The ACT government should consider breaking up ACTEW Corporation and reducing the dividends the utility pays, an independent review has recommended.
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The review by barrister and former Victorian competition commissioner Bruce Cohen also suggests that the publicly owned utility be stripped of its power to impose temporary water restrictions.
Dr Cohen said the government should consider creating a new territory-owned water and sewerage corporation. The corporation could take on other duties, such as control of stormwater systems.
A second corporation would be responsible for the territory’s stake in energy joint venture ActewAGL.
“Such a change would reduce any confusion that exists within the community as to the roles and responsibilities of ACTEW relative to that of the ActewAGL joint venture,’’ Dr Cohen said in a report that was commissioned by the government.
“More importantly, it would enable management given responsibility for water and sewerage to focus firmly upon those responsibilities.’’
Dr Cohen also recommended that cabinet consider scrapping the practice of ACTEW paying all of its after-tax profit to the government. ACTEW paid $79.5 million in dividends to the government and had $1.355 billion in borrowings.
“If dividend payments are not changed, ACTEW will have to continue to borrow to cover the cash shortfall in payments from the joint venture and it will have little ability to make any substantive repayments of its debt burden,’’ Dr Cohen said.
The report recommended that ACTEW’s power to impose water restrictions be transferred to a government minister to reduce the potential for conflicts of interest.
Dr Cohen said appointments to government boards should be advertised and limits imposed on overall terms of board service.
Treasurer Andrew Barr said the government would consult widely before responding to the report.
“We’ll take our time, have a detailed look at each of the recommendations and we’ll give a full response in due course,’’ he said.
Mr Barr rejected the suggestion that creating a separate corporation for the ACT’s energy shareholdings would be a prelude to their sale.
“I don’t think there’s any particular interest in privatisation of that business,’’ Mr Barr said.
“And it would be very difficult to find a ... buyer who would pay the price that would be necessary for that to be financially viable for the territory.’’
Shadow treasurer Brendan Smyth said the report highlighted the need for the government to develop strategies to pay off ACTEW’s debt.
“What this report says is the government must review the dividend policy so that we have a strategy to pay off the debt that ACTEW accrues,’’ Mr Smyth said.
“But what we know from their statement of corporate intent is that the debt grows and the interest payments to service that debt continue to grow.’’
