Water and Sewerage Tasmania Bill 2017
How is the new government business established in the Bill?
The Bill establishes the new government business and transfers all the assets, liabilities, rights and all the employees of TasWater to the new government business. The new government business will commence operations on the day that the assets, liabilities and rights are transferred. The Bill allows employees to be transferred to the new government business before all the assets, liabilities and rights are transferred. The Treasurer is responsible for determining the day or days when employees are transferred, and for determining the day when all the assets, liabilities and rights are transferred.
What happens to TasWater as a council-owned entity?
Until the day that all the assets, liabilities and rights are transferred, TasWater will continue to provide all water and sewerage services in the State. After this transfer has occurred, the council-owned entity will still have a Board for a short period and will have a statutory requirement to prepare its annual report for the previous financial year under the Water and Sewerage Corporation Act 2012. It will also have other requirements after the transfer as a Corporations Law company.
It is expected that the council-owned entity will then be deregistered under Corporations Law, though this is not required in the Bill.
The new government business is required to pay all the reasonable costs of the council-owned entity for its remaining tasks after it ceases to provide water and sewerage services, including the costs of the Board, costs relating to the preparation and audit of its final annual report and any costs associated with its deregistration under Corporations Law.
The Bill includes the repeal of the Water and Sewerage Corporation Act 2012 as this Act will no longer be needed once the final tasks have been completed.
Will there be an interruption to services over the period of the transition?
There will be no interruption to services arising from the transfer of responsibility for water and sewerage services to the new government business, just as there was there was no interruption when the three regional corporations were merged to form TasWater.
What are the arrangements for payments to councils?
The Bill ensures that, for the first seven years starting in the 2018-19 financial year, the councils will receive a total of $20 million per year from the State Government. For each council, the share of the $20 million that it will receive will be the same as the share of TasWater's returns that it currently receives. The level of payment for each council is set out in Schedule 1 to the Bill.
For every year after the 2024-25 financial year, the councils will receive one half of the profit of the government business from the previous financial year, except potentially in one circumstance. If the business determines that making this payment would prevent it from achieving its objectives, or meeting its statutory obligations or its requirements under its corporate plan or infrastructure investment plan, the business is to specify a lower amount that it proposes to pay to the councils, with a statement explaining its specified lower payment.
Both Houses of Parliament will have the opportunity to prevent the new government business from paying this lower amount by way of a disallowable order. If the order is disallowed by either House, the business must pay one half of its profits to the councils. The Bill is designed to ensure that, if there is such an order, Members of Parliament on Government Businesses Scrutiny Committees will have the opportunity to discuss the proposed lower payment with the new business at committee hearings before the order can be considered by both Houses of Parliament.
Again, for each council, the share of the total payment made by the new government business will be the same as the share of TasWater's returns it currently receives. These shares, for each council, are also set out in Schedule 1 to the Bill.
What are the arrangements for TasWater employees?
The Bill ensures that all employees of TasWater will be transferred to the new government business on the same employment terms and conditions as they have currently. There will be no job losses as a result of the transfer of the water and sewerage industry from council ownership to State Government ownership.
What returns will the State government receive from the new government business?
The Bill does not require the new government business to provide any returns to the State Government. The business will not pay any dividends or any income tax equivalent payments or government guarantee fees. As there will be no government guarantee fees on borrowings, the new business will have lower borrowing costs.
For the first seven years, the new government business will therefore retain all its profits, which will support its infrastructure investment program. After this time, the only payments the business will make from its retained earnings will be to councils, as set out above.
The State Government has stated that it will ensure that apart from payments to councils, all available funds of the new government business will be reinvested back into the business to either fund new infrastructure or reduce debt.
Is the Water and Sewerage Tasmania Bill 2017 legally valid?
The Bill has been prepared by the Office of Parliamentary Counsel to give effect to the Government's plan to transfer ownership and control of the State's water and sewerage industry to the State Government.
The Government has sought advice from the Solicitor-General.
The Government is confident that the provisions in the Bill, if enacted, would withstand any constitutional challenge under section 109 of the Constitution.
How does the Bill prevent the privatisation of Tasmania's water and sewerage industry?
The Bill has a specific provision that prohibits privatisation of the new government business. The Bill also prohibits the new business from selling, leasing or otherwise disposing of its water and sewerage infrastructure assets, except in cases where this arises as a result of maintenance, replacement or upgrading of its infrastructure.
The Bill also prohibits the new government business from selling, leasing or otherwise disposing of its land.
Water and Sewerage Tasmania (Consequential and Transitional Provisions) Bill 2017
What are the arrangements for the regulation of water and sewerage prices in the Bill for the transitional period?
The Tasmanian Economic Regulator is currently considering TasWater's draft Price and Service Plan, which is to apply from 1 July 2018 to 30 June 2021 under the current regulatory arrangements.
The Bill allows this process to continue, with the final Price and Service Plan, as approved by the Regulator, to apply to the new government business. However, the Bill specifies the price increases for water and sewerage services that are to be in the final Price and Service Plan.
These price increases, for customers currently on the target price, are set at 2.75 per cent for 2018-19 and 3.5 per cent for 2019-20 and for 2020-21. This compares with price increases of 4.6 per cent per year in TasWater's draft Price and Service Plan.
The Bill allows the prices in the Price and Service Plan for 2019-20 and for 2020-21 to be amended, once the Plan is in force, as determined by the Treasurer on advice from the Tasmanian Economic Regulator. The Government has committed to price increases of between 2.75 per cent and 3.5 per cent per year under its ownership.
Under the current legislation, customers who are charged prices below the target price must pay the target price by 1 July 2020 so that all customers pay for services on an equitable basis. Approximately 7 500 customers are currently charged below the target price. For some of these customers, this would require very large annual price increases over the next three years, exceeding 20 per cent per year in some cases. The Bill sets the price increases to these customers for their combined fixed charges at $75 per year or 7.5 per cent, whichever is the greater, until the prices they are charged reach the target price. In cases where a customer is charged only a fixed water charge or only a fixed sewerage charge, the price increase as set out above applies to that charge.
The Bill does not set any requirement for the prices to these customers to reach the target price by any year.
The Bill also allows the Price and Service Plan to be amended, if necessary, to ensure that the new government business can comply with its infrastructure investment plan, or any directions from the Treasurer and Minister for Primary Industries and Water.
What are the arrangements for the regulation of water and sewerage prices in the Bill after the transitional period?
In the Bill, from 1 July 2021 there will be no Price and Service Plan for the new government business. The maximum prices for the new government business will be set in a pricing order by the Treasurer, following a pricing inquiry by the Tasmanian Economic Regulator. This is the same approach as currently applies to the pricing of insurance premiums by the Motor Accidents Insurance Board. The Regulator's pricing investigation will include consultation, including on a draft report.
All non-price economic regulation, including the policies of the new government business, will remain the responsibility of the Regulator.
The Bill specifies the period of the first pricing order to be four years. Subsequent regulatory periods can be up to five years.