Water Journal : Water Journal December 2013
WATER DECEMBER 2013 2From the President WATER PRICING: THE ISSUE THAT NEVER GOES AWAY Graham Dooley -- AWA President Is there any other commodity or service of which the price is so frequently reported on and debated as water? I think not, and it has been that way for decades -- although in the past ve years electricity has possibly come a close second. In the past few weeks alone, the Water Corporation of Western Australia has testi ed before a Parliamentary Committee about water prices, the South Australian Government is inquiring into water prices for sporting clubs, and ACTEW is being investigated after a very arduous price-setting process. Even during the recent major drought, we rarely saw articles about the price of fruit and vegetables -- in spite of the fact that they went up considerably -- but we always have plenty of print and electronic media coverage of water prices. The amount of money paid each year by water consumers for their water and sewerage services is actually quite modest compared to the rest of the household or enterprise budget. IPART in New South Wales and ESC in Victoria have made water pricing less political for over 20 years now, and have been very successful in focusing the natural monopolies in water and other utilities on value for money and performance standards. OFWAT in the UK has also been a star performer in balancing the utilities delivering increasing standards, the prices that consumers pay and the returns that investors receive. (As an aside, I met Baroness Thatcher many years ago and asked her about this initiative of her Government -- but that will have to wait for another column!) In my view, appropriately set water and wastewater prices over multi-year pricing periods do three useful things for the Australian community: 1. They ensure that the most capital hungry of all the utilities (i.e. our water and wastewater utilities) get the revenue and resources they need to deliver the services to the required standard. Regulators also set ef ciency and productivity targets -- a necessary requisite for monopolies. 2. They promote innovative alternatives. We have seen plenty of stormwater and wastewater harvesting and recycling schemes become viable alternatives to valuable potable water. Irrigators of open space and agriculture often now have a cheaper grade of water to choose from. 3. They enable long-term investors to invest in water infrastructure with certainty -- for example, the Sydney and Melbourne desalination plants, BOOT type schemes and investor-owned utilities. Some water utilities are regulated for prices and standards of service by independent regulators, while some are only partially regulated and the Minister or local council in charge makes the nal decision. We have also seen cases in two jurisdictions recently where the pricing regulators or Ministers have taken the unusual step of lowering prices -- something I am not a fan of because it inevitably leads to subsequent higher increases as the demand for capital and revenue to x old infrastructure grows. Water utilities have long asset lives and expenditure pro les. Accordingly they need far- sighted price paths. They also yield steady but modest returns to those investors who own them. If the recommendations of Infrastructure Australia are adopted, this might, in the future, include the baby boomers in superannuation pension mode -- such as myself. It is a most suitable investment for superannuation, as the UK has shown.
Water Journal November 2013
Water Journal February 2014