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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2009-06-02 Daily Xml
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WATERWORKS (RATES) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 14 May 2009. Page 2396.)

The Hon. S.G. WADE (15:40): I rise to indicate that the opposition will be seeking to amend this legislation. The bill basically proposes to change the rating procedures under the Waterworks Act. Under South Australia's current legislation, water meters are read each six months with water use billed within six weeks of each reading. Water is priced on a financial year basis, and this means that, where a person's meter reading straddles two financial years, they are charged the price of the latter year for the entire period.

The government's failure to appreciate this fact led to public controversy on SA Water billing in July 2008. Treasurer Kevin Foley announced that the government would move to quarterly meter reading and billing to (in his words) 'smooth out' water billing throughout the year. To this end, on 29 April the Minister for Water Security in another place introduced the bill that we now have before us today.

As part of the introduction of quarterly billing, the bill changes the application of water pricing so that new prices commence at the beginning of a financial year, and these prices must be gazetted prior to 1 June each year. This aspect in particular, we believe, is an example of the government taking a disingenuous opportunity to avoid a political risk.

Under the current legislation, the government would need to announce its pricing for the 2010-11 financial year by 7 December 2009. However, under this bill, the government would not need to announce those prices until 1 June 2010. For those who have not heard, there is a state election scheduled in South Australia on 20 March 2010. Lo and behold, this bill, as it stands, would have the government avoiding public scrutiny of its water pricing decisions.

There might be some people who are charitable (I appreciate that there are some people on the crossbench who, from time to time, have been far too charitable) and who might say, 'Well, the government's being clear.' Water security minister Maywald has warned of significantly higher water prices. We have been told, in broad terms, that water prices will double over a five year cycle.

However, water prices are much more than the headline rate. There are the kilolitre provisions on thresholds, the rates that are charged on different sorts of dwellings such as country versus metro, and the price structure itself, where the government has, for example, introduced another step into our inclining block tariff regime. The government might well be planning further changes.

The opposition is of the view that it is very important that South Australian electors have the opportunity to see what the government is proposing going forward—not just the headline prices, but the price structures and the price thresholds. We need to see the decision as a whole. That is, if you like, the political aspect.

I would also argue that there are good water conservation reasons for the government to be more frank and to maintain the December announcement period as has been the long established tradition of this state. Water consumers will often make price-related decisions, and it is important that we give them the opportunity to respond to that. For example, if you tell a water consumer that the price will rise in December, they might well choose to take steps—for example, to make an investment in water saving technology—that would mean that they can reduce the impact of that price rise.

If they have six months' notice of a price rise, they can take those steps. If they have one month, they have little opportunity to respond before the price rise is imposed. I know the government will say, 'Well, it would be better for us to have the price setting decision made closer to the implementation of that price.' In fact, that was an argument put to us by government advisers during the briefing. Again, I remind those trade-all members of the crossbench that this is highly unlikely in a practical sense.

Over the years, both Liberal and Labor governments have taken significant amounts of revenue out of SA Water. Those dividends, those tax equivalent payments, those equivalent local government rates together are a very important input into the budget making process. That process starts relatively early in the financial year. My understanding is that it starts in November or December in any financial year. To ask the Treasurer and the government to have decided by December what their water price will be is no impost because they would have already decided how much they were intending to draw down from SA Water revenue.

I would argue that to leave the decision until very late in the financial year actually opens up SA Water's customers to the risk of being used as the hollow log that the Treasurer can dip into at the last minute to deal with some short-term political imperative. At least having the decision made early in the budgetary process means that it is more likely to be rational and more likely not to be used as a short-term revenue fund.

Continuing with other provisions of the bill, it also contains transitional arrangements for the move to quarterly billing, which will require the regazettal of prices which are beginning on 1 July 2009. The consumption period will become the period between meter readings, rather than the financial year. As a result, some customers' consumption periods will straddle financial years. If this occurs, where the rates are different for the two financial years, SA Water will charge the average water consumption for that period over a daily basis and charge each day according to the price of the financial year in which it falls. The bill does not propose any changes to property related billing.

In conclusion, I reiterate that the government argues that quarterly billing will deliver significant benefits, including enabling customers to better manage their finances by spreading water charges across the year, and it will assist households to better manage their water use by clarifying correlation between water usage and billing. The opposition has expressed similar concerns in relation to the billing system over the years and we support that general principle, but, at the committee stage, we will be moving amendments that have already been filed in my name.

