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Will a change in governance and regulation result in reduced water bills?

Water bills could double by 2040 unless Australia moves away from governments both owning and regulating water utilities, according to Infrastructure Australia.

recent paper released by Infrastructure Australia (IA) has suggested that Australian water utilities are set to come under increasing pressure through growth and climate change, and unless there is a move away from a system where governments own, regulate, and set policies, the challenges outlined above can be expected.

“Without action, a typical residential water and sewerage bill could be higher than $2500 in today's money by 2040,” the report detailed.

It also stated that the difference between each state’s populations should not be a barrier to regulatory reform across other states and territories.

IA Chief Executive Philip Davies said it is important that our governments get on with the task of initiating reforms now.

“Now is the time for governments to get on with the job of bringing urban water policy, regulation and governance up to speed so that it can meet the changing needs of Australians in the twenty-first century,” he said.

“If Australians want continued access to safe, reliable and affordable water in the future, we need to begin a staged approach to reforming the sector now – starting with a new national urban water reform plan.”

In the report, IA recommended a three-stage approach to reforming urban water, which echoed many of the concerns raised by the Productivity Commission in its Draft Report into the National Water Reforms released earlier this year:

  1. The Australian Government establishing a national reform pathway by the end of 2018, including agreeing to a new national urban water reform plan, establishing an independent national reform body and using incentive payments to drive reforms.
  2. Rolling out nationally consistent reforms over the next five years. This includes refinements to regulation and governance in each state and territory, improvements to long-term planning and pricing frameworks, and enhanced collaboration between regulators.
  3. Considering further reforms over time, such as moving to a national regulator and privatising urban water assets.

The paper also recognised that of all jurisdictions, Victoria and Tasmania have the most genuinely independent and comprehensive regulatory frameworks.

It claimed that both their arrangements, enacted respectively by the Victorian Essential Services Commission (ESC) and Office of the Tasmanian Economic Regulator (OTTER), currently meet the majority of criteria for minimum standard regulation as they are “characterised by clarity of regulatory objectives, effective stakeholder engagement and transparent decision-making”.

“It is clear that the best model for water and sewerage in Australia is for governments to regulate, rather than own the utility – definitely not both,” TasWater Chairman Miles Hampton said.

“It also makes it perfectly clear that the pressures from growth and climate change are real, and that decisions about investment must be based on prudency and efficiency and tested by an independent regulator for sustainability and the best long-term interests of our customers.”

However, University of Queensland Economist John Quiggin told The Guardian that the report did not examine the downside of water privatisation.

He claimed it’s worth noting that the partial privatisation of water utilities in South Australia produced “generally unsatisfactory results” and that water privatisation in the UK, which the report identified as a “successful model” was, an “expensive failure”.

“Recent research suggests that water privatisation there has raised costs and that renationalisation is the best option,” he said.

Take a look at IA’s full report here.

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