IS THIS THE END FOR ALLCONNEX?
Written on the 7 April 2011
WATER retailer Allconnex could be washed off the map following a decision by Queensland Premier Anna Bligh to ‘end the blame game’ over pricing.
The Premier imposed measures to force local governments to accept responsibility for water pricing.
"Enough is enough. The blame game on water ends today,” she says.
The changes to the South-East Queensland Water (Distribution and Retail Restructuring) Act 2009, announced in Parliament yesterday, will also cap distribution and retail annual water and sewerage price increases at CPI, which currently stands at 2.7 per cent.
"For the community on the Gold Coast where Allconnex was proposing a price increase in the next financial year of $208 for a typical household. The price cap have announced today will mean the maximum increase to the average household from the council owned entity will be $83 - a reduction of $125,” says Bligh.
"The government has decided to repeal the sections of the South-East Queensland Water (Distribution and Retail Restructuring) Act 2009 which require the distribution and retail entities.
"This means that Councils who wish to return to their previous structure will be able to do that and those that wish to retain the current entities can also do so.
"It means councils will be solely responsible for the price of water charged to their ratepayers and it means that they will no longer able to justify the charade of blaming the legislation, the utilities they established or the boards they appointed for the price gouging."
Allconnex Water had no advance notice of the announcement and will now consult with its three major shareholders – Gold Coast City Council (GCCC), Logan Shire and Redlands.
CEO Kim Wood (pictured) says given the Government’s decision, the statutory authority will now consult with the three councils.
“Until we have this discussion and establish the three Council’s intentions, it is business as usual for Allconnex,” he says.
In February Allconnex signed an eight-year lease across five levels in The Rocket at Robina totalling 3533 sq m. Spaces at The Rocket are leasing from $375 per square metre.
More than 260 staff occupy the premises in a move that Wood says would position the business as the key player in the management of South East Queensland’s water supply.
GCCC last month rejected a 15 per cent increase for water, where Allconnex increased charges by 2.6 per cent and the wastewater service charge by 2.5 per cent.
The average Gold Coast residential customer using 200 kilolitres per annum would pay around $4.00 a week more for water and wastewater. The prices were to be finalised by June 30.
Gold Coast Mayor Ron Clarke says the Premier’s ‘policy on the run’ announcement had left out the root cause of price increases – bulk water.
“The ratepayers of the Gold Coast should not be expected to pay a cent for this debacle which started with the State Government forcing water reform on councils – and has continued today with the Premier’s announcement," he says.
“The Premier has stated that council water price increases and their fixed charges will be capped at 2.7 per cent until July 2013 – but only these council charges.
“The State’s bulk water prices will continue to rise as they have done for the last four years and will continue to escalate by around 20 per cent per annum, every year until 2017-18.
“SEQ residents are today paying two to three times more for water than most major cities in the world and now, residents are being caught up in a political game between the ALP and LNP.
“We all know that bulk water increases are the major reason for the outrageous water prices that are of such concern to residents."
Mayor Clarke says it’s too early to speculate on the detail of the Premier’s announcement.
“Council CEO Dale Dickson will bring a report to Council next week to detail options on how to manage this latest announcement and what impacts it will have on the draft 2011-2012 budget and what avenues are open to Council regarding the possible dismantling of Allconnex Water,” he says.
“If we can dismantle Allconnex which is what this Council has been advocating, that’s great but ratepayers need to understand that this is only a minor component of the overall problem of escalating water prices."
The decision is a significant Bligh salvo following the appointment of former Brisbane lord mayor Campbell Newman to lead the LNP. Newman has also advocated a similar scheme.
Following today’s surprise by the Premier, the State Government will continue to produce and treat the bulk water that is delivered to the water utilities.
"We will also continue to operate the water grid that shares water across the SEQ region and gives water security to all its citizens," says Bligh.
"What this announcement means is that SEQ Councils will be responsible for how water is distributed and retailed and how much they charge. These decisions will rest solely with councils.
"It will be open to SEQ councils to opt out of their utility company and operate distribution and retail as a business unit of their council and set the price that way.
"Equally it will be open to councils to opt to retain the utilities in their current form with the councils still holding absolute power to set the price of water bills.
"I hope it means that the dishonesty and confusion that is being peddled to people in the South East will stop once and for all."
The Premier accepted that councils have ‘many matters’ impacting ratepayers to take into consideration accepted it may take time for them to adapt to the new arrangements.
"But ratepayers are entitled to water pricing certainty during this period, and for this reason the Government will legislate to limit the annual increases in water and sewage costs to CPI, which currently stands at 2.7 per cent," she says.
Bligh says that in 2004 when South East Queensland was entering into the worst drought in over a century local Governments across the region had control of planning, building and maintaining water infrastructure.
"Here in South East Queensland we live in one of the fastest growing regions in the world and it had become clear that we needed a plan to secure water for more than 2.5 million people who call the South East home," she says.
"It is a fact that local Governments had been making revenue from water for decades. It is also a fact that they had shirked their responsibility to reinvest that revenue in infrastructure.
"Not one major dam, not one new water storage facility and not one new water manufacturing water source has been constructed by Local Government in more than 20 years."
As the drought bore down on the South East, the Government discovered a system of council-owned pipes that had been so poorly maintained that they were losing 57 million litres of water a day on leaks alone.
The Government had to spend $33 million to fix these pipes. The Government also invested over $220 million in rebates and saw rainwater tanks go from negligible levels to over 1 in 5 homes in SEQ and implemented the Home Waterwise program to over 220,000 homes at a cost of $40 million.
Local Government had no plan to secure water supply and State agencies found themselves in the position of trying to persuade them to participate in working groups.
"It was under these circumstances that the State Government put forward a plan to secure water supply for the South East Queensland," says Bligh.
"That meant building infrastructure, to produce water when the rainfall stopped and we did that with a desalination plant that can produce 125 ML of water every day and which proved so vital during the recent natural disasters.
"It meant building infrastructure to store water and we did that with Wyaralong Dam and the Western Corridor Recycled Water Project to supply power stations and industrial customers.
"And it meant building infrastructure to move water to where it is needed and we did that with a 400Km network of pipes between Brisbane, Gold Coast and Sunshine Coast that can move 455 ML water across the region daily.
"This government stepped in to build this infrastructure at a cost of $7 billion - a massive investment in the future of this State because we needed to secure the future of this region and the safety and lifestyle of its citizens."
Bligh says Queenslanders now had the right to now question whether the initial decision to establish the water entities under this structure was the correct decision.
"Working with South East Councils and implementing their preferred structure placed a great deal of responsibility on councils to protect ratepayers from massive price hikes," she says.
"Clearly this has not happened, and I was wrong to believe that Councils would take the necessary actions to protect ratepayers. As I have listened to ratepayers across the South East they have said enough is enough and I agree. The blame game on water must end today."