Consumers should pay more for water when dam levels are low, with prices reduced when the supply is full, according to a leading water researcher, who has also called for a review of the ACT's water system.
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Professor Quentin Grafton, who is the director of the Crawford School's centre for water economics, environment and policy at the Australian National University, said consumers would pay less in the long term under a dynamic pricing model.
Extra revenue raised when prices were higher would be available to fund future infrastructure projects, he said.
"[Dynamic pricing] would allow for the water to be conserved over a longer period of time and that means there's increased revenues going in.
"In this case it would go to the ACT government if you put it as a premium over the current volumetric price. That itself could be used to provide support and reductions in the fixed charge for lower-income households. There's a number of ways that increased revenues could be used to support lower-income households, for example," he said.
It comes after Icon Water, the monopoly provider in the ACT, has flagged water restrictions could be introduced if extremely dry conditions continue for another year.
Icon Water's analytical services team leader, Owen Gould, said it was unlikely the region would experience two consecutive years of the present dry conditions.
Mr Gould in January told The Canberra Times it would take conditions worse than the millennium drought for water restrictions to be implemented.
"I wouldn't want to go on record and say it's worse than the millennium drought at the moment but if we got another [year] like last year, I'd be comfortable to say we're in a drought more nasty," he said on Friday.
Mr Gould said the ACT had a reliable infrastructure mix for the foreseeable future and the focus was currently on encouraging individuals to minimise their water use.
"We want people to be sensible with their water use and consider the water they're using. ... Those water savings will help the community in terms of our water storages and also help your own economic situation; your water bills will go down a little bit," he said.
Professor Grafton said there was a comfortable two-year buffer in the ACT's dams and it would be appropriate for Icon to reassess whether water restrictions were required in the first half of 2020.
You can't just raise the prices and call it a scarcity premium. You have to explain why this is happening and you have to explain how this extra money is going to be used and you engage people and involve them in these discussions. That takes time, it takes effort.
- Professor Quentin Grafton
An increasing population, hotter temperatures due to global warming and the possibility for reduced inflows into water catchments made good planning vital, he said.
"We've traditionally in Australia, not just in the ACT, adopted water supply approaches and then, when a crisis hits, like a middle of a drought, then we tend to put in and impose water restrictions.
"I would be arguing, yes, we need the water supply approach, of course. But at the same time we should think about other ways of managing demand, including use a scarcity price, a dynamic price, whatever you want to call it," Professor Grafton said.
He said the new system would not gouge consumers, and water bills would be less in the longer term. Large-scale water infrastructure projects - like the Cotter Dam enlargement completed in 2013 - could be funded by slightly increased water prices over the long term.
Professor Grafton said a widespread review of the ACT's water supply would be the best way to examine these issues and solicit public and commercial input.
He said he was sympathetic to decision-makers who had avoided increasing water prices, which would prove unpopular.
"You can't just raise the prices and call it a scarcity premium. You have to explain why this is happening and you have to explain how this extra money is going to be used and you engage people and involve them in these discussions. That takes time, it takes effort," he said.
Water prices in the ACT are set by the Independent Competition and Regulatory Commission in five-year cycles. The commission in a 2017 report found it was "reasonable" to increase usage charges in times of drought in conjunction with water restrictions.
But the commission concluded its preferred tariff structure would include the ability to adjust the marginal second-tier volumetric water price, which is charged for water usage above 200 kilolitres a year.
The commission has not introduced a mechanism to adjust that second-tier price to reflect drought conditions in the current regulatory period.
The ACT government commissioned a report in 2017 which explored dynamic water pricing and modelled options for a dynamic factor in the water abstraction charge, which the government charges on all water taken for use in the ACT, a spokeswoman said.
The ACT Water Strategy 2014-44 recommends investigating the use of "scarcity pricing" to encourage water efficiency.
Professor Grafton said the ACT had made good decisions and had avoided the "water emergency" that many parts of Australia currently faced.
"If we just think about water supply, we're missing half the picture, and we're not going to get good outcomes. We're not going to get cost-effective ways of responding to the sorts of challenges that we face," he said.
Jasper Lindell
Jasper Lindell joined The Canberra Times in 2018. He is a Legislative Assembly reporter, covering ACT politics and government. He also writes about development, transport, heritage, local history, literature and the arts, as well as contributing to the Times' Panorama magazine. He was previously a Sunday Canberra Times reporter.
Jasper Lindell joined The Canberra Times in 2018. He is a Legislative Assembly reporter, covering ACT politics and government. He also writes about development, transport, heritage, local history, literature and the arts, as well as contributing to the Times' Panorama magazine. He was previously a Sunday Canberra Times reporter.
