Water usage charge victory for coastal farmers – but how long will it last?

Water usage charge victory for North and South coast irrigators – but how long will it last?


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A glum outlook at Brogo? Water charges will only rise by four per cent a year if IPART's draft decision is adopted, but small coastal dams are still not being run cost effectively.

A glum outlook at Brogo? Water charges will only rise by four per cent a year if IPART's draft decision is adopted, but small coastal dams are still not being run cost effectively.

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Is the future glum for water users? IPART appears to deliver some relief in draft water usage decisions.

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Irrigators on the coast have had a small victory - for now - over a bid to massively increase water usage charges sought by WaterNSW.

The Independent Pricing and Regulatory Tribunal (IPART) has knocked back a bid to increase water charges by 40 per cent rise over four years on the North and South Coast valleys. WaterNSW was seeking full cost recovery for the running of its smaller coastal dams.

The decision is particularly important for the Bega Valley, and Bega Cheese, where 35 per cent of the company’s milk supply is derived from dairy farmers who irrigate out of the Brogo and Bega water systems. Farmers though are still wary WaterNSW will eventually seek to get full cost recovery from operating Brogo Dam. The decision means the NSW Government will take a $1.4m hit a year to run the dam.

Instead, IPART proposes a four per cent rise each year for the South Coast, according to its draft report. The charges will not be confirmed until after final submissions from stakeholders are received, with  a final pricing announcement in June. The new prices will apply from July 1.

IPART Chair Dr Peter Boxall said  “rather than continuing to increase prices by 10 per cent  per year towards full cost recovery, we have decided to set prices within an efficient pricing band that considers WaterNSW’s customers’ ‘capacity to pay’ in these valleys, as well as WaterNSW’s avoided costs.”

“When possible, we aim to set prices that fully recover efficient costs. However, full cost recovery is likely to be unattainable in the North Coast and South Coast valleys over this determination or going forward,” Dr Boxall said. Under IPART’s new efficient pricing band approach, prices for the North Coast would be frozen at the current 2016-17 price level in real terms, whilst there would be a small increase in high security entitlement and usage prices for the South Coast.

IPART said in a release: “The draft decision would mean a shortfall in revenue ($1.4 million per year) from these valleys as the draft prices do not fully recover the customers’ share of costs. This under recovery of costs and revenue shortfall would need to be borne by WaterNSW or recovered from the NSW Government as shareholder.”

Bega Valley Water Users Association spokesman Steve Guthrey though said IPART had still failed to address the underlying issue of how to manage coastal dams and their cost-effectiveness. The high cost of water was turning away irrigators he said, which was partly the reason for the shortfall in revenue. Bega Valley water users pay a massive  $40 to $50 a megalitre in water usage charges, compared to about $27 a meg on the Lachlan, and even as low as $4 or 5 on other river systems.

Mr Guthrey said the only way to be fair would be to amalgamate usage charges for the Hunter, the South Coast and North Coasts. It would mean the Hunter would subsidise water usage to the other areas to a small degree.

“IPART really has just fobbed off the issue for another four years,” he said. “If water is too expensive, irrigators won’t use it.” 

IPART has released a number of determinations this week on water charges throughout NSW.

 Dr  Boxall said the draft determination means “significant reductions in the overall revenue that WaterNSW can collect from its customers, with bill impacts depending on location and the type of licence held”.

“Most WaterNSW rural customers would see their bills either fall, or increase at or below the rate of inflation under the draft decisions,” Dr Boxall said.

“The only exceptions would be general security customers in the Gwydir, Namoi and South Coast valleys where changes to the high security premium and increased general entitlement charges would increase bills by between 2.9 per cent and 3.5 per cent per year over the next four years, and high security customers in the Murray valley where bills would increase by 7.9 per cent per year (with inflation).”

A public hearing will also be held in Sydney on 4 April 2017.

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