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House of Assembly - Fifty-Third Parliament, First Session (53-1)
2014-12-03 Daily Xml
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SA Water

Mr MARSHALL (Dunstan—Leader of the Opposition) (14:16): Will the Treasurer table for the parliament the methodology that Treasury has used to determine the regulated asset base for SA Water?

The Hon. A. KOUTSANTONIS (West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy, Minister for Small Business) (14:16): Rather than waste the parliament's time, why doesn't the Leader of the Opposition simply ask the Hon. Rob Lucas because he used to do it when he was Treasurer? I have to say these fake crocodile tears—

The SPEAKER: Minister, all crocodile tears are fake; that's the nature of them.

The Hon. A. KOUTSANTONIS: Yes, sir. I think that was my point, but thank you for being the independent umpire, invisible in the house, just interrupting every now and then when it is important to bring the house back into order.

These values were calculated by SA Water and they still are, and they form the basis for the regulatory asset base first used in 2004-05 at the beginning of the transition to regulation. Since we took government, we have steadily worked to improve the integrity and transparency of water pricing. ESCOSA is required under its act to transparently explain the methodology that they use in determining the values, such as the regulatory asset base and the cost of capital, and using them to determine an appropriate revenue cap for SA Water.

Mr Marshall: Will you table it?

The Hon. A. KOUTSANTONIS: Hang on a second. It is in stark contrast to the efforts of the former government. Given that the National Competition Council in 2001, when the Liberal Party was last in office, noted that the transparency of the pricing process in South Australia was a concern, it is this government that undertook the inception of a transparency statement, and that process began in 2004-05 and commenced the transition towards the regulatory practice we have in place now. Since then, the regulatory asset base for SA Water has been set in accordance with accepted regulatory principles. Furthermore, SA Water's practices in accounting for the asset base are properly audited.

Mr Marshall: Are you going to table it?

The Hon. A. KOUTSANTONIS: Hang on a second. When we transitioned regulatory powers to ESCOSA—transitioned regulatory powers to ESCOSA—in 2013-14, we looked carefully again at the value and the method for calculating the regulatory asset base.

Mr Marshall interjecting:

The Hon. A. KOUTSANTONIS: Hang on a second. With a view to ensuring that the revenue pricing impacts were minimised through this period of change, we determined that all assets as of 1 July 2013 would be captured in the initial regulatory asset base and that any new assets would be incorporated to the extent that ESCOSA determined that they are prudent and efficient. That is, ESCOSA will determine that they are prudent and efficient—not the government.

Consistent with the advice received from ESCOSA, the government adopted the line in the sand approach which involves setting the parameters that underpin price determination such that they generate prices, or returns, that are consistent with expected outcomes at the time. The initial regulatory asset base is now rolled forward on an annual basis reflecting new investments, as it should; depreciation, as it should; and new asset disposals, as it should.

Mr Marshall: Are you going to table it?

The Hon. A. KOUTSANTONIS: Yes, hang on a second. This approach provides a number of important benefits for the regulated businesses and consumers, including price stability. Price stability—very important, sir—business investment certainty and administrative simplicity. If we undervalue our regulatory asset base we risk undermining the ability to replace and improve our water infrastructure, and we risk not offering an attractive prospect to potential investors. If either of those risks are realised, we will inevitably have to account for the last minute full liability the government spent to prop up the asset base. Mr Speaker, the opposition can't have it both ways.

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