WATER INDUSTRY BILL

Second Reading

Adjourned debate on second reading.

(Continued from 10 November 2011.)

The Hon. D.W. RIDGWAY (Leader of the Opposition) (10:37): I rise on behalf of the opposition to speak to the Water Industry Bill 2011, and indicate that this has come from the House of Assembly. This bill has been a greatly anticipated piece of legislation and, given the public focus that water policy has had over the past term of this government, it deserves a great deal of attention and scrutiny.

In fact, you could say that the public focus on the water policy has been not only in the past term of this government but also in the entire time this government has been in office. This bill repeals the water conservation, water works and sewerage acts, the acts which confer the powers to enable construction and maintenance of the infrastructure that we need for water supply. The bill then establishes new regimes for the supply of water and sewerage services on both private and public land.

The main facets of the bill are—and reserving debate on how effectively we think the legislation will provide for these functions—a supposed independent pricing regime; third party access to water infrastructure; a state water demand and supply statement to be prepared by the minister; a new arrangement for the technical regulation of water and the water industry; and, finally, a replacement of powers from the repealed acts on land access, the establishment of infrastructure, the protection of infrastructure equipment and water supplies and the establishment of the Save the River Murray Levy and fund.

As we have often seen with significant government legislation at the point of debate, there are not yet any draft regulations for us to consider, and it really does make it difficult to be able to scrutinise how many aspects of this legislation would play out on a practical level. While I know that it is not always possible to provide the chamber with a finalised set of regulations, it really would make it simpler and a little easier to understand if we were provided with some draft regulations. I know that the Hon. Paul Holloway was frustrated at times when I requested that information but, with a couple of pieces of legislation, we did have the government provide what were draft regulations, and it really did assist us in the debate with understanding how complex legislation would play out and how it would impact the life of everyday South Australians.

Before commenting on the technicalities of the bill, I would like to repeat a few points made by our shadow minister, Mitch Williams, in the other place; I think they are important in setting out the context of this legislation. The experience South Australia has had with water, particularly from 2004 to 2009, has not really been as a result of water scarcity but rather a scarcity of water management. It is a testament to this Labor government's lack of water management credentials.

The common perception is that that the five-year period was the most severe South Australian drought in recorded history, but that was only when water users began to notice it. It was prior to 2004 that this government should have been really honing in on water security—and I think that is the point. This is a government that basically buried its head in the sand in relation to water security and the supply of water, just assuming that there would be a solution around the corner. This is something that was manifesting itself over the entire life of this government.

The government had a chance and a responsibility to implement many water strategies, but it waited until South Australia was in a dire situation to take any action and, even then, the outcomes have been less than desirable. We are in the situation we are today because the government has failed to take action over the past 10 years and not just since the River Murray began drying up.

Back in 2006, when I was the shadow minister for the River Murray, I went to Perth with a group of other opposition members to look at the Kwinana desalination plant. At that time, the Western Australian plant was, I think, a 50-gigalitre plant and, when we visited it, it was at about the same stage as the Port Stanvac plant is today. We had a taste of the very first water, but the plant was not fully commissioned at that stage.

It was interesting to look at that whole debate. The decision was made by the Western Australian government to build that plant, probably because Perth had been under threat from declining rainfall for a bit longer period than we had been; the statistics show that rainfall had been tapering off for the last 30 years. However, a decision was made by the government to build a 50-gigalitre plant in Cockburn, with the outfall and the intake in Cockburn Sound.

They were able to do all of the design work, the competitive tender process, as well as environmental monitoring and assessment of some modelling in the Cockburn Sound, and that all ran concurrently. They were able to announce that they were going build a desalination plant, get all of the approvals and regulatory approval through and build the plant in what seemed to be a very short time frame at a much lower cost than certainly our desalination plant has cost.

Since then, they have also commissioned a second plant. It is about the same size as the South Australian plant but, again, at about the fraction of the cost. The price difference, as I said, had much to do with timing. What we have seen here is that, for too long, Labor thought that it could survive the drought by simply toughening water restrictions. It refused to consider strategies that took reliance off the River Murray.

After we had looked at the desalination plant in Perth, we spoke to experts and we made an assessment. We announced, in 2007, that, if we were the government, we would build a desalination plant to produce 45 gigalitres of potable water, which is about 22 per cent of Adelaide's requirements. All the expert advice that was provided to the opposition said that, when you have different sources of water—we have the Hills and the catchments there, the River Murray and desalination—with our complex water supply as it stood at the time, 20 to 25 per cent of water being delivered from desalination was a sensible place to be.

But alas, for arrogant political reasons the government refused to concede, for a long time, that desalination would be part of the answer to the water security challenge. I can recall that in the end there was a huge degree of public pressure that finally caused the government to turn to the option—which, of course, it has executed badly.

