Water pressure highlights competing priorities

If utilities such as Water Corporation can’t fulfill their primary responsibility to the public, maybe an alternative ownership model would be a better option.

Statements by Water Corporation chief executive Sue Murphy at a recent Urban Development Institute of Australia event to the effect that Perth should move away from grassed verges raised some hackles across the city, including among the state’s turf industry.

But behind the outcry and headlines was a more important issue – whether another government agency is failing in its primary function.

The problem for Ms Murphy is that her agency believes it has two functions – one is to supply water, the other to encourage its customers to use less water. No business can operate successfully like that.

What Water Corporation should be doing is meeting the demands of its customers; and if it can’t do that then it’s time for other suppliers of water to enter the market.

If that sounds radical then you have not been following what’s happened in other government-provided services, which have been forced to give up their monopoly power over the provision of essential services.

Electricity, gas and telecommunications were once the sole province of government; and while government still has an important position in all, it is increasingly as a market regulator rather than a competitor.

Water, perhaps the most essential of all services, should be no different, and introducing private competition should not be difficult once a set of access rules is drawn up and quality controls are in place.

Water Corporation would remain a player in the game, but it would go the way of other agencies in other essential services and become a regulator.

There are aspects to this suggestion that need further investigation, preferably without the discussion becoming bogged down in the politics of the proposal.

If that trap can be avoided then the debate over the private supply of water can look at the numbers, such as: what a private desalination plant would cost to build; what its owners would be charged for access to the state-owned pipelines; and whether a private operator could compete in all markets or only sell to big consumers in the first instance, leaving households as customers of Water Corporation.

With the price of water rising steadily, and with Ms Murphy admitting that her agency cannot meet demand, there would appear to be a business opportunity developing for someone.

The alternative to encouraging private investment in meeting future demand for water raises the question of what it is that Water Corporation wants to achieve – does it want to ration supply by putting a ceiling on what a customer can buy, or actively encourage conservation?

In principle, there is nothing wrong with being frugal with water. It is a valuable resource, but we’re not facing the type of supply shortages many environmentalists would claim, thanks to the advent of highly efficient desalination plants powered by renewable energy such as that from wind or the sun.

There is another point to be made about Ms Murphy’s suggestion that Perth abandon its green verges and step up its water-saving efforts, and that’s to see what’s happened in other states with other essential services, where government decisions have created avoidable crises.

A gas shortage is developing in NSW and Victoria because of a combination of factors, all government-linked. Massive exports of gas from Queensland are limiting the future availability of domestic supplies, exploration for new gas resources has not been encouraged, and development of coal-seam gas has been actively discouraged.

In South Australia, an electricity crisis has developed because of a botched government policy to discourage power generation using fossil fuels (coal and gas) and boost reliance on renewables (wind and solar). It is a policy that has backfired spectacularly.

Industry in SA, what’s left of it, is being killed by high and erratic electricity supplies caused entirely by a policy driven by environmental politics that carry a high cost for business and households.

WA’s water situation has NSW gas and SA electricity written all over it.

A government department charged with the job of harnessing water supplies and selling it to customers has become more interested in acting as an environmental policeman, advocating policies that are drifting into increased rationing (as already applies in the summer sprinkler roster).

And let’s not forget, Water Corporation has already made its way into our bathrooms with its campaign to install water-limiting showerheads.

It’s time a bright young boffin at a business school, or investment bank, crunched the numbers on a privately built and run desalination plant and Water Corporation was forced to consider what its primary function should be – supplying water, or restricting its use.