Official Report: Minutes of Evidence

The Chairperson (Mrs Erskine): We are joined by Sara Venning, chief executive of Northern Ireland Water, and Ronan Larkin, Northern Ireland Water's director of finance. We are on your patch today, but you are welcome to the Committee to give evidence.

Are members content that the evidence session is recorded by Hansard?

The Chairperson (Mrs Erskine): We have a substantial amount of evidence, and I am aware that you have a PowerPoint presentation, which members have in their pack. If you do not mind, I invite you to run through your presentation for about five minutes, after which I am keen to open the session up to questions from members.

Dr Sara Venning (Northern Ireland Water): OK. I might take a wee bit longer than five minutes, but the beauty and the benefit of going through the presentation is that we can, hopefully, address a number of questions.

I hope that you found this morning's tour interesting and reassuring in relation to water quality and the work that NI Water does to make sure that the drinking water that we supply to our customers is safe at all times. We were really heartened by the Committee's interest in coming out to a water treatment works. Thank you very much for that.

As you said, Chair, we have a few slides to guide the conversation. At the outset, we thought that we should recap on the work that we have done to ensure that, despite the raw water quality issues in Lough Neagh, we can continue to produce drinking water to the highest quality across our four treatment works that have Lough Neagh as an abstraction source. Then, we will turn our focus to waste water to recap on the reasons why there are capacity constraints.

The Committee will understand that Northern Ireland Water, in conjunction with all the relevant partner organisations, has a remediation plan that will focus on waste water infrastructure. That plan is called price control (PC) 21, and you mentioned the Utility Regulator, so we will recap where we are, at the PC21 midpoint, and what the independent Utility Regulator concluded in its review. The fact that we have a remediation plan is really positive, but the plan will be effective only if it is funded. We will share with the Committee the funding information, as we understand it, and its associated impact. At the end, we will probably ask, "How do we take this forward?".

I will move on to the Lough Neagh piece. As I said to some of you on the tour, when the initial blue-green algae outbreak in Lough Neagh happened in 2023, we started working internally across NI Water and with our external partners to make sure that we were doing everything that we could to mitigate the impact that any blooms would have on drinking water quality. We cannot find an alternative source for that 40%-plus of our drinking water, so that work is really important. You have now seen for yourselves the treatment processes and multilayered barriers that purify the water at each stage of the process. We have focused on making sure that the stages are as effective as they can be, and we have put in place additional measures to sample and test the water and provide feedback to customers. We have been sharing all that good work with our customers through social media and ordinary media and face to face. By way of further reassurance, work has commenced in relation to the 2025 season.

Let us move on to the body of what we want to talk about today, which is waste water. As the Infrastructure Committee, you will all be acutely aware that infrastructure, as the Chair said to me, is a key enabler of many of the desired outcomes of a modern society, whether that is public health, economic growth or nature and biodiversity. You can see that in the Programme for Government (PFG), which is in its consultation phase. In recent weeks and months, however, as your correspondence reflects, the Committee has received several submissions highlighting deficiencies in Northern Ireland's waste water infrastructure and the impact that that is having on nature and the economy. This morning, Ronan and I will be happy to share with you our understanding of the current situation and how we aim to be part of a joined-up resolution to that.

You will have seen our past presentations. As we have previously told you, we treat 350 million litres of waste water a day at over 1,000 waste water treatment plants. The waste water comes to us along a pipe network that is 16,000 kilometres long. As citizens, we have all become aware of a part of the sewer network that we never talked about before called "storm overflows" and how they work to prevent out-of-sewer flooding in people's homes and businesses. Equally well documented in Northern Ireland is the fact that the waste water network and the treatment infrastructure have been subject to underinvestment for decades. They are therefore simply under the size that they need to be to convey and treat what we have. That means that there are higher levels of spills to the environment.

The environmental impact from those underinvested assets was understood back in 2007, when NI Water was formed. At the time, a regulatory dispensation was put in place so that higher environmental standards could be levied once the assets had been invested in and were fit to meet them. The dispensation should have been a short-term mitigation measure. It was there to provide breathing space for the waste water investment programme, but, unfortunately, the investment programme was not included in successive business plans until PC21. That plan had significant investment in waste water as well as the ambition to be ready for higher environmental standards by 2027. Whilst, on the face of it, Northern Ireland needs to protect its watercourses to reduce the level of nutrients that, as you saw this summer, are in the raw water, we have to tackle that problem. The way to do that is to make sure that we do not overload the waste water infrastructure. That means limiting or stopping connections to an undersized network. It is that necessary action that is impacting on Northern Ireland's ability to build new homes and connect new businesses.

The Committee previously heard evidence on our plans to work with developers to create some capacity while our investment programme got up and running. We had a plan that would take a few years to get up and running, and, in the interim, we have been able to create some of that capacity successfully, albeit that — Members have called us out on this — it placed more of a cost burden on developers. Those initiatives resulted in the identification of solutions that, if developers implement them, would enable up to 18,000 properties to be built and connected. Build rates are diminishing, but that probably gives us about three years' breathing space, if developers feel that it is viable to spend the money. Our work with developers has identified a further 19,000 properties that they want to build that require capital intervention on NI Water assets. The investment that is needed in most cases is substantial. We no longer have any line of sight to that investment, and those properties therefore cannot go forward at present. There has been much talk of developers' contributions. They can help in some instances but not routinely, and, in general, they do not address the underlying issue, which is the environmental safeguarding that has to be put in place.

The Committee will be aware that the Utility Regulator has an oversight and scrutiny role in relation to our investment plans. As part of that, it carried out a mid-term review of the PC21 plan. That review was carried out because, when we made our original submission — we were doing that work as far back as 2018-19 — not all the costs were certain, so the review was to scrutinise the more accurate costs that we had brought together.

In considering any business plan submission, a regulatory authority such as the Utility Regulator has a duty to make sure that that plan has sufficient resource cover for our services to be provided to customers. It has to make sure that those resources — from our shareholder, in essence — are in place. It gets policy guidance on minimum standards from DFI social and environmental guidance.

The Utility Regulator's review concluded that the work that, we said, we needed to do during PC21 is still required. In the time between submitting the plan and the review being carried out, however, we have all seen significant inflation, not least in energy costs. The mid-term review recognised that and allowed for an additional £180 million in operating costs in the last three years of the plan.

The review also recognised the effect of higher input prices in the capital world on our capital investments. It set £2·4 billion as the minimum necessary investment in capital works. There was a commitment to do further work to identify the additional impact of inflation across a range of areas of the capital plan. The Utility Regulator has been clear that the company's capital need is likely to increase. Our view is that that increase will take the plan to some £2·7 billion.

I will hand you over to Ronan to talk about the mismatch between our investment need and our funding allocation.

Mr Ronan Larkin (Northern Ireland Water): Good morning, Committee, and thank you.

Sara has talked about the capital allocations that are required and the regulator's review that was published in recent weeks. One of our immediate concerns, on which we want to make sure that the Committee is up to speed, is that, right now, in 2024-25, a significant gap means that we do not have enough money in resource departmental expenditure limit (RDEL) funding to keep the business running all the way through the winter period. That particularly affects the sewerage aspect, and we will come on to why that is the case.

The revenue funding gap is £23 million out of our £160 million RDEL need this year. We deem that cost to be essential, and I will come on to why we describe it that way. We cannot stop spending and using that money to run the services without there being a consequence for water and the already struggling and overwhelmed waste water services systems. It is an impossible ask to say, "Take out £23 million and then run the services to best effect". The services are already struggling, and we cannot do that. There is no way that we can reduce the spend, close that gap ourselves and still provide those services.

