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Michael McNicholas, CEO of Ervia this morning

The CEO of Irish Water’s parent company, Ervia, Michael McNicholas, spoke to Gavin Jennings on RTÉ Radio One’s Morning Ireland earlier.

The interview followed Irish Water’s announcement that it intends to cut 1,200 jobs over the next six years.

During the interview, Mr Jennings asked Mr McNicholas if he accepted the recent BAI ruling in which the BAI compliance committee rejected a complaint by Ervia about an RTÉ report in February in which RTE’s This Week called bonuses at Irish Water bonuses.

Mr McNicholas repeatedly said there are no bonuses at either Irish Water or Ervia.

Gavin Jennings: Irish Water plans to cut 1,200 people from its workforce over the next seven, six years rather. In a seven-year plan, released this morning, it says they’re going to raise €5billion, cut leaks by 10 per cent and establish an effective, commercial semi State company. Michael McNicholas is CEO of Ervia, the parent company of Irish Water. I asked him earlier how he plans to cut 1,200 more jobs.”

Michael McNicholas: “Well maybe first of all I should say that we are publishing a plan to bring Ireland’s water services to an acceptable standard to meet the needs of a modern economy by 2021. And we all know that our services today are not fit for purpose. We’ve got 50 per cent of our water lost through leakage, we’re pumping raw sewage into our rivers and into our bathing areas. We’ve got lead in the system and we don’t have enough capacity to meet the needs of a growing economy. So, with this plan, we’re going to invest, we’re doing two things in parallel, if I could say. First of all, we’re going to invest €5.5billion in our water and waste water infrastructure and, with that over the term of the plan, we will eliminate all boil water notices, we’ll address the contamination risks that there to the supply to over one million people today. We will eliminate completely the discharge of raw sewage into our rivers and bathing areas. We will reduce the level of leakage by 10 per cent and we will significantly improve the drinking water and wastewater capacity across the country to support economic growth and job creation. Now in parallel to your question, we are going to restructure the delivery model and we are going to take €1.1billion in costs out of the business through operating efficiencies.”

Jennings: “How are you going to cut 1,500 jobs?”

McNicholas: “The service level agreement we have with local authorities has, as part of it, an agreement, to transformation of our service delivery model. So by implementing modern utility systems, first of all, what we’re doing is rationalising from 31 service delivery models with 31 local authorities to a national utility – that immediately creates huge ability for us to create economies of scale which allows us to reduce overheads.”

Jennings: “That’s over 12 years. Over the seven years of this plan, how are you going to cut 1, 500 jobs?”

McNicholas: “The transformation plan called for that to be done within the term of the seven years. So we’re going to do that, first of all, by moving from 31 local authorities down to a single, national utility which creates economies of scale. That allows us centralised functions, it allows us to regionalise things and that allows us to take some of those jobs out. We’re also going to invest in the technology that allows us to run our treatment plants differently, it allows us to retrain and re-skill people and it allows us to actually move to the level that a modern utility would have in terms of staffing.”

Jennings: “Is it all going to be through natural wastage or is there going to be a voluntary redundancy scheme?”

McNicholas: “I think there’ll be a combination of natural wastage. I think there will be redeployment within the local authorities and yes, I would say there will be some form of voluntary redundancy.”

Jennings: “Has a redundancy scheme been approved?”

McNicholas: “What we’ve done at this point, is that we’ve looked at the service delivery model that’s there today, we’ve looked at international benchmarks, we’ve looked at our expenses and utility and we’ve set out what we believe we need to do.”

Later

Jennings: “What about your wage bill? I mean if some of the public servants are going to get a pay increase or a pay restoration in this Budget, or in the next few, because of the long term service deal with the plans that you have in place, a 12-year deal, isn’t that going to increase your overall wage bill?”

McNicholas: “At the end of the day, what we have is got a balance here where we’re going to be able to drive efficiencies into it. If there are wage increases that are part of that, and that’s a normal part of any business that you’re going to have wage increases…”

Jennings: “Yeah, but you don’t have any control over those wage increases. They’re going to be set by Government.”

McNicholas: “But we have a service level agreement where we will carry the costs of the staff that are there and if there are wage increases, we’ll have to take that into account. But we have to deliver the efficiencies of €1.1billion. That’s the reality for any business.”

Jennings:Where’s the money going to come from? This €5billion investment that you talked about? Where’s it going to come from?”

McNicholas: “The €5billion, it’ll come from a number of sources. First of all, we have a new source of revenue with domestic billing which will bring in €2billion of revenue over the term of this plan. As we drive efficiencies into the business that creates cash that’s generated for the business and it all creates the capacity for us to borrow money in the marketplace and we’ve already funded the business, over a billion in borrowings, to date.”

