By Max Maddison
Households will be spared steep bill increases after the pricing regulator halved those sought by Sydney Water, which had called for a 50 per cent hike to pay for much-needed infrastructure upgrades.
However, furious developers say the move to limit hip-pocket pain over the next five years will only undermine housing supply.
Sydney Water had proposed a bill hike of 50 per cent over five years.Credit: Getty Images
“You can’t have more homes without more water infrastructure,” Urban Development Institute of Australia chief executive Stuart Ayres said.
The Independent Pricing and Regulatory Tribunal’s (IPART) draft report includes an average 4.6 per cent increase, about $61, for each of the next five years before inflation.
As a state-owned monopoly utility provider, Sydney Water’s pricing is set on five-year terms by the regulator. A final report is due in September and stakeholders are expecting little change to IPART’s draft determination.
The 23 per cent hike is less than half of what Sydney Water proposed in a controversial submission to IPART in late November 2024. Household water bills would have soared by 50 per cent in the five years to 2030, including an 18 per cent rise in the first year alone.
Under IPART’s revised proposal, average bills would increase from $1220 in 2024-25 to $1527 in the last year of the determination, excluding inflation. Comparatively, Sydney Water’s submission would have resulted in an increase in the typical household bill to $1870 by 2029-30.
The hike was justified by the agency’s then-chief executive Roch Cheroux as being essential to “manage Sydney’s water future”, predominantly to ensure infrastructure was upgraded and expanded in line with the state’s target of 377,000 new homes under the National Housing Accord.
Their submission included a capital expenditure outlay of $16.6 billion on infrastructure, predominantly in Sydney’s west. The proposal was supported by the development industry, who said the price hikes would support the construction of new piping for 400,000 dwellings.
IPART’s draft determination cuts Sydney Water’s proposed infrastructure spend by 35 per cent or $5.9 billion.
IPART said the $10.7 billion provision in the draft report was “materially higher” than Sydney Water’s capital expenditure allowance of $6.2 billion for the previous determination period.
“We found that Sydney Water will need to spend more than it has previously on building new, and replacing existing, infrastructure. But we are not persuaded that Sydney Water’s proposed level of future expenditure was justified or achievable,” the report said.
In the midst of a cost-of-living crisis, Sydney Water’s proposal had been branded as “too high” by 200 individual submissions to IPART, with one lashing it as “too aggressive” and another as a “ludicrous proposal”.
Premier Chris Minns underscored the financial pressures facing NSW households in a letter to IPART chair Carmel Donnelly in August last year, urging the regulator to make “cost-of-living impacts of the price determinations” a first-order consideration.
Premier Chris Minns is having to balance cost of living pressures and the state’s housing needs.Credit: Dion Georgopoulos
The premier asked the regulator to consider opportunities to “reduce the proposed capital program with least cost planning principles”.
His views reflected those of the Energy & Water Ombudsman, which recommended finding a means of lessening the spike in household bills and said the proposal would “add further pressure on households experiencing financial vulnerability”.
But the easing of financial pain will come at the cost of upgrading infrastructure for infill housing and building new pipes for greenfield areas.
“These reductions contribute to minimising upward pressure on tariffs but they come with risks which include the timely delivery of infrastructure needed for housing, water supply reliability and environmental performance,” Sydney Water acting chief executive Paul Plowman said in an email on Wednesday afternoon.
Ayres called for IPART to be brought into the state’s agenda on housing, saying their proposal “essentially cuts funding from that objective at exactly the wrong time”.
“Infill housing needs upgrades to existing infrastructure, and greenfield housing needs new infrastructure,” the Urban Development Institute chief said.
“If the government doesn’t allow Sydney Water to spread that cost across its consumer base then taxpayers will have to foot more of the bill if NSW is to build anywhere near the homes we need.”
Property Council NSW executive director Katie Stevenson said the housing crisis would not be fixed by “placing a financial handbrake” on the organisation responsible for delivering water to those new homes.
“A cut of this magnitude risks choking off the water infrastructure our city needs to keep pace with growth,” she said, noting the $2.1 billion Upper Nepean Advanced Water Recycling Centre as one project needed to meet the city’s future housing targets.
Water Minister Rose Jackson said the state can’t tackle the affordability crisis without dealing with anaemic housing supply. Credit: Rhett Wyman
“If the government is serious about solving our housing shortage, it must provide Sydney Water with the funding certainty to get the ball rolling. We’ll make that case firmly in the upcoming IPART consultation.”
Labor MP Nathan Hagarty, whose electorate of Leppington takes in greenfield suburbs on Sydney’s south-western fringe, called on IPART to find the right balance between “funding critical water infrastructure without making the cost-of-living crisis worse for families”.
Water Minister Rose Jackson noted the premier’s letter required IPART to not only consider cost-of-living pressures but also the deliverability of proposed capital expenditure “based on capability and market conditions”.
“The fact is, we cannot expect to end the cost-of-living crisis facing our state without tackling the housing affordability and availability crisis we also face. It’s no secret my priority and the priority of the Minns Labor Government as a whole is building more, well-located homes, sooner.”
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