Tasmania’s only water and sewage utility has not ruled out raising future residential bills to help manage rapidly rising debt associated with coronavirus.
- Tasmania’s solo water and sewage utility is largely owned by the state’s 29 councils
- They have been told the entity is in financial trouble and has applied for a loan of up to $735 million
- TasWater says the money is needed to continue its capital works plan and battle the impacts of coronavirus
Figures provided to representatives from Tasmania’s 29 councils show TasWater’s underlying net loss was about $15 million before tax at June 30.
According to its last annual report, the utility recorded an operating profit of $41.3 million in 2018-19.
In a recent presentation, seen by the ABC, councillors from throughout the state were told TasWater’s revenue was particularly hit due to the State Government-led rebates offered to small businesses affected by COVID-19.
Premier Peter Gutwein has also directed the utility to freeze water and sewage bills for the second year in a row.
Members of the Local Government Association — that is, council heads who represent TasWater’s major shareholder councils — will make a submission to an ongoing Legislative Council inquiry into TasWater to raise concerns about the body’s financial situation and ongoing viability.
Also included in the presentation given to shareholder councils was that the utility spent about $11 million more than budgeted in the last financial year.
The utility has applied to take on debt up to $735 million from the state-owned investment and borrowing agency Tascorp but has only been eligible for assistance thanks to a Treasurer’s guarantee.
In a statement, a TasWater spokeswoman said: “This has been required to allow us to maintain our significant capital expenditure program and deliver the associated economic benefits for the state … while at the same time absorbing the financial impacts of COVID-19, including our commitment to a rebate for small businesses and a price freeze for all customers.”
Mr Gutwein, who is also Treasurer, confirmed in a statement he had provided TasWater with a loan guarantee.
“To ensure timely access to sufficient funds from Tascorp to respond to the COVID-19 pandemic and implement the Government’s policy responses in the current environment, all TasWater’s advances up to an agreed limit are unconditionally and irrevocably guaranteed by the Tasmanian Government.”
According to a report released in May by the Office of the Tasmanian Economic Regulator, the state’s residential water consumers pay about 5 per cent less than the national median: $1,214 versus $1,275.
The TasWater spokeswoman said the agency was unable to raise its prices above the regulatory allowance of about 3 per cent before June 2022.
“We will be reviewing the impacts of COVID-19 on our long-term financial forecasts as part of our next four-year Price and Service Plan commencing 1 July 2022,” she said.
“Any possible increase to compensate for COVID-19 in the next Price and Service Plan would involve consultation with customers, our owners which include local councils and State Government and require the approval of the economic regulator.”
Consumers to bear cost of ‘incompetence’
Shadow Treasurer David O’Byrne said Labor had “serious concerns about the deteriorating state of TasWater’s finances”.
“We warned Peter Gutwein in 2018 that what he was promising could not be delivered,” Mr O’Byrne said.
“Now two years later here we are.
Mr Gutwein said he was not concerned about TasWater’s debt position.
“The level of debt carried by TasWater is a matter for the TasWater board,” he said.
He added that pricing post-2021 was also a matter for the board.
“However, there is a funding agreement between the State and TasWater that, among other things, ensures that water and sewerage prices will not increase by more than 3.5 per cent per annum up until the end of 2024-25,” he said.
The utility has been unable to provide all required quarterly financial reports to councils, meaning it was in breach of its shareholders’ letter of expectations.