However, I recall that during that time the government said that we did not need a desalination plant, that 45 gigalitres was too big and too expensive, that we did not know what we were talking about. It is interesting to note that, at the time, we in opposition sought advice—and you know, Mr President, because you have been in opposition yourself, the scant resources that oppositions have. I also used my parliamentary travel to travel to Dubai and look at some desalination plants in the Middle East.

With our scant resources we were able to suggest that we should have a 45 gigalitre plant and that one of the places where it sort of made sense to look at putting it would be the Port Stanvac site. There was water infrastructure at Happy Valley Reservoir and it was not hard to connect into the main system, and there was also a significant power supply to the old Mitsubishi engine plant there. You did not have to be a rocket scientist to say, 'That is clearly a place to look first.' The other site to look at was maybe Pelican Point, because it has access to water and is also right next to a power station. That was an option from the opposition's point of view.

So, in 2007 we announced that if we were in government that is what we thought we should do. This government said that no, we didn't know what we were talking about; it was too expensive, we didn't need a desalination plant. I know that the then premier said to the Hon. Malcolm Turnbull, when he was federal minister for the environment, 'Malcolm, what do we do? We can build a desalination plant; what do we do if it rains? We don't need it. I'll look like a fool.' In the end he did look like a fool, because we had the Hon. Karlene Maywald, the then minister for water security, appoint a high level task force to decide on a location.

Now, recall that the opposition, with scant resources, was saying that Port Stanvac was the logical place to look first.. Of course, after 18 months a report from this high level task force came back to the parliament, to the minister, that yes indeed, they would build a desalination plant, and it would be at Port Stanvac. I think that typified the arrogance and lack of understanding of this government when it came to water security in our state.

We wasted almost two years before the construction process started. I do not have the exact figures, but my recollection is that the Western Australian plant was $300 million to $400 million. I might add that the consortia that was building the desalination plant in Perth gave us an unofficial, off-the-record view that if a state government in South Australia wanted a desalination plant it could have gone to tender; there was plenty of capacity in the water industry for construction of a desalination plant.

But, of course, the government waited; it sat on its hands and buried its head in the sand, and when it had been delayed for probably nearly two years the government eventually announced a 50 gigalitre plant but it was $1.1 billion. So we had gone from potentially, two years before, about $400 million to $1.1 billion—plus, of course, $300 million for the north-south connector. Over time the connector disappeared from the equation, although the $1.1 billion stayed the same.

Then, astonishingly, the government announced that it would double the capacity of the plant, bringing the cost up by another $400 million. So that is $1.8 billion. Finally, the connector was reintroduced into the equation, but the price had inflated by another $100 million. In the end the cost went from $1.1 billion to $2 billion.

My question to the minister is: could the minister provide to the chamber the advice the government got (and I do not think it is reasonable to accept, 'Oh, this was a cabinet document'), the advice that was given to the minister proposing this, the minister for water security, that said that Adelaide needed to go from a 45 gigalitre plant to a 90 or 100 gigalitre plant? Who in the industry gave the specialist consultants that the government would have employed, gave the government, the advice that it needed to build a 90 gigalitre plant?

I think all of us would accept that while you have the experts and the specialised equipment there, maybe that is the time to just do some of the engineering, such as maybe the tunnels that have gone out down through the cliff. We would accept that maybe you might do some of that doubling so that, when the population of the state grew or we had significant periods of drought or whenever the need arose, you would actually have done that, if you like, very heavy engineering to prepare the plant for an increased capacity.

But I think there is something missing in the debate. Usually this government is able to table a document or a report that backs up why they have made a decision. While they would say they are a pretty skilful lot, I suspect that the government is not that skilful in a whole range of areas and, in the opposition team, there are no hydrologists, no water experts. You do rely extensively on advice from external parties when it comes to this specialised decision.

In relation to the decision to double the size of the plant—given that it is a $2.2 billion project and water prices now are shooting through the roof almost like a fountain, fountaining up into the sky—I think the South Australian public needs to know what advice, what evidence, the government received as to why we went from a 45 gigalitre plant to a 90 or 100 gigalitre plant, and that should be published.

Of course, this Labor government has gone from refuting that desalination would play any part in the water security equation to saying that desalination would provide well and truly beyond Adelaide's essential water needs. We all know that about 25 per cent is what you need, but of course now it is close to 70 per cent when you take it up to 100 gigalitres a year.

If you look at our consumption over the previous years, South Australia's consumptive use in the Adelaide metro area over the time when level 3 water restrictions were in play was about 168 gigalitres per year. The restrictions reduced it to 130 gigalitres a year so, effectively, if you have 100 gigalitres supply from a desal plant, you have 70 per cent of Adelaide's water needs.

