The recent recommendation from the Economic Regulatory Authority (Western Australia’s economic regulator) and statements from the WA Government regarding Water Corporation raises questions around who is driving the outcomes for Water Corporation’s customers.
The WA Government increased water and wastewater prices for Water Corporation’s customers by 6% for this financial year (2017/18) – more than double any other price increase for a metropolitan water utility in Australia. The Government states that this decision was based on the cost to serve and the impact of the pricing on customers; however, little supporting detail was provided.
This separation of pricing responsibility and lack of transparency regarding pricing decisions for customers highlights some of the governance issues that have previously been pointed out by organisations such as Infrastructure Australia and the Water Services Association of Australia. Further to this, it is likely to inhibit the Water Corporation’s ability to effectively engage with its customers and develop a meaningful, long-term customer relationship.
Throughout Australia (and internationally), there is an increasing focus on customer engagement within regulatory frameworks to ensure that the regulated utilities are providing services that are valued by customers and at prices that customers consider fair and reasonable.
The WA Government has indicated that it is unlikely to act on some of the ERA recommendations, including:
- That the prices for metropolitan areas (Perth) are too high
- That the tariff structure for the recovery of revenue is inefficient
- The Government responded to this by stating that addressing these structural issues would be unfair and would benefit people in affluent suburbs. While this may be true for affluent Perth suburbs, the position does not consider those in non-affluent suburbs who are negatively impacted by the current tariff structure or non-affluent households living in more affluent suburbs.
The current situation penalises many of those non-affluent Perth households who may be no better off than people in regional areas that, while they may have lower salaries, are also likely to have lower living costs. This position by the WA Government assumes that any change to the status quo is inequitable, without considering how inequitable the current situation may be.
There are a number of options that can be implemented to address these issues of governance and pricing, however with each of these options there are likely to be difficult decisions and will require considerable time and resources to implement. Any option that is adopted would need to consider the long-term interests of customers. There will also likely need to be transitional arrangements over a period of time. Although challenging, addressing these issues is possible and reflects the direction of similar entities elsewhere in Australia and overseas.
This insight was written in response to the article ‘WA households ripped off in water bills’ by Daniel Mercer which first appeared on perthnow.com.au on 15 February 2018.