icon-water Water and wastewater pricing processes inquiry 2009-2010

  • Project Released: 02 Apr 2009
  • Project Closes: 30 Oct 2009
  • Contact: Nathan Petrus

Overview

Pursuant to section 35(1) of the ESC Act, the Treasurer has referred to the Commission an inquiry into 2009/10 water and wastewater pricing processes. In undertaking the inquiry, the Commission is to consider information provided to Cabinet and the document "transparency statement - water and wastewater prices in metropolitan and regional South Australia 2009-10" dated February 2009.

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 water and wastewater charges to apply in 2009-10. The Cabinet decision resulted in an average increase in water charges of 17.9% in real terms. Metropolitan wastewater charges remained constant in real terms, with regional wastewater charges increasing by 0.5% in real terms.

The significant increase in 2009-10 water charges follows a 12.7% increase in water charges (in real terms) in 2008-09. A major driver of the announced increases is the Government’s capital projects aimed at providing greater security of water supply to metropolitan Adelaide, including the Pt. Stanvac desalination plant.

The magnitude of the proposed capital expenditure, and the resulting increases in 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 best practice 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 2009-10 price setting process (for example, in expanding the benchmarking information and through the consideration of tariff reform). 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 29 October 2009. At the same time, the Government released its response (Part C of the Transparency Statement) to the Commission's final report.