Bills

Commission of Inquiry on Water Pricing Bill

Introduction and First Reading

Mr MARSHALL (Dunstan—Leader of the Opposition) (10:32): Obtained leave and introduced a bill for an act to provide for a commission of inquiry into water pricing; to provide evidentiary powers and immunities in connection with the inquiries; and for other purposes. Read a first time.

Second Reading

Mr MARSHALL (Dunstan—Leader of the Opposition) (10:32): I move:

That this bill be now read a second time.

The people of South Australia have grave concerns about the water prices which they are currently paying. We also, on this side of the house, have grave concerns about the water prices that South Australians are paying. They are the highest in the nation. The Rann/Weatherill government's water legacy has been to deliver South Australians the highest prices in the country.

In 2002, when the Labor government came to power, water consumers were paying 38¢ per kilolitre. That price is now $2.32 per kilolitre, and many pay a higher rate because Labor changed the threshold for the cheapest water, from 120 kilolitres per annum to just 30 kilolitres per annum. So you see that we have real concerns, grave concerns, about the massive increases in water prices in South Australia.

As the millennium drought took hold, Labor scoffed at the Liberal Party's suggestion to build a 45-gigalitre desalination plant in South Australia. They said that this was unnecessary and extraordinarily expensive, but as the drought continued on, and then there was talk in the media of us having to truck water into South Australia, the government decided that they themselves would introduce this concept of desalination to South Australia. Yet, unlike our proposal for a modest 45-gigalitre plant, the government said that they would introduce a 50-gigalitre plant, which they ultimately increased to 100 gigalitres.

This plant that they have installed in South Australia cost water consumers $2.2 billion and has had a major impact on water prices in South Australia. This compares with the 45-gigalitre plant which the Western Australian government put in at around the same time in Kwinana and which cost just $387 million. It begs the question: why was it that, first of all, the government fought so hard against it and then decided not only to put it in but to put in a very expensive system which was double what had originally been envisaged—by them and certainly by us on this side of the house?

Of course, we would think with a big capital project like this there would be an enormous cost-benefit analysis done for the people of South Australia, and was there? The answer to that is no, there was not. We know this because the commonwealth Auditor-General said in his report that there was no business case, no cost-benefit analysis and no case whatsoever for doubling the size of the desal plant. We know for a fact that Infrastructure Australia recommended against it. This is just one level, one layer, of the absolute mismanagement that we have seen in water in South Australia over the life of this government.

Acting Speaker, you will also recall that this is the government which introduced the Essential Services Commission of South Australia. This was an initiative which was supported by those of us on this side of the house. We think it is a good idea to have somebody independently regulating the price of water in South Australia so that water consumers can be assured that we not paying one additional cent for water than we need to be paying, so the government set up the Essential Services Commission. I think the people of South Australia said, 'This is good. We have an independent regulator.'

In recent weeks, the independence of this independent price setting has been called into question, not the independence of ESCOSA but the independence of the price-setting has been called into question. We know for a fact that approximately 70 per cent of the water price calculation is determined on what is referred to as the 'regulated asset base'. The regulated asset base is not something which is determined by the independent regulator, so 70 per cent of water prices are determined by the regulated asset base, yet the regulated asset base is not determined by the independent regulator; it is determined by Treasury, and Treasury make up their mind on what the value of that regulated asset base is in South Australia.

You can imagine our concern, Acting Speaker, when we received notification via the media that Dr Paul Kerin had put in a scathing letter of resignation to this government over this precise issue of reform and the value of the regulated asset base. I will read briefly from his resignation letter which was addressed to Dr Pat Walsh, Chairman of the Essential Services Commission. He said:

I joined the Commission principally because I had understood that, amongst other things:

1. the water industry would undergo considerable economic reform;

2. the Commission would play a key role in driving that reform;

3. the Commission's independence from government, as enshrined in the governing legislation, would be respected; and

4. the Commission would be able to serve its primary objective—the long-term interests of consumers—as its governing legislation requires it to do.

He goes on to state in his letter of resignation:

My experience over the past three years has shown that that understanding was incorrect. Instead, the government and its senior bureaucrats have clearly demonstrated that they have no interest in genuine reform, nor in serving the long-term interests of consumers. Indeed, they have stymied all efforts on those fronts at every turn. Furthermore, I have also been appalled by the behaviours that both Ministers and senior bureaucrats have engaged in to stymie those efforts.