Jennings: “Borrow money from the marketplace? I’m just looking at your investment plan, you talk about the establishment of an effective, commercial semi-State company. This is all at odds with what Eurostat describes Irish Water as being, a non-market entity controlled by the Government and therefore should be classified within the Government sector. Or, to quote them again, the commercial basis of Irish Water is that of a heavily-subsidised public monopoly.”

McNicholas: “And that’s a reality at the starting point so we do not need to pass the NCT to deliver this business plan. The Government prudently set out in its capital spending for Irish Water, to be on its balance sheet for the term of the plan so we don’t need to pass the NCT. Over time, and one of the things Eurostat did say that, it was far too early, because it was a start-up utility to make a judgement on it. So over the period of this plan, we deliver and we’ve already delivered significantly in the last two years, in terms of transforming our water services. As we deliver over the next number of years, we will start to move on that journey from a public sector, public service delivery model to a commercial semi-State model.”

Jennings: “Yes, but when you talk about raising capital of €5billion for the course of this seven-year plan, that’s Government borrowing isn’t it?

McNicholas: “Not necessarily so. We’ve already borrowed a billion in Irish Water, €800million of that in short-term facilities have come from our own relationship banks and international banks. As a utility, as a company in its own right, we have the capacity and as we drive the efficiencies into the business, we have greater capacity..”

Jennings: “But you’re not a separate company, you’ve said, you’re not a separate company, you’re effectively part of Government.”

McNicholas: “We are legally a separate company. Yes, we are funded or subsidised by Government, as we start, from the beginning of the journey and we’re only at the start of the creation of a new national utility which will be here for the next 40 years, of course that transition takes time…”

Later

Jennings: “You said €2billion of that €5billion will come from people paying their water bills. How many have paid so far this year?

McNicholas: “We’re reaching close to the end of the second cycle and the team would indicate to me that we’re gonna get about 54 per cent of people paying the second bill, a 10 per cent increase on the first bill. I’ve said it many times that we’re only at the start of this utility. It’s two billing cycles. It’ll be at least 12 months before…”

Jennings: “So 54 per cent of people have paid so far?”

McNicholas: “By the end of the cycle which is in the next week or so, the estimate the team tells me…”

Jennings:Do you know how many people have paid so far?

McNicholas: “We’re almost at 54 per cent as we said today, just under 53.78, I believe.”

Jennings: “Do you know how many people have paid their first bill but not paid their second bill?”

McNicholas:I don’t have that specific information but the trends we saw coming through on a week by week basis is that people who paid their first bill are paying the second bill…”

Later

Jennings:Do you now accept that the BAI ruling last month that it was appropriate for RTE to call bonuses bonuses at Ervia, despite fighting tooth and nail on every radio programme over the last 12 months, do you accept that ruling now?”

McNicholas: “I’ve always been on the record as saying that we do not have a bonus culture in Irish Water and I’m very pleased to see that the independent report that reviewed the pay model in Ervia clearly says that there is not a bonus culture in Irish Water. I stand over everything I said.”

Jennings: “So what BAI said, that it was of the view that the word was accurate and reasonable given the common understood meaning of the word, do you accept that?”

McNicholas: “I, as I’ve said from the beginning, I take the view that Irish Water’s pay model and Ervia’s pay model is a performance-based pay model, that has been vindicated by the independent report which looked independently at the pay model and it says clearly, absolutely, unequivocally that there is not a bonus culture in Irish Water.”

Jennings: “Do you accept the committee’s judgement that it was fair for RTE to use the word bonuses…”

McNicholas: “We’re running around in circles here, so let’s be very clear. You yourself is in a company which has just…”

Talk over each other

Jennings: “Do you accept it?”

McNicholas: “I have always maintained that we do not have a bonus culture in Irish Water…”

Jennings: “That’s not what I asked you, I asked whether you accepted the committee’s ruling that it was fair for RTE to use the phrase, ‘bonus’?”

McNicholas: “The committee is entitled to make whatever judgement it makes, I stand over everything I’ve said about the pay model in Ervia and Irish Water.”

Meanwhile…

On RTÉ’s Today With Seán O’Rourke, Mr O’Rourke reported that 703,850 households – out of the 1.3million which have registered with Irish Water – have applied for the water conservation grant.

He also reported that Irish Water has no plans to extend tomorrow’s deadline.

Listen back in full here.

Irish Water to cut 1,200 jobs by 2021 (RTE)

32 thoughts on “Treading Water

  1. Manta Rae

    I’m no fan of Irish Water, far from it, but Jennings’ badgering of McNicholas at the end of the interview was cringe worthy.

    This obsession with some Irish journalists have with emulating Paxman is embarrassing. And it’s getting boring.

