Economic Regulation Authority chairman Lyndon Rowe has praised the state government's contentious increase in water tariffs even through the government did not fully accept the ERA's advice.
Economic Regulation Authority chairman Lyndon Rowe has praised the state government's contentious increase in water tariffs even through the government did not fully accept the ERA's advice.
Treasurer Eric Ripper announced early this week that household water charges would increase by 8.1 per cent for the 2006-07 financial year.
This was based on a 4.8 per cent inflation rate (based on Perth's consumer price index) and a 3.3 per cent rise to reflect the real increase in costs facing the Water Corporation.
In a report released today, it was dislcosed that the ERA recommended that the government should have used a 3.3 per cent inflation figure, based on the Australia-wide consumer price index.
The government ignored that advice but Mr Rowe said he was nonetheless delighted because the pricing decision was based on the principle that water tariffs should reflect the cost of delivering the service.
"I am delighted with how much they have listened to us," Mr Rowe told WA Business News.
"Usage charges now reflect the long-term cost of delivering water."
Mr Rowe also praised the open process, which meant the public for the first time could see what the Water Corporatin and the ERA, an independent review body, had recommended.
"I reckon its a major breakthrough, to have an open process."
The release of the ERA report followed controversy over Mr Ripper's claim that the average increase in household fees and charges, of 3.9 per cent, would remain below the inflation rate, of 4.8 per cent.
Shadow Treasurer Troy Buswell accused Mr Ripper of deceiving the public by using the 4.8 per cent figure, which is for the September quarter, instead of the treasury department's 2007-08 inflation forecast of 3.0 per cent.
The statement from the Economic Regulation Authority, issued today, is pasted below:
Inquiry into the Water Corporation's Tariffs
The Economic Regulation Authority's final report on its inquiry into the Water Corporation's tariffs was released today by the Treasurer, Mr Eric Ripper. The inquiry was a result of a written request by Mr Ripper for the Authority to consider appropriate tariff levels for the Corporation's services and the impact that its recommended tariffs would have on customers and State Government finances.
The Authority's key findings were that:
- The Corporation's tariffs should be increased according to the rise in the eight capital city average Consumer Price Index (as determined by the Australian Bureau of Statistics) for the December quarter 2006, rather than the rise in the Perth CPI for the September quarter 2006. This would increase tariffs in 2007/08 by 3.3 per cent rather than 4.8 per cent.
- Because of climate uncertainty, it was reasonable to budget $250 million a year in capital expenditure for new water sources between 2008/09 and 2010/11. However, the Authority believed the Corporation's water source planning assumptions (that the average inflows of the last six years would continue and a one in 200 year reliability) may be too conservative.
- Tariff increases to cover the higher capital expenditure should be phased-in to minimise the impact of sudden price increases on consumers, rather than be "front-loaded" as proposed by the Corporation.
- Tariff increases for a particular service should relate as closely as possible to the costs of delivering the service, rather than be spread across unrelated services, as occurs under the Corporation's proposal.
- The productivity rate targeted by the Corporation was consistent with the Government's decision in the 2006 Budget. For the purpose of this report, the Authority accepted the Corporation's operating expenditure.
- Although the most recent estimates of Long Run Marginal Cost (LRMC) provided by the Corporation had increased by approximately $0.15 per kL, the rise was driven by capital cost pressures that were unlikely to persist over the longer term. The Authority felt it was appropriate to continue to use the LRMC calculations developed as part of the Inquiry on Urban Water and Wastewater Pricing until the next major review.
Mr Lyndon Rowe, the Authority's Chairman, said the inquiry was not a major review (which was expected to occur every three years) but advice on the Corporation's annual Budget submission to the Department of Treasury and Finance.
Mr Rowe said the inquiry was consistent with the Government's commitment to implement the National Water Initiative, which required an independent regulator to either set or review water prices. The Authority's advice incorporates Government decisions made in response to the Authority's recommendations in its Inquiry on Urban Water and Wastewater Pricing (completed on 4 November 2005) and its Inquiry on Country Water and Wastewater Pricing (completed on 23 June 2006).
The recommendations will inform the Government's decisions on the tariffs for Water Corporation's services to apply from July 2007. A copy of the final report is available on the Authority's web site.
A statement from Shadow Treasurer Troy Buswell, issues on 8 May, is pasted below:
Eric Ripper caught out on budget lie
Eric Ripper has been condemned for misleading to the public by purposely using inaccurate figures to justify his slug on charges to Western Australians in this week's budget.
The Opposition moved a censure motion in the Parliament today, damning Eric Ripper for trying to deceive the State by purposely using a high forecast inflation rate of 4.8 per cent instead of the government's own estimate of 3 per cent.
The Treasurer used the misleading figure to make it appear that his increased impost on families and businesses of 3.9 per cent was below the inflation rate, when in fact it was substantially higher.
Shadow Treasurer Troy Buswell said the deception was a disturbing display of betrayal.
"Not only is Eric Ripper displaying poor financial management and unnecessarily slugging families more for essential goods like water, but he now been shown to be trying to purposely deceive Western Australians," Mr Buswell said.
"On top of this, he has broken his Government's election promise to keep increases in household fees and charges below the rate of inflation.
"Eric Ripper's deceit and inability to manage the economy and give back to the community is costing WA family and businesses. Here we are being hit with a big increase in fees and charges, and to try to hide it Eric Ripper uses misleading figures.
"He has used the inflation rate from the September quarter 2006 which was the highest inflation rate period since 2001 as his forecast rate. He did this despite Treasury forecasting rate of inflation for 2007/08 at 3 per cent!
"There is no denying that this was a calculated move designed to mislead the public into believing the increased fees and charges he is bringing in.
"In each of the last three budgets, they have kept increases in household fees and charges below or in line with the forecast inflation rate for that year. Never have they arbitrarily picked a figure as they have done this time around in a bid to hide Eric Ripper's financial mismanagement.
"In his vain effort to cook the budget books this year Eric Ripper he has lied to the public. How can we have any confidence in anything the Treasurer says after this staggering betrayal?"
