The report calls for new planning and building rules to maximise the use of stormwater and recycled water.

The report calls for new planning and building rules to maximise the use of stormwater and recycled water. Photo: James Davies

MELBURNIANS face the biggest overhaul in the supply of household water in decades with a new plan to change the cost of water and where it comes from.

A ministerial advisory council report released today recommends dramatically altering the city's approach to water including expanding competition among government-owned water businesses and creating a water trading market, licensing private providers to offer not-for-drinking recycled and stormwater to the home and the possibility of paying a premium on water bills to avoid restrictions.  

Instead of planning for massive new supply projects such as the Thomson Dam, north-south pipeline or the desalination plant, the new plan maximises existing water sources through a "metropolitan integrated water cycle strategy" to make new communities more water self-sufficient, leading to billions of dollars in infrastructure savings.

The report highlights great uncertainty in Melbourne's future water needs that "could result in the need for augmentation in the next 10 years, or given an alternative set of planning assumptions, well beyond the horizon of this study, (i.e. 2050)". The uncertainty increases the attractiveness of using existing water sources.

"You want to be very careful about making very large bets on the basis of what are some quite major uncertainties about how the medium to long-term future may unfold," report author Mike Waller, the former chairman of Sustainability Victoria, said.

The future outlined in the report, Living Melbourne, Living Victoria, will see an increase in new housing estates capturing water off rooftops, piping it back to local water storages to be used for drinking purposes and avoiding the need for large, costly connections to Melbourne's traditional water grid.
The 40-year plan calls for new planning and building rules to maximise the use of stormwater and recycled water and "introduce arrangements to license new water sources and water providers".

"We are recommending expanding participation to include a range of new participants (local government, developers, third parties etc)," the report said.

"I think it [the report] certainly sits neatly between evolution and revolution, it is a great move forward if we do get to a situation where all sources of water in Melbourne are evaluated and we use them for the right purposes," Mr Waller said.

"As much water falls on Melbourne as we actually use, in fact more as an average. Why on earth are we allowing all of that to go straight down the drain and into the bay," he said.

Melbourne's water flows in 2010 included 453 billion litres of stormwater and 220 billion litres of treated wastewater. The city uses about 350 billion litres a year of drinkable water from the storages.

Water Minister Peter Walsh said an upgrade to the Eastern Treatment plant to be completed in the next year will provide an extra 100 billion litres of high-grade water to be available for non-drinking purposes.

"The whole idea is having longer-term planning and utilising all the sources of water available in Melbourne on a fit-for-purpose basis. So the potable water is for drinking water, but for watering of open space, for recreation grounds, sporting grounds, social amenity areas you can use other sources of water," he said.

Mr Walsh said licensing new water providers and increasing competition among the government water retailers was not a move towards privatising water. "We want innovation in how water is provided, but we are not in any way privatising the supply of water."

The report calls for a pilot program in the next water billing period 2013-2018 for new tariff options for household water bills.

"There may be be an option where you actually pay a bit less and you have less assurance about being able to water your gardens," Mr Waller said.  But Mr Walsh said wider market reforms such as water trading and sector-wide billing changes would not happen before 2018.