Page 3158 - Week 07 - Thursday, 30 June 2011

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Proposed expenditure agreed to.

Proposed expenditure—Part 1.19—Actew Corporation—$10,390,000 (net cost of outputs), totalling $10,390,000.

MRS DUNNE (Ginninderra) (1.35 am): I will address two matters in relation to Actew Corporation. The first relates to water sales and water prices for Actew. Actew has experienced a fall in sales of its water. This is a result of two factors: first, reduced consumption because of increased rainfall over the past 12 months; and, second, reduced consumption due to conservation measures and water restrictions during the preceding drought. The second of these factors, that of water conservation measures and water restrictions, is based on expensive but very successful media and other promotional campaigns calling on Canberrans to conserve water. Canberrans have responded very positively to that call, reducing consumption from 62.8 megalitres in 2001 to 45.1 megalitres in 2010. That is a reduction of 28 per cent over the 10-year period.

How have Canberrans been rewarded for this frugality? They have been rewarded with an increase in their water rates—water price increases of nearly 200 per cent over the same period, from $245 per year for an average household, to $675, based on the average consumption of 250 kilolitres per household per year. Indeed, the more up-to-date figure from the ICRC shows that the water bill for Canberra families using an average of 250 kilolitres per year has increased from $222.50 in 1997-98 to $793.63 in 2011-12. This represents a 257 per cent increase over that same 15-year period. And herein lies a significant dichotomy.

From Actew’s business viewpoint, falling sales means falling revenue. The options for Actew are to increase prices or reduce other expense line items. The most obvious expense line item is staff costs, which inevitably translates to reduced services—things like quality of water, reliability of reticulation systems, maintenance, customer service and so on. If expense items cannot be targeted sufficiently to ensure continued viability, the only option is water prices. And it is water prices that have filled most of that business gap for Actew.

But there is one other line that should be targeted to assist in filling the business gap, and this is the dividend that Actew pays to the ACT government. This is the second of the two matters I want to briefly address. The ACT government’s policy is that Actew must pay a dividend equal to 100 per cent of Actew’s net profits.

The government will tell you that this is a policy to ensure that Actew operates in an environment of competitive neutrality, and that might sound fair enough. I have been banging on quite a bit lately about competitive neutrality, and it is necessary for organisations like Actew that operate as a monopoly. But competitive neutrality means Actew must pay tax equivalents, which it does. It pays tax to the ACT government equivalent to the tax it would pay if it was a publicly listed company on the stock exchange. The dividends paid by public companies are determined by their boards after taking into consideration a whole range of matters such as prudent working capital requirements, the need to build reserves, whether any contingent costs are lurking beyond the horizon. Dividends are not set by shareholders.

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