A draft report from the EU Commission, seen by RTÉ News, has raised significant questions about changes made by the Government to make Irish Water politically acceptable.

The Commission says the prospects of the utility "becoming self-funded seem distant" because charges will be frozen until the end of 2018.

An assessment of the Government's revised water charges was carried out by the European Commission as part of its review of Ireland's progress after the EU IMF bailout.

It says the extent to which the company will be able to borrow on the markets for capital investment is yet to be determined, and may have been diminished by the revised proposals.

The draft report also raises questions about the impact changes to the original plan may have on the independence of the Commission for Energy Regulation.

The CER had approved the original proposals and was to regulate operating costs, investment plans and efficiency gains for Irish Water. The EU Commission says that while key CER decisions remain in place, the regulator may risk being politically influenced in the future.

The Commission points out that certainty about the fiscal treatment of Irish Water will not be in place until April of this year.

It says that it will be up to Eurostat to determine whether the company will pass the market test.

The draft report finds that the revised water package has increased the uncertainty surrounding the Eurostat decision for a number of reasons which include: treatment of the water conservation grant, less revenue being collected and the freezing of household charges until at least 2019.

It also notes that Irish Water will face rising capital costs as it implements its infrastructure programme.

The Commission adds that capping domestic charges at low levels will mean people will feel less likely to conserve water.