Price of water to rise after overhaul

THE Rudd government's key infrastructure body will propose an overhaul of the way states charge for water, a move that could result in higher prices

Infrastructure Australia is expected to release a landmark report on urban water as early as this week, outlining reforms aimed at tapping billions of dollars' worth of investment needed to upgrade water infrastructure to cope with the rapidly growing population and changing climate patterns.

The advisory body has previously raised concerns that water pricing in many states is not truly independent and that government influence over pricing regulators leaves utilities with insufficient revenue to invest in much-needed projects.

Any move to overhaul water prices could prove politically difficult, as businesses and households have faced big recent increases in the cost of utilities such as electricity, sparking warnings that inflationary pressures could lead to further interest rate rises.

Infrastructure co-ordinator Michael Deegan told The Australian: "The focus of this is if we're to get long-term investment in infrastructure, then how do we get the regulatory and pricing structures appropriately geared so people can make these investment decisions?"

IA has had talks with the National Water Commission, which has called for governments to take urgent action to properly value water as it has become more scarce due to the recent drought.

Soaring utility prices have already been one of the biggest recent drivers of inflation, prompting groups such as the Energy Users Association of Australia, whose members include mining giant Rio Tinto and multinational packaging company Amcor, to warn that jobs and investment could be at risk.

The Reserve Bank of Australia said in May that utilities prices had increased strongly in a number of states over the past year, or were expected to rise in coming months, to fund infrastructure upgrades.

Billions of dollars' worth of water projects are already under way, including Victoria's $3.5 billion desalination plant at Wonthaggi and Adelaide's $1.8bn desalination plant, while significant work is expected to take place in fast-growing southeast Queensland.

Mr Deegan said the IA work was "really trying to embed in the infrastructure space a real discussion about getting that long-term infrastructure funding in place through a proper mechanism".

15th June 2010 | Money Matters www.news.com.au
http://www.news.com.au/money/money-matters/price-of-water-to-rise-after-overhaul/story-e6frfmd9-1225879680865