Our sector is facing its most significant challenge since the 19th Century with the impacts of ongoing climate change. This will manifest itself in many ways including compromising water resources, changing customer behaviours and needs and putting pressure on the ability of the industry to maintain its assets and services under more extreme climatic events of fire, flood and prolonged higher temperatures.
In addition, a growing and changing population add pressure to our members’ ability to maintain low prices. Across Victoria there will be a net increase in population but underlying that will also be further changes in population patterns. Cities will increases in density, there will be significant growth in major regional centres, peri-urban areas are likely to expand, but some smaller regional communities may also see a decline in population. Each of these different patterns of growth will bring with them different servicing challenges for the water industry.
According to our recent research:
- $6 billion extra CAPEX can be attributed to mitigating negative impacts and building climate change resilience. This is in addition to over $40 billion over the next 30 years to service Victoria’s growing population
- A business-as-usual approach (maintaining current service levels, price setting and allocating systems), addressing the negative impacts and building climate change resilience will increase bills by a further 35% in addition to a 2% +CPI real increase cumulative and smoothed over 10 years
- Bringing forward augmentation by five years and increasing capital costs by 15%.
This impact will be most felt in regional areas.
The Victorian community is becoming more aspirational and is seeking improved liveability, productivity and resilience – despite the above challenges. There is now a better understanding of the role that both water and the industry can play in meeting these aspirations. Therefore, the industry is currently and will continue to be asked to work with government and key stakeholders to help deliver on these outcomes. This extends our industry beyond its traditional service provision base and adds to the costs of services.
In addition, the rapidly evolving nature of technology and the digital world will present opportunities for the industry to better connect with its customers and community and provide more efficient and effective services.
Customers will continue to be sensitive to price shocks, so there will be on-going pressure to keep water bills at manageable levels in the context of the overall household budget.
VicWater’s Role in addressing these challenges
We work with our members to understand the crux of their strategic issues and to identify mechanisms that will best alleviate the challenges that they face. Our Policy Platform records these strategic issues and the mechanisms for change.
Specific issues identified in the Platform are often taken further to facilitate progress. For example, in 2020, VicWater assisted our members in navigating the complexities of sourcing carbon offsets and seeking from Government amendments to the Statement of Obligations (Emissions Reduction), and its review of the economic sustainability of the water sector in 2021 led to the presentation of its key messages to the Government agencies and expected improvements to industry financial models.