• about $1 billion of new water and sewerage infrastructure is required over the next decade;
• half of the 29 Councils, who are the owners of Tasmania’s water and sewerage assets, have not completed asset condition assessments and 70% do not have adequate asset management plans;
• the financial returns from the sector average around 2 to 3%, which has resulted in little capacity to service debt and an underinvestment in infrastructure;
• approximately 50 per cent of the waste water treatment plants in Tasmania were not always in compliance with their licence conditions;
• that 23 water supply areas are on permanent boil water alerts, including in key tourism areas; and
• Tasmania’s water and sewerage regulatory framework is light-handed compared to other Australian states.

Employees in the sector will be transferred to the new businesses based on a target transfer date of 1 July 2009.

Employees will be transferred on their existing remuneration and terms and conditions, which will be maintained for a minimum period of 12-months. The leave entitlements of employees will transfer with them and may be claimed from the employing corporation.

5. What level of consultation has occurred with the community and key stakeholders?

The water and sewerage review commenced with the release of a Ministerial Taskforce Discussion Paper in December 2006 for initial consultation with stakeholders. Submissions closed on 23 February 2007 and sixty-two submissions were received, including approximately thirty from local councils. The Discussion Paper can be found here.

All stakeholders have had the opportunity to contribute to the regulatory reform process. The Proposed Position Paper - Future Regulation of the Tasmanian Water and Sewerage Sector (Part A) was publicly released and submissions to this Paper closed on 14 January 2008 (submissions also on this website).

Part B of the Paper was released on 9 January 2008 and submissions closed 20 March 2008. These papers captured the ideas and extensive discussions that have occurred with all stakeholders over the past 12 months.

Over 160 people attended the regulatory workshops and seminars that were held in Hobart, Launceston, Devonport and Burnie.

The Treasurer, Michael Aird, has also had one on one discussions with all twenty-nine councils, as well as with numerous business and other interest groups. The Treasurer also met with the Local Government Association of Tasmania – General Management Committee on a number of occasions.

In addition, the Water and Sewerage Project Team has met with all councils and all bulk water authorities. There was also a working group established which comprised representatives of the State Government and a group of key local government representatives.

The outcome of all of these discussions and consultation was the local government owned, regional model which was accepted by the Premier’s Local Government Council at a meeting in early February 2008.

6. What will be the financial impact on councils of the move to the new structure?

The long-run viability of councils will be enhanced by water and sewerage reform.

Under the proposed local government owned regional model, returns to owners from water and sewerage businesses will go back to councils. Returns to owners will grow over time as the required investment in assets occurs and efficiencies are achieved.

The State Government recognises that some councils may incur costs directly related to the implementation of the reforms and has committed to provide $5 million in transitional funding assistance.

7. What does the State Government gain out of the reforms?

The State Government’s objective in reforming the water and sewerage sector is to improve public health, environmental and economic outcomes in Tasmania.

The State Government will receive no financial benefit from the new businesses. All owner returns will flow back to councils. It was not on the State Government’s agenda to seek returns from the water and sewerage businesses or to privatise them.

8. Which areas will be fixed first?

Generally, the investment challenge will be dealt with by the new businesses which are expected to be operational in early 2009.

However, the Government recognises that there are a few well-advanced, relatively small scale projects that need to be started soon, irrespective of the broader reform timetable and when the new businesses will be established.

The Government has identified an approach that will enable things to get moving quickly involving working with the existing BWAs and councils.

The Minister for Water announced at a Public Meeting in Swansea on 21 February 2008 that the Swansea water supply problem will be the first demonstration project which will be addressed through this approach. Other projects elsewhere in the State may be considered thereafter.

9. What is the level of support for reform of the water and sewerage sector?

The Local Government Association of Tasmania has demonstrated leadership for local government and has recognised the need for reform. It has worked maturely and constructively with State Government to work towards a solution that balances the objectives of state and local government for the benefit of all Tasmanians.

There is also support for the reform of the sector from all over the State. Organisations such as the Tasmanian Chamber of Commerce and Industry, Tasmanian Farmers and Graziers Association, the Property Council of Tasmania, the Housing Industry Association of Tasmania, the Tasmanian Conservation Trust, the Tourism Council of Tasmania and TasCOSS support State-wide reform of the water and sewerage sector. These key organisations represent business, the rural sector and some communities that are severely affected by poor water quality and poor treatment of sewerage.

10. Why can’t the State Government simply provide money to councils to replace or upgrade water and sewerage pipes and treatment plants?

Council water and sewerage activities are not individually of a size to be able to cope with the future task of providing the large scale of development required across the state to support the needs of the community generally. Furthermore, the current light handed regulatory environment and fragmented service provision model does not support the achievement of a sustainable water and sewerage sector in Tasmania. Regulatory and structural reform is vitally important.

