when it returns to the Dáil.

The Bill approved yesterday, which will be published on Friday, will allow for the current regime to be discontinued, and provide for general tax to fund domestic water services.

Households will be charged for excessive use of water from January 2019 if found to have used 70 per cent more than the average household.

Minister for Housing Eoghan Murphy will allow the Commission for Energy Regulation to determine what is average consumption levels. It is currently set at 127 cubic metres, meaning the figure for wilful waste would be 215.9 cubic metres - 1.7 times normal usage.

The commission will also agree the financial penalty applied to householders after they reach this limit. The Bill does provide for future governments to increase that figure by way of a Dáil vote.

The new billing system will come into force from January 2018, but it will be January 2019 before bills will be issued.

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Householders will be given six months to reduce usage or fix leaks before being financially penalised.

It is estimated that up to 70,000 households - about 8 per cent of customers - will face fines under the new system. These households are currently using 30 per cent of all domestic water.

The wording of the legislation has been agreed between Mr Murphy and Fianna Fáil spokesman on housing Barry Cowen. This will ensure its passage through the Dáil.

In terms of Irish Water, the Bill approved by Cabinet will commit to an annual budget for the utility from the Department of Housing. The department will be asked to find the €240 million in lost revenue from the abolishing of charges, and will also be asked to provide capital funding to Irish Water.

The Bill, to be published this week, will be followed by a separate piece of legislation to allow for a referendum. The Attorney General’s office is considering amendments to the proposed wording put forward by the Independents4Change TD Joan Collins to ensure group and private water schemes will not be pulled in. A Government spokesman said those issues had not been resolved and a separate piece of legislation would be required.

The referendum would enshrine public ownership of water services in the Constitution.

Other measures included in the Bill include the establishment of a national water forum as agreed in the confidence and supply arrangement between Fine Gael and Fianna Fáil.

In terms of group water schemes, a working group on the subsidy levels to rural dwellers and those on the public water supply will be established after this legislation is passed.

Mr Murphy has already secured Cabinet approval to refund 990,000 householders who paid the controversial water levies before they were suspended last year. The refunds will cost €173 million, and cheques will be posted to households by the end of the year.

Households will receive up to €325 through the water charges refund process, but this depends on the amount paid over the five billing periods.

*Correction: An earlier version of this story erroneously reported that the Cabinet had discussed and agreed to hold a referendum on water ownership at its meeting yesterday.