icon-water Potable water and sewerage pricing processes inquiry 2010-2011

  • Project Released: 30 Jun 2010
  • Project Closes: 07 Dec 2010
  • Contact: Nathan Petrus

Overview

Pursuant to section 35(1) of the ESC Act, the Treasurer has referred to the Commission an inquiry into 2010-11 potable water and sewerage pricing processes. In undertaking the Inquiry, the Commission is to consider information provided to Cabinet and the document "Transparency statement - Part A - 2010-11 potable water and sewerage prices South Australia" dated May 2010.

The inquiry will focus on the application of certain pricing principles enunciated by the Council of Australian Governments (CoAG) as well as through the National Water Initiative (NWI) in 2004. The underlying intent of these principles is to improve the efficiency of the provision and use of water services, for the benefit of the wider community.

Status

Current status is Final

  • Initiate
  • Final

Final

The Commission has finalised its inquiry into the process that led to Cabinet’s decision on SA Water’s potable water and sewerage charges to apply in 2010-11. The Cabinet decision led to an average increase in potable water charges of 21.7% in real terms. Metropolitan and regional sewerage charges increased by 0.8% and 1.3% respectively in real terms.

The increase in 2010-11 potable water charges follows a 17.9% increase in water charges (in real terms) in 2009-10.  The major driver of the announced increases are the costs associated with the Government’s projects and initiatives aimed at providing South Australian customers with a sustainable and secure water supply in the longer terms, which include;

  • the construction and expansion in capacity of the Adelaide Desalination Plant at Pt. Stanvac,
  • the implementation of the Network Water Security Program, designed to improve the connectivity between the northern and southern water supply systems,
  • purchases of River Murray water, ensuring a sufficient quantity of water is available for critical human needs, and
  • the provision of rebates, designed to encourage the public to use water conservation products.

The magnitude of the costs associated with the Government's projects and initiatives, and the resulting increases in potable water charges, provided an important context to the current Inquiry and accentuate the need to ensure that the pricing process is robust and is capable of meeting the NWI pricing principles.

Consistent with the approach taken in previous inquiries, the Commission has identified the types of improvements that should be made to the pricing process in order to achieve greater consistency with the relevant pricing principles.  The Commission notes that there have been a number of improvements in the 2010-11 price setting process (for example, expanded discussion in the areas of planning, approval and procurement processes for capital expenditure).

However, many of the suggested areas for improvement are similar to those raised by the Commission in previous inquiries. In particular, the Commission has raised concerns with the lack of information presented to Cabinet to demonstrate that forward-looking prices are based on prudent and efficient forecast costs. This deficiency is particularly significant, given the impact of the proposed major capital projects on future water prices.

The final report (which forms Part B of the Transparency Statement) was released by the Government on Thursday 25 November. At the same time, the Government released its response (Part C of the Transparency Statement) to the Commission's final report.

As outlined in the Government's response to the Final Report, a number of issues raised in this Inquiry will be addressed in the transition to independent economic regulation, in accordance with the new regulatory arrangement announced in the South Australian Government’s Water for Good Plan.