There are always questions about efficiencies and whether Northern Ireland Water is an efficient company. That is a good question, and people should ask it. That should be asked at all times: is it an efficient company, and is it doing all it can to be efficient? We have no issue with that question being asked. We get an independent assessment of our efficiency from the Utility Regulator. It is one thing for us to say that we are efficient, but the good news for government, shareholders, the owner, stakeholders and customers is that somebody independent looks at our planning, at where we spend the money and at how we run the service and then benchmarks that against other parts of the United Kingdom and these islands, and it says that we are efficient.

We have pretty much closed the efficiency gap since we went live in 2007. There was a gap of just under 50%. In 2007, the organisation that Northern Ireland was running to provide water and waste water services was 50% less efficient than those that the Utility Regulator benchmarked it against across the UK. That meant that, back then, for every pound spent on those services in England and Wales, Northern Ireland spent £2. That gap is now pretty much closed; it sits at just under 6%. That is deemed as being a closed gap, because some things that we want to do may not be possible under a government ownership model. That model might prevent us from doing some of those things in Northern Ireland. We have to recognise that that is part of the dynamic for us. That shows that we are an efficient water and waste water company.

I will refer to the graphic on the right-hand side of the slide. At the beginning of the year, we thought that we might need £176 million resource DEL from government in order to run the business. We said that we would start the year and examine where we could continue to drive efficiencies and take out cost. We knew that some of the costs were variable. Things such as energy costs move around depending on geopolitical issues. In the October monitoring round, we managed to bring £176 million down to £160 million. We think that we need £160 million resource DEL for our operating costs for the full year 2024-25. Because of the constraints on DFI, it says that it can give us only £137 million. That is a £23 million gap.

The Utility Regulator's PC21 mid-term review, which is represented by the blue bar on the right-hand side of the bar chart on the slide, said that we should determine to use about £170 million or £171 million to run the services. Northern Ireland Water has got that down to £160 million. We cannot get it down to £137 million without breaking the waste water service this winter. We must find a way to break out. We describe the situation as being a perilous downward spiral. Northern Ireland has to find a way to come away from this. We want services to run, and you will all want the services to run for your constituents during the winter period, in particular, and into the next year, the year after that and the year after that. We find ourselves with a gap of £23 million between what we need to run the service and what is available to run the service.

That was just on the operating side. Sara described the capital piece. The next slide takes us back to capital. Sara touched on the fact that we said that we would set in place the PC21 plan. That plan was determined by the Utility Regulator. It approved it and said, "Go off and do the plan". It said that doing that would begin to address years of underfunding of waste water services in Northern Ireland, which has a significant impact on the economy and the environment. That was our plan.

I will describe the chart. The graphic shows the shape of the capital programme for the current six-year price control — PC21 — plan. We are in year 4 of that price control plan, at which point the large brown piece at the top of the graph starts to take off and grow: that is when the investment really starts to come into the plan. Years 4, 5 and 6 would see intense capital spend and investment on the assets — particularly waste water — to start to alleviate some of the stresses and strains on the waste water network and the impact that those have on customers. In the plan, the Utility Regulator determined that we would need to invest £590 million in that fourth year. That is before the mid-term review piece that Sara described. We would need that £590 million to do the schemes that we have to do this year. From that graphic, you can see that the piece around waste water really kicks off in the fourth year. This year, we are being allocated £321 million against the £590 million need.

That is a gap of £266 million or a shortfall of about 45% against what we need.

The issue with the schemes and the investment that we were all describing and about which you as a Committee are keen to understand what is happening and why they cannot go forward is that there is a gap in available funding. We cannot begin those schemes and get them under way without that funding in place.

The Chairperson (Mrs Erskine): Sorry to interrupt. I know that there is quite a bit to get through, and I am keen to come to members' questions because we have seen some of that in the slides. If you do not mind, please touch briefly on the rest of the slides, and we can then come to members' questions. Is that OK?

Mr Larkin: We will keep moving through.

The next slide shows a large block at the top. That is the unfunded PC21 waste water recovery. That is what that looks like for the end of the price control period. For the last three years of the price control period, we will not be able to invest to the extent needed in Northern Ireland, so the large investment goes from that big block at the top to a much smaller block that is not able to meet the needs of the population in Northern Ireland and the needs of the plan with the regulator. That investment shortfall will continue to kick up, possibly towards a billion pounds, over the period ahead.

As the headline of the next slide indicates, the Belfast Living with Water programme is likely to be a casualty of the investment here. The Living with Water programme for greater Belfast was endorsed by the previous Executive and Assembly, and it is pretty much on hold at this stage. There is significant interest in the state of Belfast lough and what that might mean for the ecosystem there and for the economy in Belfast and the ambitious growth plans that Belfast and Northern Ireland have for its first city.

Without the funding, we cannot fulfil our role in the river basin management plan. That is the plan that was put in place to examine the state of the receiving waters and what our waters look like in Northern Ireland and to assess how clean they are and whether they are in a healthy state or a poor state. Without the funding, we cannot fulfil our role as part of the group that will fix that in Northern Ireland, and that is a major issue for us. Renewed interest from the Office for Environmental Protection (OEP) is starting to come around, examining where Northern Ireland is against its plan, what it is doing about it and what that investment looks like.

The next price control period is PC27, and we are starting to think our way into that now because, in order to run the long-term investment programmes and this long-term sector, we have to start thinking ahead. We cannot wait until the year that is upon us to start thinking about what we do.

The first half of PC27 will be about catching up on the stuff that we have not been able to do and that was deferred from PC21 because of issues around funding. We will also need approximately £200 million to start addressing the climate commitments that are now built into and baked into Northern Ireland's net zero commitments. On the way round the treatment works this morning, members were asking me about what happens to waste water sludge. We will need between £180 million and £200 million for new sludge disposal processes and facilities when we get to 2032. The current contract that looks after those will be replaced with something different, and that will take towards £200 million.

Equally, we have been asked to take a look at PC21 from a continuum of £321 million. It simply will not cut the mustard. Three hundred and twenty-one million pounds will not be enough to invest in what is needed for this price control period, let alone the next one, but, if we are looking at a planning horizon at the moment, the sense is that we are being asked or instructed to look at £321 million for the funding horizon. I know that that can change. That may change because we are not in that period yet, but the regulator will determine an independent plan. We strongly contend that the plan that we will need to put in place and the plan that the regulator is likely to determine on will be significantly above £321 million capital investment each year.

If the situation that we face today in Northern Ireland around capacity constraints, network constraints and the ability to provide the service to build houses and to grow the economy and so on prevails into PC27, the problem will only get worse. That problem will be with Northern Ireland for a long time.

Dr Venning: I have two quick messages. There were lots of numbers there; you were bamboozled with the numbers. Why are we doing this? Thirty-eight per cent of Northern Ireland's watercourses are classified as "good" status. There is a target to get to 70% "good" status by 2027. The Office for Environmental Protection has said that that is unachievable. If we do not invest in waste water infrastructure — you have seen, from the previous slides, that there is likely to be no investment — there will be no improvement in water quality driven by the publicly owned water utility. That will be in stark contrast to what is happening in the rest of the UK and across Europe. As citizens, all our consciences have been awakened now to the importance of the environment, and standards are rising.

