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.
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