    1. fmong

      I thought it was a fair point to press him on the RTE issue, and he was clearly dodging the question too, which was sort of the point of the BAI judgement

      5.5 billion… fupping hell, if local authorities had accsess to 5.5 billion we’d have a deadly water system AND none of this endless bull plops…

      1. Manta Rae

        It is indeed a fair point. Jennings didn’t need to repeat it five times. Doing so just gave McNicholas more room to wriggle.

      2. Steve

        They did – between the period 2003 and 2013. And they still left behind leakage of 50%, dublin with a capacity margin of 2% and arklow’s p@€s and sh&t still being fed directly into the avoca river.

  2. Clampers Outside!

    Was the numerical incompetent gimp boy Tierney gagged with a ball-cock from a dirty cistern for the duration of the interview or was he quiet because he had his head up someones arse as usual?

  3. Original Cynic

    How is a company with virtually no income planning to fund 1,200 (inevitably massive) redundancies?

    1. fmong

      how are they planning on investing 5.5 billion?

      this move to ‘semi-state’ is really worrying, it’s means we’re footing the bill again.. i.e. we’re paying for water via the bills AND our taxes and state coffers are being used to fund and borrow against loans for IW… we’re double fupped!

      1. curmudgeon

        Paraphrasing here but “We’re planning on people paying us via billing and the rest we’ll just take out of the exchequer but no we’re not government funded, except for all the money at the start… And yes the EU classes us as a public monopoly but sure legally we’re a private company….”

      1. Steve

        Sorry answer below. They weren’t hired. Essentially. They were transferred over by the government to IW.

        1. Lorcan Nagle

          The way they’re being talked about in the interview, they seem to be considred employees of Irish Water, though he does say some of the headcount reduction will be people moving back to local authority.

          It still beggars the question as to why these people were added to Irish Water’s organisation in this way. If they were working on a service level agreement (though that’s not the right term, I understand what you’re getting at. And while I am being pedantic it’s just because I’m doing my next ITIL exam on Friday and the terminology is rattling around my head) as you suggest, then there’s no need to take them on, just pay the local authority for services rendered and keep your own personnel overhead low.

          Basically, either McNicholas doesn’t know what he’s talking about, in which case he shouldn’t be on the radio making this point; or Irish Water has engaged in some ridiculously overcomplicated personnel management for no good reason, which is one more nail in the coffin of their alleged efficiency.

          1. Steve

            Hhmmm who to believe…a qualified parliamentary draftsman or a bloke studying for an exam??? Good luck with next Friday.

          2. Lorcan Nagle

            The term service level agreement gets bandied around a lot like it’s a contract or something. But it’s not. It’s part of an agreement between an organisation and their customer – which can be a contract if the customer is an external party, but it can also be between two departments inside a company. Specifically, it lays out the expectations for speed and accuracy of the contracted work.

            In a call centre, for example, the service level agreement could be to answer 90% of all calls within 30 seconds. You have the speed of the work – answer calls within 30 seconds, and the accuracy/margin of failure – it’s not a problem so long as 90% of calls are answered on time.

            So yeah, if a parliamentary draughtsman used the term, they used it wrong. And while I’ll beat Irish Water around the head for their horrible inefficiency, all I was pointing out what that they used the wrong phrase. It happens all the time, especially when you’re talking about a fairly arcane piece of jargon that has entered common vernacular to some degree.

            (This will be my third ITIL certification, I’m nauseatingly well-informed on process management and improvement)

  4. donal

    McNicholas, as quoted above, says we lose 50% of water to leakage, and all this money spent will reduce that by 10%, so still 45% of water lost to leakage. There’s ambition for ya

    1. Steve

      GB had similar levels of leakage in the early 1980s. It has taken them 30 years to get down to around 20% (or 5% every 5 years). This is a long term issue, not something that be fixed by 2021.

      1. donal

        Fair enough so, perhaps.
        In UK the water companies are privatised. Is there an example country where a non-privatised water system had similar issues with leaks and how did they get on?

        1. Steve

          Sorry , I would have to do some research on that. I’m no AAA fan but I do agree with them that the primary objective of a private company is to maximise profits and return to shareholders. Unlike a public utility.

          Leaked water in a private company, such as those in England and Wales, is wasted money on producing the product (I.e treating the water), lost money on product delivery and ultimately lost revenue/higher costs. So you would imagine that there is a big incentive in these private utilities to get these leakage rates down as quickly as possibly…so my point is 5% every 5 years might be the benchmark.

  5. Fergus the magic postman

    Everything they do or say is worthy of a massive rolling of the the eyes.
    How they expect to be taken seriously, following one demonstration of their incompetence after the other is beyond me. The Keystone Cops are more competent.

  6. Steve

    They weren’t.

    Their work is carried out under a service level agreement between Irish water and the local authorities , who directly employ them.

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