Desal deal could see payments pushed
Negotiations are underway which could see a largely-dormant desalination plant take an extra thirty years to pay off.
Victorians have been asked to consider a proposal from Melbourne Water to spread the $18 billion bill for the state's desalination over 60 years, rather than the 27 years in the current contract.
The new deal would reduce water bills by up to $11 a year, but would cost even more in the long run.
The desalination plant was commissioned by the Bracks' Labor Government to help create new supplies amid a long-running drought. It came into service in late 2012, not long before drought conditions and water restrictions ended.
Victorian Water minister Lisa Neville says the payment review is the responsibility of the independent Essential Services Commission, and she would not comment on its validity.
“In this case as part of the review of Melbourne Water pricing, they have asked Melbourne Water to have a look at both the risks and the benefits that are involved in spreading the costs of the desal over a longer period,” she said.
“Victorians, particularly those who utilise Melbourne Water, can have a say about what works best for them in the short and the longer term, and how we best fund water infrastructure going forward.”
The terms of the price review are published on Melbourne Water’s website, and currently require the company to pay around $620 million per annum over the next five years of the 27-year payment period.
The company says that if it was allowed to extend this period, it would have to collect less revenue and so charge customers less.
But the trade-off for the prolonged payment scheme would be an increase in the amount of payments that will be made, and therefore increased interest charges.
“It means that our children's children will be paying for this white elephant,” Opposition water spokesperson Peter Walsh said.
A final decision on the proposal is expected from the Essential Services Commission in October.