The interim report into the Tasmanian Water and Sewerage Corporations has been released by the Select Committee, which fnds that current water and sewerage infrastructure in the state is not meeting pre-existing license requirements, and that bringing assets up to a contemporary standard will be both financially and environmentally challenging.


The Committee also found that whilst intended to provide price relief for customers the degree of difficulty of the aforementioned task has been exacerbated by the imposition of the 5% price cap and key stakeholders provided evidence that it should be removed or phased out and price shocks should be mitigated against.


It said that the removal of the State Governments 5% price cap will cause a price shock of up to 20% to occur on the 1st of July 2012 unless one or a combination of the following actions occur:

a). The State Government’s pre election 5% price cap policy is continued in some form;
b). Owner Councils accept lower priority dividends immediately and future dividends are delayed;
c). The Corporations significantly reduce operating expenses;
d). The Corporations defer and extend the timeline for capital works; and
e). Significant grant funding is obtained from the Federal Government for capital works.

The Committee's discussions with stakeholders including the State Government, Owner Councils and the Water and Sewerage corporations found all acknowledge that the 5% price cap policy will cause a price shock to occur when the cap is removed.


It recommended that the State Government, The Water Corporations and their Owner Councils meet urgently and at least within 30 days of this interim report being tabled to negotiate an outcome to mitigate the price shock that will effect customers on 1 July 2012 as a result of the Governments 5% price cap, and once the three parties have agreed, the Interim Price Order be amended to suit.


Tasmanian Premier Lara Giddings, welcomed the findings, and said she was particularly interested in the report’s findings in relation to minimising price shocks on households.


“The State Government is very happy to meet with the Water and Sewerage Corporations and owner councils to discuss the introduction of regulated pricing,” Ms Giddings said.


“However I would question the assumption that prices will go up by 20 per cent from 1 July 2012, which is not based on any official information from the Economic Regulator.


“The Regulator is yet to release the two-part pricing model so any speculation about the quantum of price rises is premature and unfounded.”


Ms Giddings said options were also being considered to ease the impact of the removal of the five per cent cap.


She said the State Government’s pricing regulations, released for public comment last month, also provided protection for householders against price shocks.


“Under the new regulations the Regulator must take into account the impact of any increase in price on different classes of customers.


“That means that due consideration will be given to the impact of any price increases, particularly on low income Tasmanians.”


“The advice acknowledges the need to continue to invest in infrastructure and the gradual move to cost recovery. However we all acknowledge that this will need to occur over time and in a way that avoids price shocks, particularly for disadvantaged Tasmanians.”


Ms Giddings said the Government shared the view that capital works would need to occur over time.


“I support the public comments made in relation to the Corporations taking a longer term view to their capital requirements which may contribute to lower price increases for consumers.”


The Interim Report can be found here.