Bills

Water Industry (Third Party Access) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 13 October 2015.)

Mr WILLIAMS (MacKillop) (12:01): It is with great pleasure that I rise to speak on the Water Industry (Third Party Access) Amendment Bill 2015. This, I can tell the house, has been a long time coming and, now that it is before us, it is only a shadow of what the state really needs. The reality is that this government, over an extended period, has made an absolute dog's breakfast of water management and planning in South Australia.

The reason that the government have done that is that they have utilised SA Water, this monolithic monopoly that controls most of the water traded in South Australia certainly to residences but also to a significant number of businesses, as a revenue source for the Consolidated Account, sucking hundreds and hundreds of millions of dollars a year out of the pocket of SA Water's clients to prop up a failing budget. The government, at no point in my opinion, has looked at the needs of the South Australian economy, South Australian business, or indeed South Australian households, and tried to formulate policies to maximise the benefit to all those aforementioned.

I particularly want to talk about business in South Australia because we now find ourselves as the state with the highest unemployment level in the nation and it is going backwards. All the things the government spruiked as the future economic drivers in this state have turned out to be nothing more than mirages in the desert. This government has no understanding of the economy of this state and therefore no understanding of the sorts of policy settings that should be put in place to help business not only to survive but thrive and increase employment.

Water policy is one of those areas where the government could have done a lot, lot better. I am not going to go through a full history of what has occurred over the last 10 or 15 years in South Australia, but let me just highlight a couple of things. I am sure that a number of people have taken the opportunity to mention our infamous desal plant, with $2.2 billion or $2.4 billion—

Mr Whetstone interjecting:

Mr WILLIAMS: —the shadow minister tells me $2.3 billion—wasted. This is a piece of infrastructure that has not been used and probably will not necessarily be used within the 30-year period. If it is partially used, well and good, because I stood there, with my then leader, Iain Evans, and members on this side of the house, arguing back in 2007 that we needed to build a modest desal plant to guarantee essential water supply for South Australia, and that is what we should have built.

We would have saved over $1 billion. The original cost flagged in this house by the Labor government back in—I think it was, late 2007, it might have been earlier—I think December 2007 was $1.1 billion, including the connecting pipes to connect the northern and southern parts of the metropolitan water supply system. That blew out to $2.2, $2.3 or $2.4 billion, take your pick. It will be somewhere in that order, at least 2.2, possibly up to as much as 2.4, an absolute waste of money by a government that did not understand what it was doing.

I remember we argued very stridently that there were other avenues, certainly harvesting stormwater and recycling harvested stormwater, and the government pooh-poohed that idea, and I remember one member of the government, a senior minister at the time, even arguing that the opposition wanted to put water as it washed down our streets directly into our drinking water supplies with all the pollutants etc. within it, which just showed the mentality of the government. They did not want to know; they did not want to recognise a good idea when it jumped up right in front of them.

We have seen since then that organisations such as the CSIRO have come out and said that that is indeed a technology which is viable, sustainable and much, much cheaper than the desal option that was taken in South Australia and it was the option that we should have adopted at that time. So I think one of the pieces of history in water policy development in South Australia is that the Liberal opposition, certainly in the last 10-plus years, has had the better and the right ideas for water policy in South Australia, as opposed to the nonsense that has come out of the government.

We are amending the Water Industry Act, and I note that the minister in the other place refers to the ongoing reforms which started with Water for Good and then the Water Industry Act. Let me remind the house that the Water Industry Act was nothing more than the government taking the opportunity to get headline news saying that we were going to have a new water regime in South Australia, a new management regime in South Australia, and one of the underpinning principles of that would be that we would have independent pricing of water in South Australia. What a nonsense.

Even though the Water Industry Act established ESCOSA as an independent pricing umpire, it tied ESCOSA's hands through a mechanism where the treasurer of the day sets a pricing audit which ESCOSA has no opportunity to argue against, or to modify. It has to accept the pricing audit as presented to it by the treasurer of the day, and that is the instrument by which the government continues to set water prices in South Australia, and manipulate water prices it has, not just to cover the exorbitant cost of things like the desal plant but to prop up a failing budget.

