An Independent Inquiry into Water Pricing in South Australia has found the former Labor government deliberately inflated the value of SA Water’s opening regulated asset base (RAB) to maximise profits and protect government revenues, driving up water bills for hardworking families and businesses.
The damning final report of the Inquiry, led by a former regulator and respected corporate leader Lew Owens, found that the RAB had been deliberately inflated by at least $520 million (in 2012 dollars) and ‘despite the (Labor) government claiming it was acting in the interests of consumers, that was not apparent and it appeared that the main driver of the decision was the securing of revenue for the Government’.
“While the Government was able to deliver a small reduction in price from July 2013, that needs to be seen in the context of an increase in water prices of over 150% in the previous 5 years,” the report found.
Average household water bills in SA under Labor rose from $236 in 2001-02 to an estimated $782 in 2017-18 – an increase of 232 percent.
The report found Labor ignored advice and criticism by the Essential Services Commission of SA and other stakeholders and used their powers under the Water Industry Act (2012) to set a $7.77 billion opening RAB value in May 2013 – which was “not reasonable’’ and “locked in its revenues for many years to come, at the disadvantage of customers”.
The RAB (which reflects the value of SA Water’s economic assets) is important, because it is used to set a Pricing Order which sets parameters that must be adopted by ESCOSA in setting its four year price determination for water bills.
“… the process was not transparent, balanced or credible: the decision was taken without proper public consultation or explanation, and there was no demonstrable effort to balance the interests of consumers against those of the Government,” the final report said.
“The Inquiry concluded that the process and the RAB value were not ‘reasonable’ under the criteria it applied, and concluded the value was at the upper end of a range of possible values.”
The Inquiry – which fulfills an election commitment of the Marshall Liberal Government – has found that, a ‘reasonable’ value of the RAB at 30 June 2013 (in December 2012 dollars) is probably in the range $7.1 billion to $7.25 billion, which would represent a fair balance between the interests of consumers and the Government.
Treasurer Rob Lucas said this report was a stunning and damning indictment of the former Labor government.
“We now know what many have suspected for years, and that is Labor puts its flagrant self-interest above the needs of hardworking South Australian families and business,’’ said Mr Lucas.
“They ignored criticism and advice and arrogantly pushed ahead with inflating the opening value of SA Water’s regulated asset base, knowing full-well it would ultimately cause undue hip pocket pain to consumers.
“It’s disgraceful, shameful and typical Labor, who say one thing publicly and do another in private.
“Labor, under the leadership of Mr Malinauskas, now owe South Australians an apology and must explain to them why they deliberately jacked-up their water bills and cost of living for the past six years.”
Mr Lucas said the Government would now consider the report in full, and he expected it – together with a lower interest rate environment – will result in lower water prices to customers and lower returns to the budget from 2020-21 onwards.
The next SA Water Regulatory Determination will apply from 1 July 2020 to 30 June 2024.