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Memo Premier: It's not too late to get us a better deal on water

Date

Baillieu will be blamed for the desal disaster, unless he cleans up Brumby's mess.

PUBLIC opinion across the political spectrum is overwhelmingly against privatisation of major infrastructure assets.

At last October's Liberal Party State Council meeting in Bendigo, listed for debate was a Kew branch motion to the effect that the Baillieu government should save billions of dollars by breaking the 28-year ''take or pay'' contract for water from the Wonthaggi desalination plant.

The motion called on the government ''to renegotiate the contract for the Wonthaggi desalination plant with a view to saving billions of taxpayer dollars and to use such of the valuable infrastructure as would facilitate the transfer of readily available excess water from Tasmania to Victoria and hence to South Australia, creating $18 billion of extra gross domestic product and facilitating the expansion of mining in the Roxby Downs area''.

It came with a supporting statement prepared by long-standing Liberal and chairman of the Docklands Science Park, John Martin, who has been negotiating with the Tasmanian government to buy surplus water to sell to potential mainland customers at a fraction of the price of desalinated water.

The statement said: ''Tasmania is very much in need of the funding that royalties on the water could produce. The water produces hydroelectricity as a first duty.

''They have 5000 gigalitres available in the North West area alone and the proposal is to use 1500 gigalitres of that to supplement the Melbourne water supply [total unrestricted Melbourne usage is 500 gigalitres], fix any problem in the Murray-Darling Basin, assist irrigation and make Adelaide's water supply fresher and more secure.

''The reorganisation of water supplies in south-east Australia would be achieved by this scheme which is extremely economical and will deliver greater benefits than the Snowy Scheme. The renegotiated contract should be a win-win situation for all Victorians.''

There wasn't time to debate the motion. Delegates were asked to indicate by a show of hands whether they supported the motion. It was unanimously supported, with applause.

The Kew Branch expected the motion to be listed for debate at the next council meeting, which took place in Melbourne over the weekend. It wasn't. Liberal officials say it wasn't removed from the agenda at the instigation of government ministers, but simply fell off the list because the Kew branch failed to resubmit the proposal.

Concern about the desalination plant extends well beyond the leafy eastern suburbs of Melbourne.

Richard Martin, the chairman of the Liberals' committee responsible for policy development relating to rural and regional development, regional cities and water, submitted a motion for debate at the conference, asking the government to conduct ''an independent review of the financial, economic, social and environmental impacts of the current Wonthaggi desalination plant against known alternatives and the amendment or cancellation of the desalination plant contract if the findings of the review warrant such an outcome''.

The agenda committee replaced this section with a request for ''a review of standing recommendations against existing government generated reports, strategies and inquiries''.

This decision is inexplicable. There is a near-universal consensus among rank-and-file Liberals that the desal contract is odious and has to be renegotiated if Victoria is to develop its water resources in a safe, secure, affordable manner, which promotes, rather than inhibits the state's development.

Every day the Baillieu government avoids cleaning up the mess it has inherited from the Brumby government the blame for the problem will be ascribed to the Liberals rather than Labor.

The Labor opposition and the relevant bureaucrats in Treasury and the Department of Sustainability and Environment are hopelessly compromised over the desalination plant and are only concerned to protect their jobs and reputations.

An example of the corrosion of DSE's ability to offer sensible, disinterested advice to government is the report published last week setting out how Melbourne can extend its water supplies without major investment in new infrastructure, using instead innovative methods of conserving and recycling water.

It would have been an excellent report if it had been written five years ago, before the decision to build one of the world's biggest desal plants.

The report's lead author, Rob Skinner, was for six years to 2010 the chief executive of Melbourne Water and was intimately involved in the decision to go ahead with the Wonthaggi desalination plant.

The desalination plant is not even mentioned in the report. The mind boggles. The government and its advisers are either serious about the desalination plant or about the conservation of rainwater.

The report took a year to write. Except for more recent rainwater statistics, there was nothing in the report that couldn't have been written before 2009 when the contract for the desal plant was written.

The Baillieu government should listen to its members - its political survival may depend on it.

Kenneth Davidson is a senior columnist.

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25 comments

  • Lets see how bad the desal and pipeline decisions are in several years when the next draught takes place!