The government also transferred a significant part of the state's debt two years ago from the Consolidated Account to SA Water—$2.7 billion I think was the figure. A debt was transferred out of the Consolidated Account to SA Water to try to make its books look better. SA Water has been used and abused by this government for far too long and when the state is crying out for good, sound water policy to help industry and business, we are getting this bit of nonsense that is before us today, that is, a piece of legislation which claims to be about giving third-party access to SA Water's infrastructure but actually is designed to make sure that that third-party access is virtually impossible to achieve. That is what this legislation is about; it is about giving lip service to a grand idea but ensuring that that grand idea never comes to fruition.

Some of my colleagues have talked about some of the schemes that we have had in South Australia. The member for Schubert talked about Barossa Infrastructure Ltd, and I will not go into the detail of that, but the reality is that that is a fantastic scheme to drive ongoing investment in, build confidence in, and to underpin the wine grape industry in that area of the state, the Barossa Valley.

We have other schemes that have been built around the state to drive horticulture and agriculture. There is the scheme where treated wastewater from the Bolivar Wastewater Treatment Plant is utilised in horticulture in the Northern Adelaide Plains. We have the Willunga Basin scheme where recycled wastewater from the Christies Beach Wastewater Treatment Plant is being used to do exactly the same thing within the wine grape industry in the McLaren Vale area. All of these schemes were developed while the Liberal Party was in power in South Australia and ensured that these industries were given access to low cost, high quality water to produce food, fibre and wine, products that we could export for the state and also sustain our own food needs here in South Australia.

I juxtapose those schemes that I have just mentioned to the one that was developed under this government, and funded almost entirely by the commonwealth, to build a recycled wastewater pipeline from the Glenelg Wastewater Treatment Plant to the city to provide water for parks and gardens around the city, and to business, supplying water to buildings for air conditioning, cooling etc., and other purposes, generally, in and around the CBD.

The difference between the scheme developed under this government and the scheme developed when John Olsen was the premier of the state is that the water from Bolivar being utilised in the Northern Adelaide Plains is costing those producers a matter of a handful of cents a kilolitre. I think the original price was 14ȼ, and I do not think it is a heck of a lot more than that now, although I am not sure what the exact figure is.

The figure for the water supplied to the City Council to water the Parklands is 75 per cent of the cost of potable water. That is the cost that SA Water has been forced to charge for the recycled wastewater from the Glenelg Wastewater Treatment Plant—75 per cent of the cost of potable water. Every year, as the cost of potable water goes up that cost also goes up. The reality is that it is not worth using that water. The reality is that after expending something in excess of $70 million building that pipeline it is grossly underutilised. Even worse than that is the fact that instead of the wastewater from the Glenelg plant being piped up here to be utilised in and around the CBD, that water is dumped into Gulf St Vincent and it is causing environmental problems out there.

There is a litany of problems which have been created because this government is blindsided by its need to extract money from SA Water. It has caused untold problems for the state, both for business communities and the environment. We do need third-party access, and a number of members have talked about the situation in their individual electorates.

In the northern part of my electorate, there is a pipeline that runs from Tailem Bend to Keith. It has a branch that goes off to Meningie. Not only does it service communities along the Dukes Highway and Meningie, down on the Princes Highway, but it services the farming community and provides stock water to farmers in that region of the Upper South-East stretching from Tailem Bend all the way down to Keith. Those farmers are now paying an exorbitant amount of money for water to keep livestock production happening in that part of the state, as the member for Hammond mentioned yesterday. This is a fairly productive part of the state, which turns on high quality beef, milk, mutton—all requiring water from that pipeline, and the cost is becoming prohibitive.

We now have farmers and groups of farmers spending literally hundreds of thousands of dollars building their own pipelines parallel to SA Water's infrastructure to shift water from one part of their farm where they have a bore of fairly reasonable quality water to another part of their farm, which might be five or 10 kilometres down the road, where there is no potable water supply on the property from the groundwater system because it is too saline. So parallel to the SA Water network we have farmers building their own infrastructure. We have farmers putting in desalination plants, spending hundreds of thousands of dollars again. They are building storage or rainwater collecting systems to collect vast volumes of water because they cannot afford to run their business with the cost of water from SA Water.

