Australia’s Independent Pricing and Regulatory Panel’s (IPART) decision to no longer regulate the price of recycled water – instead leaving it to the market to determine - is a move that will create uncertainty in our embryonic NSW water market, and may also see increased water costs passed onto consumers.
Just as Government is trying to encourage the use of recycled water to meet its sustainable water targets and ensure communities are serviced with secure water supplies into the future – this decision looks set to do the exact opposite.
And just as the Government is trying to create a competitive water marketplace where multiple private service providers are able to compete against an oligopoly of Government utilities – this decision looks set to undermine those efforts.
- Removing the rigour of regulatory review to set the usage and service charge price of recycled water - with the exception of Rouse Hill – creates major uncertainty for localised private water services which are only now providing competitive service offerings as a result of the newly deregulated market.
- Abolishing service charges for recycled water at Rouse Hill now sets a precedence in the marketplace that is contrary to drinking water charges and other recycling schemes such as Homebush.
IPART’s intention is to support Government and encourage financially viable recycled water schemes by providing a light handed regulatory approach. But what the competitive marketplace requires – at this stage - is certainty and stability.
We believe the determination will prevent a level playing field for these new market players, slowing down the evolution of the newly NSW deregulated water market and undermining the very intention of the WIC Act.
When we consider this new water market only really exists inside the Sydney Water jurisdiction – any mechanism affecting the level playing field will make competition by the private sector in NSW near impossible.
IPART have acknowledged the critical role the private sector will play in supplying recycled water for communities now and into the future. However this determination will jeopardise those efforts.
IPART’s solution is for recycled water to be self-regulated by public and private water utilities as long as they follow 2006 Pricing Principals. These price guidelines are outdated and do not reflect the evolving drivers of the fast emerging water market.
Why is it that drinking water prices and sewage water prices can be regulated - but recycled water prices cannot?
For well-established competitive markets, self regulation works – however NSW does not yet have a fully competitive market.
And how do we truly assess the viability of a recycled water scheme when the pricing is different? Who actually decides if a scheme is viable or not? Is it Sydney Water or the land developer who selects its water utility? Who represents the consumer at this decision-making stage?
IPART’s determination considers sewer usage prices when assessing the viability of commercial sewer mining schemes, and to ensure they are viable it sets prices according.
Why is there a difference between this commercial building recycled water scheme and a residential land and housing scheme?
One thing is for sure. IPART’s determination raises more questions than it provides answers. We will endeavor to find questions to these answers over the next few weeks and report back in the next Water Spectators.
Terry Leckie is one of Australia’s leading water industry experts and a passionate advocate of water reform, championing key changes to legislation and regulation.
Terry is also Founder and CEO of Water Factory Company, Australia’s first private water utility which is creating affordable and sustainable smart water networks. More of his blogs can be found at Water Spectator.