    Commenter
    simonj
    Location
    Fawkner
    Date and time
    April 30, 2012, 8:30AM
    • Draught? I laught!. You are aware that one of the meanings of this word is 'a drink'.

      Commenter
      barfiller
      Date and time
      April 30, 2012, 9:38AM
    • Im with you simonj When we have 7 million people in the State and the next TEN year drought which we will.Then lets see who had the smarts to build the Desal plant.

      Commenter
      Proud Victorian
      Location
      Brighton
      Date and time
      April 30, 2012, 9:46AM
    • Meanwhile millions of dollars go into the pockets of private companies for the 90 years out of a hundred that we don't have a drought and don't need the desal plant. And with the Tassie option, we NEVER needed the desal plant.

      Commenter
      Jim
      Location
      Melbourne
      Date and time
      April 30, 2012, 10:22AM
    • Kenneth Davidson is right about the Tassie option which he has been advocating for years. If Brumby and Bracks had listened to Mr. Davidson in the first place we would not be in this financial mess with the white elephant that is the desalination plant. If Mr. Davidson had been running Victoria we would have had a much better public transport system, less congestion and avoided the wasteful expenditure on unnecessary toll roads and motorways. I say to those politicians who are trying to run Victoria, follow his wise words on important issues and you will solve problems instead of creating them !
      Commenter
      Rail Now

      Commenter
      Rail Now
      Date and time
      April 30, 2012, 12:41PM
  • We hear that the contract can't be cancelled because of Sovereign Risk, yet Governments around the world who refused to cancel bad contracts signed by preceding governments are all seeing their credit ratings dip. The Government is effectively acting with "Power of Attorney" for the people of Victoria and according to those rules, can not sign a contract that the people wouldn't sign if they had a choice.

    Commenter
    Tim
    Location
    Melbourne
    Date and time
    April 30, 2012, 8:49AM
    • Kennet repudiated a number of contracts when he came to power all those years ago - governments can move or amend any legislation they like, it owul be relatively simple to end the desal contract - of course the investors would lose their dough and that is probably what is worrying the Liberals.

      Commenter
      PK
      Date and time
      April 30, 2012, 9:36AM
      • I was a member of the Kennett government between 1992-99. I don't recall Jeff Kennett repudiating any contracts that the Cain-Kirner governments signed.

        Yes, legislation was changed, government departments were restructured and major changes were made to the structure of the Victorian public sector. These things were necessary to bring the budget back into balance and to rebuild a state that was virtually bankrupt.

        Despite all of those changes, I believe existing contracts were honoured. If governments want to alter contracts, they are in the same position as a private sector corporation - they can seek to re-negotiate the contract with the other parties and come to a new agreed position or they can repudiate the contract and pay the resultant damages. Government is not immune from being sued for breaching contracts.

        For example, the Bracks government breached the contract for the construction of the tourism centre at Seal Rocks on Phillip Island. The company involved took legal action for damages and won (from memory) substantially more than $40 million. When legal costs are included, I believe the total cost of breaking the contract was in the region of $70 million.

        The cost of breaking the desalination plant contract would be massive. It would also result in all major contractors putting a risk premium on future bids for projects in Victoria. I don't like the desal plant any more than you do, but I believe the cost of scrapping it would be prohibitive.

        Commenter
        Steve
        Location
        Montrose
        Date and time
        April 30, 2012, 5:26PM
    • If Tassie is capable of supplying 3 times the annual water use of Victoria, surely we must have known this prior to the desal decision? This white elephant has to be reconsidered. I'm prepared to pay a fair price for water supply - but not be gouged for it. The proposal outlined in the article seem sensible, affordable and provides a solution to not just Victoria's needs but the ailing Murray-Darling and those of SA. It's time for Ted et al, to bite the bullet on this one.

      Commenter
      Czar
      Date and time
      April 30, 2012, 9:43AM
      • If you want water you have to pay for it...if you want air you have to pay for it....if you want ground to walk on you have to pay for it...if you want the benefit of sunshine you have to pay for......if you want a place of shelter you have to pay for it.....and everytime you pay for it someone is creaming off a few cents here and a few cents there......its a great system if you can manage to bend it to your own benefit....

        Commenter
        candyvulco
        Date and time
        April 30, 2012, 11:06AM

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