Water Journal : Water Journal August 2014
WATER AUGUST 2014 34 Opinion In February 1994 the Council of Australian Governments (COAG) adopted a strategic water reform framework, which they incorporated into the National Competition Policy agreements. COAG envisaged that the framework would be implemented by 2001. It is now 20 years on and domestic users have experienced substantial increases in water costs despite signi cantly reducing consumption. In 2004, after slow to intermittent progress, the Premiers signed the National Water Initiative (NWI), which obliged State and Territory governments to set prices based on full cost recovery and consumption-based pricing principles to ensure adequate provision for infrastructure investment and encourage ef cient water use. Using pricing to promote economic ef ciency is a fundamental tenet of National Competition Policy, the COAG Agreement and the NWI. Competitive markets are desirable because the price signals they generate ensure that resources are allocated to the use in which their value is greatest. The NWI was described as "Australia's enduring blueprint for water reform', leading to greater water productivity and greater certainty for investment". When fully implemented, all dischargers would pay for the transport of wastewater to treatment plants and the cost of treatment to the basic level accepted by customers of recycled water (less any recoupment of costs from sale of biofuels and the like). Recycled water could then be provided to customers for the cost of storage and transport. Customers requiring higher levels of treatment would have that additional cost included in their recycled water charges. The regulatory framework comes under notice at this time as Infrastructure Australia (IA) has identi ed AUD37.5 billion of water utility assets for sale, to generate the funds needed to tackle the country's growing infrastructure de cit. IA put forward a strong argument for a national water regulator. Many senior industry representatives support this view and feel that this would promote more ef cient regulation, opportunities for private investment, a corporatisation model and greater certainty for customers. PUBLIC INFRASTRUCTURE PRIVATISATION Privatisation of public infrastructure is advocated on the grounds that government policymakers are inherently reluctant to implement ef cient pricing and investment. This is the natural domain of privately run enterprises subject to competitive market forces. User charging is also an effective way in which governments can create opportunities for increased private sector investment in infrastructure, because it leads to revenue streams that yield better economic and environmental outcomes. Our infrastructure-oriented Prime Minister has recognised that more must be done to better harness the potential for private sector investment and lift Australia's falling productivity. Australia's superannuation funds are currently crying out for opportunities to invest in nation-building infrastructure. Governments are keen to tap into these funds to reduce the need for massive public investment. This will only be achievable if project sponsors are able to offer a risk-return pro le that is more closely matched to the expectations of superannuation funds. The key is that the right regulatory framework be set up in order to allow private sector ef ciency and innovation to translate into tangible bene ts for water customers, while also allowing private sector infrastructure owners to make fair returns on their investment. TRADE WASTE REGULATION AND PRICING FOR UTILITIES Infrastructure Australia has identi ed AUD37.5 billion of water utility assets for sale, to generate funds to tackle a growing infrastructure de cit, says Envirofriendly's Neil Christie. They also argue for a national water regulator. Many in the industry feel this would promote more ef cient regulation and opportunities for investment.
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