Of course, the former premier feared, when he spoke to the federal minister about the desalination plant, what he would do if it rained, and of course it did rain. It always does rain and that is why it was just a foolish, reckless decision to double the plant at the time that they did. Sure, parts of the engineering needed to be done so that that could be done in the future, but to lock South Australians into a $2.2 billion desalination plant when there appears to be no evidence to do so is just reckless and very arrogant.

I say at this point that this ridiculous decision, especially given the point I made earlier about the scarcity of water managers versus the scarcity of water, is a standout kneejerk response to South Australia's drought. It highlighted this government's failure to offer water security and a genuine understanding of water management. The opposition does not believe that this bill will actually do anything to correct those fundamental issues, that is, the fact that Labor really does not seem to understand or be able to achieve water security.

The other issue is that South Australians will now pay for that bad decision. SA Water's asset value is critical to the determination of the price of water. One of the main parts of this bill is to do with water pricing. This bill supposedly delivers on a government policy to institute an independent water pricing mechanism. What it actually does is give the Treasurer the power to issue ESCOSA with a water pricing order.

The price of water can be determined from there, so the bill does not contain any policies, parameters, principles, factors or other matters that guide the setting of water and sewerage prices. They are all subject to an order from the Treasurer. That includes whether the $2.2 billion desalination plant should be structured into water pricing to be borne by consumers over the next 30 years. It is far from being an independent pricing mechanism.

The bill also requires the minister to prepare and maintain a state water demand and supply statement which is to be comprehensively reviewed every five years with a progress report being tabled each year. The opposition sees this as a positive move, but it still fails to see how it will contribute to the government's 'active management' of water. That was the term used by minister Caica in his second reading explanation. How does this reporting mechanism contribute to the government actually having a firm grasp of the environment that it is operating in, and what has been done on the ground to achieve water security? Will this reporting requirement actually have any real outcomes, or will it be just another bureaucratic regime?

The other area I would like to touch on is stormwater. This is another hallmark policy failure by Labor. The annual run-off from metropolitan Adelaide in an average rainfall year is about 160 gigalitres. Interestingly, that is almost equivalent to the figure I quoted earlier for metropolitan Adelaide's average annual water consumption when restrictions first came into place. I repeat that South Australia's water situation is not about water scarcity, as can be seen by that amount of stormwater run-off; it is about a failure to manage the resource properly.

In May 2008, the Liberals committed to implementing a stormwater recycling infrastructure plan to ensure the capture and re-use of at least 50 per cent of that 160 gigalitres. Like desalination, it is not the silver bullet for our water crisis, but it was an important opportunity to increase and diversify our supply options and therefore improve our water security. The technology needed to capture, clean, store and re-use water for potable and non-potable supplies has been proven, but the government again refused to embrace the policy which could unlock one of the state's most plentiful water resources.

As stated by my colleague, due to this Labor government we now have a situation where we have been forced to develop stormwater recovery and re-use schemes for none other than irrigation purposes. This is a reasonable thing to do, but the water still falls well short of its potential. The essential problem is that, to re-use water efficiently, you need to treat it properly. You need to put it underground, bring it back to the surface and then put it into the existing system. The government says you cannot do that, but the technology exists to do it.

If you look at the great work that has been done by the City of Salisbury, sure, they use the water for irrigation, but it comes back out of the ground in almost potable condition. I am sure that it is no worse than the water that comes out of the River Murray or the Adelaide Hills' reservoirs, and it certainly would not be very difficult to treat it to a level where it can be put back into our pipes, without having to dual plumb the city, which would be tremendously expensive.

The government was particularly opposed to the Liberal stormwater plan. They tried to debunk it for the whole of the last election campaign. It was interesting to note that after the election campaign there was a request from the minister—so I was advised by some public servants, and that they were looking at every possible way to do a backflip on their opposition to stormwater harvesting and recycling. The government set down some new targets, but they are limited by their policies and some of the infrastructure that we have.

Sadly, this legislation does nothing to resolve that situation. In fact, this bill actually takes a backward step in one sense because it fails to distinguish between potable and non-potable water. The bill proposes to establish a new regime to regulate water supply and sewerage services under the auspices of the Essential Services Commission. While this makes sense, the opposition does not see how non-potable water supply is classified as an essential service.

We now have a situation where many local governments, such as Salisbury, are well advanced in their non-potable water management and also responsible for stormwater management. Of course, SA Water remains responsible for the bulk of the potable water supply, and this bill fails to determine how different entities will be treated. I indicate that we will be moving amendments to exempt non-potable water supply. Council wastewater management schemes do not deserve to have this heavy-handed regulatory treatment.

