Posted on Tuesday 23 August 2011 byUlster Business
[caption id="attachment_1128" align="alignnone" width="510" caption="Former Minister Conor Murphy, pictured with NI Water\'s interim CEO Trevor Haslett, had a clear vision of where NI Water was going, according to Sean Hogan"][/caption]
John Simpson asks NI Water's new Chairman Sean Hogan how he plans to restore the organistion's reputation
Sean Hogan, the recently appointed Chairman of NI Water has a simple, slightly surprising, but laudable ambition: to return NI Water to the anonymity of a well-functioning organisation that no one notices!
His determination is to see NI Water working so that it justifies a degree of anonymity. Of course, he is reacting to the high profile, controversial events of the last two years and the careful process of rebuilding customer and taxpayer confidence.
The new Chairman has inherited an organisation where the former Minister had discharged most members of the former Board and its Chairman and then appointed an interim Board whilst a formal competition was completed to appoint a new Board.
Not sufficient to inherit an organisation which had not enjoyed a stable non-executive Board, in addition he takes the Chair whilst the search for a new Chief Executive has not yet been finalised. The controversy about the competence of NI Water in responding to the big pipe freeze of Christmas 2010 meant that the continuity and coherence of the top management group was questioned.
Just to add to the changed circumstances, Sean Hogan has taken up his post after a change of Minister. Instead of reporting to Sinn Fein's Conor Murphy, the baton of Ministerial responsibility has passed to Ulster Unionist Danny Kennedy.
As a public utility, NI Water should attract little attention. Provided good clean water is supplied, leaks from pipes are minimised and sewage disposal meets legal standards, then the utility would tend to be taken for granted. That satisfactory state now has to be recreated.
The whole structure of how water services are organised, how they are paid for, how much capital is invested and where the capital is to be found, contains a matrix of political, economic and legal questions.
To be selected as Chairman, Sean acknowledges that he had to go through the formal process of making an application, being short-listed and interviewed, and then meeting the Minister. There was, as he puts it, 'no tap on the shoulder'.
"I saw this job as a challenge. I knew that they had had a bad press, although I did feel that a lot of the bad press was unjustified. There was work to be done to change the public perception," he said.
The change in the Minister may have implications for the direction of NI Water.
"The outgoing Minister had a particular vision of where the organisation was going. That was very much towards being part of the public service as opposed to being a water utility company. However, we are still a GoCo with a set of official financial structures that do hinder us a little. For example, we do not have end of year financial flexibility. It is difficult to plan capital spending ahead for three or four years. There can be a loss of economies of scale," explained Hogan.
"If we want to benchmark against some of the best water companies in Great Britain then we need to have a level playing field. However, if the Minister wants us to continue with the present arrangements, then that is how we will deliver it," he adds.
"The Minister has not yet finalised the future governance arrangements for the company whether as a GoCo, brought closer Government as a public sector organisation, or redesigned as a mutual company. The Executive now has the opportunity to reconsider the approach."
The new Chairman must operate within whatever systems have Ministerial approval. However, without presuming on the Ministerial prerogative, there is a willingness to consider changes in the way NI Water is financed.
"I know that there is a notional figure in each household rates bill of something like £160 that is supposed to go towards water. This money goes through the Exchequer and comes out again as part of a subsidy to NI Water. If that money were able to go directly to NI Water that would be a defined source of revenue that might allow NI Water to go to the market to borrow funds, using this revenue to service the debt," said Hogan.
Earmarking revenue to NI Water through the reallocation of domestic rates revenue would create a baseline which, year by year, could be broadened to generate more of the revenue needed to fund the services.
"Hypothecating a part of the domestic rates revenue to NI Water could be a good way to start. Customers would see more clearly what they are already paying," the Chairman added.
NI Water needs a continuing large capital investment programme to make good on previous under provision, to enhance standards and meet the requirements of European Directives. That capital programme is subject to examination and approval by the Water Regulator and is constrained by the allocation available from the Department of Regional Development.
"Like all public sector organisations we have to live within our budget," said Hogan. "There will be things that we would like to do, but we cannot. This may mean that the Regulator's performance standards are too ambitious. Perhaps we should not be benchmarked against GB companies because we are not in the same position. They have had the best part of 20 years to improve whereas we are only at the start of that programme. We are delivering the highest quality of water ever provided in Northern Ireland. We simply do not operate in the same world (as English water companies)."
A recent report from the NI Audit Office confirms that the water service here is not funded adequately enough to reach parity with standards in England and Wales.
The memory of, and the lessons from, the big freeze and thaw last winter are high on the agenda of the new Chairman. NI Water took a lot of criticism, but within a very short period the necessary repairs were completed. What then of the preparations for another cold winter?
"Our communication with our customers needs to be that much better. We plan, this year, in the early autumn, to informally establish an implied contract with them. We will be telling them what we have done since the last freeze-thaw to try and ensure that the same thing does not happen again. In turn, customers will be asked to play their part by knowing where their stop-cocks are located. We cannot guarantee that pipes will not freeze again. We can guarantee that we will respond better," said Hogan.
"If an identical situation happens this year, we will handle it very differently. Our Chief Executive will be charged with being up-front in organising the responses."
There are still decisions to be made about the recruitment of a new Chief Executive. Sean Hogan awaits the outcome of discussions by the Minister on the future shape and organisation of NI Water. The choice of structure and its relationship with the Government Department will have an important influence on how the job of a new Chief Executive is defined and the setting of criteria for the appointment.
A new Board of non-executive Directors will be announced shortly. Interviews have taken place and the final decisions now rest with the Minister. The 75 applications were reduced to 25 people who were interviewed and 13 names have gone to the Minister.
Although there is a continuing debate about the merits of the decision to remove most of the former Directors, this is not an issue for the new Chairman.
"It is not in my bailiwick at all," he said. "My job is to build the new team. The main work in appointing the new Board is completed. What is now delaying me is the waiting for final decisions affecting the appointment of a Chief Executive Officer.
Then it will be hugely important that we all work together as a team building positive relationships for the benefit of our customers."
Sean Hogan has enjoyed a career spanning the private and public sectors. He has recently retired as a non-executive Director of Translink and a Director of Sentinus. Currently he is Chairman (designate) of the Education and Skills Authority. Formerly, he served as a Director of Warrenpoint Harbour Authority.