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No justification for cost differences in council waste charges – IPART NSW

NSW councils need to be more consistent in their pricing and will be regulated to do so, according to Gerard O’Dea, principal analyst for IPART NSW.

The independent government agency/regulator will be publishing a draft review in late May of the state of domestic waste in NSW.

Speaking at the Waste 2021 Conference in Coffs Harbour, O’Dea said that the agency would have several recommendations moving forward when it comes to Domestic Waste Charges (DWC). The review has found that prices have doubled over recent times, with the rise going up 178 per cent more than inflation, with charges ranging between $390 to $750 depending on the council.

“We also found that the audits that had been conducted by councils were generic and not as specific or forensic as we had understood. They didn’t go into anywhere near the detail that we had understood they would go into,” said O’Dea.

O’Dea pointed out that he knows that there are many reasons for these differences including China Sword issues, the recent Basel export ban, regulatory risk, market concentration, increases in the waste levy and also the CDS within the state. However, that doesn’t give the council’s carte blanche to charge what they want.

“Why are we regulating? We have the delegation from the Minister to do that,” he said. “If we know that most of the cost issues are outside the councils control why are we regulating? We can’t justify the variations in charges between councils so we have an obligation to act and that is in the interest of the rate payers. We don’t shy away or apologies for it.”

According to O’Dea there are three options available for IPART to regulate, not all of them are great, he said.

First, is detailed individual reviews which IPART does for the water utilities such as Sydney Water, Hunter Water and for the Central Coast Council utilities too. However, O’Dea said it is a very expensive and time consuming exercise and the agency has issues with regard to specific variations around that.

Second, is the default option that IPART was presented with, which was that it should be regulating domestic waste charges much like the delegation it got for council rates.

“We set a domestic waste cost index and we have a domestic waste peg. That would mean you would have to have special variations if you had individual impacts,” he said. “We don’t think either of those options harnesses any of the knowledge or experiences that are in the local government waste sector.”

What IPART prefers is option three. This is a set clear pricing principles so that everyone is on the same page and there would be a simplified benchmarking process. What would that mean?

“We are not going to benchmark Blacktown and Bankstown, “ said O’Dea. “We are not going to compare Caringbah and Cobar, it would against peers. We would only be regulating by exception. What we would do is have a two-year phasing period where we would have benchmarking. The councils would benchmark. We wouldn’t publish those numbers – first, it would be just for the councils. This would give them time to align with the pricing principles and benchmarking and learn and exchange information from each other.

“At that point, we would only regulate by exception – i.e. that is the councils that were outliers. Without wanting to put specific numbers on it, if peer councils’ pricing is different from either other by two or three or four per cent, that is not an outlier. Fifteen per cent? That is probably an outlier.”

O’Dea said the pricing principles should reflect a user-pays approach. He said that the Local Government Act specifically separates out domestic waste charges and also water and sewage charges from general rates. Part of the pricing principles are establishing the categories of cost you can charge for.

“Domestic waste charges should reflect the efficient cost. They should be transparent. Everybody should be able to see them. That applies to contractors as well,” said O’Dea.

For a more in-depth look at the issue, be sure to read the upcoming June/July issue of Inside Waste.