I would also like to touch on third-party access. This bill does not do anything in terms of real action on what is supposedly a government policy. It simply requires the minister to produce a report on certain factors of a regime. The industry sees third party access as an absolute must in order to promote innovation, lower costs and competition. My colleague in another place has proposed that we take this legislation a step further by obliging SA Water to provide a transport service to farmers for stock water, where farmers acquire their own River Murray water entitlement.

Mitch Williams, the member for MacKillop, has been approached by a number of farmers on this particular issue. Due to water prices, they are desperate for a product that they can use to keep their livestock and farming properties viable in coming years. He has informed me that he has constituents in his electorate paying over $100,000 a year for water for their livestock. It is well and truly time for reform of our water industry in terms of third party access. We really cannot afford to sit and wait while the government prepares and then shelves yet another report.

These provisions need to be made in legislation so that we can protect one of South Australia's most important industries and stop it from being wiped out. I think that this government fails to grasp the impact of its decisions on country South Australians. Clearly, as we will see later today with the debate on the select committee report into the sale of the forestry rotations, it simply does not understand or care about the impact on rural and regional South Australia.

We are also glad to see that this technical regulation of the industry will be removed from SA Water—and the plumbing industry is very happy with that, too. However, setting up a new regime seems a little short-sighted. As stated by Mitch Williams, the member for MacKillop, the Water Industry Association already sponsors a full suite of codes of practice. Why can't we get on board with other jurisdictions across the country and establish an organisation such as the Water Industry Association to provide all the technical standards that we need? Is the government even having that conversation with other states?

That is a question I would like to formally ask the minister. Naturally, we have the debate raging about the Murray-Darling Basin, but what discussions are being had with other states in relation to regulation and in particular the technical regulation across borders? I am not sure if there is any transfer of potable water across borders but I am sure that in the South-East there potentially could be and, of course, we have all the other states—Victoria, New South Wales and Queensland—where there may well be a transfer of potable water across state borders. I am interested in knowing whether the government is having that conversation.

We are also pleased to hear that concession schemes will be approved and funded by the minister under this bill, and congratulate them for seeing the folly of their ways in implementing a cross-subsidy scheme for solar feed-in. There has been a terrible outcome, especially for people on concessions who can barely afford their own electricity. I recall that in a meeting with the minister's office throughout debate on the feed-in bill, there was an admission that the Premier had not got it right in committing to increasing the tariff and, from there on, moves to honour the commitment were predicated on a political decision rather than good policy. We are glad the government, at this point, is not making the same mistake again.

The minister in his second reading discussed protection for low-income earners and regional consumers but we are waiting to see that in the regulations as it does not appear in the bill. Again, that is why I raise the concern about not seeing the regulations as it will actually help us to understand what the government is try to achieve.

The opposition will be moving a number of amendments to this bill, including one to relieve South Australian SA Water customers whose supply has no connection with the River Murray from paying the levy as per part of our party policy; it is insane that we should levy people who do not use the River Murray. Mr President, back in your old stamping ground in the South-East—as you well know, the River Murray pipeline finishes halfway between Keith and Bordertown—all SA Water customers pay the River Murray levy.

That is a pretty arrogant, selfish and out-of-touch approach from this government. When the Premier visits the South-East some time between now and Christmas I hope he makes two decisions: one to reverse the sale of the forests and the other to exempt all non River Murray connected water users from paying the River Murray levy. With those comments, I look forward to further debate, and the opposition supports the second reading of the bill.

The Hon. R.L. BROKENSHIRE (11:04): Firstly, I rise to advise the house that Family First will be supporting the principles of this bill. However, we intend to move some amendments in committee stage, which I understand will be early in the new year. The Water Industry Bill is an important bill, and I am hoping that it will pave the way to allowing more flexibility and more opportunity for third-party associations, corporations and the like to be able to utilise what has been a monopoly situation with SA Water pipes in the past. I hope we will see this develop into opportunities like those we have seen with multiple telco companies now as against the old monopoly of Telstra.

There is no doubt—and I am sure all colleagues would agree—that water is a key issue for all South Australians. It is an issue that will continue to need very good management into the future if we are to be able to continue food production the way that we all hope to and also be able to accommodate the government's Greater Adelaide plan over the next 30 years with respect to up to 500,000 more people coming into the state and needing water. Of course, we also see issues around mining expansion; mines are also quite high users of water.

There are opportunities where we can learn a lot. I commend the Salisbury council, and Colin Pitman in particular, for the way they have led the way with stormwater harvesting, aquifer storage and recovery. In the south in particular, the City of Onkaparinga has developed Water Proofing the South and other initiatives with quite a lot of money provided by the commonwealth. There are other smaller initiatives, one of which I was proud to have a lot of input into back in the mid-1990s. That was the opportunity through the now Willunga Basin Water Company, which buys bulk recycled water from SA Water at Christies Beach treatment plant and brings that through purple pipes into the Willunga Basin.