First, we will attempt to maintain transparency in water pricing by maintaining the December announcement time frame. We will also be taking the opportunity to enhance transparency by making other amendments in relation to the pricing process, and also to continue the theme of the bill in terms of information for consumers by promoting the use of individual meters. I will address those issues in more detail at the committee stage.

The Hon. M. PARNELL (15:49): The Greens support the second reading of this bill, which facilitates the move to quarterly water meter reading and billing for SA Water customers. I put on the record my thanks to the minister for her personal briefing in relation to this bill. Quarterly meter reading makes sense because it provides more information to householders about how much water they are using, and it gives them this information in a more timely manner so that it has a greater chance of influencing behaviour, particularly in relation to water conservation.

This bill is consistent with a motion that we recently passed in the Legislative Council in relation to certain matters that were referred to the Select Committee on SA Water. Members might recall that one of the items we referred to that committee was to 'replace the water restriction regime with a household allocation based on occupancy and quarterly meter readings to allow citizens to choose where and how they use their water'. While my original motion called on the government to simply implement such a policy, we decided here in the Legislative Council to refer that to the select committee—and that work is underway.

Certainly, the government bill does not do everything that the Greens believe should be done in relation to water pricing, but we can be thankful at least for this small mercy in that we will move to quarterly billing. What else does the government need to do? The answer is that it needs to do a lot, especially if the government is serious about waterproofing Adelaide and serious about doing it in an ecologically sustainable manner.

There are two aspects of water pricing on which I want to focus in my contribution today. The first aspect is the use of inclining block tariffs and the proportion of the water bill that comes to us in the form of fixed costs. At present, for residential properties the fixed component or supply charge is $39.35 per quarter or $157.40 per year. That is an amount you cannot avoid, regardless of how efficient you are in your use of water and regardless of any water-saving measures you might have introduced into your home.

Many people manage to be self-sufficient, even in the metropolitan area, through the use of rainwater tanks for much of the year, and they rely only on mains water during dry periods, particularly in summer. There is no recognition for the effort those people make in relation to the supply charge because the amount is fixed.

Members might be familiar with a regular series of publications put out by Professor Mike Young, which go by the name of 'Droplets'. Mike Young's Droplet No. 10 is entitled 'Pricing your water: is there a smart way to do it?' I will refer to a couple of the points that Professor Young makes in this document. One of the things he points out is that governments tend to use water pricing regimes to achieve a number of objectives; that is, equity, environmental, revenue and economic efficiency objectives. They seek to do it simultaneously. Droplet No. 10 states:

This approach violates a golden rule in policy development, to avoid conflicts—use a separate instrument to achieve every objective and, once an instrument is assigned to one objective, don't try to use it to achieve another objective.

When it comes to the price for urban water, the professor points out that different principles apply in times when water is plentiful compared to times when water is scarce. It continues:

When it unexpectedly gets or stays dry, water supplies have to be rationed. There are two ways to ration water use. One is to introduce water restrictions which impose indirect costs on many people. The other way is to increase the price.

Economic research keeps on pointing to the fact that water users respond to price increases. Pragmatic as ever, Quentin Grafton recommends that the best way to set a scarcity price is to estimate the amount of water in storage every quarter and charge accordingly. As dam storage goes down the price goes up. To drive home the scarcity message, meters need to be read and bills sent, at least, quarterly. In the USA many utilities read every meter every month.

This bill does not propose that our water prices change according to the volume of water in storages, but at least we are moving to quarterly meter reading.

In relation to keeping the price of water fairly low, it is generally accepted on the grounds of equity. In relation to equity, it continues:

Many people think that water, especially non-discretionary water use (water used inside houses), should be supplied at an 'affordable' price. This is why there is so much interest in inclining block tariff regimes. 'Affordable' is code for not having to pay for the full cost of the water delivered. The idea is that the first amount of water you use should be cheap. Those who use lots of 'discretionary' water (gardens, pools, etc.) should have to pay more for it. The result is a cross-subsidy from large water using households to small water using ones. At first glance, this may seem reasonable.

