Northern Territory Second Reading Speeches

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WATER SUPPLY AND SEWERAGE SERVICES BILL 2000

Mr PALMER (Primary Industry and Fisheries): Mr Speaker, on behalf of and at the request of the Treasurer, I move that the bill now be read a second time.

The purpose of the bill is to replace the current Water Supply and Sewerage Act in order to improve the regulatory arrangements that apply to water supply and sewerage services in the Northern Territory. In particular the bill establishes the framework necessary to ensure appropriate regulation of the monopoly provision of these services and to separate regulatory functions from service provision.

The changes represent a further instalment in the government’s response to the comprehensive review of the Power and Water Authority undertaken in 1998. The electricity reforms were implemented by a passage of the Electricity Reform Act and related legislation and establishment of the Utilities Commission early this year.

Through the combination of these reforms the government is seeking to provide a long term industry and a regulatory framework which ensures that PAWA concentrates on commercial objectives. This is essential if PAWA is to achieve their $30m per annum financial improvement target, which the government has set for it.

In addition, the framework will allow more appropriate scrutiny of PAWA by the government by, for example, requiring better definition of service standards and monitoring of compliance. In turn this should help ensure that improvements and efficiency at PAWA do not come about at the expense of appropriate standards of service for Territorians.

The reform of the regulatory arrangements apply to the water supply and sewerage services. It will also address 2 of the Territory’s national reform commitments. They are the review of restrictions on competition in Territory legislation under national competition policy and the institutional reform requirements of the Council of Australian Government’s strategic framework for water reform. Both sets of commitments are linked to the Territory’s continued receipt of competition payments from the Commonwealth. These are worth around $4.7m this financial year and over $7m per annum from 2001-2002. To ensure the government meets its commitments, a review of the legislation was recently conducted by independent consultants. The bill being introduced today also responds to that review.

The Water Supply and Sewerage Services Bill is essentially an amalgam of relevant provisions of the Electricity Reform Act, suitably modified for the water supply and sewerage industry and the existing Water Supply And Sewerage Act. The key elements of the new arrangements involve retention of the single supplier model for provision of water supply and sewerage services in defined geographical areas in the Territory, the introduction of a requirement for the single supplier of water and sewerage services within an area to hold the licence to operate issued by the Utilities Commission, the transfer of regulatory functions including the price regulation related to water and sewerage services in PAWA, and the Minister for Essential Services to the minister responsible for the Utilities Commission that is the regulatory minister, currently the Treasurer. The establishment of a requirement for a licensed supplier of water and sewerage services to comply with the service and supply conditions to be approved by the regulatory minister and, in future, the adoption by the regulatory minister of procedures for regulating the prices of water and sewerage services provided by PAWA, broadly equivalent to those now in operation with respect to non contestable electricity customers under the electricity reform act.

I’ll address each of these elements in turn.

Retention of the single supplier model. The review of the legislation recently conducted for the government concluded that there is an overall public benefit from the retention of restrictions on competition in the supply of water and sewerage services. The natural monopoly characteristics and economies of scale of these industries mean that it is not realistic to expect competitive provision of most water and sewerage services. Importantly there is no evidence that these restrictions are creating adverse impacts on the Northern Territory economy. Most parties consulted during the review supported the single provider model and none of the alternatives identified provided a realistic approach which would be equally effective in achieving the objectives of the legislation.

The new legislation will, however, better define the limits of PAWAs monopoly role. In addition the duty of PAWA as the monopoly service provided to most customers in the Territory will be strengthened by, for example, requiring PAWA to develop customer contracts in order to offset those monopoly rights. Responsibility for regulatory type functions, currently assigned to PAWA, will be transferred to appropriate agencies. To engender the confidence of both PAWA and customers, regulatory transparency will be achieved by codifying the regulatory principals and frameworks to the maximum extent appropriate and regulatory independence will be achieved in the main by separating policy making and administrative functions. The government will establish the broad regulatory principals and framework and so retain responsibility for regulatory policy. This will be achieved through the various functions assigned to the regulatory minister, and the Utilities Commission will be charged with the administration of these principals and frameworks.

Licences to supply. The principal new regulatory instrument will be licences to be issued under the new water supply and sewerage services act. These will be similar to the licences currently issued in the electricity supply industry. The provision of water supply and sewerage services will be licensed by function. Licences will be issued by the Utilities Commission for defined geographical areas in the Territory. This will give the licence to provide it within an area, generally PAWA, the powers necessary, for example, to construct new infrastructure and to levy charges in the relevant area. The Utilities Commission may only grant one water supply licence in any water supply area. Similarly, it may only grant one sewerage service licence in any sewerage services licence area.

