Sydney’s New Flexible Water Prices
The price of water in Sydney is now based on dam levels, enhancing resilience to climatic extremes while ensuring adequate revenue for capital expenditures.
In water resource management, economic theory suggests that demand for water should behave like any other goods — as price increases, water use decreases. As such, pricing of water is commonly used as an incentive to promote water conservation. In water conservation, the pricing of water is used to:
- Internalise the environmental costs of consumption decisions
- Serve as an allocation mechanism directing water where it is most valued, protecting water resources from wasteful use
- Promote water efficiency (doing more with the same amount of water), for example, pricing of water can incentivise the development or adoption of water‐saving technologies
Sydney’s New Flexible Water Prices
The Independent Pricing and Regulatory Tribunal New South Wales have set new prices for Sydney’s water to enhance resilience to climatic extremes. Since July 1st, 2020, the price Sydney Water customers pay for water is based on dam levels. When dam levels are above 60%, customers pay $2.35 per kilolitre of water. When dam levels fall below 60%, the price of water increases to $3.18 per kilolitre.
While the Tribunal has set a higher water usage charge, it has reduced fixed charges for water and wastewater, resulting in customers being rewarded for saving water at all times, even outside times of drought. Also, a higher price during periods of drought rewards customers who reduce their water consumption when it is most scarce.
The new prices mean that the typical household water and wastewater bill will:
- Decrease by 7% in average weather conditions
- Increase by 7% during drought
At the same time, the new prices provide Sydney Water with $4.6 billion for capital projects, ensuring the utility can maintain or improve its level of service and environmental performance.
The take-out
Water pricing can reward conservation while not jeopardising future investments.
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