But when you dig a bit deeper, it becomes clear that inclining block tariff regimes transfer money from disadvantaged households to richer ones which, as a result of the block regime, gain access to cheap water. Concerned that inclining block systems are inequitable, John Quiggin has shown that, if you want to help disadvantaged households, it is better to set a uniform charge and then pay rebates to everyone or only to those in need. In short, use separate policy instruments to chase every objective you are interested in. Remember, however, that typical per capita household use is around 46 kilolitres per year. At current prices, the cost of this water is less than the cost of running an old fridge in your garage.

Inclining block tariffs are inequitable also because most of them are implemented on top of a fixed service charge.

He goes on to say:

The real reason water supply utilities set fixed charges is that this guarantees them a revenue base. These utilities are monopolies but it is hard to argue that they should not be subject to the same pricing disciplines as other businesses. In summary, inclining block tariff systems represent a clumsy attempt to achieve efficiency and equity objectives simultaneously. We believe they should not be used.

The professor concludes his short paper with the following recommendations. He believes that the water pricing regime should be changed to:

1. Send an efficient price signal to everyone by charging them the same for every kilolitre of water they use.

2. Send a scarcity signal to all water users. Read meters and send out a bill quarterly. Expect unmetered apartments to start applying for meters.

3. Inclining block tariff systems should be phased out—they are...inequitable.

4. Fixed water service charges should be phased out—for a monopoly, revenue protection is unnecessary.

They are the first four of eight principles that the professor sets out.

The second pricing issue I want to raise in my contribution relates to the price of sewerage. Towards the end of last year, in his Droplet No. 14 entitled 'Yucky business: paying for what we put down the drain', Professor Young argued for a similar volumetric regime for water out as we have for water in. The professor basically makes the point that in most of our cities and towns we have water meters so we know how much water is going into homes. We know that at different times of the year a certain proportion of that water leaves our home via the sewerage system. Therefore, it is possible to extrapolate and incorporate a volumetric charge. In winter, for example, it would be expected that about 90 per cent of the water in leaves the premises as sewerage out. The professor says:

...we see a case for pricing reform on both sides of the water supply equation. All cities and towns need to get the price right for what goes in and what goes out.

Finally, I raise the issue that the shadow minister raised, and that is the question of the timing of the announcement of water price increases. My understanding of the transitional arrangements is that, if this bill passes, the government will be re-gazetting the last lot of water price increases before the end of this financial year and then gazette the next lot of increases by 30 June 2010. Normally we would have had an announcement in the first week of December as to what water pricing would be for the following consumption year. If this bill goes through in its present form, the next announcement of a water price rise will be before 30 June, which, conveniently, will be three months after the next state election. I do not believe that we should wait until next June to find out what the water price increase will be. The government is well advanced in its planning and its costings for the Port Stanvac desalination plant. It will certainly know by December this year how much water rates will need to rise to pay for this massive expenditure.

My question of the minister is: will the government commit to announcing in December this year what the water rates will be for the 2010-11 water consumption period? If the government will make that commitment, there may be an argument to say that no further amendment to the act is necessary, and maybe we could just look at it as a transitional arrangement, although we need to take on board what the shadow minister said about businesses needing as much notice as possible to plan their expenditure and that maybe a permanent December announcement is the way to go. I look forward to the committee stage on that point.

At a bare minimum I would see that a transitional provision, to get the best of both worlds—the best of the old and new systems—would be to tell us in December this year what will be the water price so the people of South Australia can go to the election knowing at least in part what the legacy of the desalination plant will be in terms of our hip pockets. The Greens will support the second reading of this bill, and we look forward to the committee stage.

The Hon. R.L. BROKENSHIRE (16:02): I support the second reading of this bill. Family First thinks that the bill is well intentioned and we will support it through the second reading. However, I give notice that we will table some amendments to be moved in committee. Water use is a matter of high importance and concern to families as we go through the present drought. The family water bill is one way in which families monitor their usage in terms of their concern about both the environment and their own family budget.

As information systems improve, Family First believes the more information families can receive on water usage the better to track their improved efficiency. Quarterly billing, therefore, is welcome, with one qualification that I will go into in a moment. Not only does it enable better tracking of water use, for instance, working out whether you have a leaking tap, but also it spreads the cost of water use. This water use will be much higher with desalination because this government has been reluctant to look at more cost effective ways of providing necessary and urgent water supply to our state, namely, stormwater harvesting, which the evidence we have indicates is a far cheaper alternative and certainly better when it comes to greenhouse emissions than the high energy impacts and higher costs associated with desalination.