PAWA will be licensed to deliver water and sewerage services within areas, including aboriginal communities it currently services or could service in the foreseeable future. Similar to the arrangements applying to electricity supply, a flexible light handed approach will be adopted to licensing requirements in areas currently serviced by providers other than PAWA such as mining companies. The Utilities Commission with the approval of the regulatory minister will also be able to grant exemptions or partial exemptions from licensing requirements. Licensing will ensure a focus and commitment to customers. This will be achieved through a requirement for customer contracts and processes for complaint resolution. A licensee will be obliged to publish customer contracts setting out the rights and responsibilities of customers and providing transparent mechanisms for customers to raise complaints and for resolving disputes.

The bill provides for parties who are satisfied with the decision of the Utilities Commission in relation to licensing to have that decision reviewed initially by the commission. There will be penalties for contravention of a licence condition. A significant contravention will render the licensee liable to a maximum penalty of $250 000. And to the possible suspension or cancellation of its licence.

Regulation of service standards. Licences issued by the Utilities Commission will provide clarity as to the performance standards which licensees are required to meet. The standards included in licenses will be subject to approval by the regulatory minister. Initially license conditions will include the requirement that the quality and reliability of supply must be maintained, at least equal to current standards or as provided for in service contracts. Over time the Utilities Commission is to recommend to the regulatory minister where improved service standards would be appropriate. These standards are to be developed through a transparent process in consultation with industry and consumer representatives. They will recognise the trade-off between cost and service standards and the willingness of consumers to pay. Responsibility for overall monitoring of compliance of the service standards required under a licence will rest with the Utilities Commission. However, other agencies will have responsibility for overseeing specific outputs. For example, the Department of Lands Planning and Environment will continue to regulate water obstruction and effluent discharge.

The licensee will be obliged to report on its performance against key indicators on a routine basis. The adequacy of that compliance may be further assessed through the use of operational audits. Whilst the Utilities Commission is to be responsible for monitoring, the licensee is responsible for publishing information on actual performance against service standards included in the licence and against the supplier’s customers charter. The Utilities Commission will also be responsible for enforcing penalties for failing to meet licence conditions.

Price regulation. Under the bill, responsibility for prices oversight of the water and sewerage industries in the Territory will reside with the regulatory minister rather than the Minister for Essential Services. As is already the case in the non contestable segment of the electricity market, price control for water and sewerage services will be achieved by the regulatory minister periodically issuing a pricing order. The pricing order will specify tariffs and future price paths to apply to final customers and the methodologies for determining certain charges where it would not be appropriate to assess the individual charges themselves, such as for developer charges and trade waste charges. The licensee will have the authority to charge customers in line with these terms. The role of the Utilities Commission in this area will be an advisory one. The commission will also provide assessments on matters such as insuring that PAWA has correctly implemented the pricing determinations and the costing of community service obligations. Importantly, the government’s commitment to uniform tariffs across the Territory will be made binding through the licence conditions.

Other issues. The bill retains a range of provisions from the existing Water Supply and Sewerage Act, though, where necessary, these have been reworked to apply generically to licensees rather than specifically to PAWA. For example, the bill provides powers to licensees to carry out certain works and to enter a property to read meters or disconnect services. Similarly, the bill retains offences from the existing act such as for tampering with the property of a licensee, connections that have not been approved and building over infrastructure. Also, the relevant sections of the existing act that reflect the previous transfer of the regulation of plumbing standards from PAWA to the Department of Lands, Planning and Environment will be retained. When plumbing standards are adequately regulated by the Building Act, the relevant provisions of the Water Supply and Sewerage legislation will be able to be repealed.

There are two other important issues which deserve a brief mention – trade waste and infrastructure management, and in particular how these will be accommodated within the new arrangements. The discharge of trade waste into sewerage system is currently dealt with in part 4 of the Water Supply and Sewerage Act. The arrangements are unwieldy as they require formal gazetting of each trade before the relevant sections can be applied. These provisions will be replaced with a more generic approach which involves a set of criteria defining the characteristics of trade waste that may be discharged. The current act gives no rights to the customers in this area. PAWA is left with discretion as to whether to accept the waste, and if so, on what terms. Under the new arrangements, an obligation to accept trade waste, which complies with predetermined guidelines, will be included as a licence condition. Any controls will be administered in a flexible way that takes account of the risks involved.

Finally, in relation to asset management, licensees will be obliged to develop robust asset management plans. The plans will be required to demonstrate that outcomes will be delivered which appropriately balance performance and investment in the medium and longer term. The Utilities Commission will monitor the compliance with this requirement as part of its licence monitoring activities, and report to the regulatory minister.

This bill implements the government’s reforms to the Territory water supply and sewerage industries. It complements the reforms already implemented for the electricity supply industry. Together, these reforms provide a long term framework for improvement in efficiency at PAWA and through the effective delivery of affordable utility services to Territorians.

I commend the bill to the House.

Debate adjourned.

 

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