The Northern Ireland Environment Agency (NIEA) has a waste water regulation reform programme, and it is signalling more stringent standards. Higher standards are good, but they are only good if you can meet them. Currently, if you cut the investment in the waste water assets, new environmental commitments cannot be met and will not lead to improved water quality. We find ourselves back in the conversation where we started and with the issue that you want to talk about, where the only action that is open to us is to prevent connections to the waste water network, which, we have all heard, is already starting to hit architects and the construction industry, so, if you want to go on —.

I do not want your overarching impression from NI Water to be one of doom and gloom. There is much to be positive about. The water utility is publicly owned. Clear plans have been developed that will allow us, over a long-term programme, to effect the improvements in the infrastructure that will deliver for the environment and for economic growth. That work was the hard part, and that has been done.

Not only have the plans been developed, they have been checked for value for money, but the plans are now being undermined, and the necessary infrastructure investment programme is currently paused. It is not happening, and there is an urgent need for additional funding, through monitoring rounds, just to meet the basic running costs. We are not even talking about capital costs: at the minute, we cannot even meet the basic running costs.

I have heard everyone here say that long-term, infrastructure-intensive businesses need a stable and sustainable investment profile. Short-term injections of cash are welcome, but they do not provide the most efficient or effective vehicle for delivering the aims of the Executive. The challenge and the opportunity is this: how do we work together? How do the Executive work together to identify how best to secure that longer-term surety, going forward? If you listen to all the evidence, it would seem that we really cannot afford not to find a way through that.

The Chairperson (Mrs Erskine): OK. Thank you for your presentation. I am keen to come to Members' questions. We have quite a few Members who want to ask questions, so, if you would not mind, could you briefly and concisely speak to the questions that they raise?

I want to kick off on the statement of regulatory principles and intent (SORPI) arrangements. You said that the SORPI arrangement was to be a short-term piece that was to fall once assets were up to a standard. We are still not at that stage, clearly, but the SORPI arrangements are being looked at. What is your view of the Ministers who are looking at taking away those SORPI arrangements at this time?

Dr Venning: I would love to think that that collaborative approach would allow us to say, "Here are the commitments, and this is what the OEP has asked for." If you could set out the work that you are going to do and a programme of work that is milestoned but that gets the assets to a condition in which they can treat to the requirement of the higher standards, you can hold NI Water to account for delivering against those higher standards.

It feels to me that the goal that we want is better water quality. We all want better water quality, so, in order to achieve that, removal of the SORPI needs to go hand in glove with a programme of work to invest in the waste water assets. That would be a super outcome. That is what we should be trying to achieve.

The Chairperson (Mrs Erskine): I suppose the difficulty is that we are dealing with pollution incidents. Some of those come from bigger companies as well. They are looking to government to have in place a SORPI arrangement that, effectively, allows overspills into our waterways.

Dr Venning: It is an arrangement that recognises the top treatment capacity of the assets. You cannot make an asset operate better than it is designed for.

I cannot deliver higher environmental standards with the asset base that we have. The answer is this: invest in the assets and improve the standards. That is why we have engaged with the Environment Agency through its waste water reform programme. That is why PC21 had quite a bit of work on and capital allowed for monitoring equipment: so that we could better understand which assets require investment. That is why we have been doing environmental modelling: to make sure that, when we spend capital, we spend it on the areas that deliver the best outcome for the environment. Everything that we are talking about today is about trying to achieve that environmental outcome.

The Chairperson (Mrs Erskine): The difficulty is that there are budget constraints across all Departments.

I will move on. There is an awful lot of talk about developer-led contributions and what developers can do. In your presentation and the evidence that we received previously, you said that NI Water can accommodate 18,000 new properties with the help of developers but cannot connect a further 19,000. What help is required from developers to connect those properties? Can they all be built if developers do something? Can nothing be built otherwise?

Dr Venning: For the 18,000 properties for which solutions have been identified — I think that you have heard evidence to this end — developers have to work independently to find storm water and remove it, which means carrying out the engineering or the soft sustainable drainage systems (SuDS) work to make sure that storm water does not reach the sewers. That is how they create the capacity for their new connection. That is a cost burden, and some developers say, "When we look at that and cost it up, it is more than we want to spend, so we won't do the work. We will pause and wait". Others will do the work, and those properties can connect.

The question of how many properties will go forward sits with the developers, who will say what they can and cannot do. That is permitted to happen only under the SORPI arrangement that says that you will not make anything worse. It is called the principle of "zero detriment". The higher standards that are being talked about will remove the principle of zero detriment, which will remove even that accommodation. The accommodation acknowledges that our assets are not up to standard, that there are more spills to the environment than we want and that the Environment Agency has said, "As long as you don't make anything worse, you can continue". If that dispensation is removed, the storm water offsetting solution will no longer be viable. You cannot really escape the fact that you have to increase your capacity and your waste water infrastructure. You have to invest in it, if you want to connect.

The Chairperson (Mrs Erskine): I want to touch on NI Water's modelling of waste water treatment. Written evidence from Marrac Design and Sheehy Consulting is included in our packs. They acknowledge that assessment is required on a site-by-site basis but advise that it would be of assistance to have a more detailed mapping or a breakdown by postcode rather than a blanket approach. What consideration has been given to making capacity modelling information more widely available? That might help developers, architects and the whole industry.

Dr Venning: Yes. We are open to chatting to people. We have a pre-development enquiry process so that people can come and understand their area better. I hear people asking why that is not just done on a map available on the internet. One of the concerns might be that it has an impact on the attractiveness of land prices across Northern Ireland, so, as people come to us through the pre-development enquiry process, we make information available to them on their individual locales or where they are thinking of developing. We are open to working with consultants and developers, and we take feedback on models. We would be the first to say that you can model only with the data that you have, and, as we get better information, we feed that into our models to upgrade them and to make sure that they are kept as up to date as possible.

The other thing to recognise, as the engineers have said to me, is that all of this goes back to how many spills go into the environment. At the end of the day, how much waste water spills into the environment is the end determinant. Sometimes, whether a storm water connection is or is not connecting to a pipe may not determine the level of overall spills, because those models are verified with flow measurements. If a model has been verified with a flow measurement and the flow measurement says clearly that, through an actual flow, there is a spill, it does not really matter whether someone can say that that bit of storm pipe did or did connect. The spills are still happening, and the spills are doing the environmental damage. Those are the things that need to be minimised.

The Chairperson (Mrs Erskine): On that point, your presentation says that 1,200 storm overflows are "still to be assessed". Are those that are still to be assessed in areas of constraint?

Dr Venning: They will be right across Northern Ireland, because there is a constraint right across Northern Ireland.

The Chairperson (Mrs Erskine): OK.

Mr Stewart: Sara, Ronan and your team, thanks so much for the invite to come here today and for the excellent tour. I also thank your staff across the country, who invariably go above and beyond when contacted by me and, I am sure, the other MLAs here. We appreciate that, and I am 100% sympathetic on the funding crisis. We will continually support you in getting the funding package that you need and deserve and that Northern Ireland needs to move forward.

I want to look at some of the policies around the areas of constraint. In a closed catchment area, Northern Ireland Water considers providing a positive planning response only where developers can demonstrate that the proposed development is like for like. You have created a rigorously enforced five-year rule when assessing like-for-like cases — ie, that the building must have been operational in the previous five years. Often, those premises are vacant and not abandoned, so, in theory, they could be switched on at any time, yet that does not seem to be applied to any of the processes when assessing it. A change to that process could open up industrial, brownfield or economic sites in such a way. In that context, who decided on the five-year rule, and what was the rationale for that?

