More than a quarter of Victoria’s water projects delayed

More than 50 major projects to construct water infrastructure for Victorians were delayed last year, prompting the essential services regulator to warn that providers were failing to properly forecast costs.

The Age on Wednesday revealed Treasurer Tim Pallas expanded his cash-grab on Victorian water providers with a new efficiency dividend as part of the COVID debt repayment plan, prompting concerns he risked pushing up bills or infrastructure investment being scrimped.

Water projects were delayed for reasons including the need for more planning and design work and delays in planning and tendering.Credit: Jason South

A new report into the performance of the state’s water businesses reveals that 51 major projects – or 28 per cent of the pipeline – blew their planned timelines in 2023-24.

That was “a high number considering for most businesses this is only the first year of their regulatory period”, the Essential Services Commission said in the report released last week.

It said this suggested “many businesses did not adequately forecast their capital expenditure having regard to current market circumstances”.

“We expect businesses to proactively manage these changes to ensure customers continue to receive value for money and timely service delivery.”

Water authorities provide commitments to their customers in their price reviews, generally every five years, with the regulator. Most were in the first year of their plans, meaning they have only recently committed to timelines, however some were nearing the end.

Of South East Water’s 10 projects, seven were delayed or deferred and forced the authority to mitigate consequences for customers.

Melbourne Water delayed or deferred 70 per cent of its projects, mostly by a year or two. The government-owned corporation, which delayed or deferred 11 of its 19 projects and cancelled two, was nearing the end of its regulatory period.

A Melbourne Water spokeswoman said its capital expenditure had increased over the last three years to $870 million in 2023-24 to meet demand and renew infrastructure.

“Despite some delays in the first three years of our regulatory period, we expect to be on track and exceed the program we committed to by next year.”

North East Water, which was nearing the end of its eight-year period, deferred or delayed five of its 10 major projects.

North East Water managing director Jo Murdoch said the authority was investing more than $90 million in new and upgraded infrastructure this year alone, with more than $300 million by the end of its pricing period in 2026.

The projects were mostly set back because of scope changes, the need for more planning and design work, delayed planning and tender processes or they were reprioritised.

Of the 182 projects listed, 129 were on time or had been completed. Only Central Highlands and Gippsland Water were all on schedule.

Still, the blowouts are an improvement on last year – almost 40 per cent of projects were delayed or deferred at the end of 2022-23.

On Wednesday, The Age revealed that an analysis of dozens of annual reports showed Pallas was pulling at least $651 million from water companies in dividends, capital repatriation and the COVID debt repayment plan.

Pallas on Wednesday said he was confident water authorities were progressing with necessary projects and that he would not have pulled cash from them if it would harm those investments.

He said water authorities had to apply the same discipline as other areas of government and contribute to paying down COVID debt, but that it would have “zero impact” on bills.

“We require them to spend their money efficiently,” Pallas said. “We expect the taxpayer to get value for money.”

The regulator and water providers also deny the payments could lift bills or reduce their ability to invest in infrastructure.

Opposition Leader John Pesutto said the government was shifting debt around to prop up the state’s books and could force water companies to “cut back savagely” on capital works.

“That’s not sustainable, it’s not right, and it’s not fair,” he said.

The state government on Wednesday said the water sector spent about $2.5 billion on capital works last year, with $3.2 billion planned for 2024-25.

“Victoria’s water corporations have a strong track record of delivering projects on time and within budget – changes to capital works timing or deferrals are generally due to factors external to water corporation operations,” a spokesman said.

“Across our state more than $8 billion will be invested in capital works programs by our water corporations to 2028, ensuring delivery of new water and wastewater infrastructure continues to be directed to where it’s needed most.”

Gippsland Water and Greater Western Water both reported that cost of living had a major impact on customer satisfaction and South East Water also said it had a record year providing payment assistance.

Storms also worsened outcomes for water businesses, particularly in Melbourne’s east, south and Gippsland.

South East Water was contacted for comment.

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