Central Highlands Water to secure regional water resources and wastewater services by investing $368 million over 2008-2013 Water Plan period

Central Highlands Water today released the Exposure Draft of the 2008-2013 Water Plan, highlighting a record investment program of $368 million in the 5-year period in order to secure the region’s water supplies and wastewater services.

The Exposure Draft of the Water Plan details $140 million of direct capital investment, with $41 million committed to new projects across the Central Highlands region designed to help communities cope with the crippling drought.  A further $228 million will be spent on operating and maintaining new and existing infrastructure.

Managing Director, Mr Neil Brennan, said that it was important that the community could have confidence in the security and sustainability of water supplies and wastewater services.

“This investment program will enable businesses right across the region to invest in the future with confidence, knowing that water resources will be secure,” said Mr Brennan.

“We consulted widely with our communities and stakeholders during 2006 in order to understand what is important to our region in this challenging period of record drought and climate uncertainty,” said Mr Brennan.

“As a result of that work we developed a 50-year Water Supply Demand Strategy for each of the 15 systems we manage.  This Water Plan is now all about the process of starting to implement these individual strategies. 

“In addition we heard that customers understand the need to pay more to improve long-term water security while preferring pricing structures that also encourage and reward water conservation.  Key new investments include:

- $14 million to secure water supplies, including the completion of the $180 million Ballarat Link of the Goldfields Superpipe that will improve water security for 97,000 residents across the Central Highlands region in the centres of Ballarat, Ballan, Creswick, Smythesdale and Skipton. This includes implementing water supply projects consistent with the 50-year Water Supply-Management Strategies such as: Beaufort - Troy’s Reservoir inter-connection, Daylesford - supply augmentation and Maryborough - groundwater supply.  This investment is in addition to the $15.1 million already committed during the current Water Plan period in order to secure water supplies.

- $14 million to implement Country Town Sewer Projects for Blackwood, Gordon, Smythesdale and Waubra.  This investment is in addition to the $5.3 million already committed to this project.

- $10 million for completion of the Ballarat North Wastewater Reuse scheme (including Creswick Wastewater Treatment Plant) which will initially provide up to 800 million litres of reclaimed water each year, reducing pressure on the potable drinking water supply.  This investment is in addition to the $36.7 million already committed to this project.

- $3 million to implement the Country Town Water Improvement Projects (Avoca and Landsborough). This investment is in addition to the $5.1 million already committed to this project.

Central Highlands Water has modelled two pricing options in order to raise the required revenue to implement the planned improvements.  The Essential Services Commission’s (ESC) regulatory ‘building block’ pricing model indicates real price increases averaging 11.4% for each of the five years, resulting in an overall average price increase of 71% after the five-year period.  However, Central Highlands Water has developed an option that results in a lower cost impact to customers after the 5-year period of just 55% increase.  This pricing option has an average increase of 25% in the first year, followed by four years of 5.5% average price increases.

For a customer receiving both water and wastewater services in the Ballarat & District using 150kL per year the standard pricing model results in a price increase from $715 currently to $1167 in Year 5, while the alternative option sees price increase from $715 currently to $1058 in Year 5, representing a saving of $110 per year from the standard pricing approach in 2013.  (CPI increases excluded).

If Federal Government funding of $90 million is not received and Central Highlands Water must borrow the funds to complete the Ballarat Link of the Goldfields Superpipe, the impact on customer prices will be substantial.  Prices would increase for the average residential customer by approximately $180 by year 2013.  The impact for a major commercial customer using 100 ML per year would be approximately $25,000 per year.

The proposed pricing model also incorporates three price steps that increase with the volume of water used in order to encourage and reward water conservation.  The steps are 0-150 kL of water used per year (charged at the base rate), 150-300 kL (base rate + 20% premium) and above 300 kL (base rate + 50% premium).  Mr Brennan said that 65% of customers would be in the lowest pricing step based on usage patterns.  The pricing model also simplifies water volume prices which will have only two rates based upon the water quality, either potable (drinking) water rate and a lower rate for non-potable water supplies.  The pricing models also realign water and wastewater fixed access fees, to better reflect the actual cost of providing each service.  Non-residential customers would be charged at the base rate due to the non-discretionary nature of the majority of the water use in this customer sector.

Mr Brennan said that the pricing structure would result in a considerably more equitable approach to raising revenue from the Central Highlands region for the benefit of the entire Central Highlands region.

“However we are aware that not all customers will support the increase prices for services across the region and we are in the process of improving our customer assistance programs to help protect vulnerable customers.  These will be based upon industry best practice and include additional support services,” said Mr Brennan.

Mr Brennan said that Central Highlands Water will write to every customer in the region with a summary of the Exposure Draft and was keen to receive their feedback on their preferred pricing model before the end of August.  Copies of the full Exposure Draft of the 2008-2013 Water Plan are available from the Central Highlands Water website at www.chw.net.au/2008WaterPlan or by calling Central Highlands Water on 5320 311.  Central Highlands Water will consider the community’s feedback prior to submitting the Draft Water Plan to the ESC in October.  A final decision from the ESC is expected in May next year and the 2008-2013 Water Plan will come into effect from 1 July 2008.