They were powerful words, and that is why the Budget and Finance Committee asked Dr Paul Kerin to appear before it, and that was done on Friday of last week. Can I just say that the evidence which was presented to that committee was explosive—it was explosive on many fronts. Part of the evidence provided to that committee included that Stephen Mullighan, then chief of staff to the treasurer at the time (who of course was also the Premier) had gone to the Essential Services Commissioner and asked him to, within a 24-hour period, model up the maximum revenue into SA Water of a 5 per cent, 10 per cent and a 15 per cent increase in the regulated asset base.

It begs the question: why would he do that? Surely the regulated asset base valuation is determined with a methodology based upon the actual value of those assets. Why would he be asking what the impact upon water prices (and therefore revenue to the state government) would be with a 5 per cent, 10 per cent, and 15 per cent increase in the value of those assets? You can imagine our shock when we saw that the increase this year in water assets was 5 per cent and the increase this year in sewage assets was 10 per cent; they seem amazingly rounded-off numbers.

We have come into this parliament this week asking respectful and reasonable questions of this government regarding how it determines the regulated asset base valuation. Have we got one single answer from this Treasurer?

Honourable members: No!

Mr MARSHALL: Not one single answer—'Oh, it's the way it has always been done.' I have asked the Treasurer: will he table the methodology? We would like to be assured, on behalf of water consumers in South Australia, that the regulated asset base of SA Water is determined in accordance with a methodology based upon the value of those assets. I will tell you why we are concerned: as part of the evidence that Dr Kerin provided to the Budget and Finance Committee last week, he said that water prices in South Australia were artificially inflated because the government had artificially inflated the asset base by $2 billion and that had a flow-on effect of increasing the price to water consumers of a massive $100 million per year.

According to Dr Kerin, water consumers in this state are paying $100 million extra per year because of the inflated value of our asset base. We have asked questions and we have not had any answers; therefore, we come before the parliament today and I introduce this bill establish a commission of inquiry on water pricing. We need somebody to clear the air. We need somebody independent to tell us the truth. We need somebody independent to give us the facts.

This bill does a number of things. First of all, it provides that an inquiry will take price into water pricing in South Australia. When we refer to water pricing, of course, we are referring to water pricing related to SA Water. It provides a number of terms of reference: first of all, why water prices are so high here in South Australia; and secondly, how can we lower those water prices in South Australia? It also provides for a commissioner to be to be appointed, and for that commissioner to have the appropriate powers to collect evidence to make sure that his inquiry comes to conclusions that we can then implement. Finally, the commissioner will prepare a report, and that will be completed by the end of next year, to be laid on the table within three sitting days.

It is a simple bill. It is a bill that the government should have no fear over. We would like this bill to be implemented as a matter of priority. The government can actually set this up themselves without it passing this house but, either way, if it does not, we will pursue this.

We understand that the government will continue with its folly of proroguing this parliament, its expensive and untimely folly of proroguing this parliament this week, but we do not support that whatsoever. If it does we will reintroduce this, and we will reintroduce it because it is important for water consumers in South Australia to understand why we have a government that does not have an interest in water pricing reform here in South Australia, why we have the highest water prices here in South Australia, why it is that a former chief executive of ESCOSA and two former commissioners all have grave concerns about the determination of the regulated asset base, the flow on cost of more than $100 million to water consumers each year, and why the Treasurer, when asked questions in this parliament, cannot give straight answers to straight questions. That is why we have brought this before the house today.

I must say that I have also been concerned about evidence provided to the Budget and Finance Committee of serious allegations against ministers. The allegations were that ministers had made false claims. That is a very serious case. It will not be pursued as part of its inquiry, but it is something I think this parliament needs to get to the bottom of. The other point that was made in this evidence, of course, was that there is bullying of and intimidatory practices against officers within ESCOSA.

I raised these questions in the parliament yesterday in what I thought was a very respectful way, but did I get a respectful answer? No. All we get from those opposite is rhetoric; 'Oh, these are politically motivated.' Well I can tell the house that Dr Paul Kerin, in his own resignation letter, said that he was a long-term Labor supporter, that he was not politically motivated but that he was employed in this state under false pretences. He thought he was coming to work for a government that wanted reform, he thought he was coming to work for a government that cared about water prices here in South Australia, but he was wrong and he resigned.

I will finish by stating that the reason water prices are so important is that at the moment families are doing it tough, and so are businesses. Water is a major input into the productive capacity of our state. We are in hard times at the moment, our unemployment is rising and our young people are leaving our state, and it is incumbent upon all of us in this place to do everything we can, every day that we are in here, to make sure we create jobs, and keeping our water prices as low as possible in South Australia is a very commendable objective.

Debate adjourned on motion of Hon. T.R. Kenyon.