Irish Water is to inherit a debt of €100 million in relation to unpaid commercial water rates from local authorities later this year, while a further €50 million in bad debt is likely to be written off.

The utility company is introducing a metered water service to domestic customers, with the first bills due in April. It took over responsibility for commercial charges from the local authorities on January 1st last year and has, since then, authorised the disconnection of 270 businesses.

The councils continue to act as billing and collection agents for the State-owned utility, an arrangement which will continue until later this year.

But the company will take over the councils’ debt books within the next two months, inheriting the commercial water-charge debts owed to the country’s 31 local authorities. This will include up to €100 million of “collectible” debt and a further estimated €50 million of “bad debt”.

“The gross value of the debt . . . is nearer to €150 million so the best part of a third of the overall debt is likely to be written off,” Paul O’Donoghue, head of customer operations with Irish Water, told The Irish Times.

However, he stressed that “there’s a difference between writing it down and continuing to pursue it . . . we are still entitled to pursue that debt.”

He said a common set of guidelines was agreed between Irish Water, the Department of Environment and representatives of the local authorities early last year.

Outstanding items

The councils were asked to review their debt books and, based on these guidelines, to find outstanding items which should be “identified as ‘to be written off’, to be declared as bad debt”.

“Until we have agreed value with each local authority for its outstanding book it can’t be transferred over,” he said. It is expected this process will be finished within two months and a ministerial order will need to be signed at that point.

In 2014, Irish Water, through the local authorities, billed commercial water customers €181 million, of which it collected €161 million, an 89 per cent collection rate. This rate is significantly higher than that recorded as collected by the city and county councils which reported collection rates of between 35 per cent and 77 per cent at the end of 2013.

However, Irish Water said these collection rates were deceptively low because the figure includes bad debt accrued in some local authority areas.

Legacy debt

“One of the masking issues . . . is legacy debt. Some of [the local authorities] were quite rigorous and quite progressive in their provisioning activities and in their write-down activities. Some of them were not as rigorous . . . that had a tendency to mask their performance because they were carrying this big wedge of [debt] they should have declared at some time in the past as no longer collectible.”

“When you kept comparing their in-year collections to their outstanding book it didn’t look too healthy but that’s primarily because they hadn’t addressed their outstanding book properly. When you tidy up their books on a harmonised basis you get a different picture where they indicate . . . a much better in-year performance than book performance.”

Since taking over responsibility for commercial water charges on January 1st 2014, Irish Water granted authority to the various councils to disconnect water to approximately 270 businesses as well as approving one court proceeding.

However a spokesman for the company said both “disconnections and/or litigation” can only be brought about “once a lengthy series of measures to reach resolution have been exhausted”.