Water Journal : Water Journal September 2011
feature article 50 SEPTEMBER 2011 water feature articles Controversy over the rising price of water and wastewater services is having a profound effect on the urban water industry. An obvious example is the decision by Gold Coast City Council and, later, Redland City Council, to pull out of Allconnex, the common water utility servicing these two local government areas, as well as Logan City Council. The justification for the breaking up of Allconnex is price. Gold Coast City Council, in particular, feels that it can provide water services more cheaply than Allconnex -- and perhaps it can. However, while the rising cost of living -- and the rising price of utility services specifically -- is a concern, perhaps the response is out of kilter with the actual cost of water, notwithstanding recent above-CPI price increases. There are several perspectives from which this issue might be viewed. In its recent draft report, Australia's Urban Water Sector, the Productivity Commission noted that the cost of water for households is low compared to other utility services and as a proportion of total household expenditure. The Commission looked at household expenditure on water and wastewater services as a percentage of total household disposable income for three income groups: low, middle and high. It was found that in low-income areas of Sydney and Melbourne household expenditure on water and wastewater services averaged "just over 1 per cent of income, and ranged between 0.3 per cent and 4.9 per cent of income in 2005--06, assuming all volumetric costs were borne by the household and before concessions were deducted" (Productivity Commission April 2011). Interestingly, the jurisdiction in which water prices had least impact on low-income families was Queensland, and for middle- and high-income families, Queensland charges were the second lowest as a proportion of household disposable income in 2007--08 (although this was a statewide view that did not separately deal with South-East Queensland, where the greatest controversy has arisen. The analysis was carried out before the most recent price rises). Comparison of Household Expenditures Viewed alongside other household expenses, the Productivity Commission found that: "The available evidence indicates that relatively few households experience payment difficulties for water and wastewater services" (Ibid). More households, the Commission claims, have difficulty paying for energy and housing costs, as shown in Figure 1. Of course, this graph masks the fact that the cost of utility services has been rising quickly, and that in many jurisdictions increases well above the increase in the CPI have been experienced, particularly over the past two years. For some people real pain is incurred and the water industry, economic regulators and governments will need to have in mind the social impacts of pricing decisions. Several times over the past 12 years the research organisation Global Water Intelligence and the OECD have conducted a Global Water Tariff Survey. The most recent was completed in 2010. The survey considered the prices charged in 276 cities around the world. It looked at the total cost of water services, including fixed charges for water and wastewater services, volumetric charges for water, volumetric charges for wastewater and total sales tax. The survey's authors considered both water and wastewater charges as, in many jurisdictions there is just a single charge for services, while in others significant cross- subsidies exist between water and wastewater services. To calculate the effective rate for water the authors looked at the total cost to a household using 15 kilolitres of water per month and divided this total by 15 to get a nominal cost per kilolitre. The survey's findings are expressed in $US. In the 12 months since the previous Global Water Tariff Survey was conducted, global water prices increased by 8.5%. This builds on substantial rises during the previous period (2008--09) of more than 9%. These increases appear to be Written by Andrew Speers, AWA National Manager -- Policy Despite a perception that water prices are rising disproportionately, the real cost of water services as part of total household expenditure is still low for most Australian households. But how do water utilities get this message over to consumers? Putting a Price on Water 0 5 10 15 20 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Water and sewerage Energy Housing Per cent of total household expenditure Figure 1. Household expenditure on selected essential services, Australia (Productivity Commission, April 2011). Rising water prices primarily reflect the cost of new services.
Water Journal November 2011
Water Journal August 2011