Hunter Water's new billing methods will have 'mixed'…

Hunter Water's new billing methods will have 'mixed' impact on customers, says IPART

Water Minister Melinda Pavey with Hunter Water's Darren Cleary, left, and Graham Wood, at Grahamstown Dam, now 68 per cent full, in February this year. Picture: Jonathan Carroll

IN a free market, companies and service providers can charge what they like - more or less - and they will sink or swim on their own decision-making.

But in the highly regulated fields of water, power and gas, prices are set by government-appointed regulators.

For water, it's the NSW Independent Pricing and Regulatory Tribunal, and its job is to balance the interests of customers - who will generally want the product delivered at the lowest possible price - against the needs of the utility, which needs to make enough money to pay its way, to reinvest and to expand or upgrade its infrastructure.

READ MORE: IPART Hunter Water web pagehere

Hunter Water must also pay a state government tax equivalent of 30 per cent in the dollar on profits, as well as any dividend that the state, as its owner, wants it to provide.

And all of this before IPART even looks at the detail of how the reasonable rate of return that Hunter Water is allowed to earn should be assembled from a myriad of prices and charges for its various services.

The major change in the new four-year pricing schedule starting on July 1 is a drought surcharge on water use when dam levels fall below 60 per cent.

Hunter Water was granted the higher rate after arguing that even level-one restrictions added to costs that included a greater emphasis on repairing leaks.

It pointed out that encouraging customers to use less water also reduced its earnings.

To mitigate costs associated with the Belmont desalination plant, IPART says the utility can recover $10 million, across four years, of an estimated $14.5 million in "detailed design" costs for the $100 million works.

The nine-month design program starts if dam capacities fall below 60 per cent. If built, the plant would operate if dams fall below 30 per cent.

READ MORE: Belmont desal plant file:

Overall, IPART expects the new charges to have a "mixed" impact on Hunter Water customers.

Some households should have smaller bills first up, but the drought surcharge could be a substantial impost.

In IPART's words: "For all customers, using 2020-21 prices, a 15.2 per cent reduction in usage would fully offset the bill impact of drought pricing."

Or put the other way, using the same amount of water when dam levels fall below 60 per cent will see your bill go up by 15 per cent.

And from July 1 next year, big customers will lose the volume-based discounts that previously kicked in after 50 megalitres.

The devil, as always with these things, is in the detail.

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