$130m bungle ‘could cause water bill pain’

By John Van Klaveren
MORE rates pain could be in the pipeline after a $130 million bungle at Barwon Water, Essential Services Commission has warned.
The commission said Barwon Water would need a “strong” case to seek further price rises to cover the unfunded infrastructure spending.
Barwon Water failed to include the $130 million as part of a five-year plan in an application to the commission for price rises.
The commission discovered the bungle when granting Barwon Water draft approval for a three per cent rise next financial year to pay for a Melbourne-Geelong pipeline.
The $15 rise on average residential bills would be on top of a previously approved hike of seven per cent. The increase equates to $127 for average business customers and $11 for tenants.
The commission said Barwon Water exceeded price approval benchmarks by around $130 million.
“This expenditure exceeding the benchmark combined with Barwon Water’s forecast operating expenditure may produce an upward impact on its prices in the next regulatory period,” the commission said.
“We have not assessed the prudence and efficiency of Barwon Water’s actual or forecast expenditure.
“This expenditure will require strong justification in Barwon Water’s water plan should it seek to recover these costs through customer prices in the next regulatory period.
“Nothing in this draft decision should be taken as our approval or otherwise of the prudence or efficiency of expenditure undertaken or planned by Barwon Water or taken as any approval of its prices for the next regulatory period.”
Chairman Michael King said Barwon Water spent the $130 million on infrastruture projects including Armstrong Creek, Black Rock treatment plant and Torquay.
The expenditure should have been included in Barwon Water’s five-year plan, Mr King said.
Barwon Water was as yet unable to determine whether it would have to scale back other projects, he said.
“We have a number of projects coming up for determination over the next six months and we’ll make those decisions as they arrive.
“As a board we are aware of the cost-of-living pressures in the community and our focus is to manage debt and keep rate rises to a minimum.
“We have commissioned an efficiency and effectiveness report to look at all our costs.”
Mr King said government grants of $25.5 million had partially offset the unfunded spending.
State Water Minister Peter Walsh said Geelong families would suffer price increases to pay for the mistakes of the previous Labor government.