Chief Minister labels water price increases an "unfair" proposal the government cannot support
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Chief Minister labels water price increases an "unfair" proposal the government cannot support

Chief Minister Andrew Barr has hit out at the ACT's independent market regulator after it proposed a $500 hike in annual water charges over the decade from 2018.

The annual supply charge increase would be phased in over 10 years as the two-tier per kilolitre consumption charges were lowered and combined into a single price, the Independent Competition and Regulatory Commission's draft 2016 tariff review recommended on Tuesday.

ACT Chief Minister Andrew Barr has criticised changes to the ACT's water tariff system.

ACT Chief Minister Andrew Barr has criticised changes to the ACT's water tariff system.Credit:Rohan Thomson

Mr Barr on Wednesday said in a statement he believed it was an "unfair proposal" that would have a "disproportionate impact on low volume water users".

The commission had previously noted the likely negative effects of the price rises on residents who use less water, which led to it confirming a 10-year roll-out for the changes to minimise the financial impact.

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Following Fairfax Media reporting on the details of the tariff review and a proposal for Icon Water to take over key parts of the ACT's water price-setting process from the commission; Mr Barr said the government would also put its views forward "in the strongest terms" in a submission to the tariff review under way.

"I will write to the ICRC to urge them in the strongest terms to ensure consideration of the social and environmental impacts of their proposal is undertaken to ensure fairness in water pricing," he said in a statement.

But, just weeks out from the ACT election, Mr Barr would not be drawn on any potential changes to the commission's price-setting functions.

A spokesman for Mr Barr said the Chief Minister had not yet considered the proposal – which the commission has endorsed in broad terms.

While Mr Barr said the government did not set water prices in the ACT – the commission did – as Treasurer he previously set up an industry panel to review and recommend new prices after Icon Water asked for a review of the commission's last price-setting decision in 2013.

The panel was set up after an ACT Auditor-General's report on water and sewerage price setting that highlighted communication problems in 2014 between the commission and Icon Water, among other findings.

But commission documents on a recent "price adjustment" released earlier this year described the industry panel's forecasts as "overly ambitious", resulting in a "negative pass-through" adjustment for Icon Water's revenue for 2016-17, due to the overestimation of Icon Water revenue in 2014-15 .

That adjustment meant the reliance on the industry panel's forecast resulted in ACT taxpayers over-paying Icon Water some $1.9 million for water sales and $357,000 for sewerage sales in 2014-15, which has since been adjusted for in the commission's estimates.

The "divergence" in the industry panel's forecast and actual water sales compared with the commission's original 2013 decision, which could have seen about an $83-a-year saving to the average Canberra household, a move Mr Barr has previously said would have led to a $20 million to $25 million a year hit to Icon Water's revenue.

Icon Water and the commission said earlier this week the commission would still have the final say on any Icon water price proposals, if price-setting functions were moved from the regulator to the provider.

Daniel Burdon is a reporter for The Canberra Times

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