I cannot for the life of me imagine any greater need for third-party access to SA Water's infrastructure than for those farming communities in the northern part of my electorate. If they could get access to the infrastructure and have water transported, they could then go into the open water market for water on the river, purchase the water themselves and have SA Water transport it to their properties. They could do it as individuals or collectively. It beggars my imagination that they could not more than halve the cost of water if they were charged the real cost plus a small margin for transporting that water through the existing infrastructure. That is the sort of policy setting we need in South Australia, but that is just one example.

We have the same thing with industry throughout South Australia. I am well aware of what the Salisbury council did when they had two problems a few years ago. They had a stormwater problem and they also had businesses in their community that were large water users, and one of them was the Michell Wool scourers. I think they were the biggest water user in the state. The Salisbury council did something that this government is incapable of doing: they looked at two things at once and said, 'We can put them together. There are some incredible synergies here. We can take the stormwater problem and turn it from a problem into an asset. Then we can take one of our major businesses in our community and we can give them access to a much cheaper water supply.' That is what they did over a period of years, and they developed a fantastic system.

I would argue that one of the reasons we had the Water Industry Act, and thereby were able to declare the Salisbury council as a water entity and then regulate it, was that this Labor government in South Australia was so concerned at the success of the Salisbury council's management of water within their own council area that they thought that it might be replicated and indeed undermine their ability to continue to use SA Water as a cash cow. That is how serious the problems with water management are in this state. We have the government who are not just incapable of seeing the needs of the community and providing water policy to accommodate those needs but, in my opinion, actively working against those who come up with better solutions to stop them in their tracks and to secure their cash flow or their revenue stream from SA Water.

The piece of legislation that we have before us today is unfortunate. It is unfortunate because the name of it and the rhetoric behind it is what the state needs but, in practice, the reality is that this will have the opposite impact and the opposite effect to what the state needs. In this very dry state where we have very limited water supplies, we need very, very good water management and we need people who are managing our water system who understand the needs of not just householders and communities but business and industry as well. That is one of the reasons that, in this state, we find ourselves with that huge unemployment level, because we have a government that is only intent on using SA Water because of its capacity to provide revenue to the Consolidated Account rather than using SA Water to underpin the growth and development of business and industry in this state.

Unfortunately, I will not be opposing the bill as it sits because there is nothing else and there is no other opportunity. The opposition will be moving some amendments, and I will certainly be supporting those. I lament that, yet again, after all these years, the Labor Party in government cannot get it right.

The Hon. S.E. CLOSE (Port Adelaide—Minister for Education and Child Development, Minister for the Public Sector) (12:20): I thank members for their consideration of the bill and for their contribution. This bill is a significant milestone. It establishes a state-based access regime for South Australia's water industry, one that is consistent with National Competition Policy. It also represents the achievement of a key action in this government's water security plan, Water for Good. It is the government's intention to commence these proposed amendments on 1 July 2016 and to align it with ESCOSA's second regulatory determination for SA Water's retail services. The government will also be seeking certification of this access regime by the National Competition Policy.

The bill requires that ESCOSA provide an annual report and a periodic review. It is the government's intention to use this information to adjust the application of the access regime as the market matures. Initially, however, it is the government's intention that the proposed access regime will apply to SA Water's bulk drinking water pipelines and to the Glenelg to Adelaide recycled water pipeline. This is because the upstream market for bulk water is more fully developed, taking into account the market for River Murray water entitlements and technological advances in water production.

At this stage, I note that the bill also clearly maintains the current legislative and regulatory frameworks for public health, environment and safety. I also note that an amendment was made in the Legislative Council that would require the arbitrator to take into account any ministerial direction given to SA Water under section 6 of the Public Corporations Act 1993.

These directions currently include non-commercial activities performed by SA Water, such as fluoridation and statewide pricing. It is intended to provide SA Water with a direction regarding the basis for negotiating access prices with an access seeker, which would include a requirement for access pricing based on retail price minus avoidable costs. I look forward to an interesting committee stage where, no doubt, a range of views will be expressed. I commend the bill to the house.

Bill read a second time.

Committee Stage

In committee.