Clearly there are lots of avenues for expanding and re-using our water. When you consider that water from the Thames in England is used up to seven times before it goes to sea, I am sure we still have a lot to learn in South Australia, and indeed throughout the nation of Australia, with respect to better water usage.

I just want to touch on the Save the Murray levy. It will not be a surprise to the government. I have been critical of the Save the Murray levy for some time. I do not believe that it has delivered what it should have delivered. It is costing South Australian taxpayers about $24 million a year. We have seen a situation where there has been a change of responsibility, control and management now with the new Murray-Darling Basin Authority.

We have seen $13 billion provided by the commonwealth again since the Save the River Murray levy was first introduced. Given that a lot of that money is unspent and a lot is used for administration, I believe that there is an opportunity to not only remove the levy from those people who do not access River Murray water, as the Hon. David Ridgway, Leader of the Opposition in the Legislative Council just debated, but to remove this levy and start to give people some full taxation relief at a time when we all really do need it in South Australia.

We know that pricing is a big issue for water. The desalination plant is only further adding to that. There is no doubt now that people are as worried about water pricing as they are about electricity pricing. They are big on the agenda of all households in our state. We have the third-highest price for water of all states and territories, at about $2.30 a kilolitre. When you look at states like New South Wales, Western Australia and Tasmania, we know Tasmania has the advantage, but comparing New South Wales and Western Australia, where I would argue they do not have an advantage, they are at $1.96 a kilolitre in New South Wales and $1.64 in Western Australia.

As I said, water prices are rising. The government's decisions of late have indicated that we could see another 50 per cent increase, I understand, in water prices. Family First supports independent pricing, as exists, for instance, in New South Wales and Victoria, but with some controls which we think are the aim of the structure the government has developed through the pricing order regime. Our concerns as to just how effective that will be will come out in the questions I will ask during the committee stage, but certainly we do need to look closely at pricing structure.

I put on notice a question for the government; specifically: how will the pricing order structure work if it has been issued to ESCOSA, and what sanctions can they take if the pricing structure developed by ESCOSA is not in harmony with the pricing order? Is it like a veto? I also want to touch on issues regarding farmers in particular. This exorbitant increase in water costs has had an impact and will have a continuing impact on all South Australians who utilise River Murray water, but it is having a significant impact in the Clare and Willunga basins for those who irrigate their vineyards and other horticulture with mains water.

Also impacted are dairy farmers and sheep and beef cattle graziers, especially in the Meningie area, where they have to use mains water for watering their stock, cleaning their feedlots, cleaning their dairies, and for all animal husbandry. I have had reports through the South Australian Dairy Farmers Association, of which I and my family are members, that some of these farmers are now seeing bills of over $100,000 a year for mains water. It is now the biggest expense on their farms, and is actually threatening the viability of their businesses, so I do intend to move some amendments to address that during the committee stage.

I want to see a principle of fairness for farmers. If we are to be serious and holistic in our approach as government and parliament, there is no doubt that we need to look at what imposts are prohibiting and inhibiting farmers from being able to produce the food we need for our state's consumption, for the nation's consumption, and for exports. I think all members would agree that, if we are now seeing figures of $100,000 or more for water bills, it is just unacceptable and completely puts those farmers out of any level playing field competition base with their counterparts in other states.

I believe that competition is an issue we really need to question and challenge during the committee stage. We will be moving an amendment regarding competition; I see that as an opportunity, with respect to the Water Industry Bill, and I know that the government will have concerns about their bottom-line return from SA Water. From memory, the net return to the government is well over $250 million a year; it is one of the biggest returns—next to ForestrySA and possibly the Lotteries Commission—that the government receives.

The Hon. S.G. Wade: Cash cows.

The Hon. R.L. BROKENSHIRE: As the Hon. Mr Wade said, it is a huge amount of money. I know government needs to manage its budget but, now that this bill has been brought in, I think it is time that we have a look at how we can actually get more competition in and ensure that SA Water does not have a monopoly dictated to by Treasury, where there is just more and more by way of charges.

I talk to pensioners and people on low incomes, and they are telling me that they now get a water bill for $70, $80, or $90 and the actual amount of water that they utilise is less than or around $10; the rest of it is for fees, charges and management of infrastructure. They are noticing that now and talking about it in the community; therefore, I believe that we have a responsibility in this chamber to move amendments that may, down the track—I admit and acknowledge that it will not be overnight—through legislation allow legal opportunities for competition through those pipes in South Australia.

Family First certainly welcomes competition if it delivers cheaper water and fairer water billing for householders. We need to reduce our water consumption and, subject to some of the savings provisions about equity for pensioners, families, and regional communities, we believe a fairer pricing model is possible, either through the SA Water monopoly or through the involvement of monopolies and opening up that competition.

