Young Water Professionals discuss Water Economics 101
Posted 17 April 2018
Written by Courtney Brown and William Speirs
The QLD Young Water Professional (YWP) Committee provided a platform to explore the topic of water economics at its annual Discussion Panel event held on 7 March 2018. The event took place at the SMEC office in Fortitude Valley with close to 100 attendees who were eager to chew the fat on this contentious issue. The esteemed panellists included Leith Boully (Sunwater), Ian Hall (Queensland Urban Utilities or QUU), Cameron Murray (University of Queensland or UQ), and Chris Adams (Strategic Asset Management).
On arrival, attendees were invited to answer a simple question: What would they be prepared to pay for a kilolitre, 1000 litres, of drinking water. The results of this small social study showed a wide range in how much people would be prepared to pay for water, underscoring the theme of the night – how as society should we value water?
Acting as the discussion panel facilitator, William Speirs (Unitywater) opened the panel by posing a similar question to the panellists: Is price the best way to communicate the value of water? Leith contested that no one in QLD actually pays the ‘price’ to own water, rather, that water users are only paying for stewardship: the capture, treatment, delivery, collection and release of water. To throw wood on the fire, Cameron (the academic) introduced the Diamond-Water Paradox from Adam Smith’s 1776 The Wealth of Nations. The paradox describes the two different types of value; the value of use and the value in exchange. Water has infinitely valuable uses, yes is virtually worthless in exchange compared to diamonds, and vice versa. The conversation described the water industry as ‘rubbish’ at communicating the value of water, and from Leith’s (wisdom yielding) comment, it seems our costs don’t reflect the true value of water. Every person is well aware that having access to clean water is a basic human right, and yet water remains somewhat of an ‘invisible commodity’. Cost-reflective pricing (mentioned by Ian, a voice for the customers) arises as a problem: people can have a direct impact on their energy bills, their phone bills, their transport costs, but not always on water usage. People are becoming more and more frustrated with the rising cost in water bills – but we’re not actually paying for this water, right?
On the topic of what market structure was best for water utilities, Leith commented that the water grid attempted to enable ‘water trading’ unsuccessfully, and that more sophistication is required in agriculture. Ian brought the issue back to the customer, that customer-centricity needs to be the main focus (and ensures relevance of water authorities like QUU). Chris used the scale of economies as an example; Sydney is a very large economy, whereas competition is rife between smaller economies in Victoria. Queensland is a hybrid of large and small entities, and that regardless of the scale of economies, he proposes it all will become decentralised in the future. Industry dynamics are changing, and the water industry needs to be dynamic in response.
On the issue of privatisation, the panel brought to light that for most of Australia’s history, water and sewage services were paid for through the public purse, until the process of deregulation and competition separated utilities from governments. Cameron went a step further presenting a list of countries that had private water authorities (predominantly in developing countries), and all those with public water authorities (predominantly in developed countries). Is this a coincidence? All panellists reached consensus that privatisation should stay off the table for several reasons: water is, and always will remain political, “even when private electricity companies fail on a large scale, the electricity companies are not attacked, but rather the government is attacked”, that private companies are driven by profits – whereas public entities are about social equity, and that water is again a basic human right which should not be party to private enterprise factors such as ‘competition’ and ‘profit’.
So, where to from here? Ian, the advocate for the customer, thinks that the resolution lies with customer satisfaction. That if water authorities become more customer-centric, they remain relevant in the years to come – this perspective is from a monopoly water authority i.e. Queensland Urban Utilities. From the extensive discussion, it seems that social license (such as the Citizen’s Jury in Yarra Water), and stronger water reform from Queensland’s government are both viable solutions to reframe the future of the water industry from ‘uncertain’ to ‘opportunity’.
The QLD YWP committee would again like to thank SMEC for sponsoring and hosting the event, to all the panellists for immensely engaging & explorative discussion, to Sharon James for always supporting the QLD YWP committee to achieve our very best – and to the committee members who organised this year’s event; Alice Connell, William Speirs, and Nicholas Convery.