Dr Venning: I do not know who decided on the five-year rule. I guess that I can only outline my view on the logical impact of it. In general, our models will be refreshed on that kind of cycle, and ,if something is vacant for five years and there are higher levels of spills into the environment, if you occupy it and put more waste in, you will push more spills. All those decisions and constraints are based on the fact that we are now aware that the level of spills into the environment is much higher than is permitted.

Mr Stewart: OK. I appreciate that, but, in those areas, the owner or occupier of that existing building could, at any stage, go back in, reoccupy it and continue to contribute to the system, if that is the case.

Dr Venning: If we know that an area is polluting, just because it could pollute even more does not make it right to pollute even more. That is the place that we find ourselves in. As a responsible water utility, we would have to be able to demonstrate to the Environment Agency that, by our actions, we are not putting in place additional pollution.

Mr Stewart: Was any consultation required to be carried out with stakeholders on the five-year rule, or is that something

?

Dr Venning: I recognise that that query has been raised with you, but it has not been raised with me, so I do not have the facts behind that. I can get them, but I do not have them.

Mr Stewart: It would be incredibly useful to find out why it is five years and not 10 or 15 years.

Chair, if I may, I want to raise a local issue, but it impacts on areas of constraint across the country. For example, in my constituency, a special educational needs school in Larne recently applied for three new mobile facilities to be put in. All the children who would have been using those live in the Larne area. The application was turned down as a matter of course, because Northern Ireland Water said that there were capacity issues. That was despite the fact, not to be too graphic, that those children would have been using their facilities at home, and, when they were not at home, they would have been in school. Has there been any opportunity to assess each of those on their merits rather than issuing a blanket ban, saying, "No, that cannot be done" simply because they are in an area of constraint? Do you understand the example that I am using?

Dr Venning: Generally, there is an attempt to assess on merit, but, when you know that an area is excessively overloaded, you cannot do that.

Mr Stewart: I appreciate that, but they would have been using those facilities in their house in Larne rather than at school.

Dr Venning: If Larne is excessively overloaded as it stands, again, as a responsible organisation that has environmental commitments, it is difficult for us. We would leave ourselves open to prosecution. It is difficult for us to take actions that can demonstrably add to that pollution potential. That is part of why you find yourself in this situation.

Mr Stewart: I appreciate that.

Dr Venning: Could we find a way through? We will, potentially, work with the Environment Agency. That is why, with the agency, we took the time to explore and push the idea of zero detriment and to see whether there was a way to extend that. That would, however, require the buy-in of the Environment Agency. Certainly, if that was acceptable to the agency, that would be looked at. We are happy to work with other agencies.

Mr Stewart: That brings me to my last question, if I may, which is about that. Where the Executive are prioritising specific projects such as, for example, special educational needs schools or areas of economic development, if there was that flexibility and buy-in from stakeholders such as the Northern Ireland Environment Agency, is there a process that would allow for flexibility within the current constraints?

Dr Venning: We can be flexible within the legislative and regulatory framework that we are given. The legislators and the regulators can give us that flexibility: they already give us what flexibility we have. That is a conversation to have with NIEA.

Mr Stewart: Has NI Water ever asked that of NIEA?

Dr Venning: We asked about and explored the idea of zero detriment, and NIEA worked well with us on that. However, in its environmental stewardship role, it seems to be saying now — the Chair alluded to it — that we need to be strict and that we need to strictly apply the letter of the law.

Mr Stewart: OK, thank you very much.

Mr K Buchanan: Thank you for the tour. I appreciated that.

The first slide says:

It goes on to say:

Hypothetically, if we do not have heavy rain, can your system cope today?

Dr Venning: There are still some overflows, some of which are called "unacceptable intermittent discharges" (UIDs). That means that, in some areas, those discharges can spill when there is not heavy rain. The system across Northern Ireland —.

Mr K Buchanan: Explain to me how that happens.

Dr Venning: There is more sewage or more foul water going into the pipe than the size of the pipe can cope with. Therefore, when it gets to capacity, it releases through the overflow. That is called a UID.

Mr K Buchanan: Theoretically, if it is not raining, that is a standard flow.

Dr Venning: Yes.

Mr K Buchanan: How can it overflow?

Dr Venning: It is a pipe, OK? The pipe is a certain size, and, if there is more stuff coming down the pipe, it comes out of the hole at the side of the pipe.

Mr K Buchanan: That would mean that overflows are happening 24/7.

Dr Venning: There is the potential for that, but not 24/7. The pipe is not always full, so sometimes it will run down at a lower level. If you have increased flows, yes, there will be an overflow

Mr K Buchanan: The only thing that will increase flow is rain.

Dr Venning: That is not the only way to increase it.

Mr Larkin: There might be more industrial load coming in. It is not just about households; we need to think about manufacturing, businesses and so forth. All of those can add load, and, at peak times, that pipe could be overflowing; at other times, it may not be. It is a good question, Keith.

Mr K Buchanan: OK. I appreciate that I am using the rain as an example. Heavy rain creates a bigger problem than the problem that is currently there.

We are talking about finances, and we know that we need this. How do we get away with it between now and then? We need a midway point. You do not want any more connections to your system, yes? Let us say that a developer goes to build 20, 30 or 40 houses or whatever, and they say, "Right, I am going to put in a treatment plant, but I will not connect to your system". What are your thoughts about a septic tank soakaway principle? Your loading will not go up. You have a septic treatment plant sitting there with no connection to your system. What are Northern Ireland Water's thoughts on that?

Dr Venning: That is probably not a question for me; it is for the Environment Agency. It gives consent for those, and it would be best placed to say what environmental impact that might have. All of you, though, have probably made representations to us in the past where waste water assets were built by developers but were are not adopted. That is because developers, at some point, have to walk away, and, if they have not put in place a management framework for the maintenance of those assets, problems arise. The best solution is to have assets that can be adopted.

That might lead to this question: why do we not just build lots and lots of small treatment plants and adopt them? That might take you back to where Ronan said that there is a £23 million gap in our running costs. If we create a network and infrastructure of tiny waste water plants — remember, as things stand, we have over 1,000 waste water treatment facilities and 24 water treatment plants — and connect lots and lots of them, that £23 million gap will only widen, and you create another problem for yourself.

You do things right and design things in the right way by ensuring that you have capacity in your waste water system. How do you do it right and allow development to continue? The PC21 plan allowed for that. What was happening was that developers, knowing that our investment programme was coming behind them, were developing up to a certain stage. Now, the hard stop on the investment programme is causing a lot of difficulties, and we are having to say to people, "There is a hard stop, and I have no line of sight to the new assets". However, the question of whether there should be soakaways is definitely one for NIEA.

Mr K Buchanan: I just want to give you an example, if I may. I will not go into the detail.

The Chairperson (Mrs Erskine): Quickly, because we have a number of members waiting.

Mr K Buchanan: OK. A developer goes to build 20, 30 or 40 houses. He communicates with NI Water, and you come back and say that the treatment works should be constructed in such a way that they will be offered for adoption under article 161. The developer goes through the planning process and gets approval with an attached condition — it is important, if I may, Chair — that the plant shall be maintained by the developer until such times as it is adopted by NI Water or is no longer necessary to serve the development. That developer has planning approval. Legally, he or she could build those houses. However, after that, NI Water comes back and tells the developer, "We're not giving you a 161".

