Warning on water bill costs doubling

Urban water bills stand to double because of population growth, climate change and the absence of reform.

 

Urban water bills will double in line with energy bills because of population growth, climate change and the absence of reform by state and federal governments — hitting more than $2500 a year by 2040.

In a report to be released today, Infrastructure Australia recommends that governments eventually move to privatise water and sewage utilities and ­assets across the country to drive investment and efficiencies, and prevent crippling consumer costs over the next decade.

It also recommends the federal government appoint an urban water minister to drive ­national economic regulation and reform of the sector to drive down prices.

While praising reforms undertaken in the 1990s and early 2000s, the report claims that reform had since stalled. Without a new reform agenda, it says, consumer prices will go the way of energy bills and place a significant cost-of-living burden on households. Modelling in the report forecasts that a typical residential water and sewerage bill “could rise by around $600 in today’s money over the next 10 years”. This would result in average bills increasing from $1226 to $1827 in 2027. By 2040, the modelling shows the average would reach as high as $2553. This would represent more than a doubling in real terms.

“The impact of these changes on household affordability could be substantial,” the report says.

“For many families, growth in bills of this scale could cause significant hardship. In the context of slow wage growth and rising cost of living pressures, including increasing bills across other forms of infrastructure, it is ­imperative that the urban water sector ensures services remain ­affordable.

“Managing emerging cost drivers should therefore be front of mind for governments, regu­lators and utilities alike.”

The report says that a failure to factor in urban population growth, ageing infrastructure and climate change impacts on supply would expose consumers to price shock risks. It says the millennium drought “exposed a number of vulnerabilities of the sector, and led to over $11 billion of investment (in today’s dollars) to augment supply through desalination plants”.

Many of the decisions were to invest in desalination, but the report says this was a costly response still being paid for through increases in customers’ bills and taxes.

Infrastructure Australia calls on the Turnbull government to intervene and drive reform through incentive payments to the states, national uniform water policy and regulation, and the creation of a national regulator for water.

“Past reform efforts have delivered widespread benefits for urban water customers … However, reform efforts in urban water have largely stalled over recent years,” the agency says.

The report says the problem was less about construction of new infrastructure such as dams and desalination plants than the need for national regulatory reform and efficiency gains from existing infrastructure, as well as better planning for maintenance and replacement.

The exec­utive director of Infra­structure Australia, Adrian Dwyer, said the analogy with the current electricity price crisis was relevant but governments had the chance to avoid it because the reform areas were clear and well-established.

“I don’t think we will get to the point where stuff starts collapsing,” he said. “This is most likely to hit bills.”

Brendan Lyon, chief executive of industry group Infrastructure Partnerships Australia, welcomed the report, saying current utilities were highly geared, under-equipped to respond and lacked protection mechanisms around pricing.

“It should be unacceptable that large sections of Queensland, Tasmania and NSW have boiling water alerts,” he said.

Mr Lyon accused some state governments of using water bills to feed revenue gaps in other services, essentially gouging consumers on their water prices as “backdoor revenue”.