We have seen a sweetheart deal done this week with BHP Billiton. Yes, we did support this and want to see the success of that expansion, but when you consider that they are going to be using between 24 million and 42 million litres of water a day, and they are paying only $1,200 for that when we should be charging $88,000, we are able to accommodate the needs of BHP—one of the biggest mining companies in the world—yet we have this major negative impact on general householders' budgets.

In conclusion, this is a major bill for South Australia. I will be spending quite a bit of time in committee moving our own amendments, questioning the minister and listening to other colleagues who will have amendments as well, as has already been flagged by the Liberal Party so far. I would expect other amendments, possibly, from other parties and crossbench members.

I want to finish by saying that I appreciate minister Gago indicating that the government did want to get through second readings on this but was prepared to then look at amendments and the committee stage next year. I think that is a good move on behalf of the government. With the heavy workload that the Leader of the Government has in this house, she made the time to speak to some of us, I understand, to let us know that the government would accept that. I see that as good management of the house and I want to put on the public record my appreciation to the Leader of Government Business in this house.

It is important to get this right and look at all the options, particularly after this summer when water supply and retail issues become clearer. With those few remarks, I look forward to committee on this bill next year.

The Hon. M. PARNELL (11:16): The Greens will be supporting the second reading of this bill, but, as other colleagues have mentioned, we accept that this bill will need a lot of scrutiny in committee and, no doubt, many amendments will be moved. Certainly, the Liberals have some amendments on file. Family First have flagged some amendments and the Greens, too, are looking at amendments—in particular, amendments that seek to protect low-income people and vulnerable consumers from the ever-increasing cost of water. We expect that, when this bill comes back into committee in February next year, it will be a comprehensive debate.

The starting point for the Greens is pretty straightforward: water is absolutely essential for life. It is essential in the domestic realm, in commerce and in industry. As it is a natural monopoly, the Greens believe that water is most appropriately managed in public hands by public authorities who are responsive, first and foremost, to the public interest.

The idea of natural monopolies has been undermined over the years as governments have sought to artificially break down those monopolies and increase competition, and we see it in a whole range of utilities. Whilst there might be one set of wires going into your house, one set of pipes going into your house and one bus running past your house, the government seeks to try to artificially insert competition into that process with a view to having more efficient services.

Sometimes that is successful; more often than not it fails. Ultimately, the cost is always borne by consumers and, when private interests are involved, the consumers pay not only the cost of the services but the cost of the profit component to the private-sector operators as well.

So, the natural monopoly argument, I think, is still very valid in relation to water services, whether it is water in or wastewater out. I say that, even knowing that third pipes, delivering non-potable water, would be of great advantage to many people in South Australia. We see that in new housing developments and I think there is still scope to retrofit the existing urban area with third pipes—purple pipes that provide a quality of water suitable for flushing toilets, suitable for watering your garden, but not necessarily of a high enough standard to drink. That service can still be provided by public sector agencies managing the service in the public interest.

A big question in this bill and, in fact, the key driver behind this bill, is: how do we involve third parties, what role should there be for third parties and how should we regulate third-party access? The first thing I would say is that we are already seeing some of the opportunities for third-party involvement. As has been mentioned before, the City of Salisbury have become involved as a water supplier through their innovative and award-winning projects to capture stormwater and inject it into the aquifers where it is stored and then retrieved later on for use. We need to allow those publicly owned third parties to have fair access to infrastructure and a role in the overall water-distribution system.

The more controversial element is going to be the role for commercial third parties. I think it is fair to say that the Greens are very nervous around how that will be managed, given the history of commercial third-party access to natural monopolies and public infrastructure in the past. We are not ruling it out, but we do need to make sure that any commercial third-party involvement is managed and regulated in the public interest and managed ultimately by public authorities.

It is probably a decade or so ago that we saw the maintenance of our water infrastructure outsourced to United Water. Long before I came into parliament, I was part of the movement that questioned that approach, opposed that approach. I remember attending rallies. That particular contract, as we all know now, ended in tears. It ended in the courts as well. However, the principle, I think, remains, and that is that essential public infrastructure should remain under public control. That does not mean there cannot be contracting out, but we need to make sure that we keep control.

It is impossible, I think, to talk about the water industry without talking about the desalination plant. The Greens are on the record as saying that we believe that that plant was unnecessary, wasteful, too expensive and that the so-called DBOM model (the design, build, operate and maintain model), in effect, enshrined private profit at public expense. So, given that we are certain to have more new water infrastructure in the future, we need to make sure that all decisions in relation to planning for that infrastructure, the approval process, and paying for it, is controlled publicly and, as I say, undertaken in the public interest.

