Last Tuesday (23 April 2013) the Essential Services Commission (ESC) released a draft decision on the price review process for the metropolitan water businesses
for Melbourne. This covers Melbourne Water, City West Water, Yarra Valley Water, South East Water and Western Water.
Every five years, water businesses submit a request for prices that, once approved, govern how much our water bills are and what they will spend the money on. On 1 July, the next five year period commences.
The price review decision from the ESC was that the metropolitan water businesses were asking for too much and needed to cut back. And when I say cut back, the retail businesses ‘lost’ $793 million from their claim for a combined revenue of $12,266 million over five years. And Melbourne Water ‘lost’ $489 million and was approved revenue of $8,123 million over five years. I say lost in inverted commas because if it wasn’t raised in the first place, it isn’t really lost!
The desalination plant makes up 36 per cent of the operational costs that Melbourne Water needs to cover over the next five years (and thus requires in revenue). We can now safely say that Melbourne is paying $593 million a year as insurance for our water supply. The merits of this insurance probably need another blog (or book).
From an initial glance, I don’t think there are substantial implications for the cut back to revenue that the ESC has recommended. Normally it might result in less capital works, less maintenance, or reduced targets (which translates into a reduced level of service or reduced ambition for environmental protection). But when you take desalination out of the equation, and note that there are probably efficiencies, delayed capital works and reduced borrowing rates, there is still scope to do creative and innovative things that will keep Melbourne moving towards a resilient and sustainable water system and ultimately a liveable city.
Either way, water business is big business.
Wonthaggi desalination plant