Councillors reject water firm's proposed price rises

Manukau's water company price rises have been rejected in a move that is hailed as an example of how council-controlled organisations (CCOs) can be forced to toe the political line.

Manukau Water's pricing plan for 2010-11 urged a 2.34 per cent rise for water and 5 per cent rise for wastewater for residential customers.

Manukau City Council members decided on Tuesday to use powers under the Local Government Act to change the CCO's statement of intent to peg prices at last year's levels.

"I think it ties into the argument about whether CCOs can be controlled or not," said Jami-Lee Ross, who is the council's accountability and performance committee chairman.

"As a council, we are doing our job and controlling the organisation because we are accountable to the ratepayer for what they do.

"The committee reviewed the performance and since being established four years ago, the company has performed better than budget in every year.

"They are finding efficiencies and cost savings and running the organisation more effectively than it did as a council department and we thought there was room for the company to absorb inflationary costs."

Mr Ross said the company predicted it would be $6 million ahead of budget. But he disagreed this meant the company was overcharging consumers, saying residents enjoyed the lowest water prices in the Auckland region.

The company's budget was conservative and the council was pre-empting its being ahead of budget again in 2010-11.

The pricing plan continues to reduce commercial wastewater and trade waste fixed charges, which have subsidised residential charges in the past.

A council decision to levy a $399 fixed charge per rateable unit yielded an extra $1.2 million in waste water revenue in the past two years.

Extra sales of water resulted from the drought and Contact Energy's needs for cooling Otara power station, which amounted to $589,000.

These were one-off boosts to revenue, said council enterprises group manager Andrew Duncan, and the company faced extra costs in 2010-11. These included Watercare's proposed major wholesale price rises and extra costs when Manukau Water and other councils' retail water operators merge with Watercare.

Redundancy payments to long-serving Manukau staff unable to get jobs with the new organisation could be up to $500,000.

Mr Duncan said Watercare would keep local operators' prices until June 2011 and wastewater charges for a year longer. A small price rise now would avoid the need for a 12.5 per cent increase in funding for 2011-12.

The move to amend the statement of intent has to be approved by the Auckland Transition Agency.