Domestic waste charges have more than doubled in recent years, with council charges ranging from $390 to $750, according to IPART NSW Principal Analyst Gerard O’Dea.
IPART NSW will be publishing a draft review on the state of domestic waste in NSW in late May.
A discussion paper was released in August last year, with IPART’s preliminary analysis indicating that domestic waste management charges may not be delivering good value for ratepayers, and there may be challenges for local councils in purchasing and pricing these services.
IPART observed that some councils appear to be in surplus for domestic waste management services, as annual revenue from domestic waste management charges exceed expenditure on providing services, and that some councils appear to be allocating ‘overhead expenses’ that contribute more than half of total costs.
Speaking at the Waste 2021 Conference last week, O’Dea said charges have risen almost three times that of inflation.
“We also found that the audits that had been conducted by councils were generic and not as specific or forensic as we had understood,” he said.
“They didn’t go into anywhere near the detail that we had understood they would go into.”
O’Dea explained that cost increases are coming from issues such as China Sword, the export ban, regulatory risk, market concentration and increases in the levy. He said, however, that IPART cannot justify the variations in charges between councils.
“Does IPART have the power to act in this space? Yes, it does. It has a delegation to do so,” O’Dea said.
“We are not writing a report or a recommendation to councils like is currently going on with the Rating review being conducted about Accounting for Growth. This will actually be a determination by IPART.”
WHAT FORM OF REGULATION IS IPART LOOKING AT?
According to O’Dea, there are three regulatory options. First, detailed individual reviews, such as those conducted for water utilities. He explained, however, that this option is expensive and time consuming.
“The other option is the default option that we were presented with that we should be regulating domestic waste charges much like the delegation we got for council rates,” O’Dea said.
“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.
“We don’t think either of those options harnesses any of the knowledge or experiences that are in the local government waste sector. I have been gratified to have 15 people from council on the working group.”
The third and most preferred option is setting clear pricing principles so that everyone is one the same page, with a simplified benchmarking process.
“What would that mean? We are not going to benchmark Blacktown and Bankstown, we are not going to compare Caringbah and Cobar, it would against peers. We would only be regulating by exception,” O’Dea said.
“What we would do is have a two-year phasing period where we would have benchmarking. The councils would benchmark.”
O’Dea explained that this would give councils time to align with the pricing principles and benchmarking.
“At that point, we would only regulate by exception – i.e. that is the councils that were outliers,” he said.
“Without wanting to put specific numbers on it, if peer councils by two or three or four per cent form each other, that is not an outlier. 15 per cent? That is probably an outlier.”
O’Dea added that pricing principles should reflect a user pays approach.
“The Local Government Act specifically separates out domestic waste chargers and also water and sewage charges from general rates. Part of the pricing principles are establishing the categories of cost you can charge for,” he said.
“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.
“People who are paying similar charges should have similar access to services. We should be ensuring price stability.”