The increasing cost of water use can be spread for family budgets over four quarters. Cynics may say that quarterly use is intended to soften the anger over the rising cost of water under desalination as it may slip more easily under the nose of people concerned with the family budget. We are not saying that desalination is necessarily a bad thing; the way that South Australia is existing now, we realise there needs to be a fallback position for the state with desalination.

We know that there will be a considerably increased cost for water through the expensive process of desalination. We want to see transparency with respect to those increased costs and therefore concur in this regard with our colleagues on the cross benches and with opposition members. We are seeking transparency when it comes to water pricing prior to the next election, so that people can see exactly what is occurring with desalination and the government's costs involved therein, particularly when we consider that with the economic stimulus package there has been a significant bonus to the South Australian state government from the commonwealth government through the provision of millions of dollars to allow that desalination plant potentially to double in size.

The qualification to Family First's support on quarterly billing is that we want to be sure that people effectively will not be billed for five quarters rather than four initially. I ask the minister to put on record in committee whether the change in billing periods will not mean that families will be hit with a substantial unbilled portion. This extra impost may come in through the re-gazetting measure for pricing, and I ask the minister to provide case studies showing what will happen to families in terms of costs when the new billing mechanism is put in place.

I turn to the important issue of shared water meters, on which Family First will move amendments. I have no clear indication from Housing SA on its timetable for introducing individual billing for all its sites, and now that this legislation is before us it is timely for the Legislative Council to get something concrete for the future of Housing SA tenants when it comes to the operation of water meters. We have an unfair situation at the moment where usage at a given site is simply divided between all users. You may have an elderly, water conscious person using hardly any water, but they are subsidising the water usage of less efficient water users or bigger families. Whilst we feel for the cost of running larger families, we still need to look at equity.

Growing numbers of people are complaining to Family First and other MPs about this situation. Surely in this high technology era we can ensure that a Housing SA family is billed for actual use, just as they would be in private accommodation. I ask the government, in the interests of accountability, to support Family First's amendment mandating a time frame for transition of shared water meters to individual meters for almost 18,000 families and individuals who are Housing SA residents throughout South Australia. With respect to this initiative, I want to touch on Parliament House and place on the public record my congratulations to the Clerk and the President, as well as other executives involved in the administration of this place. It is pleasing to see that someone here has been watching the water bills because we have actually seen the water usage at Parliament House going down. Those people are to be commended.

That it is the opposite of what has happened when the decision-making occurs through the Department of the Premier and Cabinet—namely the State Administration Centre, where usage is going up. It was interesting to see the government's response to that when I was involved in a story on Stateline about more people working at the State Administration Centre—and I would like to know what those people are doing there at a time when we will, unfortunately, see 1,600 public servants made redundant. However, the government also said that the other reason for the increase in water consumption at the centre was that more people were riding bikes to work and they had to shower. Well, they must have long showers or a lot of them must be riding bikes, because here at Parliament House we have a bike room that is full of bikes these days (and I commend those who live close enough to ride them); those people also have showers, yet we have not seen an increase in water consumption here but rather a net reduction. So it is interesting what is happening at the State Administration Centre.

I cannot let this bill pass without saying that I find it disturbing that families are being asked to pay more for water when day after day we hear, on the traffic reports, about burst water mains. I understand that SA Water thinks it is within the national parameters for mains bursts and repairs compared with other capital cities, but I think it is paramount that this state be the national leader in terms of being proactive with respect to maintenance and upgrades of water mains, particularly with the old infrastructure that we now have—and I believe some of it is close to 100 years old. Clearly not enough effort is going into proper replacement and I ask the minister to advise, during question time or at the summing up of the second reading debate, how much of the cost of repairing old infrastructure and burst mains is ultimately passed on to the consumer through their water bills. That is, what component of water bills relates to maintenance works by SA Water?

I would like to touch on state residential water usage and would appreciate it if the minister would provide an update on the residential water usage of South Australian families. I recall hearing that there was some concern that usage had gone up after mammoth savings. Family First congratulates all the water-conscious families in South Australia; however, having said that, during this debate we would like put on the public record the current situation with respect to residential water usage. I would also like to say that, at a time when we are talking about water, there is still only a flippant commitment given to address the major water users—namely, industrial water users—in this state when irrigators and general residential water users in South Australia have been subject to incredible restrictions.

