So many questions and no answers as the desal plant costs keep rising.
Before Easter your correspondent sent several questions to Water Minister Tim Holding, to Aquasure (the consortium that is building and will operate the Wonthaggi desalination plant) and to the Essential Services Commission. The questions related to the public-private partnership contract, signed six months ago.
The desal plant, when originally announced in 2007, was to cost $3.1 billion. It became clear that farmers would not countenance overhead power lines, so under-grounding increased the cost to $3.5 billion.
Then last July the then Aquasure chairman announced that the $3.5 billion was only the cost of construction and the full cost would be $4.8 billion with financing. Last November the Victorian government tabled a document showing the cost would be $5.7 billion.
The contract can no longer legitimately claim to be ''commercial in confidence''. The reply from Department of Sustainability and Environment public relations came with a reference that turned out to be the tender document submitted last year with the crucial amounts blacked out.
Clearly there are things to hide - otherwise the public could see the finished contract. The project will be a burden on Victorian water consumers and taxpayers over the 30-year life of the contract. In brief, I believe the capital cost of the plant will amount to $600 million a year before even one gigalitre of water is produced.
If the plant operates at full capacity producing 150 gigalitres a year - about 40 per cent of Melbourne's 3A restricted use or about 30 per cent without restrictions - the cost of the water will be $280 million a year. If we needed this water (we don't), it could have been made available by conservation, recycling and new flood diversions for a capital cost of $350 million and an annual operating cost of $50 million.
It is no surprise the government is lifting water restrictions, but the decision has irritated households who have adapted to the restrictions and who feel good about the reduced consumption, seeing it as a real contribution to the environment. Lifting restrictions is not just about getting re-elected. It is about increasing revenue by increasing consumption to pay the huge ongoing and rising costs of manufacturing potable water.
The current system is cheap to operate because it uses gravity to move water. The desalination plant is located at sea level, which means that any water must be pumped to customers. This means that Melbourne's water price will escalate in line with the price of electricity.
Over the past five years the price of electricity has increased 13 per cent a year in Victoria - and in NSW prices have risen 28 per cent a year in each of the past two years. For as far ahead as we can see the price of electricity will continue to rise at the current rate for two reasons: some sort of carbon tax will be imposed and the existing generators must be replaced early in the 30-year life of the desal contract for a multibillion-dollar cost, irrespective of whether the power source is coal-fired or renewable energy.
Assuming the costs of electricity generation at a conservative 10 per cent, desal operating costs are likely to rise from $280 million in the first year to $450 million and $4.8 billion in the 30th year.
On these figures alone, it is unlikely that Victoria will ever achieve a surplus budget without an increasing burden of taxation. All the alternatives to the desal plant to produce extra water (recycling, conservation and diversions to trap flood water) use gravity, not electricity to transport water.
But there is a further complication. The pipe they are building from Wonthaggi to the Cardinia distribution dam for Melbourne is too small without branch lines to Melbourne being opened close to sea level.
This means the Melbourne water network will be pressured from the bottom up rather than gravity fed. This will put the whole ageing network at risk of burst mains.
There is no evidence of any risk analysis for Melbourne's pipe network or the cost of supplementary pumps across Melbourne.
The operating costs compared to other sources of water show that the desal plant should not be turned on because it is too expensive. The question is: does the contract allow for the plant to be mothballed?
The budgetary implications are so huge, that without the answer to this question election campaign talk about more policemen, more hospital beds, or more public transport is simply a waste of time.
There is an even darker interpretation. Most of the politicians on both sides don't know and don't want to know the implications of current policy. But the relevant senior executives in the Treasury, Sustainability and Environment, Melbourne Water and Aquasure should know.
If policy drift behind a veil of secrecy is allowed to continue through to the November election, the post-election government is likely to be presented with water privatisation throughout the state as a fait accompli.
Kenneth Davidson is an Age senior columnist.