Why do you tell developers to build to a 161 and that planning is approved — it costs thousands of pounds to get that approval — and then not accept the 161? Technically, they can build those houses and put in a treatment plant, according to the document that I have in front of me, which is the green light from planning to go ahead, with the developer maintaining the plant it until it is adopted.

Dr Venning: It would never be adopted.

Mr K Buchanan: Why, then, did NI Water, several months before, say that it should be constructed in such a way that it shall be offered for adoption under article 161?

Dr Venning: I do not know the specifics of that case, and I am happy to take it away.

Mr K Buchanan: You understand my point.

Dr Venning: I do not think that that happens routinely. If I had to hazard a guess, I would say that that was one of the early developments when we were trying at every juncture to find an accommodation to allow people to continue to build so that the investment programme could catch up.

Mr K Buchanan: This was 2024, only months ago. I just make the point that developers are getting the go-ahead, heading in a direction and, suddenly, the door closes.

Dr Venning: The entire supply chain of NI Water is in the same position. We went through a significant procurement process, brought on board a supply chain and stand ready to invest significant amounts — you have seen the graph — and that has all been stood down as well.

Mr K Buchanan: I will close on this point, if I may.

The Chairperson (Mrs Erskine): Keith, quickly, please, because I have —.

Mr K Buchanan: NIEA's response to the same application was that no private sewage infrastructure consent relating to housing development would be granted unless an article 161 agreement and bond were in place. Why can a developer not put in the correct equipment to your standard, submit a bond to secure it, maintain it — whatever the terminology is — and ensure that it is fail-safe but not provide a connection to you? In that way, there is no more loading on the system. The soakaway principle, as I call it, is there, and it is working in other countries. Why are we not looking to that solution, between NI Water and NIEA, in order to commence some degree of building without putting any more load on you?

Dr Venning: That is probably a question for NIEA.

Mr K Buchanan: Sara, can you not

?

Dr Venning: I will still point you, with respect, to all the unadopted developments that exist and that the Committee has examined in some detail. A significant number of people live in unadopted developments where their infrastructure is not in good nick, but they cannot afford to fix it, and they struggle to sell their house. If you go down that route, you increase the risk of that happening to even more people. It is not a question for me, because I do not make those policies. It is a question for the policymakers. It is much better to have the infrastructure and have it under the ownership of a utility that has to look after it in a good manner. That is what we have do to.

Mr K Buchanan: Thank you.

The Chairperson (Mrs Erskine): At this juncture, I declare an interest as somebody who lives in a fairly new unadopted development.

Mr Dunne: Thank you, folks, for the presentation, the tour and the welcome.

Sara, towards the end of your presentation, you mentioned the contrasts with the other parts of the UK. What lessons or good practice should be looked at seriously to help us in Northern Ireland? On the back of that, what impact — you may not know this yet — will the most recent October monitoring round have on you, and is it a step in the right direction?

Dr Venning: I will hand over to Ronan. The UK water companies went through a price control review. They put in their business plans for the next five years' worth of investments. Ronan, maybe you want to talk about what they are doing on waste water.

Mr Larkin: At the moment, they are finalising the arrangements for the 20-odd companies in England and Wales. Some of the issues in England and Wales are well documented, but, by and large, the system works. The key principle is that the regulator examines the companies' plans and gives a determination. The regulator is called Ofwat, and it is the same as our Utility Regulator here. Our model is pretty much based on the same principles. The regulator opines, "There's the determination of the plan". In fact, what the regulator has to determine is the capital investment in waste water, pollution and combined sewer overflows (CSOs) — the things that we are talking about this morning. The regulator has allowed that to almost double in size in the price control 24.

England and Wales are about to embark on an enormous capital programme to get after the things that, they know, impact on people in England and Wales and that, we know, impact on us here. The first principle is that you have to invest. Once the regulator opines and determines on the plan for the Ofwat companies, the next thing that it asks is, "Are you able to fund your plan?". It wants to see a signed-up-to, tiered funding plan that makes sure that the companies, which are the licensees in the same way as Northern Ireland Water, can make those investments happen on behalf of customers. That is the first thing.

The reason why England and Wales are doubling the investment is that they have recognised in the same way as Northern Ireland now recognises that they need to invest in their drainage infrastructure. I do not exclude water — water absolutely needs investment as well — but there is a huge need for investment in the drainage infrastructure. Once that is recognised and a regulator determines it, the investment has to be forthcoming. In ordinary terms, the shareholders have to make sure that they can put up the funding. In England and Wales, there are examples of where that is stuck. One example is Thames Water. There are conversations going on with funders and shareholders. The Government and the regulator are carefully monitoring that situation with Thames Water.

The companies will submit their plans for scrutiny to a regulator. The regulator will examine the plans and determine an outcome for those plans. It will then give that back to the companies, and the companies have to decide whether to sign up. The plans then have to be funded so that customers can have the services that need to be available today and into the future. Those are the key things. That is what is happening in England and Wales.

You mentioned the monitoring round. In the October monitoring round, Northern Ireland Water put bids in to the Department. We bid for £23 million to cover the gap in the operating cost this year. We put in a bid for £30 million of capital so that we could continue to drive some of the schemes that, we know, we could get after, even in the short-term window between now and the end of the year. There was some publicity this week on the outcome of the monitoring round. We have not seen an outcome for Northern Ireland Water yet. We will work with the Department to see what that outcome will be, but we have not seen an outcome on the RDEL piece. That £23 million gap will cause issues in the second half of this year, in this winter. We have not seen an outcome on the capital piece yet. We await that outcome, which will come from the Department. The Department will brief us in the fullness of time, but we want to know what the outcome is on both of those lines. The sooner we have an outcome on the capital side, the sooner we can start using that money and getting it into the ground.

The final thing that I will say is that Scotland has its own water company: Scottish Water. It is regulated by an authority in Scotland. The principles of how Scottish Water and Northern Ireland Water are regulated are broadly the same, but, by and large, funding is made available to put in place the plans that, the Scottish water regulator says, have to happen for customers. There may be tweaks to those plans and little bits of funding that may not happen sometimes, but, by and large, the funding is made available.

Mr Dunne: Thank you. I have a couple more quick questions. In relation to Belfast lough, you touched on the fact that the Living with Water programme might be paused. I am keen to establish what impact that might have on the environment, including my constituency of North Down, which extends into that area. There is concern, because we do not want to see another Lough Neagh. You are aware of that. Information about that has been put out in the past number of weeks.

I understand that Kinnegar waste water treatment works are due to be upgraded. There was some work on those earlier in the year. Will the pause impact on that work?

Mr Larkin: I will start with the final question. Yes, the investment in the upgrading of Kinnegar will be and is being impacted on by the shortfall in funding. The answer to that question is, "Yes, it is".

Beyond that, I will pick up on your question about the wider catchment area around Belfast lough. The Living with Water programme was an excellent example of collaboration with stakeholders across the piece: the Department, the regulator, others who came together, the Northern Ireland Environment Agency and Belfast City Council etc. They came together to look at the system around the lough and what needed investment so that the receiving waters in Belfast lough could reach a good standard.

At the moment, the programme has probably been paused because, again, of issues around funding constraints in Northern Ireland. Without that funding, we cannot begin the investment programmes around five or six key plants from Kinnegar in Holywood to Duncrue Street, back out the other side to Whitehouse and Greencastle and out as far as Carrick. Those plans and investments need to happen.