One of the more popular pages on my website is my water security page, and that includes some consultants' reports that we have had prepared. Our view is, and has always been, that we want water that does not cost the earth. There are obviously multiple meanings in that phrase. It means environmental sustainability but also making sure that this essential service is provided in an affordable way to all consumers.

A reform bill for water is clearly necessary, given that the legislation this bill repeals is some of the oldest legislation on our statute books. This bill repeals the Sewerage Act 1929, the Water Conservation Act 1936 and the Waterworks Act 1932. I cannot think of any other bill that we have debated in this place that has modernised and repealed such old legislation, particularly in relation to such an important community service.

I know for example that the Waterworks Act 1932, in its application, has led to perverse outcomes that have been bad for the environment. As an environmental lawyer some years ago, I remember dealing with an appeal against a housing development at Coffin Bay. Coffin Bay, as members would know, is reliant entirely for its water supply on limited freshwater lenses down on Lower Eyre Peninsula. What was remarkable in that appeal heard before the Environment, Resources and Development Court was that SA Water took absolutely no responsibility for resolving the issue of where the water would come from for the new houses.

Ultimately, SA Water's response was, 'It's not our problem; it's the minister's problem.' I think in many ways it was a throwback to the old E&WS. They saw themselves as people who built pipes, dug culverts and built pumps and things like that. Someone coming along with an opportunity to build new pipes and pumps was not to be sneezed at, regardless of the fact that the township was already over-using the limited water supply and that SA Water had to go cap-in-hand to the water minister for additional allowances out of its licence. So, that old Waterworks Act with its concept of water supply districts—once you are in the district you are entitled to as much water, effectively, as you want—I think is the wrong approach. It needs to be modified.

The flip side of the coin is that we have seen property developers who have wanted to build housing developments that do not rely on mains water, and they have had a dickens of a job getting their developments through local councils. Local councils have been very reluctant to approve housing estates that involve massive underground rainwater tanks sufficient to allow the properties to be self-sufficient and yet, because there was not mains water available, councils have been reluctant to approve those developments. We have seen that on Eyre Peninsula, for example.

In relation to sewerage and how we pay for that, certainly there is an argument that the property based sewerage charges are effectively a form of progressive taxation, and the Greens would normally be very much in favour of progressive taxation, but we also need to pay attention to people like Professor Mike Young who have advocated for a more user-pays system. Before members turn up their noses at that idea, you do not need to have a meter on your toilet or on your kitchen sink; there are ways of providing for user-pays charges. You can estimate the use that people make of our sewer network.

Another issue that I think needs to be addressed is about those people who seek to be self-sufficient, either in relation to water in or waste out. I mentioned property developers seeking to build housing developments that are water self-sufficient, but we still have the problem with individuals who can go to great personal expense installing rainwater tanks; if they are on big enough properties, they can install all manner of greywater and even black water disposal systems, yet if they are unfortunate enough to have mains water pipes or sewerage pipes going past their properties, there is no way they can avoid the charges even though they are not using any of those services.

The question would be: why would anyone try to be self-sufficient? Why would they bother investing their own personal resources if they get no recognition for that? Even though not everyone wants to be completely self-sufficient, you do have people who want to be partially self-sufficient. They want the security net of having mains water past their house and are prepared to pay something for that. But at present, I think we have the balance wrong. Too much of the water charge is in relation to the fixed component, not enough in relation to the variable component or the actual usage component.

What I want to do in this contribution is to put on the record some of the concerns that the South Australian Council of Social Service (SACOSS) have raised. They have put in a comprehensive submission to the water reform process, and I think we need to pay attention to what they are saying. The SACOSS submission is very likely to form the basis of a number of amendments that the Greens introduce in committee.

The first thing to say is that in the past the price of water has probably not been a major factor in the cost of living, but that is not the case any more. As water prices go up, we find that water bills are starting to emerge as a major driver of poverty. I think we need to pay attention to the parallels between the regulation of the water market and the regulation of the electricity market. We have now had some years to observe what is happening in relation to energy markets. Certainly, what SACOSS and other welfare groups have learnt from the reform process for electricity is that the idea of using competition (market based or similar regulatory techniques) to protect consumers is inadequate.

Therefore, there are probably four areas where I think reform is needed. They are in relation to better defining what is meant by essential consumption; secondly, better protection for vulnerable tenants in the housing rental market; thirdly, we need stronger hardship provisions to protect those who have difficulty in paying their water bills; fourthly, we need more capacity for end users' involvement in decision-making over water. I will just touch on those briefly.

In relation to essential consumption, as I have said and as all members know, water is an essential element of life and, therefore, a percentage of every household's use of water is essential. Extravagant lawns during the height of summer, swimming pools and other luxury items are not essential but there are some aspects like washing, cooking and drinking that certainly are essential.

