The Queensland Government recently handed down a referral notice directing the Queensland Competition Authority (QCA) to investigate prices for all bulk water supply schemes and some distribution systems operated by SunWater and Seqwater for irrigation customers. The QCA’s examination will also determine new prices for irrigators for the 2020-24 period.
The Queensland Farmers’ Federation’s (QFF) initial analysis of the bulk and distribution services provided by SunWater and Seqwater shows significant variation in cost increases for different irrigation schemes. In several schemes, irrigators will face significantly higher prices because of cost increases to maintain scheme assets, rising electricity and insurance costs, and the impacts of lower water demand forecasts.
This raises questions about the viability of schemes that face extended years of real price increases of over $2/ML per year for fixed charges in addition to coping with high variable costs. Particularly because these issues do not fall under the QCA’s remit and must be addressed by the Queensland Government.
Under the referral notice, the QCA will also investigate pricing options that include essential dam safety upgrades. These upgrades include costly works to various scheme elements such as dam spillways, the installation of spillway gates, and various structural modifications such as to dam embankments.
The inclusion of these upgrades in the QCA’s investigations could leave irrigators to contribute towards what could be very large expenditures for dam safety infrastructure to protect downstream communities from the possibility of dam failure.
The QCA did not consider the recovery of dam safety upgrade capital expenditure through irrigation prices during the last review in 2012. However, the current government has now changed its mind. The QCA has released a consultation paper, Rural irrigation price review 2020-24: apportionment of dam safety upgrade costs outlining how it would propose to apportion the capital costs of the upgrades between irrigator customers and others who could be held responsible for these major investments.
QFF’s policy on this unacceptable cost is clear – dam safety is a community benefit and the upgrades provide no additional benefit to irrigators, therefore they should not be expected to contribute to the dam safety upgrade capital expenditure. In fact, it runs the risk of making water so expensive that we see a wide-scale disconnection of farmers from the schemes and a return to lower-productivity, dry-land farming in some areas. With about 300,000ML of unused water already sitting in existing public storages, the government needs to carefully consider its own policy position on issues such as dam safety.
The QCA is now calling for submissions on the costs that both SunWater and Seqwater are submitting for their bulk and distribution irrigation schemes. QFF will mae its position on dam safety upgrades very clear and urges all irrigators and interested parties to have their say.
To assist irrigators with the preparation of their submissions, QFF is also undertaking independent assessments of each bulk and distribution scheme costs and the pricing. Workshops are planned in a number of locations across Queensland to present the cost analysis to all schemes before submissions close in the new year. A full list of the workshops will be made available on the QFF website.
The QCA’s Draft Report is due to the Queensland government by August 31, 2019 and its Final Report by January 31, 2020. In the meantime, existing water prices will be escalated by CPI.