There is an endorsement in the current price control, PC21, to begin the Living with Water programme now and continue it in the next price control period so that the work gets done. The key stakeholders have endorsed it. It particularly ties up with Belfast's ambitions to attract people to live around the city, create jobs in the city and attract students to live in the city while studying there. That is a key programme. There are sensitivities around the receiving waters in Belfast lough. The Environment Agency will set standards with us — it has done so — that those receiving waters will have to reach.

Dr Venning: Of the nutrient load that happens in Belfast lough, 90% comes from NI Water assets. Whilst it is less than 20% in Lough Neagh, we know that it is NI Water assets in Belfast lough. We now know that we are not doing the construction work to fix those assets.

Mr Larkin: A study called 'Story of Belfast Lough' was recently completed. The study was examined and endorsed by stakeholders, and it is out there now. It basically says where we are, where we need to be and, without proper investment in Belfast lough, where Northern Ireland will get to with the lough.

Dr Venning: It is probably worth noting that a third of the Northern Ireland population is served by those assets and catchments. If we know that that area is overloaded and that we are likely to have to say no to developments there, we have to note that a third of the population in Northern Ireland lives there.

Mr Dunne: There are significant challenges.

Briefly, I have a final question. There were media reports about NI Water staff potentially being balloted on strike action soon. At this stage, can you say any more about the potential impact on services?

Dr Venning: A ballot is ongoing. It will close at the beginning of next month. It is of deep concern to us as an organisation. For sure, as you have all said, our people provide an essential service. If there were to be industrial action or action short of industrial action, there absolutely would be an impact on services and customers.

Mr Larkin: I will pick up on that. You met some people this morning who are the staff members whom we are talking about. They continue to await an outcome, not from the 2024-25 pay review but from the 2023-24 pay review. That is why we are keen to make sure that the current gap — that £23 million — is closed, so that we can pay those people from the 2023-24 pay review and think about the 2024-25 pay review. Those people are waiting patiently while doing their job.

Dr Venning: Nineteen months.

Mr Larkin: We always give a shout-out to our staff, who make the systems run every day. You met some of them this morning. It is important that they know what is happening with their pay, because it is causing them issues. That is why we are keen to make sure that we understand where the funding is.

Mr Dunne: Thank you.

Mr McMurray: Dr Venning, I noted from one of the environment slides that Northern Ireland faces:

The more I thought about that, the more it struck me. Keith touched on how the storm overflows and waste water treatment plants are affected. How much does NI Water forecast it needs to fix all those things, and what does it cost, if more pollution is going in? We have seen today how the water is taken out, and you referenced the fact that the deteriorating quality of some of the water means that additional measures are needed. One assumes that that means additional costs, so we are in a downward spiral. How do those things get fixed?

Dr Venning: Going back to the environment and root causes, having good raw water quality is about having a joined-up approach: it involves not just NI Water but agriculture. We want to ensure good raw water quality. That is what the river basin management plans are about. That is what the Office for Environmental Protection reported on. It has said, "Have plans, with milestones, that describe the interventions that you will make, how much they will cost and when you will make them". That is what it has asked for, and, to be fair, that is what a water company does. In PC21, we had plans with milestones and time frames for plants and networks to be upgraded.

As you have seen, we now look to the next six years and to the six years after that. It is a slow burn and a long-term fix, but it can absolutely be done. There are added complications from having to bring in what to do about climate change, but the wherewithal to do it is here: it sits with us as a company and with Northern Ireland. The key challenge is how to fund it. Remember that, in regulatory price control, affordability is taken into account. Whilst the numbers that we talk about are big, big costs, they are affordable, and business customers are paying for them, so they are affordable within tariffs, and that is given consideration.

That is why it takes a little longer to do all the work that we need to get done, but that is also why we have the likes of the Living with Water programme in Belfast. We have been clear that Belfast lough has poor water quality and that we need to fix Belfast waste water treatment works. We now know how much that will cost. We had the team ready to start building it — it would have been building right now — and we are designing the Kinnegar and Sydenham solutions.

It is a programme of works, but that is what water companies do, and Northern Ireland can have that. It is in hand. The challenge, however, is making sure that it can be funded. How do we identify a sustainable funding stream that allows that programme line of sight for the next six-year period and the six years beyond that? We have stopped it. I heard the Construction Employers Federation (CEF) or maybe it was the architects say that a potential delay of two to three years had been introduced, even though it had been paused for only nine months or 11 months, as it is now. So, do not stop it. Get the work done.

Mr Larkin: Do not stop that programme of work.

Dr Venning: Do not stop the programme.

Mr Larkin: Invest. Put the money into the assets so that people have the services and the economy can grow. It is not a case of Northern Ireland Water's needing the investment; Northern Ireland needs the investment, so that it can provide those services to citizens and allow for a growing economy. The Government have great ambition for growth in the economy. You cannot grow it on the back of poor infrastructure. It is as simple as that. I think that I am echoing what I heard the Royal Society of Ulster Architects, the Construction Employers Federation and others say when they met you recently.

Mr McMurray: My next point follows on from that. We have seen the gap. There are two options: we can keep doing what we are doing, in which case that gap will keep growing; or we can change the funding model, essentially. Will you elaborate on the implications of both?

Mr Larkin: The Northern Ireland Audit Office (NIAO) carried out a two-year study. Its key recommendation — remember that this is the Northern Ireland Audit Office; it is not Northern Ireland Water — is that an independent, expert-led review be conducted of Northern Ireland's options to fund those services. I would start with that recommendation and get that independent, expert-led review under way. That would give you some of the answers that you asked for, Andrew, on how the funding options might look and feel different.

If that review gets under way, let it run its course. It is an important recommendation that, possibly, is not being undertaken currently. In the meantime, the policy in Northern Ireland is not to charge citizens for water or waste water at home but make sure that they have the services. We, as the company owned by government tasked with making the services happen every day and making sure that the investment goes in to make them happen in the future, ask that the government-owned water company be funded: make that happen.

The good news is that Northern Ireland has a good water company. Its structure and programme and how it goes about planning for that is solid and sound. It is regulated by an independent regulator that scrutinises what we do. We are probably the most monitored organisation in Northern Ireland, so, if we do not get something done, people will know about it pretty quickly. However, you have to fund it. The current policy is that it will be funded through government intervention, and that is really starting to cause an issue. Our ask is that you simply fund the company that Northern Ireland owns so that those services continue to happen. That is the current policy, which we, as a government-owned company, very much support.

Mr McMurray: Net zero transition is at the top of that slide, as is the new sludge disposal facility. We saw some of the dried peat briquette-type stuff. Net zero is at the top, but there is no extra funding for it. How will that affect the net zero targets, which have legal implications? What other nature-based solutions are there for sludge disposal? I am trying to think about the circular economy.

Dr Venning: It is important to be clear that that sludge disposal facility is for waste water. Everything that you flush down the toilet goes to a waste water treatment works and is treated. A similar cake is produced, and there are two incinerators in Belfast that burn that. We get limited energy from it. It gets burnt and sent up a chimney. Those two incinerators are under contract with a public-private partnership (PPP) provider, and they will be at end of life in 2032. One of them definitely will not work; it is very old. That means that, by 2032, we will have no means of disposing of 50% of Northern Ireland's waste.

