Hardworking families and businesses are a step closer to enjoying significant water bill savings from July 1, with the Marshall Liberal Government reversing a ‘deliberate, deceitful and shameful’ former Labor government decision that locked-in sky-rocketing bills for consumers over many years.
An independent inquiry into Water Pricing in South Australia last year found the former Labor government ignored advice and criticism by the Essential Services Commission of SA (ESCOSA) and other stakeholders by deliberately inflating the value of SA Water’s opening regulated asset base (RAB) by at least $520 million (in 2012 dollars) to $7.77 billion to maximise profits and protect government revenues, driving up water bills for South Australians.
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.
Treasurer Rob Lucas has announced the Marshall Government has taken the first opportunity to revise down the value of SA Water’s RAB by $520 million (in 2012 dollars) – from $7.77 to $7.25 billion – considered by independent Water Inquiry chair Lew Owens as ‘reasonable’, representing a fair balance between the interests of consumers and the Government.
“We are putting to an end Labor’s grubby, arrogant and underhanded cash grab that saw hardworking families and local businesses slugged more for their water every single time they turned on the tap,” said Mr Lucas.
“It was a deliberate, deceitful and shameful act designed to protect their budget revenues and Labor – under the leadership of Mr Malinauskas – owe South Australians an apology for the significant hip-pocket pain they’ve inflicted on them over many, many years. For the average family, this would have cost them thousands of dollars over the years.
“The grubby fingerprints of Mr Koutsantonis and Mr Mullighan were all over this decision as Mr Koutsantonis was a senior Minister and Mr Mullighan was the Premier’s deputy Chief of Staff at the time the decision was taken.
“In fact, it was Mr Mullighan, who – according to evidence given to a 2014 Parliamentary Budget and Finance Committee by the former CEO of the independent regulator ESCOSA, Dr Paul Kerin – had sought last-minute advice on government revenue outcomes of increasing the RAB.”
Dr Kerin told the Committee: “I got a call from Stephen Mullighan, the Premier’s Deputy Chief of Staff, asking me, ‘Can you consider a few alternative scenarios?’ I said, ‘Well, Commission papers have already gone out. What are they?’ He said, ‘Can you tell us what the revenue caps would be if the RAB is increased by 5 per cent, 10 per cent and 15 per cent?’
Mr Lucas said: “Long-suffering South Australian families and businesses ought to keep this in mind every time they hear Mr Malinauskas and Mr Mullighan claiming to care about cost-of-living or cash-flow issues.”
“The revised Regulated Asset Base value, together with a lower interest rate environment, will result in significantly lower water prices to customers and lower returns to the budget from 2020-21 onwards.”
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 next SA Water Regulatory Determination will apply from 1 July 2020 to 30 June 2024 – and an announcement on that is due in coming days.
The Independent Inquiry into Water Pricing in South Australia fulfilled an election commitment by the Marshall Government and handed down its damning final report in July last year.
Led by former regulator and respected corporate leader Lew Owens, it found that the RAB had been deliberately inflated by at least $520m (in 2012 dollars) and ‘despite the (Labor) government claiming it was acting in the interests of consumers, that was no 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.
“… 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 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 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.