Clauses 1 to 4 passed.

Clause 5.

Mr WHETSTONE: I move:

Amendment No 1 [Whetstone–1]—

Page 3, lines 21 to 24, page 4, lines 1 to 7—Delete subsections (1), (2) and (3)

The Liberal Party has put forward amendments Nos 1 and 2 (amendment No. 2 being at clause 7) after strong views were raised by ESCOSA during consultation. Amendments Nos 1 and 2 relate to the same issue, that is, the scope of assets. ESCOSA has said that it clearly believes that more infrastructure than should have been had been included within the assets regime.

One of the areas the Liberal Party has previously advocated for is sewer mining. We believe that ESCOSA ought to be the body which makes the determination about which assets should be included. ESCOSA is to protect consumers, and we believe it is the body best placed to make those sorts of decisions.

No doubt the government is going to continue without any amendments to this legislation, meaning that it can itself cherrypick which parts of our water and related segments participate in the scheme. Therefore, we think ESCOSA ought to have greater scope under this particular regime.

Mr WILLIAMS: I was considering asking my question at clause 7, but I think I can ask it here as it is not specific to that clause. In her concluding remarks at the second reading, the minister suggested that part of the scope of the bill would be aimed at certain parts of the infrastructure and included the Glenelg wastewater treatment to Adelaide pipeline.

Can the minister inform the committee what percentage of the capacity of that pipeline is being utilised? It does not bother me which way she expresses that—as a percentage or whether she can tell us how many megalitres or kilolitres of water are being pumped through that pipeline on an annual basis. I think the committee would be well informed if we could have that figure for the last few years rather than just for the current year.

The Hon. S.E. CLOSE: I am afraid we do not have the adviser here who would have that answer, so I am unable to answer that question at this stage.

Ms CHAPMAN: Are any of the items of infrastructure currently owned by SA Water under consideration or being scoped in any way for sale by the government?

The CHAIR: This is on clause 5, is it?

Ms CHAPMAN: It is all infrastructure. Clause 5 relates to the extent of all of the assets to be taken into consideration.

The Hon. S.E. CLOSE: I have absolutely no knowledge of any such proposition.

Ms CHAPMAN: Can the minister obtain that information and come back to the house with it?

The CHAIR: Between houses?

The Hon. S.E. CLOSE: Yes, I guess it is still between houses even though it is going back to one that has been passed, so that is acceptable, yes.

Amendment negatived; clause passed.

Clause 6 passed.

Clause 7.

Mr WHETSTONE: I move:

Amendment No 2 [Whetstone–1]—

Page 5, lines 12 to 20—Delete subsections (1) and (2) and substitute:

(1) Subject to subsection (2) and (3), this Part applies in relation to the operators of the following water infrastructure or sewerage infrastructure, and infrastructure services with respect to the following water infrastructure or sewerage infrastructure (insofar as those operators form part of the water industry under this Act):

(a) water infrastructure that is able to be used for—

(i) the collection or storage of water, including a dam or reservoir; or

(ii) the treatment of water; or

(iii) the conveyance or reticulation of water;

(b) sewerage infrastructure that is able to be used for—

(i) the collection or storage of sewage; or

(ii) the conveyance or reticulation of sewage; or

(iii) the treatment of sewage, including any outfall pipe or other work that stores or conveys water leaving infrastructure used for the treatment of sewage;

(c) other water/sewerage infrastructure brought within the ambit of this subsection by the regulations.

(2) The Governor may, by regulations made on the recommendation of the Commission, exclude—

(a) specified water infrastructure or sewerage infrastructure, or a specified class of such infrastructure; or

(b) specified infrastructure services, or a specified class of such services,

(being infrastructure or services of a kind referred to in subsection (1)) from the application of this Part.

This amendment deletes subsections (1) and (2) and inserts new subsections (1) and (2). I will not expand on this, as I have already explained it in my opening remarks.

The committee divided on the amendment:

Ayes 19

Noes 23

Majority 4

Amendment thus negatived.

