Essential Services Commission

The Hon. R.L. BROKENSHIRE (14:39): I seek leave to make a brief explanation before asking the Minister for Sustainability, Environment and Conservation a question about the Essential Services Commission of South Australia.

Leave granted.

The Hon. R.L. BROKENSHIRE: On Tuesday The Advertiser reported on the reasons behind the resignation of former ESCOSA head, Dr Paul Kerin, which took place just after Labor was returned to government earlier this year. The story included revelations outlined in Mr Kerin's resignation letter that the state government is gouging water and sewerage prices knowingly and intentionally, and without concern for struggling families, businesses or primary producers in this wonderful state. We could take the view that this was just one man's opinion—a very well respected economist, however, but still just one man—then the following day Dr Kerin's revelations were backed up by two other former ESCOSA commissioners, very respected economist, Prof. Richard Blandy—

An honourable member interjecting:

The Hon. R.L. BROKENSHIRE: —he is a respected economist, very respected—and energy market expert Ms Barbara Rajkowska. Mr Blandy and Ms Rajkowska accused this government of using its political power to take monopoly profits from households, thereby ripping off the people the government is supposed to represent. So instead of one expert, we now have three senior members of ESCOSA claiming that this government has deliberately blocked proposed reforms to set consumer water costs at a rate closer to the expense that SA Water incurs and, thereby, at a cost which would ease the burden of households which are now paying the dearest water prices in the nation.

Anyone who is in touch with the people of this state would know that farmers are also facing huge water bills for watering stock, in excess, in some cases, of $100,000/year, and struggling families are allowing their yards to fall into disrepair because they cannot afford to water the garden or keep their small patch of lawn alive and pay the various and increasing amount of subsequent taxes that this government is heaping upon them. After that factual overview, my questions to the minister are:

1. Does this government admit that it is hurting people, undermining farmers and keeping businesses away from this state by setting water and sewerage prices at unreasonable levels? I'd like an answer to that question.

2. Will this government and the honourable minister admit that price gouging is unacceptable behaviour?

3. Isn't it about time that this government decided to do what it expects the public to do—live within its means?

4. Will this government commit to reform the state's water industry?

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Aboriginal Affairs and Reconciliation) (14:42): I thank the honourable member for his most important question. The honourable member is very consistent in his approach to these matters. I commend him for that consistency, and I refrain from—

The Hon. G.E. Gago: Consistently wrong.

The Hon. I.K. HUNTER: I was going to refrain from using the Oscar Wilde defence for consistency. I will let the honourable member look that up for himself. The South Australian government has taken significant steps in the reform of our water industry—of course we have. South Australia's water industry, in comparison with other industries such as the energy industry, is in the very early stages of its development. With this in mind, the government has put in place a number of sensible and appropriate initiatives to encourage growth of the sector and allow a level playing field.

The introduction of the economic regulation of the water and energy sectors by the Essential Services Commission of South Australia is one example of the reforms introduced by this government. ESCOSA is now responsible for the economic regulation of South Australian water and now caps the amount of water that SA Water can collect, delivering greater transparency and accountability in respect to water pricing. As a result, as I have said a couple of times now this week, water prices have dropped by 6.4 per cent in 2013-14 and price increases for the two subsequent financial years have been limited to CPI.

This government is committed to the sensible reform of the water industry—and that answers the honourable member's fourth question—but as this government has made very clear we will not blindly embrace economic reform which would have devastating impacts on the majority of South Australian SA Water customers. We made that very clear after the release of the ESCOSA draft inquiry into pricing reform, and I make that very clear again for the honourable member's benefit.

This pricing inquiry drew upon a purely economic framework to explore potential pricing reforms. The water pricing reforms suggested by ESCOSA are estimated to provide economic benefits of about $30 to $40 million per annum to the state—not to be sniffed at. But then you could understand that this represents only about 0.04 per cent of gross state product and, weighed up against the impacts on the majority of South Australians, residential and business users, the government has ruled out adopting these reforms. As I said today, it was very surprising to hear the opposition leader, the member for Dunstan from the other place, on radio this week seemingly backing these reforms from this report, reforms which would have seen massive increases in the share of the water costs born by the state's most disadvantaged.

Some of the recommendations of the report include setting the price of water use at 62¢ per kilolitre but setting a water supply charge of $843 per annum and a sewerage charge of $507 per annum. This would have seen an overall benefit for only the largest water consumers, with the burden falling on those vulnerable South Australians. Indeed, ESCOSA has acknowledged that 75 per cent of residential customers would be worse off under these proposals. Furthermore, if the recommendations of the report were implemented, over 50 per cent of residential customers would experience a total bill increase of over $300.

Is that what you want to take as your policy to the by-elections that are coming up? By backing these reforms, you are going to increase the price of water and the price of sewerage to the majority of households in Adelaide and this state. That's what you want. Any changes to the way water and sewerage prices are set remain a government policy decision, and long may it be so.

Governments must take into account a number of different elements before any pricing reform is implemented, including the broader socioeconomic factors. Economic regulation is not the only reform that this government has made to South Australia's water industry, and we are committed to continuing to reform this industry. We amended the Water Industry Act to create a level playing field for water retailers in this state. We have also progressed a scheme to allow for third party access to water infrastructure, with a draft bill tabled on third party access to infrastructure, the Water Industry (Third Party Access) Amendment Bill 2013.

There is now a requirement for external reporting and monitoring of SA Water's performance and compliance, as well as a requirement for audited regulatory accounts for SA Water. We have increased transparency on non-commercial activities through a direction from the minister to SA Water. As well as these reforms, the water industry now has an independent technical regulation through the transfer of responsibility for technical regulation away from SA Water to the Office of the Technical Regulator.

The government is committed to providing assistance to SA Water customers, especially those who face difficulties in paying their water bills. We expanded the Energy and Water Ombudsman of South Australia to independently assess SA Water customer complaints. As well as this, we have formalised SA Water's customer service standards through the SA Water customer charter and the standard customer contract and have introduced a new hardship policy. Through the regulatory approach we now have a long-term price path (three to four years), ensuring customers can plan for any changes in price, which is vitally important to our business customers.

These reforms have led to the introduction of a formal customer consultation requirement for SA Water's future revenue determinations, resulting in SA Water's biggest ever customer engagement process. The government is pleased that the ESCOSA board, under the leadership of its chair, Dr Pat Walsh, will work with the government on further reform of the sector. I am very pleased to say that we work very cooperatively together. I am also pleased to note that ESCOSA is committed to independent economic regulation of this essential service throughout our state.

The PRESIDENT: The Hon. Mr Lucas.

Members interjecting:

The PRESIDENT: Order! The Hon. Mr Lucas has the floor.