Business SA analysis shows SA paying extra $129 million a year on water

South Australians are being slugged up to $129 million a year too much for water — around $166 each — because of an inflated asset base that has been applied to SA Water, Business SA analysis shows.

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South Australians are being slugged up to $129 million a year too much for water — around $166 each — because of an inflated asset base that has been applied to SA Water, Business SA analysis shows.

Lew Owens, the former SA Water chairman appointed to conduct an independent inquiry into the utility’s pricing structure, found the value of its regulated asset base had been overstated by somewhere between $421 million and just over $1 billion when it was set under the previous Labor government for multiple terms. He says consideration should be given to changing the process.

The latest four-year term, which will expire in 2020, was set in 2016.

The next term is currently under review.

Under Business SA’s analysis, SA Water customers would have been slugged up to $166 more on their bills annually on average.

Mr Owens said previous decisions that had inflated the asset base were “unreasonable”. A higher regulated asset base — which takes into account a range of network investments within the utility — increases the amount of revenue SA Water must pay the Government and the amount it charges consumers for water and sewerage services.

“The Treasurer should seriously consider changing the previous treatment of the matter,” Mr Owens’ report says.

Former SA Water chairman Lew Owens.

Business SA executive director Anthony Penney.

Treasurer Rob Lucas told ABC Radio the interim report showed the former government had been “caught with their hand in the cookie jar”.

He said it was clear the regulated asset base had been inflated, but that Mr Owens’ final report needed to be received before the Government could determine how much it should be reduced by.

Mr Owens’ report said the Government appeared to have “unfairly benefited” from the higher regulated asset base for many years.

“A reduction (in the regulated asset base) would remove this ongoing benefit,” the report said. “Secondly, this was a case of conflicted interests, where the Government was making decisions which benefited itself, and without any independent review.”

Business SA executive director Anthony Penney said the organisation’s own modelling showed the regulated asset base — set every three years — had been inflated by as much as $1.5 billion for just water, and $2 billion if sewerage services were included.

He said those figures meant South Australians had been “slugged” between $100 million and $129 million too much each year for the past three years. Using the top end of that price modelling, the 773,980 water account holders across the state would have paid an additional $166 annually on their water bills on average.

“South Australia needs to be one of the lowest cost environments to do business if our small-medium enterprises are to have any chance of competing on a national scale,” Mr Penney said.

He urged the State Government to take action to lower water costs when it received Mr Owens’ final report.

But SA Council of Social Services policy officer Jo De Silva said reducing the asset base could “lead to a $1.5 billion hole” in the State Budget.

“While a reduction in water prices may sound good for consumers, it threatens to blow a hole in the State Budget which will mean either higher taxes or cuts to vital services,” she said.

Opposition treasury spokesman Stephen Mullighan said any decrease to the regulated asset base would make it harder for SA Water to continue its “postage stamp” pricing, which ensures regional areas pay similar rates for water as metropolitan customers.

Mr Lucas guaranteed that regional customers would not be charged higher rates for their water, no matter what action the Government took.