Another "insightful" report on Australia's water problems by economists who have become experts in our industry overnight, Towards urban water reform: a discussion paper has been released by the Productivity Commission, March 2008. The charging regimes of monopoly utilities reflect production cost, but not the scarcity value of water (in times of shortage). Prices are set by independent pricing regulators not by utilities. Prices give such a poor return on the assets, that competitors aren't interested in entering the market. Do they understand the difference between the normal scarcity of water and drought? Instead, restrictions are placed on particular water uses and these impose substantial hidden costs on many households. The costs of restrictions have been estimated and used by some utilities for determining water infrastructure needs. The issues are complex and no definitive answers are provided. Funny that ...to warrant...a comprehensive review to assess options and inform the community about what is at stake. Obviously the copious quantities of community liaison and options presented across Australia has been ineffective! For the past two decades, and in contrast to earlier years, most governments avoided investments to augment supplies. Governments embarked on appropriate demand management programs to stretch the life of existing systems. When we got a unique stepped drop in supply and on top of that a year of extremely low supply, the rules change, not even economists have modelled that. Policies that restrict interaction between water used by rural and urban sectors limit opportunities for inter-sectoral trade.
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