Fair Water Charges or a "gold-plated" supply?

Alternative lower-cost scenario

An alternative to high cost scenario of building Oaky is to raise Malpas by 6.5 metres and revise water charges so that everyone pays $5 per kL (compared to the current $4.60 for high water users), with a commensurate reduction in the access charge to raise the same amount of money, thereby rewarding the 90% of users who together currently use only 25% of the secure yield after raising Malpas.

If consumption in a typical year is 2.5 GL (68% of the secure yield after raising Malpas), and the average charge per kL is $4.30, this would raise 0.7 x 2,500*1000 =$1.75 million, reducing everyone’s access charge by 47%, i.e. to $180 a year.

To discourage high water consumption in really dry years, level 1 restrictions should also be introduced and the charge per kL increased by 10% (i.e. from $5 to $5.50) when stored water in the raised Malpas falls below current capacity (12.3 GL, i.e. 46% of the enhanced capacity of 27 GL after raising Malpas). Progressively higher restrictions would be introduced after that, e.g. at 10.5 GL, 9 GL, 7.5 GL and 6 GL. 

At 30 June 2024, ARC’s water fund held $31.5 million, with a surplus of $1.35 million budgeted for FY2024-25. Although the revised charges could result in higher year-to-year variability, this is unimportant given the size of the fund and that this scenario (ideally with the promised $27 million to raise Malpas reinstated) would almost certainly provide a secure water supply until 90% funding is found to build Oaky. If, as claimed, our region is an ideal location for intensive horticulture, those who benefit from the increased water supply (the intensive water users) should surely provide co-contributions to top up grant funding to at least 90%.

Questions for the scenario modellers: How often in the above scenario will level 2 or greater restrictions need to be imposed if the population grows by 10%, 20% and 30%, and residential and commercial water use increases by the same proportions?

What variants of this scenario should be considered to provide the optimal outcome?

Who should pay for infrastructure to satisfy the needs of intensive water users?  Intensive users should pay! It seems totally unfair to ask residential users to subsidize intensive water use, with a typical residential bill increasing to $1,730 per year, if other levels of government pays only half the cost.

Could have twice as many residents with minimal bill increase, if raise Malpas wall first and make intensive water users pay their fair share! Residents likely to use less water in future. Residential block sizes are becoming smaller and BASIX requirements for new builds encourage water efficiency, so median residential use is likely to decrease from the current 100 kL/year. Furthermore, if new dwellings have small, water-efficient gardens, some install rainwater tanks and smart water meters alert council to any leaks in the system (estimated to save 15% of total water use), increased water consumption in dry years is likely to be lower than in the past.

Residential Unlike PWA’s projections, this suggests we could double the residential population, have some increase in intensive water use and still remain within the secure water supply after raising Malpas by 6.5 metres, resulting in hardly any increase in annual water bills.

Consider new charging models - pay more in really dry years - could also avoid major price hikes for residential users. The willingness-to-pay consultation should also consider the possibility of discouraging profligate water user by linking the cost per kL to water levels in Malpas, e.g. the current rate for levels over 90%, increasing by 50 cents/kL when Malpas falls below 90%, $1/kL when Malpas falls below 80% and $1.50/kL below 70%, noting that even with current storage, since Malps was built, water levels have remained above 80% for most of the time, and only fell below 70% in two severe droughts (2014-15) and (2019-20). Such charges would be easy to implement once smart water meters have been rolled out and could avoid the major $386 million expense of building Oaky for at least 2 decades, perhaps longer.

Models of water use should be based on up-to-date information. Costas Group was bought by a North American consortium that might, for example, wish to grow less water intensive crops in their glass houses. Current protocols of introducing level 1 restrictions at 80-90%, level 2 at 70% and level 3 at 60% will greatly reduce the chances of running out of water compared to the severe drought of 2018-2019.  

If residents are happy with the current drought management protocols, there is no need base estimates of demand on superseded protocols assuming that assume everyone wants unrestricted demand for 9.5 years out of 10, and 90% of unrestricted demand in the other 6 months.  A major reason for the record low dam levels in the recent severe drought was that here was no hint that Armidale residents should save water until level 1 restrictions were introduced on 19 March 2019 and Malpas was at 58.8%. Another month went by until level 3 restrictions commenced on 23 April when Malpas was at 55%.  Dam levels would have been much higher under the current drought management protocol. 

The above information should be used to refine models of water use to ascertain whether the community favours the much cheaper option of first raising Malpas by 6.5 metres and delaying any further work on the $386 million Oaky project until needed.

Careful modelling of needs and willingness to pay is a much better option than forcing residential users to pay twice as much for water and subsidize the exorbitant costs of intensive water use in an environmentally sensitive area.