New water contribution plan

A new system for calculating developer contributions to the Water Corporation may be introduced by the state government, if recommendations by the WA Economic Regulation Authority are adopted.

The ERA has finalised its report into developer charges, which was drafted last year and will be tabled in Parliament later this month.

It proposes two options for calculating developer contributions, one of which would maintain the current system, using a uniform pricing structure across the Perth metropolitan area and regional centres.

An alternative scheme-based model, similar to that used by Western Power, would effectively divide the state into zones, with prices to be set according to location.

The advantage of this model, according to the ERA, is that it would send price signals to developers about whether building in a particular area was viable, based on the availability of water.

However, both the Water Corporation and the Urban Development Institute of Australia (WA) have voiced their opposition to this proposal.

In a submission to the ERA, the Water Corporation said a scheme-based fee structure was unlikely to deliver a pricing signal strong enough to discourage development, because the charge was a small part of overall costs.

The organisation said its preference was for a state-wide, uniform standard headworks charge - currently in place - which it said provided certainty for developers, was simpler to calculate, and met the government's regional development goals.

It's a position that is supported by the Urban Development Institute of Australia (WA).

UDIA WA chief executive Debra Goostrey said the organisation strongly favoured the current system because it ensured a level playing field for development.

"The only way [the zone system] will work is if you have extremely large zones to moderate the extremes," she said.

Ms Goostrey said a similar zoning system for the state's electricity grid under Western Power had resulted in outrageous charges, which impeded development in regional areas.

"We are very concerned that a similar approach could be taken to the provision of water. Separating the metropolitan area from regional areas will have a disproportionate impact on regional communities," she said.

Ms Goostrey said the process of determining areas for development should be left to planning mechanisms.

According to the ERA's draft report, while subsidies could be used to offset higher developer fees in regional areas, they would need to be assessed against other uses for government revenue.

The Chamber of Minerals and Energy WA also made some recommendations to the ERA, stating that some businesses felt a timeframe was needed for negotiations with the Water Corporation, because past delays had resulted in cost escalation on projects.

The CME said its member companies believed a timeframe would help to overcome the issues created by having no alternative water providers or avenue of appeal.

A statement from the Department of Treasury said developer contributions should attract greater regulatory scrutiny, and that source and transmission costs should be recovered through user charges, rather than developer contributions.

The ERA report also said developer charges should reflect any savings in distribution costs that were achieved through water sensitive design, such as the use of water reuse technology.

The final report on developer contributions was presented to the government by the ERA on July 1.