Sydney water users may face higher prices as de-sal plant costs are passed on

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The plant that was forced on us contrary to public opinion. $2Bn cost.

Sydney water users may face higher prices as de-sal plant costs are passed on

Desalination plant

Aerial view of the Desalination Plant at Kurnell, Sydney. Picture: Test Source: The Sunday Telegraph

WATER bills could rise under a new arrangement which will see Sydney’s desalination plant pass on its electricity-trading losses and gains.

In what the opposition described as an “unprecedented change to the rules of the game”, NSW Finance Minister Greg Pearce has written to the Independent Pricing and Regulatory Tribunal (IPART) to change the rules under which Kurnell‘s desalination plant operates.

The changes would mean that Sydney‘s 4.5 million water users pay the difference between the purchase and sale price of electricity.

“The winners: the government’s private sector mates. The losers: Sydney’s water users,” Opposition water spokesman Luke Foley told reporters today.

“This is a sneaky manoeuvre by the O’Farrell government to fatten up Sydney Desalination Plant for private bidders at the expense of Sydney’s water users.

“When losses are incurred they won’t be borne by the winning private consortium that picks up the desal plant this year. Instead those losses will be covered through higher water bills paid by Sydney’s water users.”

But Finance Minister Greg Pearce said the current arrangements were flawed and meant the public was not reaping any benefits when the desalination plant sold electricity back into the grid at a profit.

“I have been advised under the electricity contract arrangements, there’s a possibility for there actually to be savings which could be passed on,” Mr Pearce told reporters.

“I have written to IPART asking them to put in place an arrangement which allows reduction of prices as well as increases in prices in relation to electricity.”

He hit back at opposition claims it was a secret manoeuvre by the government, saying the letter he had written to the pricing body had been published on its website last month.

“It’s all been public, it’s all been transparent.”

In November last year the government called for expressions of interest in a long-term lease over the Kurnell desalination plant.

Mr Pearce denied the pricing arrangements were designed to sweeten the deal for potential bidders.

“I don’t know if it makes it more attractive or not,” he said.

“That was not a consideration. The entire consideration was that I was told that IPART had pointed out that there was a possibility that there could be savings, that they needed an amending letter to be able to implement that.

“I was satisfied that it was a worthwhile thing to do.”

He also could not say what sort of pricing increases or decreases were expected.

“That will be a matter which will be shaken out through the long term lease proposal process, so it will be part of the package that we see when those bids are evaluated.”

Treasurer Mike Baird said in November that the proceeds of any lease of the plant would be used to put a dent in the NSW infrastructure backlog and that water bills would not rise under the new arrangement.

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