South Australia is a water cash cow, and I think it is appropriate to say that the South Australian people are overwhelmingly of the view that the days are numbered for South Australian water being used as a cash cow for government general revenue. People pay their water bills and expect to see fewer mains bursts, quality drinking water in their communities, sufficient water for them to be able to go about their business and also, for those who are keen gardeners, to enjoy the opportunity to garden. Many have not been getting much of an opportunity to do that in recent years, and that has also had an impact on the value of their residences.

People pay their water bills, and they expect to see individual meters to all properties in the state and a fair go and some equity for the South Australian community in this whole issue of water management. People would like to see—and Family First is very keen to see—SA Water taking a different approach, through policy implementation by the government, where it actually looks at genuine water conservation and genuine alternative water initiatives. The government talks a lot about partnerships, and I would like to think that the government would enhance partnerships with experts and people such as Colin Pitman rather than just the engineering solutions we continually see put up by SA Water. We have gone past that these days; we have to look at innovative and partnership approaches to better water supply, sustainability and delivery.

Finally, I would like to mention Point Sturt and Hindmarsh Island. We talk about the fact that some homes do not have water meters and how we want that addressed, but I am very concerned for and frustrated on behalf of the residents of Point Sturt and Hindmarsh Island. One of those constituents has seven children and, twice a week, has to cart water from way out at Point Sturt just to be able to provide potable water for their children. They have also had to destock their property.

There is $13.5 billion in overall water initiatives that the Howard government initially funded and which has been continued by the Rudd government, and there is $120 million being spent around the Lower Lakes. We have seen all this engineering—which is absolutely necessary—going on on the Narrung peninsula and in the Raukkan community, and we see these huge pipelines going into Langhorne Creek and Currency Creek. However, where is the equity and fairness when the government has not shown the endeavour or thrust to look after the people of Point Sturt and Hindmarsh Island? They are important too. At the moment those people are not even guaranteed any potable water pipeline availability, even though they will be the only two communities in the whole Lower Lakes system that will not have potable water or any economic contribution from the commonwealth and the state government. It is outrageous and unfair.

I place on the public record that I heard some comments from the Hon. Dean Brown, who is doing some work for the government. I do not agree at all with his comment that this government has done a good job with water—in fact, far from it; very far from it. It has been ad hoc and mismanaged, and a classic example of that is that Point Sturt and Hindmarsh Island residents have waited five frustrating months but still have not received an answer.

I put the challenge to Dean Brown (a person who has great ability and for whom, overall, I have a lot of respect) to put pressure on this government to deliver that water for the people at Point Sturt and Hindmarsh Island. Again, from Family First's point of view, we do not see this government doing anywhere near enough comprehensively to provide an adequate water supply for irrigators and residents of South Australia, and for sustainability. The government has been far too late off the mark and has missed out on a lot of opportunities that have been given to other states. Victoria is still way ahead.

I will not be giving credit to this government for water management until I see some real results. People are hurting right around this state; they have not had the results delivered for water that they should have had. I am happy to debate this matter with anybody involved in managing water processes at this time, be it government ministers, members or, indeed, people employed by or on behalf of government to address these matters. I am pretty passionate about this matter. We cannot be flippant and dismiss the pressures that this state is under because of a lack of vision over a period of time when it was known that we needed more water.

Service delivery should be a priority from SA Water revenue, which should not be directed as funding for some other waste which governments are prone to do—and this government is no exception. As I said at the beginning, overall, the intent of this billing procedure does have quite a lot of merit, and we will be supporting this bill as a general principle, subject to our amendment and subject to some questions that we have put on notice for the minister.

I conclude by mentioning the debacle that occurred last year regarding water overcharging invoices. Let us not forget that overcharging scandal. We are now going into an even more comprehensive billing process, and I want the minister to assure this chamber (or at least assure me, if the minister wants my vote) that we are not going to see a debacle like the one involving water overcharging which caused so much concern to many communities last year. The government had better get this right, because South Australians deserve a billing system that is fair and reasonable.

Debate adjourned on motion of Hon. J.M. Gazzola.

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