Paying a price for ALP folly

One of the South Australian Labor government’s biggest legacies has been to deliver us the highest water prices in Australia. In 2002, the base price for water consumers was 38c a kilolitre; it’s now $2.32/kL.

The average annual household water bill in 2002 was $236. In 2014-15 it will be $790. When the millennium drought took hold, Labor scoffed at the Liberal Party’s idea that a 45 gigalitre desalination plant would secure our state’s long-term water needs and take pressure off the Murray-Darling Basin, opting instead to “pray for rain”.

Following water restrictions and SA’s water needs coming perilously close to being trucked in, Labor finally agreed to a desalination plant. In a bizarre move that was not only recommended against by Infrastructure Australia but criticised by the federal auditor-general, Labor decided to build a massive $2.2 billion 100GL plant.

Our calculations show that the decision to double the plant’s capacity means consumers pay an additional $50 million to SA Water each year in returns on its “regulated asset base”. This figure excludes the additional operating costs of the expanded plant, meaning the true cost to South Australian households and businesses is even higher.

After two years of testing the plant in this post-drought period as our rainfall has returned to more normal averages, the government now tells us that it needs more time to work out whether Adelaide’s desalination plant will become a white elephant or whether it will spend $30m every year to run it in standby mode.

Acting Water Minister Leon Bignell justifies the mammoth plant by saying that our farmers will welcome the security that the capacity provides. As Minister for Primary Industries, you’d think he’d know better. Just two weeks ago, Livestock SA’s incoming president Geoff Power said that one of the impediments to expanding the state’s livestock industry is the high price of water.

Independent regulator Essential Services Commission of South Australia’s former chief executive Paul Kerin has belled the cat on the government’s abuse of SA Water to gouge local households and businesses through water bills. He quit his post this year because he says that Labor is completely unwilling to reform the state’s water industry to benefit consumers.

Kerin recently told a parliamentary committee that “with the stroke of a pen” SA Water’s assets were artificially inflated by $700m million, reducing water prices in time for last year’s state election but effectively increasing them for the next 50 years. He has also estimated that SA Water’s regulated asset base has been overestimated by $2bn and that this is costing customers $100m a year (with the costs of the expanded desalination plant being one such example).

The Liberal Party is calling for an independent inquiry into our water prices. Every consumer in this state deserves it.