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Desalination plant at Wonthaggi; Taxpayer’s $200m a year for the purpose of buying environmentally dirty water that it doesn’t need

Posted by gmarkets on 20 September, 2007

Some small attention has been paid to the political expediency of locating the proposed facility in a non-government electorate far from the consciousness and prying eyes of city environmentalists, reported The Age (16/8/2007, p. 10). State Government’s philosophy is to use Public-Private Partnerships: Far less exposed to public debate is the method by which the $3.1 billion facility will be funded, owned and operated. The State Government’s philosophy regarding such major capital works is to procure them using Public-Private Partnerships (PPPs). A private entity builds, owns and operates the operation and makes its profits by selling the end product (desalinated water) back to the project sponsor (the Victorian taxpayer).

Taxpayer could be paying for expensive surplus water: The commercial relationship between the builder and the government in this case would be on the basis of “take or pay”. That is, the government will be committed to buying the plant’s output for an extended period of 30 or 40 years, whether or not the water is actually required. If Victoria’s natural water catchments return to anything approaching their historical storages, then the taxpayer could be paying for a huge volume of expensive, desalinated water that is surplus to requirements.

Eventual cost of carbon emissions might add $30 million each year: The excess could go back into the sea or the state could start building Lake Wonthaggi. In addition to running costs, likely to amount to about $200 million a year. The eventual costs of carbon emissions under a carbon trading scheme might add another $30 million to the bill each year. This means that the Victorian taxpayer could be handcuffed to payments of $500 million or more every year for the purpose of buying environmentally dirty water that it doesn’t need.

Reference: Tony Cutcliffe is a director of the forum and consultancy for The Eureka Project

The Age, 16/8/2007, p. 10

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