Media Release: WATER INDUSTRY EFFICIENT AND PRICE CONSTRAINTS ON TRACK

FROM THE OFFICE OF THE TREASURER

DATE: Thursday, July 3, 2008

WATER INDUSTRY EFFICIENT AND PRICE CONSTRAINTS ON TRACK

An independent analysis of the metropolitan water sector has strengthened the Brumby Labor Government’s commitment to keep Victoria’s water businesses in public hands as Melbourne’s three water retailers manage the challenges facing the sector.

Treasurer John Lenders today released the Victorian Competition and Efficiency Commission (VCEC) Report, Water Ways: Inquiry into Reform of the Metropolitan Retail Water Sector, as well as the Government’s response, which finds the Government’s plan to constrain water price increases was achievable.

“The Victorian Government will make Melbourne’s water retailers government owned statutory authorities further enshrining our water retailers in public hands,” Mr Lenders said.

“It also confirms we are on track to ensure average water bills do not more than double over the next five years in real terms. This is a significant achievement considering the lack of rainfall in Victoria over the past ten years and the neglect of water infrastructure we inherited from the previous Government.”

In mid 1990’s the Kennett Liberal-National Government established Melbourne’s three water retailers in a move to prepare these authorities for potential privatisation.

Mr Lenders said the predicted water price increases would help to provide an extra $4.9 billion worth of water infrastructure and other water improvements to secure Victoria’s water for the next 50 years. The Inquiry found that the current structure of the industry was efficient and effective but there were some opportunities to make the industry work even better.

Minister for Water, Tim Holding, said the Government fully or partly supported 20 of the VCEC’s 21 recommendations, including that all water authorities should be publicly owned statutory corporations to provide uniformity across the sector and he would therefore introduce legislation to make retailers statutory corporations under the Water Act.

The Government largely supports the VCEC’s key recommendations that will:
· improve the governance and regulatory arrangements for the metropolitan water sector;
· clarify rights of water users; and
· improve the integration of water resource management in Melbourne.

“The Brumby Labor Government is taking action to provide water security for all Victorians by investing in water projects right across the state,” Mr Holding said.

The Report also found only small cost savings could be found by merging Melbourne’s three water retailers and that instead the retailers could tap into cost reductions by sharing functions and purchasing materials in bulk using their combined purchasing power.

Mr Holding said the Essential Services Commission would resume its regulatory pricing process now that the Inquiry process was complete.

“This Report will help the ESC with its review to find the best water pricing mechanisms from 1 July next year,” Mr Holding said.