Mr WHETSTONE: I move:

Amendment No 3 [Whetstone–1]—

Page 5, after line 29—Insert:

86BA—Pricing principles

The pricing principles relating to the price of access under this Part are as follows:

(a) that access prices should be set so as to generate expected revenue that is no more than necessary to meet the efficient costs of providing access;

(b) that access prices should allow multi-part pricing and price discrimination when it aids efficiency;

(c) that access prices should not allow a vertically integrated operator to set terms and conditions that would discriminate in favour of its upstream and downstream operations;

(d) that access prices should provide incentives to reduce costs or otherwise improve productivity.

Amendment negatived.

Mr WHETSTONE: I move:

Amendment No 4 [Whetstone–1]—

Page 7, line 18—Delete '$20,000' and substitute '$200,000'

Amendment negatived.

Mr WHETSTONE: I move:

Amendment No 5 [Whetstone–1]—

Page 7, after line 42—Insert:

(3) The information must be provided within 30 days (or a longer period allowed by the regulator) after the regulated operator receives the application.

(4) If a regulated operator fails to comply with this section in any respect, the regulated operator is guilty of an offence.

Maximum penalty: $200,000.

Amendment negatived.

Mr WHETSTONE: I move:

Amendment No 6 [Whetstone–1]—

Page 10, line 20—Delete '6 months' and substitute '3 months'

Ms CHAPMAN: Why on earth is it not possible for the compliance of the information that is being requested here to be within three months instead of six months? Why on earth is it necessary for them to have six months? Can I just add to the question to ask, what on earth has to be done from the time that there is clearly no resolution, to have to wait six months before the next referral for arbitration takes place? What other information needs to be collated, for example, that requires it to have to wait six months?

The Hon. S.E. CLOSE: My understanding is that the clause refers to it being resolved within six months rather than being required to take six months. The six months is to allow conciliation to occur and that indeed that could be longer if the arbitrator exercises powers under the act if that is seen to be productive.

Amendment negatived.

Mr WHETSTONE: I move:

Amendment No 7 [Whetstone–1]—

Page 11, line 38—Delete paragraph (k) and substitute:

(k) the access price that applies under a determination of the regulator under section 86ZLA (and any award of the arbitrator must not be inconsistent with such a determination); and

Amendment negatived.

Mr WHETSTONE: I move:

Amendment No 8 [Whetstone–1]—

Page 12, lines 1 to 14—Delete subsection (2)

Amendment negatived.

Mr WHETSTONE: I move:

Amendment No 9 [Whetstone–1]—

Page 12, lines 32 to 37—Delete subsection (4)

Amendment negatived.

Mr WHETSTONE: I move:

Amendment No 10 [Whetstone–1]—

Page 16, line 20—Delete '6 months' and substitute '3 months'

Amendment negatived.

Mr WHETSTONE: I move:

Amendment No 11 [Whetstone–1]—

Page 20, after line 5—Insert:

86ZLA—Price determination

(1) A proponent or a regulated operator under this Part may, at any time, apply to the regulator for a determination of the price (the 'access price') that should apply with respect to gaining access to (and using) regulated infrastructure and infrastructure services.

(2) If—

(a) a dispute is referred to arbitration under Division 6; and

(b) the parties have not, before the dispute is so referred, made application under subsection (1),

the regulator will, in connection with the arbitration, make a determination of the access price envisaged by subsection (1).

(3) The regulator, in acting under subsection (1) or (2)—

(a) may require the proponent and the regulated operator to provide such information as the regulator may require; and

(b) must take into account the pricing principles specified in section 86BA; and

(c) must, in any case where Division 6 applies, confer with the arbitrator; and

(d) may otherwise determine the matter in such manner as the regulator thinks fit.

(4) A determination as to price under this section will have effect for the purposes of any negotiation about access under Division 4 or 5 (unless the parties come to their own agreement as to price) or any arbitration under Division 6.

(5) The regulator may, on application by the proponent or regulated operator, or at the request of an arbitrator, vary a determination under this section.

Amendment negatived; clause passed.

Remaining clause (8) and title passed.

Bill reported without amendment.

Third Reading

The Hon. S.E. CLOSE (Port Adelaide—Minister for Education and Child Development, Minister for the Public Sector) (12:42): I move:

That this bill be now read a third time.

Bill read a third time and passed.