A sewerage bill should track the sewer, not the width of the water pipe

Nobody meters a sewer

Water coming into a property is metered at the connection. What leaves down the drain is not. There is no meter on the outflow, and installing one on every commercial property would cost more than the information is worth. So a utility that wants its sewerage charges to reflect the load a customer places on the network has to find a proxy for something it cannot see.

From 1 July, TasWater picked the diameter of the incoming water connection. The logic is not stupid. A sewerage network is overwhelmingly fixed cost - pipes, pumps, treatment plants, all sized for the peak they must be ready to carry. A bigger connection implies a bigger potential discharge, and therefore a bigger claim on standing capacity. Charging by connection size is a way of billing customers for the capacity reserved on their behalf rather than the litres they happen to send.

It found exactly the wrong customers

The trouble is that water connection size is driven by things that have nothing to do with sewerage. A sporting club with a large connection has it because it irrigates an oval, and irrigation water soaks into the ground. A manufacturer may hold a wide connection for process water that ends up inside the product, or for fire service requirements that are about a pipe standing idle for decades. None of that arrives at a treatment plant.

So the proxy did not merely produce noise. It produced a systematic error that selected for low-sewer-load customers and billed them as though they were high-load ones. Some faced increases of five hundred per cent. TasWater’s own general manager has now conceded the point, describing customers whose large water connections do not reflect the comparatively low demand they place on the sewerage system. That is not a complaint about the policy. That is the utility describing the mechanism by which its own charging basis failed.

A 500 per cent increase is not a price rise. For a suburban club running on bar takings and canteen margins, it is a change in whether the club has a budget.

Price caps regulate the average, not the bill

Here is the part that should travel. The state’s economic regulator does scrutinise TasWater - it refused the utility’s request for an 8.8 per cent water price increase over four years. That is regulation of the overall revenue the monopoly is allowed to collect, and it appears to be working.

But the level and the structure are different questions. A restructure that moves the basis of a fixed charge can be entirely revenue-neutral in aggregate - TasWater says the new method produced lower charges for many customers - and still redistribute enormous sums between individual payers. The average bill tells you nothing about the tail. A price cap that is satisfied by the total is blind, by construction, to the customer whose bill went up fivefold while someone else’s fell.

That is a design gap in how Australian monopoly utilities are overseen generally, not a Tasmanian quirk. Any regulator that approves a revenue envelope and leaves the tariff structure to the utility is approving an average and hoping about the distribution.

The strongest case for TasWater

There is one, and it deserves stating properly. Cost-reflective fixed charges are the right direction. The alternative - flat charges, or recovering sewerage costs through water volume - makes small users subsidise large ones and sends no signal at all about capacity. Connection size is the standard proxy in the absence of sewer metering, used widely, and the utility had reason to think it would work. And TasWater has moved fast: within a quarter it has acknowledged the problem, committed to a fix, backdated it to 1 July and promised refunds to those who have already paid. Plenty of monopolies take years and a tribunal to get there.

That is a real defence of the response. It is not a defence of the process. Discovering that a tariff is broken by sending out the bills and waiting for the phone to ring is the most expensive possible test, and it is not evenly distributed. The customers who get heard are the ones with a finance manager, a trade association or a reporter’s number. A small operator who paid the invoice and absorbed it tells you nothing, and shows up in no feedback loop. Complaint-driven correction systematically under-counts the harm it is correcting.

The refund has to come from somewhere

Backdating and refunding is the right call, but it is not free. If the restructure was revenue-neutral, and the increases are now unwound while the decreases stay in place, there is a hole. It will be filled either by TasWater absorbing it - and TasWater is government-owned, so that is Tasmanians - or by pushing the recovery into a future price determination, where it lands on everybody including the households whose water charges this announcement does not touch.

That is a legitimate choice. It is not a legitimate thing to leave unsaid. A monopoly that has just agreed to hand money back owes its customers a plain statement of where the money is coming from, because one way or another they are the ones providing it.