Legislative Council Wednesday 31 October 2018

Ms  FORREST  (Murchison) - Mr President, I was not planning to say much on this bill but the member for Hobart was so encouraging I thought I would.

I support the bill.  I supported the process being dealt with and the first facilitation of this process to allow the councils, the owners of TasWater, to make a decision about whether they would accept this proposal.

As I said by interjection a moment ago, we could have saved 18 months of pain and uncertainty and frustration for many people had the Government considered this option earlier when it was proposed to them.

I personally proposed it and the Treasurer told me not to be so silly.  I am sure the owners of TasWater would have done so.  It takes time to get there; it is a bit like the health system really, with the one versus three health organisations or whatever you want to call them.  We got there in the end, but there was a loss of time, a loss of money potentially on the way and the frustration that exists.

I am not going to go back over the whole history because we have done this to death a couple of times, but I will make a couple of points about some aspects of the bill.  It was raised in the briefing and I appreciate the briefings provided by Mr Miles Hampton, the current chair of TasWater, still, though I know he is planning to get away at some stage -

Ms Rattray - And dump that big file.  He will put it in the bin.

Ms  FORREST  - He might have to keep it for a few years.  There is some information there that cannot be destroyed, I suggest.

The issue was raised in the briefing about governments interfering in pricing.  The member for Mersey raised this previously on electricity as well; it is the same.  You have an independent regulator who is there for a purpose.  If the independent regulator is getting it wrong, maybe we need to look at the regulator and how the regulator is operating.  Once you allow government interference, the risk of pork barrelling becomes significant and a race to the bottom can begin before elections.  Then, after the election, who knows what is going to happen.  That is always a concern to me.

It also means in this circumstance that should the capital expenditure requirements - and this is a very capital-intensive business - be such that to cover them a price rise of above 3.5 per cent would be necessary to achieve it, decisions have to be made by the TasWater board on how they are going to manage that.

There are a limited number of options.  One way would be to defer, delay or not do capital expenditure projects.  They cannot really defer them for too long or not do them because these are essential infrastructure upgrades.  As we have said before, we want a service we can afford at a price we can afford, so it has to be compliant and it has to meet the needs of the people who are using it for health and safety reasons and all sorts of things.  To delay infrastructure or capital expenditure projects may be an option in some circumstances but not a solution in the longer term. 

The Government may decide to bring forward some of the payments a bit and enable that work to continue if it is a particularly expensive project that needs to be done.

There are mechanisms that can be used to deal with that, but you are making it more challenging.  That is not necessarily a bad thing because it makes the TasWater board and the management question how they are managing to meet the requirements expected of them.

I wanted to raise that point.  It is always fraught when we put in place a system that allows the overriding of the independent regulator.

Mr Valentine - The regulator can still set the cap.

Ms  FORREST  - They set the maximum and TasWater can charge less if they want to.

Mr Valentine - That is right and they can charge less.

Ms  FORREST  - I made a bit of a flippant comment that perhaps Hydro could charge less sometimes, too.  It operates under the GBE act but TasNetworks is a state-owned company which operates under the Corporations Act.  They are supposed to make a profit; that is what they are there for.  Anyway, it creates this risk of political interference.

I do not have an issue with the other aspects of the bill.  There was discussion about the payment of dividends, but the Government will not be taking dividends.  I think that was always the intention, otherwise we are giving money and they are taking it back.  What is the point?  That is a sensible decision.  It is in the legislation.  Legislation can always be changed, yes, but the intent is pretty clear and I imagine it would be a bit of a devil's own job to get it through this House if that were changed in the next 10 to 20 years.

On the issue of income tax equivalents and loan guarantee fees, this is required because it is a competition policy aspect that TasWater has to pay income tax equivalents and guarantee fees to their owners.  This requires them not to pay those.  They will still pay the same amount, but it will all be classified as the dividend.  The end result is the same:  they still get the full amount of money for the same value.  It is just called a dividend.

If, for some reason in the future - I can't see how this would happen - we had a competitor and it was no longer a monopoly, you would have to go back to the requirement to pay income tax equivalents and guarantee fees as well as dividends, potentially.

Mr Valentine - Thank you for that explanation.

Ms  FORREST  - I initially thought the Government was going to take a seat on the board.  I may have been wrong but that was my impression.  They are not, according to the information we received at the briefing today.  Treasury will have a seat at the table in selecting board members.  They want a skills-based board.  They will not be selecting someone to be their spokesperson.  That is not what the role of a board member is.  It is not a representative board.

Mr Valentine - It shouldn't be.

Ms  FORREST  - It is not a representative board.  It is a skills-based board that has to act according to the -

Mr Valentine - I appreciate that.  It is the same as a representative of the Hobart City Council who sits on the TMAG board.  They are not there to represent the council.

Ms  FORREST  - It is good governance and principles.  That is right.  You have all the responsibilities of a board member.  If the Government has a view on something, they can bring that forward but they are only one voice around the table.  Once they have paid the first $20 million, they will have the opportunity to look at the corporate plan and agree or suggest changes as any other owner will as part of their role.  The other 29 councils get a look as well. 

Mr Valentine - There's only one representative from them, one Treasury representative and the board's chair.

Ms  FORREST  - Do the 29 councils not each get a look at this?  

Mr Valentine - No, I don't think so.

Ms  FORREST  - Are you saying there is only one representative for all 29 councils?

Mr Valentine - All 29.

Ms  FORREST  - That is what I thought I heard in the briefing.  Looking around the room I understand that is the case.  They are only one voice in 30.  They can have their say if they thought it was inappropriate or wrong and they may need to convince all of the other councils, but they are not going to stymie the work determined necessary by TasWater in that period.  They will have a look at it, they can have a say on it, but they cannot say they do not like it and demand it be done again.  They can try but they will not get all that far.  That removes some of the political interference aspect that concerns me.  It completes the process we started some time ago.  

I commend the Government for working cooperatively with TasWater since the last election, particularly given that they went to the election with a completely different policy.  They saw after the election that there had to be another way.  The feedback in the community was clear about that and some of the feedback from this place was clear about that:  people were not happy with that approach.  Good on the chairman, Miles Hampton, for sticking to his guns and continuing to put forward an alternative solution, with the Government finally starting to listen.  It took a while, too long, but you made it in the end.