This bill does not adequately recognise the difference between discretionary and essential water consumption. I think we need to enshrine that in legislation and I think it will be important for protecting consumers. The water minister in another place, the Hon. Paul Caica, has talked about essential consumption, he has used that phrase in parliament. Effectively, the bill leaves the task of determining what that is to the Essential Services Commission, yet I think this role is better performed by parliament rather than leaving it to ESCOSA.

SACOSS has also talked about the need for what it describes as an essential residential consumption amount and building that into the pricing structure to formally distinguish between essential and discretionary consumption. That is something that we need to look at in some detail when we get to the committee stage. We need to look at a fairer way of pricing water and we also need to look at the issue of concessions.

In relation to tenancies, the legislation needs to better define the relationship between customers and consumers, because these two words are effectively a proxy for landlord and tenant. In most rental agreements water consumption charges are passed onto the tenant. The customer of SA Water is the landlord, but the consumer (the tenant) pays the landlord and then relies on the landlord to pass that amount onto SA Water.

As this legislation is currently drafted, all of the consumer protection provisions are effectively with the customer (the landlord) and not the consumer (the tenant). What happens if you are behind in your rent but you are able to pay your water bill? A landlord could take the money that you have given them for the water bill and use it instead for rent, and then you find yourself behind in relation to your water bill and the consequences that will flow from that. So, we need to explore that in the committee stage.

There is an argument that as water costs rise, SA Water could be issuing two separate bills: it could divide the fixed costs from the consumption costs. The fixed costs, tied to the property and, as I have said, often built into the property rental price anyway, could go to the landlord and the water consumption costs could go directly to the renter.

The third issue that SACOSS has raised relates to hardship provisions. What is lacking in this bill is any kind of consumer impact statement. SACOSS argues in its submission that the hardship provisions in this bill are, effectively, underdone. The reason for that is because the low water price has meant that it has not been an issue, and yet, despite rising water prices, the government has not seen fit to incorporate it into this update of our water laws. There are reasonable hardship provisions in our existing energy laws and we could learn from those and the experience of their application and import some of those protections into the new water regime.

The final issue that SACOSS has raised is that it believes there should be more capacity for end user involvement in decision-making over water. SACOSS points out that there is little to no capacity for consumer participation in decision-making. It points out that there are opportunities—and, yes, readers of the public notices of a newspaper or the Government Gazette might find opportunities—but no real capacity to engage.

Again, if we look at the experience of energy reforms we find that the market mechanisms are actually improved if consumers are able to participate in the process. You do get better outcomes. You get better policy. You get better regulation and better outcomes overall. Nationally, there is some $2 million to $3 million being spent on consumer panels, and that, to put it into context, is in relation to a $30 billion energy market. In this bill, consumers are not strongly represented, and we need to redress that. The relevant organisations, groups such as SACOSS, need to be resourced to engage in advocacy on behalf of the people they represent, and particularly in South Australia that means low income people.

I will finish where I started; that is, to raise some concerns about the effect that this bill could have as a precursor to privatising parts of the water industry, in particular the retail arm of SA Water. There is no doubt that there is considerable pressure on government to go down that path. What we need to ask ourselves is, if the government is going to flirt with that idea, do we have in place the regulatory framework that is tight around consumer protection and around third party access? At the end of the day, as I said before, the consumer, the taxpayer, always pays.

So, we need more information, for example, about the desalination plant: how expensive it is and what would be a fair split of costs with that infrastructure between government and consumers. We know that in relation to the desal plant the take or pay clause is critical. The idea that consumers have to pay for water that they don't need—and it goes beyond simply maintenance retainers—means these contracts actually let the community down and are counterproductive to water conservation because we are required to pay, whether or not we need the water.

In conclusion, the reform process is timely. Some of the oldest statutes on the South Australian statute book are being repealed and modernised, but we must make sure that every aspect of this legislation does the right thing by the people of South Australia and the right thing by our environment and that we make sure consumers are fully protected, because ultimately they will be the ones picking up all of the tab.

The Hon. I.K. HUNTER (Minister for Communities and Social Inclusion, Minister for Social Housing, Minister for Disabilities, Minister for Youth, Minister for Volunteers) (11:36): I rise to conclude the debate. I reiterate that the Water Industry Bill is imperative if we are to bring the management of the water industry into the 21^st century. As the Hon. Mr Parnell commented in his contribution, we are repealing acts, some of which are as old as 80 years. The bill will promote efficiency, competition and innovation, and critically the bill will provide transparency in setting water prices and will protect the interests of consumers.

I thank the Hon. Mr Brokenshire, the Hon. Mr Parnell and the Leader of the Opposition for their contributions in this debate. I acknowledge their comments and the questions they have put on the record, and I will come back with the government's response to those questions at clause 1 when we come to consider the committee stage early next year. I commend the bill to the house.

Bill read a second time.