We have to put something in place. A new sludge disposal facility is an absolute must-do, but it is expensive. We will have to design and build it in the period up to 2032. Net zero, climate change and climate resilience are all things that need to be worked on. As a water company, we have a climate change strategy. We have identified all the areas that we need to work on and the changes that we need to make. We have identified that there will be a cost associated with that. That goes back to the principle of just transition and where those costs sit. Some of those debates are still happening, and whether the costs will sit in a regulated model and be passed back out to customers is not clear, but we can set out, "This is the work that you will need to do. If you want to get to net zero for energy, this is what you will need to do. If you want climate resilience, this is what you will need to do. If you want to take carbon out of your supply chain, this is what you will need to do". We are doing that work.

Mr McMurray: Will that work be affected by where that line is?

Dr Venning: Yes. If there is a suggestion that you continue to invest in your capital at the same level as you are investing now — at £321 million — you will not do any enhancement in waste water; you will not have a sludge disposal facility; you will not spend any money on net zero; and, worse than that, you will not spend money on water enhancement. You will not even have enough money for the work that you need to do on water enhancement: things like dealing with algae bloom and because more water will be needed for people. The signal is that more money needs to be invested in the assets for the water utility. It is really important to think about how we will fund it, because, as a society, we cannot not have those facilities.

Mr McMurray: Thank you.

Mr Boylan: Thank you very much for the presentation and for facilitating our visit today.

I will take it in a totally different direction. I understand the environmental challenges 100%. Nobody will argue about those. I have two points to make. Was there any negative response to the Utility Regulator's mid-term review? How do you feel about it?

Mr Larkin: First and foremost, it was a piece that all the stakeholders, including the Department's sponsor body, agreed on. At the outset, when we put PC21 in place, it was agreed that we would do a mid-term review. We did a lot of work on that mid-term review to underpin our support for it. The regulator has studied and scrutinised that submission. It is a positive outcome for it to be known and identified that the regulator continues to endorse pretty much all that we had in the plan originally. There might be some minor changes, but, at the mid-term stage, the Utility Regulator continues to say that the lion's share of everything that we put into the PC21 that was originally determined on needs to be delivered for customers in Northern Ireland.

The key thing that the Utility Regulator said was that we needed more money to fund the costs of running the business every day, because costs have gone up. We are still in a hyperinflation scenario, where inflation is going up. People say that inflation has come down because it is sitting at 2% now: it is not. It is still going up by 2%. That is on the back of the highest inflation since about 1948. Energy prices have gone up. You will know that from conversations that you have with constituents and others about energy bills. Energy prices continue to rise. They went up by 4% in Northern Ireland last month. The regulator said, "Those are things that you could not have foreseen when you put your price control 21 plan in place in 2020. We now need to allow you more money, because you have to go out and buy the energy to run the systems".

You will have seen some of the plant that we have here. Energy is being used here this morning. The regulator has allowed additional money to be put into our determination to cover those volatile costs. The regulator recognises that we continue to be efficient but also that the prices that we have to pay for some of our inputs have gone up. That price has to be recovered from somewhere. We will need more resource DEL from our funding model from government, and we will have to charge customers more.

On the capital side, the regulator looked at the impact of inflation on capital schemes and said, "Yes, that has gone up". Significantly, the capital schemes that were determined, which, the regulator says, should still go ahead, will now cost Northern Ireland more money, but Northern Ireland still needs those schemes to be in place.

By and large, Cathal, the mid-term review is a positive endorsement of the PC21 plan that all the stakeholders worked with us on to put together. The need continues to be there, and we know that the immediacy of that need is becoming greater, because we see the impacts of not making the investments for housing, businesses and others.

Mr Boylan: Ronan, I have a wee supplementary. Are you content that you can deal with the real price effects that have been observed in the report?

Mr Larkin: No. We need to have the funding in place to deal with that.

Mr Boylan: It says in the report that the Utility Regulator will work with you.

Dr Venning: It will do more work. It stands at £2·4 billion, and that is just because the Utility Regulator did not get through all the work. The regulator recognises that, with a spend of £321 million per annum, not all the schemes will be delivered. By the time we go for the next price control, however, the regulator will have done that work. It signalled that £2·4 billion is at the lower end of what would need to be spent to do the work.

Mr Larkin: The regulator has done a lot of that work since publishing the review. We are starting to get an early-stage, informal read-out from the regulator, and it will publish on that again. You will see that that cost need sits there and goes up. The Utility Regulator says, "Yes, it has gone up. It is a cost that you, as the water company, cannot avoid. The money has to be found to make those asset investments so that customers can continue to have the services".

Mr Boylan: Fair enough.

This is my final point, and it is an important one. All of us have sat in government, and we keep talking about Departments working in silos. Nobody connected to government should work in a silo. I will turn the argument around. I appreciate that there are environmental issues, but we need houses and development. You kept mentioning NIEA's responsibility. I agree with Keith on the matter: we need to be collective, including talking to councils. There is no point in councils drawing up local development plans saying that they need 10,000 units over the next 10 years, along with growing the economy, building, skills and everything else associated with that, if we are not all involved in the game.

I appreciate that you have a working engagement with individual developers on how they develop, but we need to have a broader discussion, because the Minister has given NI Water 40% of his budget for this year. We will have a conversation about that. We came down to listen today, and we have seen what is happening. We need to have a broader conversation across the board about how to deliver. It is for all the Departments, all outside bodies and all bodies linked to every Department to address the issues.

Dr Venning: Yes.

Mr Boylan: We get cried at about social housing and affordable housing not being able to get connections. We need to have a broader discussion.

Mr Larkin: That is a fair point, Cathal. Water, waste water and Northern Ireland Water sit with the Department for Infrastructure, but this is an all-Executive matter that has a profound effect on societal issues in Northern Ireland such as the basic human right to housing and clean, safe drinking water and how we want our environment to look and feel for everybody who lives here. All of those are good, everyday needs. That is housed in the Department for Infrastructure, but I agree that it is an all-Executive matter. A strong place to start might be to pick out that key recommendation in the NIAO report to have an independent expert-led review of how best to fund services for customers. We will contribute to that review.

The Chairperson (Mrs Erskine): Thank you. That is key: it is a headline in the draft Programme for Government. I am sure that you responded to the consultation on that and made those constraint issues known.

Mr Larkin: We did. There are nine key pillars in the draft Programme for Government. We examined them carefully: we sit firmly under four of those pillars. If we can make happen what we need to make happen, four of those pillars will immediately be supported.

The Chairperson (Mrs Erskine): Thank you.

Mr Durkan: Thanks to the crew for your hospitality and for giving evidence. What we have heard about today and what we have seen for some time is the impact of decades of underinvestment in the environment and the economy. It is not just architecture and the construction industry; it is the whole economy and all of society. Today, we have heard all parties express their recognition of the importance of Northern Ireland Water. It is not the first time that you will have heard that, but you really need to see that make a material difference.

Some of the questions that I was going to ask have already been touched on. Sara, I am particularly interested — there has been a wee bit about this — in the modelling on which a lot of the refusals are based. Having listened, I appreciate the point about it being modelling and measuring, but concerns have been raised about the accuracy of the modelling. I do not know what the verification process for the modelling is or has been. On the flip side, how, where and when is the measuring done?

Dr Venning: There are two elements to it. We have done the modelling work in conjunction with consulting engineers who do that kind of work across the UK. They have put their professional indemnity on the line to underpin the models. We have shared, through presentations to the Construction Employers Federation, how those are done and the verification that comes with them.

