WATER AND PUBLIC POLICY

It was intended by those drafting the Constitution of the Commonwealth of Australia at the close of the 19^th century that natural resource policy, including that relating to water, would remain a responsibility of the States.

In fact, one section of the Constitution specifically restricts the role of the Commonwealth in relation to water.

Towards the close of the 20^th century that remained largely the case, although the legal position has become less clear as a result of decisions by the High Court.

However, the Commonwealth Government has the capacity to indirectly influence any area of public policy in Australia.

In relation to water, the Commonwealth has acquired an important role in policy development in recent years.

Given the increasing commercialisation and private sector involvement in the water industry, the option remains for the Commonwealth to explore the extent of its direct powers under the Constitution. However, the path being followed in the development of national policy and a regulatory framework in this area, as in others, is one of cooperation with the State and Territory governments.

In 1994 the Council of Australian Governments (COAG) agreed on a Water Reform Agenda to work towards reform in the water industry at the national level. More recently, in 2004, this was succeeded by the formation of the National Water Commission and adoption of the National Water Initiative (NWI). The NWI represents the Australian Government's and state and territory governments' shared commitment to water reform in recognition of:

The National Water Quality Management Strategy is also a national initiative aimed at developing guidelines to assist regulation of public health and the environment. Australian Drinking Water Guidelines fits within the umbrella of the National Water Quality Management Strategy.

At the level of the individual States and Territories, commercial pressures from within Australia and from overseas have also produced changes in the way water services are delivered.

Commercialisation and corporatisation of many Australian urban water businesses has led to management responsibilities being vested in commercial boards, in contrast to earlier arrangements where services were provided directly by an arm of government. Now the role of board members is to provide significant commercial skill and focus, as well as to buffer the organisation from extraneous political involvement.

Competition for inputs to the water industry in Australia is well developed with outsourcing and Build Own Operate (BOO) and Transfer (BOOT) contracts for major treatment plants completed and currently in operation.

Another recent development in the water industry in Australia has been the growing involvement of large international water companies.

In Queensland, New South Wales and Tasmania, local government has long had a key role in the provision of water services. This remains the case. In the other states and territories, various other arrangements have evolved.

In Sydney, a catchment authority (Sydney Catchment Authority) has been established to work with the government-owned corporation that formerly had total responsibility for the city’s water supply (Sydney Water Corporation) but remains responsible for water distribution and wastewater services. Sydney Water Corporation services a population of four million.

In Melbourne, three government-owned companies (City West Water Ltd., South East Water Ltd., and Yarra Valley Water Ltd.) are the retailers and the wholesaler is a government-owned corporation (Melbourne Water Corporation). The wholesaler also controls the catchment for most of its supply.

In Adelaide, a privately owned water company (United Water International Pty. Ltd.) provides water services under an agreement with the government authority (South Australian Water Corporation).

The Water Corporation is a government-owned corporation that provides urban water services in Perth, and in most of Western Australia.

In Canberra, and the ACT generally, a public-private multi-utility partnership now provides services (ActewAGL).

A government-owned multi-utility (Power and Water Authority) provides services to the larger and less remote communities in the Northern Territory, including Alice Springs and Darwin.

Brisbane is an example of local government in a major Australian city providing water services (Brisbane City Council). Bulk water is supplied to Brisbane and neighbouring councils by South East Queensland Water Corporation.

Most organisations providing urban water services in Australia have experienced some degree of structural reform in recent years, which has clarified accountabilities by separating policy, regulatory and commercial (operational) functions. The accepted wisdom is that this separation provides urban water businesses with clear commercial goals of customer service, while safeguarding public health and achieving environmental compliance in a sound business operation, free of other conflicting objectives.

The COAG Water Reform Agenda, agreed in 1994, adopted the principle of public consultation by government agencies and service providers when change and/or new initiatives were being contemplated involving water resources.

Subsequently the Australian Drinking Water Guidelines emphasised the right of communities to participate in the development of policies relating to their water supply.

The Guidelines also provide advice on how customers should be involved in considering options for effective and acceptable monitoring and reporting on performance of their water supply, and on the frequency of such reporting.

The COAG Water Reform Agenda also mentions the need for the public to be informed of the cause and effect relationship between infrastructure performance, standards of service and related costs, with a view to promoting levels of service that represent the best value for money to the community.

In Australia, most water businesses have changed from a charging system based largely on property value to one based on actual water consumed (a user-pays policy). This reflects the major change in the philosophy contained in the COAG Water Reform Agenda.

Hunter Water in the Newcastle area of New South Wales pioneered this policy in Australia in the 1980s and reported a fall in household water consumption of 30 per cent over previous trends. Even before the COAG decision, this experience encouraged other water authorities to adopt the policy with a view to managing demand for water.

The user-pays system gives the right economic signals to consumers about the real value of this dwindling resource and encourages people to make more efficient use of water.

However, low-income households in Australia spend in proportional terms much more on utility services than high-income households. The implication is that increases in the price of utility services, if not accompanied by other compensation, will have a regressive and disproportionately negative impact on low-income households. This is an issue for governments to consider.

Currently in Australia, the COAG-initiated industry reforms have led to water-pricing structures based on a tariff comprising:

• A fixed charge reflecting the cost of the service provision.
• A variable charge based on the volume of water purchased.

The term "demand management" can be defined as any regulatory, policy, technical, service or commercial interaction with customers or consumers that enables volumes to be managed to minimise economic costs and environmental impacts to society.

Demand management measures to ensure consumers use less water have included advertising, education, pricing and appliance redesign.

Some current approaches to demand management include:

• Improved information for customers on water-saving devices.
• Promotion of the National Water Conservation Labelling (AAA) Scheme.
• Information for homeowners and gardeners on more efficient watering practices and irrigation systems.
• Provision of information on low water-use gardens, plants and shrubs.
• More efficient watering of public open space.
• Integrated and coordinated planning involving all agencies with an interest in water-related issues.
• Water and energy efficiency in the planning, design and construction of homes and buildings.

Encouraging the use of alternatives to conventional surface and groundwater harvesting can also be regarded as a form of demand management. These alternatives include stormwater, effluent reuse, rainwater tanks and greywater use. As always, pricing plays an important part in weighing up these options. How do the costs of these alternative sources of water compare with the construction of new reservoirs? Producing a non-potable water supply (for example, garden and fire use only) from some of the above sources involves significant treatment and cost.

Some water businesses in Australia have opted for restrictions on water use to conserve water supplies and minimise capital expenditure.

Restrictions can enable construction of expensive major storage reservoirs to be deferred for many years. By developing a series of restriction levels, depending on remaining storage capacity, the maximum daily consumption can be curbed during drought periods.

Following a community consultation process, community endorsement should be obtained for such a policy.

Several water authorities in very hot and dry regions of Australia have adopted a cooperative policy with consumers to restrict peak water usage on very hot days or to restrict garden watering to periods in which it is more effective.