Water and wastewater pricing processes inquiry 2008-2009
- Project Released: 02 Apr 2008
- Project Closes: 06 Aug 2008
- Contact: Nathan Petrus
In February 2008, the Treasurer referred to the Essential Services Commission
of South Australia (the Commission), pursuant to Part 7 of the Essential
Services Commission Act 2002, a public inquiry into the processes leading to
the Cabinet decision in late 2007 on the level and structure of SA Water's water
and wastewater prices in metropolitan and regional South Australia for
Current status is Final
The 2008-09 pricing decision increased water
prices by 12.7% in real terms. Cabinet also took an in-principle decision to
increase water prices by the same magnitude in each of the following four years.
These increases in water prices are driven particularly by the significant
investments in capital projects (e.g. $1.1 billion for a desalination plant)
required over the next few years to address current water shortages.
The Commission's inquiry was required to have
regard to the application of certain pricing principles enunciated by the
Council of Australian Governments (CoAG) in 1994 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.
In undertaking its inquiry, the Commission was
required to consider a report prepared by the Department of Treasury &
Finance (Transparency Statement Part A - Metropolitan and Regional Water and
Wastewater Prices in South Australia 2008-09), together with other information
considered by Cabinet at the time of the pricing decision.
In March 2008, the Commission released an Issues
Paper to facilitate public consultation on the inquiry; 3 submissions were
received in response to the Issues Paper. On 24 June 2008, the Commission
forwarded to the Treasurer and the Minister for Water Security its Final Report
for the inquiry into 2008-09 Metropolitan and Regional Water and Wastewater
Pricing Processes. The Final Report outlines the Commission's view as to the
extent to which the price setting processes facilitated pricing decisions that
were consistent with the CoAG and NWI pricing principles.
The Commission has recommended certain
improvements to the pricing process to ensure adequate application of the
pricing principles. For example, it is important that Cabinet is provided with
additional information to demonstrate that forward-looking prices charged by SA
Water are based on prudent and efficient forecast costs. The matter of efficient
costs is particularly significant for the 2008-09 and later water pricing
decisions, given the impact of the proposed major capital projects on future
The final report also outlines key elements of a
framework for a best practice approach to price setting which places maximum
emphasis on achievement of the efficiency objectives of the pricing
The final report (which forms Part B of the
Transparency Statement) was released by the Government on Wednesday 6 August
2008. At the same time, the Government released its response (Part C of the
Transparency Statement) to the Commission's final report.