You asked about monitoring. As a drainage area plan is developed, flow recording may happen over, perhaps, 12 months. Moreover, on those CSOs, we have installed event duration monitors. You can go on to our website and see where the event duration monitors have been installed and get information on what they record. By the end of this price control period, probably half of our CSOs will be monitored. The map on the NI Water website shows all the bathing water discharges, because we focus first on bathing waters. That is a programme of work that is included in the capital programme. For the most part, we are up and running on that. It has not been stopped or reduced by PC21. We will finish the PC21 plans for those monitors, as we set out to the regulator.

Mr Durkan: You said that you update the models as you learn more. If, with an application, a survey is submitted that conflicts with the model that you use, is a comparison done between the two? What is done with the survey that is submitted? Is it used to do the update?

Dr Venning: If someone says, "Look, your model shows a connection that does not exist", we can adjust our geographical information system to remove that connection. The engineers have told me that they do that routinely. I do not do it by myself.

Mr Durkan: OK. I will go local for my penultimate question. The issues facing the Buncrana Road development have been in the news. I have written to you about the potential to explore a cross-border solution, and I will keep on on that. There is great frustration that that scheme has been 20 years in the development — it did not just fall out of the sky — and it is only latterly that the issue has come to the fore, and it has proved to be insurmountable thus far. Why is that? Is it because it is only now that the NIEA has stepped in?

Dr Venning: Mark, it is more because of the £321 million line that goes across the graph. It is a big issue. When it was a big issue initially, we probably thought, "Oh my goodness. How are we ever going to do this?". Then, we were planning PC21, and some of that work was factored into those plans. That is why, for some of those developments, the conversation was, "Yes, this should come together". However, since last December, our plans have been stopped —

Mr Durkan: You thought you would have got there.

Dr Venning: — so the money is not there.

Mr Larkin: In year 1 of PC21, we got the full allocations to get the work under way, and that was a good prospect. The regulator had determined our plan, and said, "Yes. Your plan is good. Here are some tweaks, but you can go ahead and do it". There was a positive approach to investment, and the Living with Water programme was endorsed. People recognised the environmental issues, and they wanted it to happen. As Sara said, it was really only last December that, for want of a better phrase, a hard stop was put on funding on the capital side that said, "You will not spend over £321 million". Since then, we have been told, "You will use that number for this year — 2024-25 — and for 2025-26 and 2026-27 and for your next price control planning horizon".

As we have said before, it is awful to think about it, but this will not go forward on £321 million. We will get to a point where some of the water schemes that we need to do may not happen. Somebody asked me this morning about lead pipe replacement schemes and things like that. They will go to the wall; they will not happen. We can understand the issues for developers and so on. We know about that — we see that — but a hard stop was put on the capital programme last year and crystallised last December. We have not seen it change since. We are waiting for the outcome of the October monitoring round to see whether we might get some more capital. We do not know yet — we might know in the coming weeks — but it will not be to the extent needed to drive the PC21 programme up and get ready for the PC27 programme.

Dr Venning: An October monitoring round allocation would have to be spent by March. It goes back to the question of what developers can do. You are investing really big amounts of money for some of those schemes. They are multi-year programmes of work, so, once you start them, you have to finish them. That goes back to certainty of funding.

Mr Durkan: Finally, to be sure that I have picked you up correctly, is the avoidance of strike action and the awarding of a long-awaited and well-deserved pay rise for your staff contingent on an allocation as part of the monitoring round that we have just gone through? Can you not do it otherwise? How much do you need?

Mr Larkin: The 2023-24 pay review is the one on which our staff await an outcome. We completed our accounts for 2023-24 and submitted those numbers to the consolidation process in the public sector. We finalised our annual reporting accounts for that year. We have included in our cost base, which we have lived within, the amount for the pay rise for 2023-24. The good news is that the cost of that pay review in 2023-24 is covered in all the costs that we have put together for 2023-24. Given that that goes forward for people in perpetuity, we have reflected that in our estimates and forecasts for 2024-25 as well.

We need an outcome on that so that we can work with the trade unions and let our staff know so that they have some certainty on their incomes. Staff have been waiting for, I think, 19 months for an answer on that. However, the good news is that we have put that money away. We have covered that. We have accrued that money and filed it appropriately in our actual numbers for 2023-24. We have allowed for and recognised that a piece of that comes into 2024-25, as that piece is carried forward in people's pay. Therefore, we are accounting for it properly. It is sitting within our estimates. It is within the numbers in our filed accounts for 2023-24. We now need an outcome to that.

The Chairperson (Mrs Erskine): Thank you.

Mark, you asked about the October monitoring round at the start. I apologise because I did not have the information in front of me at the time. The Department for Infrastructure has been allocated £39·6 million towards capital pressures, including for ongoing issues arising due to constraints in the waste water infrastructure and the resultant impact on construction and the environment. There is £13·7 million for over-planning, which, I think, is to come off that £39·6 million. We will seek more clarity on what was asked in the Committee.

Keith, I am really pushed for time. Can you come in very quickly and ask your question, before we move on.

Mr K Buchanan: This is a quick question. Who do you use to optimise and get maximum capacity at your waste water treatment plants? Is that internal or external or a mix of both?

Dr Venning: It is a mix of both. We use process design consultants to help us if we are trying to optimise the works to get more capacity. We have done that. We have carried out a process of optimisation and will continue to do so.

Mr K Buchanan: I do not need to know names, but are those local, UK-based or European-based? The Danes and the Dutch are experts in that field. Do you go as far as that?

Mr Larkin: We go as far as you describe, yes. We use local organisations, and we look beyond these shores and UK shores to see what expertise lies out there and how we can deploy it.

Mr K Buchanan: Are you utilising any of that expertise?

Mr Larkin: We have used some of that, and we know that there is more to be done, but it will not solve the whole system problem. It can buy you a little bit of capacity from time to time, and we are looking at that now.

Dr Venning: We look at work that is being done in America as well. Wherever we can take learning and innovation from, we will certainly do that.

Mr K Buchanan: Thank you.

The Chairperson (Mrs Erskine): The Executive are working through their investment strategy. I have been asking questions of Ministers in the Chamber about that, because key parts of the strategy concern infrastructure. Have you had any conversations with the Minister or any other Executive Ministers about the investment strategy, given how crucial it will be to investment and delivery on the draft Programme for Government?

Dr Venning: We have spoken to officials, and we share our numbers. We, as an arm's-length body, do not make submissions directly to the Strategic Investment Board, so I do not know the extent to which the numbers that we share make it the whole way through to the investment strategy. That is the honest answer. However, thinking about that sludge facility and the impact of climate, we forecast, I fear, that there will not be sufficient allocation in the investment strategy for the full water and waste water needs. That peaks at over £800 million a year.

Mr Larkin: If the forward projections that we shared at the time were included in the investment strategy, we could take it positively that they were in there. Then, on an ongoing basis, they would have to be updated for inflation. The modelling should do that. However, if the £321 million figure is used, that would give rise to concern. If that £321 million is used as an estimate in the investment strategy for Northern Ireland for Northern Ireland Water's capital scheme, that might be an issue.

The Chairperson (Mrs Erskine): OK. It is a stark picture, and, no doubt, we will continue to look into the issue.

We appreciate your hospitality today. Thank you for having us. Members mentioned it in their contributions, but I thank NI Water's staff across Northern Ireland who engage with us at a local level. Thank you for your evidence today, and no doubt we will be in touch.

Dr Venning: Thank you.

Mr Larkin: Thank you, all.