Ad-hoc water and sewerage funding from the State Government to support councils without fixing the underlying structural and regulatory issues would amount to a ‘band-aid’ solution.

11. Why is water quality and delivery important to economic development?

Tasmania’s prosperity is linked with the availability of water and sewerage infrastructure that can meet our needs. Good water quality and delivery is important to Tasmanian communities for economic development. Tasmania has a reputation for producing fine food and beverages and unique tourism experiences. High quality water accessibility is essential to maintain the competitiveness of all those sectors.

12. Why is regulatory reform urgently needed?

Water availability is a source of comparative advantage for Tasmania, but to date the current light handed regulatory environment has not aided the delivery of a self sustaining sector.

Tasmania’s arrangements do not meet best practice regulation in water and sewerage – we need to align ourselves with best practice.

The sector requires significant investment, particularly in infrastructure. Appropriate regulation can help deal with this issue at the minimum sustainable cost to consumers, by supporting effective long-run co-ordinated infrastructure planning.

13. What are the key elements of the regulatory reform?

The proposed regulatory framework includes new or revised roles that provide for:
the creation of a State-wide policy responsibility to guide infrastructure development;
minimum service standards to protect consumers; and
transparent price setting through an independent regulatory process which will protect the long-term interests of consumers by ensuring viable service providers.

Regulatory reform must also be consistent with the National Water Initiative (NWI) which seeks to promote the sustainable and efficient use of Australia’s water resources. Tasmania is party to the NWI Agreement which means that the State must adopt certain policies and practices, such as best practice water pricing and planning.

14. What will the proposed regulatory reforms achieve?

They will ensure that long-term water supply planning occurs and is balanced with an understanding of future demand for water and sewerage services.

They will protect customers and ensure they receive an appropriate standard of service.

They will clarify roles and responsibilities, eliminate duplication of effort and provide clear accountabilities.

Ultimately, they will provide a stronger foundation for future economic development and protect consumer health and the environment.

15. Will the new regulatory requirements be complex for the water and sewerage businesses to manage?

The proposed regulatory framework merely formalises sound business and risk management planning processes that any service provider operating sustainably and efficiently should be doing anyway.

The approach is well proven nationally and internationally in the water sector and in similar infrastructure services. Modern-day businesses are accustomed to dealing with a reasonable degree of regulation.

16. What can the consumer expect in terms of new levels of service?

The regulatory reform will create minimum levels of customer service that must be met for water and sewerage delivery, but will provide for the community to contribute to the development of these service standards.

17. How will the price paid by consumers be affected by the proposed changes?

Tasmania currently has the lowest domestic water charges in Australia. A number of options are being considered for how water and sewerage services should be priced which will be explored in more detail over coming months. The options will involve two-part pricing of water services, an approach that is widely accepted in Australia and is consistent with the National Water Initiative. Two-part pricing is a method of charging for water where users are charged a fixed cost which reflects capital costs and a volumetric charge, based on the variable costs of water supply. This approach means that the amount users pay reflects the amount of water they use.

Under future pricing arrangements, a consistent methodology will be applied across the State. These arrangements will be clearly linked to the level of service provided and will be set through a transparent and independent regulatory process.

In addition, a transition period will apply to manage any potential price shocks.

18. How will those in hardship be assisted?

The impacts on different classes of customers will be examined in determining any new pricing arrangements. The Government has a proven record of providing financial assistance to low income groups in the community. An Office of the Water and Sewerage Economic Regulator will be established, with an independent Regulator having appropriate powers and functions to regulate prices.

19. Who will set the price of water under the reforms?

Prices will be set through a transparent and independent regulatory process that will be designed to ensure that users pay no more than required to ensure services can be provided on a sustainable basis. Prices need to ensure that new infrastructure can be built and current infrastructure maintained and that appropriate public health and environmental standards can be achieved. An Office of the Water and Sewerage Economic Regulator will be established, with an independent Regulator having appropriate powers and functions to regulate prices.

20. Will I have a water meter installed under the Government’s reforms?

The majority of councils in Tasmania already use water meters. While no decisions have been made, it is likely that metering will be more widely used into the future.

21. What happens next?

Legislation on both structural and regulatory reform is expected to be introduced into Parliament in April this year.

Discussions with local government through the Local Government Association of Tasmania will continue, with the focus being to work though implementation issues and to develop an effective transition plan.

It is planned for the new businesses to be operational from 1 January 2009. The target date for the transfer of the water and sewerage staff and functions of councils and bulk water authorities is 1 July 2009.

A proposed timeline can be found here.