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Labor cops spray over SA Water hikes

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An independent inquiry into water pricing in South Australia has found the former Labor state government over-valued SA Water assets by at least $520 million, driving up household and business water bills in order to increase government revenue.

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The final report of the inquiry – commissioned by the Marshall Liberal Government and headed  by former SA Water chair, Essential Services Commissioner and ETSA CEO Lew Owens – said Labor had  inflated SA Water’s opening regulated asset base by more than half a billion dollars, at 2012 value.

As first revealed by InDaily in January, Owens distributed an interim report suggesting the valuation had likely been overstated by at least $421 million – and as much as $1.071 billion.

The regulated asset base or RAB is used to set a pricing order which sets parameters that must be adopted by the Essential Services Commission of SA when fixing its four-year price determination for water bills.

The final report said Labor ignored ESCOSA advice in setting an opening RAB value at May 2013 of $7.77 billion, through a process that was “not transparent, balanced or credible: the decision was taken without proper consultation or explanation, and there was no demonstrable effort to balance the interests of consumers against those of the Government”.

It said a “reasonable” value would have been between $7.1 and $7.25 billion, and “despite the government claiming it was acting in the interests of consumers, that was not apparent and it appeared that the main driver of the decision was the securing of revenue for the government”.

“While the government was able to deliver a small reduction in price from July 2013, that needs to be seen in the context of an increase in water prices of over 150 per cent in the previous five years,” the report said.

The inquiry was set up by the incoming Marshall Government after complaints that SA Water’s value – and all water bills flowing from it – was set too high, prompting claims Labor was using it as a cash cow to prop up revenues.

Treasurer Rob Lucas said this morning that Labor had “jacked-up” the utility’s value in order to increase dividends heading for Treasury coffers.

“They ignored criticism and advice and arrogantly pushed ahead with inflating the opening value of SA Water’s regulated asset base, knowing full well it would ultimately cause undue hip pocket pain to consumers,” he said.

“As a result of Labor’s greed, millions of dollars has been washed down the basin as a result of their particular decision.”

Former ESCOSA head Paul Kerin, who dealt with the Weatherill Government over the 2013 pricing decision, quit after Labor was returned at the 2014 election.

His resignation letter – later published by The Advertiser after an FoI battle – said: “As the Labor Party has been returned to government and a badly-needed shake-up in the make-up and culture of the senior bureaucracy will not occur, I have concluded that I am simply not prepared to waste the next four years of my life.”

“I have voted Labor most of my life and I chose to join the Commission under a Labor government,” he wrote at the time.

“However, having seen that government from the inside, I have no appetite to deal with it for another four years.”

Lucas said he had set aside a contingency in the June State Budget in the expectation SA Water asset values would be cut, leading to lower consumer bills and a subsequent hit to government revenue.

He expected a combination of the report findings and lower interest rates to lead to reduced bills when ESCOSA sets water prices for July 2020-24, but could not predict by how much.

Opposition treasury spokesman Stephen Mullighan hit out at Lucas for criticising Labor while taking no action to reduce water bills before next July.

“By focusing on only one part of the determination made by the former Labor government – a determination which saw water bills decrease by over 5 per cent and deliver some relief to water customers – he has failed to outline what his government will do,’” he told reporters this morning.

Mullighan accused Lucas of a “political stunt”, claiming the Treasurer had told Owens not to deliver his report before the State Budget in June so its findings didn’t have to be factored in.

“Rob Lucas is happy to complain about a water price reduction delivered under the former Labor government, but he’s not so keen to talk about the more than $50 million extra he’s taking out of SA Water this financial year and to increase next financial year, and the impact that’s having on SA Water’s finances and ultimately SA Water bills,” he said.

When asked if Lew Owens had also engaged in a political stunt with his report accusing Labor of overcooking SA Water’s value, Mullighan said the report made it clear that “determinations that were made by the former Labor government six years ago led to a real reduction in people’s water bills”.

“(Lucas) is criticising the former Labor government for taking decisions which brought down water prices, and yet in the very next breath, he’s taking an extra $55 million a year out of SA Water – that’s money that would much better be used lining the pockets of South Australians, particularly as they are struggling with a 500 million dollar increase in taxes, fees and charges from the recent state budget,” he said.

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