NSW government cost recovery decision to increase state water charges

26 June 2014

CLARIFICATION: This news release was amended on 27 June 2014 to clarify the relationship between increased State Water charges and the Murray-Darling Basin Authority (MDBA).

The increased fees for State Water customers in the Murray and Murrumbidgee valleys are a result of the NSW Government decision to increase the revenue requirement on State Water, to be recovered from its customers, to fund the user share of the NSW Government’s contribution to the MDBA’s joint programs. These joint programs, principally River Murray Water operations, are managed by the MDBA on behalf of Basin States. 

The MDBA does not impose charges on irrigators, State Water Corporation or the NSW Government.

The ACCC also notes the MDBA have stated that the cost of running the River Murray system and maintaining its assets (dams and weirs) has remained about the same over recent years.

The ACCC’s decision on State Water’s charges did not review the MDBA’s costs.

The Australian Competition and Consumer Commission (ACCC) has released its Final Decision on pricing for bulk water supplied by the State Water Corporation in the New South Wales Murray-Darling Basin (MDB) in the 2014-17 period. The final decision incorporates the increased charges that the NSW Government intends to recover from irrigators through State Water, to fund the NSW Government's contribution to the joint programs managed by the Murray Darling Basin Authority ('MDBA Costs').

The decision will increase State Water bills for Murray and Murrumbidgee customers. Bills will fall for the majority of customers in other valleys. The ACCC’s Final Decision adopts lower financing costs, investment spending and operating costs than proposed by State Water. Without the higher irrigator contribution to the MDBA, most irrigators would have benefited from lower bills. The tables attached compare bulk water bills under the ACCC’s Final Decision with current bills.

For the Peel Valley, State Water proposed substantial price increases as it moves to full cost recovery. To aid the transition and limit price shocks the ACCC has set a 10% cap on annual increases in charges in the Peel Valley.

One of State Water’s proposals was to increase fixed charges in all valleys to an 80/20 fixed/variable ratio. The ACCC has rejected this proposal because of the financial burden of high fixed charges on irrigators during drought periods. The ACCC retained the current 40/60 fixed/variable charges ratio consistent with the ACCC’s draft decision.

“Without the higher irrigator contribution to the MDBA costs, most irrigators would have benefited from lower bills. On 30 May this year the NSW government advised the ACCC that it will increase Murray Darling Basin Authority (MDBA) cost recovery from 1 July 2014,” ACCC Chairman Rod Sims said.

“These costs will be recovered from Murray and Murrumbidgee irrigators through higher State Water charges.”

“The NSW government decision will increase Murray and Murrumbidgee irrigators’ contributions to MDBA costs by around 75% in 2014-15. The result is that water bills will increase by around 24% for Murray and 5% for Murrumbidgee general security irrigators in 2014-15. If the NSW government had maintained MDBA cost recovery at current levels, water bills would have fallen by 7% and 3% for those customers.”

The ACCC recognises that Murray and Murrumbidgee irrigators may want to discuss the impact of the increase in charges with the NSW government. Should the NSW Government decide to change the level of MDBA costs it recovers through the irrigators, any savings will be passed onto to irrigators in the form of lower State Water charges in those valleys.

The ACCC’s Final Decision follows a 12 month public review process during which the ACCC received 71 public submissions, met with numerous stakeholders and released a draft decision for comment in March 2014. Prior to receiving State Water’s proposal in July 2014 the ACCC held 8 public meetings across regional NSW to discuss the ACCC’s forthcoming review.

The decision is available at: State waters regulated charges - 2014-17 review

State Water Bill analysis - Effect of ACCC final decision and irrigators' contribution to MDBA and Border Rivers Commission (BRC) costs 

Percentage change in bills from current charges
(2014-15 over 2013-14, in real $2013-14)
  With irrigators' contribution to MDBA/BRC costs constant (at 2013-14 levels) With new irrigators' contribution to MDBA/BRC costs for 2014-15
General security users
Border 5% 0%
Gwydir -13% -14%
Namoi -8% -10%
Peel 10% 10%
Lachlan -10% -10%
Macquarie -8% -8%
Murray -7% 24%
Murrumbidgee -3% 5%
High security users
Border -5% -9%
Gwydir -8% -9%
Namoi -1% -2%
Peel 10% 10%
Lachlan 0% 0%
Macquarie 4% 3%
Murray 3% 38%
Murrumbidgee 5% 13%

 

Release number: 
166/14
Media enquiries: 
Media team - 1300 138 917

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