University’s Chair of Engineering shakes up water pricing in NSW

Associate Professor Peter Coombes, the University’s Chair of Engineering, along with colleagues Michael Smit and Associate Professor Michael Barry analysed the impact of different costs and charges for efficient water management.

“We found the charges were not only inequitable, they punish people who save water,” Professor Coombes said. “Water charges have been split between a fixed charge and a usage charge. The larger part of this is the fixed charge that most people don’t even notice.

“Even if you consume a little, you still pay a large fixed charge, which disadvantages low-income households in particular. Those people who use less water don’t get the real savings as they still have to pay all of the fixed charges. Water savers pay more for each litre they use than those who use a lot of water.”

Professor Coombes, Mr Smit and Professor Barry presented their submission to the NSW watchdog IPART (Independent Pricing and Regulatory Tribunal) in April 2020 based on papers they have published (details at end).  

The change to water pricing for both residential and commercial supply in Sydney, parts of NSW and the Hunter region come into effect on July 1.

Importantly it includes a slashing of fixed water service charges.

“Ninety per cent of charges are now based on usage, not fixed charges. This is an exciting and wonderful outcome both for consumers and the environment,” said Professor Coombes who points to a 2008 COAG (Council of Australian Governments) national urban planning principle that encourages price structures to signal the full value of finite water resources to encourage efficient water use by consumers, business and industry.

Professor Coombes has advised commonwealth ministers and state premiers on water reform and policy for the past three decades in numerous roles including Chief Water Scientist in the Victorian government and member of water advisory panel of the Prime Minister’s Science, Engineering and Innovation Council. 

He and his colleagues also made some important findings on the spatial cost of water in their submission to IPART. Spatial cost is the distribution of prices across geographically distinct locations.

“It costs more to pump water to the top of the Blue Mountains than it does to pump it to Manly. But Sydney Water assumes that the costs are the same all over Greater Sydney. This means people in Manly are subsidising the cost of water in the Blue Mountains. That subsidy is very bad for competition," Professor Coombes said.

“Other sources of water, like rainwater harvesting which has environmental as well as hip pocket benefits, are unfairly disadvantaged and households are paying more than they should for the service.

“This principle was partly recognised by IPART which documented the spatial variation in wastewater costs across Sydney, from $15.98 per kilolitre to $0.80 per kilolitre. That is a great breakthrough.”

Professor Coombes praised IPART’s determination to introduce drought pricing for Sydney Water.

“This will see water charges rising from $2.35 to $3.18 per kilolitre when the storage levels fall below 60%. This is designed to change consumer behaviour in times of crisis and is likely to set a precedent for the whole of Australia,” he said.
 
 
Papers
Coombes P. J., Barry, M. E., Smit, M., Bottom up systems analysis of market mechanisms for pricing water and sewage services. OzWater19, Australian Water Association, Melbourne, 2019
Coombes P. J., Barry, M. E., Smit, M., Bottom up systems analysis of urban water resources and market mechanisms for pricing water and sewage services. Hydrology and Water Resources Symposium (HWRS 2018): Water and Communities, Engineers Australia, Melbourne, Australia, 2018