Profound changes to urban water services recommended

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The Productivity Commission (PC) today released the final report on its inquiry into Australia’s urban water sector, proposing profound changes to the way water services are provided in cities and regional towns across Australia.

In what would be a major departure from current arrangements, the PC recommended that urban water price regulation be abolished, with the regulator’s role downgraded to monitoring – rather than approving – water prices. After five years, even price monitoring could be replaced with business self-reporting.

However, price regulation is almost universally recognised as an essential safeguard against the abuse of monopoly power in utility sectors. If governments adopt the PC’s recommendation, consumers will no longer have the protection of an independent umpire setting or approving fair prices that balance businesses’ need for a sustainable revenue with consumer interests.

In another major change, the PC report also endorsed the introduction of service, product and tariff options for consumers to choose from. While choice can have benefits, it may also bring with it the kind of complexity consumers already face in energy and telecommunications. To date, insufficient work has been done to determine whether consumers actually want to see this type of reform. This is critical because unless consumers actively embrace choice in water products, services and tariffs, the hypothesised benefits of this reform will not materialise.

With such radical reforms on the table, consumer voices need to be heard.  The PC’s own report acknowledges that current arrangements for consumer participation are unsatisfactory, and suggests that the government consider options for the formation of a representative consumer body specific to the water sector. With the establishment of a national energy market, part of the quid pro quo was that consumer consultation and funding saw a substantial boost, ensuring consumer input into the design of reforms. The same kinds of mechanisms should be developed in the urban water sector. The Consumer Utilities Advocacy Centre (CUAC) will be calling on the Federal Government to ensure that consumers are able to participate in any fundamental reforms to the delivery of water, the most essential of all services.

Of major significance to Consumers’ Federation of Australia members is Recommendation 8.3 that COAG should progress implementation of a key recommendation made in the PC’s earlier review of Australia’s Consumer Policy Framework. In this 2008 recommendation, the PC recommended that the Australian government lead the development of arrangements to:

  • fund the operating costs of a representative national peak consumer body,
  • assist the networking and policy functions of consumer advocacy groups, and
  • enable an expansion in consumer policy research with the establishment of a grants program and a National Consumer Policy Research Centre (NCPRC).

CFA member CUAC has been advocating for the implementation of this outstanding recommendation. That the Productivity Commission has twice made this recommendation presents a significant opportunity for consumer groups to advocate to the Federal Government for action to support national consumer research and advocacy.

Jo Benvenuti, CUAC

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