Water and wastewater pricing processes inquiry 2008-2009

Status

Current status is Final

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 water prices.

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 principles.

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.