The state’s independent economic regulator has rejected the price hikes being sought by Melbourne’s four water businesses, although it has warned that ratepayers could still face an average extra hit of $200 a year.
The culprit behind the sharp rise remains Victoria’s dormant desalination plant: the auditor-general has put its cost to taxpayers at $1.81 million a day, almost double the dividend paid to the government by the water companies.
To help make up the shortfall, the water companies want to add around $300 to the average bill over the next five years, a rise of more than 30 per cent. But three of the four suppliers which cover metropolitan Melbourne — City West, South East and Yarra Valley — want the full amount added from this year. Western Water has offered to increase bills incrementally over the five years.
The impending price rise – which takes effect from July 1 – comes after increased water consumption pushed bills around 15 per cent higher last year. As a result, Yarra Valley Water householders paid on average $147 more for their water in 2011-12, while customers of South-East Water and City Water paid on average an extra $107 and $104.
The regulator, the Essential Services Commission, will set the final price. Last week, it released its draft review of the water companies’ proposals and said the rises were not justified. It found the companies were over-estimating their energy, parts and maintenance costs. The discrepancy was greatest with Western Water. It is seeking approval for a 35.6 per cent rise: the commission’s draft figure is one-sixth of that, just 5.9 per cent.
Click here to see how your water charges could rise.
Ron Ben-David, the commission’s chairman, said in an interview with The Citizen: “We’ve gone through the water plans very, very carefully and we’ve found savings worth a few hundred million dollars, and that gets reflected back in the lower prices, which is why we announced that we haven’t accepted the proposed $300 increases.”
The companies lay the blame for the sharp increases squarely on the desalination plant, which was commission by the previous Labor State Government at the height of Victoria’s extended drought.
But Dr Ben-David rejected Melbourne Water’s claim that it needed to pass on the full cost of the plant in order to avoid declining service and an adverse impact on its balance sheet.
Listen to the full interview with Essential Services Commission’s Ron Ben-David here.
The debate over rising ratepayer bills remains politically charged. The Minister for Water, Peter Walsh, said if not for the desalination plant “an average bill may only have increased about $50 next year”.
But the Opposition’s John Lenders blamed other costs. “Victorians over the last year have paid more in State Government water taxes, water dividends and other water charges than they will pay for the desalination plant.”
Either way, bigger bills are inevitable, a fact acknowledged by Dr Ben-David: “We certainly do appreciate that even though $200 is better than $300, $200 is really a lot.”
The commission has allowed each retailer to set aside a $5 million ‘safety net’ to protect customers in hardship. It is inviting public comment in the lead up to its final decision.
Public meetings are scheduled for tomorrow (April 30) in Melbourne, and in Sunbury (April 30) and Frankston (May 1). Details here .
* Video includes aerial footage of Victoria’s desalination plant taken for Thiess.