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  Issue No 23 Official Organ of LaborNet 23 July 1999  





The Stench from the South

By Noel Hester - ASU Services Branch

In 1997 the entire Adelaide metropolitan area was drenched in foul, sulphorous, sewerage odours, emanating from the Bolivar waste water treatment plant.

The pong was so strong and sustained citizens complained of traumatic mood swings, nausea, sinus problems, asthma attacks, headaches and sleeplessness.

A year later residents of Australia's largest city were boiling their water for weeks following the contamination of Sydney's water supply.

The inquiries that followed the breakdown of these life-vital services found a common link - the over-arching dominance of commercial imperatives over the public good in their management.

The McClellan inquiry into Sydney's water contamination revealed inadequacies in the privatised Prospect treatment plant, a compromising of the catchment area, and a neglected distribution system.

'Sydney Water's focus on catchment protection has diminished as the focus on commercial production has increased,' McClellan said in his report.

Investigations into Adelaide's Big Pong found the stabilisation lagoons at Bolivar had been overloading during the period when South Australia Water had heavily commercialised its operations. This overloading accelerated rapidly under new private managers.

Competition policy drives destructive water reforms

New research by economist Dr Christopher Sheil shows a clear link between Australia's 1997-98 water failures and the economic rationalist agenda of the last decade.

Sheil says National Competition Policy has been the driver behind commercialisation with its 'strategic framework' for water.

This strategic framework dictates that organisations like Sydney Water 'should have a commercial focus, whether through contracting out, corporatisation or privatisation.'

Sheil says it is the relentless pressure by the state governments for greater and greater commercial returns without a corresponding increase in productivity which has led to the Adelaide and Sydney breakdowns.

This commercialisation of Australia's water systems, he says, is bound up with the Federal Government's annual revenue payments to the states as dictated to in the National Competition Policy.

In return for implementing this policy the Federal Government pays the states annual competition grants in three instalments adding up to $1.2 billion by 2001-02.

'These grants - effectively bribes - are made conditional upon the commercialisation of particular areas including water infrastructure,' he said.

'No matter what future political changes occur at the state level or what adverse consequences there are for citizens and the environment the commercialisation of water remains locked into the states' annual budgets.'

A smelly deal in South Australia

The commercial imperative in water management has been most pronounced in South Australia. The complete breakdown of Adelaide's sewage system came only 14 months after the entire water system was flogged off to a French-British consortium.

In 1995 the South Australian Water Corporation had contracted with a private company - United Water - to manage, operate and maintain the entire Adelaide metropolitan water and sewerage system, including its capital works program.

It was the largest out sourcing contract to be signed anywhere in the world in 1995 outside information technology.

Under the contract SA Water agreed to pay $1.5 billion over 15.5 years to United Water, a consortium of the French company, Campagnie Generale des Eaux and the British Thames Water. Des Eaux's annual turnover is five times the size of the South Australian government's budget.

Another private company was contracted to build, own and operate ten new water treatment plants.

Public utility only gets money in a crisis

The failure of the Sydney water infrastructure in the winter of 1998 supports the view that commercialisation is the key to understanding the breakdowns rather than the issue of public or private provision.

The Sydney crisis came after more than a decade of commercialisation of Sydney Water initiated by the Wran Government and accelerated by the Greiner public sector reforms.

In the mid-1980s when increasing demand was putting pressure on Sydney's existing water system a strategy was drawn up within Sydney Water to augment the capacity of the Prospect reservoir.

The economic rationalists who dominated the NSW Treasury fought against the solution, bluntly telling the utility's manager to 'wait for it to crash, you only get money in a crisis.'

Starving Sydney Water of funds to do the job in-house set the framework for future policy.

Greiner insisted on Build, Owned and Operated (BOO) schemes by the private sector for any new water treatment plants in New South Wales. Eighty five per cent of Sydney's water now goes through the privatised Prospect filtration plant.

Water sewerage and drainage functions were starved of capital and then contracted out.

Sydney Water mimicked the destructive downsizing ethos of the private sector with staff numbers tumbling from 11,000 to 4,500 in ten years.

Meanwhile the NSW Government milked the organisation of money that should have been spent on rebuilding the infrastructure.

The State Government has bled Sydney Water of $1.3 billion dollars in dividends over the last decade. On top of this the organisation coughed up $360 million in taxes between 1993 and 1998.

Economic rationalism institutionalised in government

McClellan in his report on the Sydney contamination recommended the government take back control over the infrastructure of Sydney Water. This included increasing the power to get information from the management and to give directions in the public interest without consulting the Sydney Water board.

But industry observers like Chris Sheil point out that these recommendations conflict with competition policy which effectively institutionalises and embeds economic rationalism within the financial heart of Australia's federal system of government.

Sheil says competition policy is behind the partial privatisation already undertaken within the nation's water infrastructure.

'Australia's water is now precariously poised between continuing privatisation and the reversal of commercialisation,' he said.

Alison Peters, Secretary of the ASU - the union which covers Sydney Water - says this is particularly true of New South Wales.

'The changes made in Sydney because of the 1998 contamination crisis are just as likely to smooth the passage for more sell-offs as to secure water's future in public ownership,' she said.

New water watchdog muzzled

Another key recommendation of the McClellan inquiry was the creation of the Water Auditor which was to take over the role of the existing licensing regulator.

McClellan saw the Water Auditor as a full-time body with a role emphasising water quality (as opposed to commercial) objectives. The body was to include directors with a 'proven track record in balancing the interests of all shareholders as well as experience in appropriate areas such as health, environment (and) consumer affairs...'

Jim Wellsmore from the Public Interest Advocacy Centre has been monitoring the development of the new body. He believes there is a danger that McClellan's concept of a watchdog over these vital non-commercial aspects of water provision could be undermined.

'Essentially, the creation of a Water Auditor to oversee the entire system from which we source our drinking water is dependent on political will,' he said.

'Already Sydney Water has begun its own process of 'consultation' with various groups in order to shape its own submission on the new licences. There is no question that Sydney Water intends to remain a player in the development of the new licencing framework.'

Bean counters rule over engineers

Alison Peters says Sydney Water management is now dominated by those with commercial expertise at the expense of those who understand how the system works.

'They've allowed so many people to leave with that experience and expertise - all that organisational knowledge. Now if anything happens outside the corporate plan they are lost,' she said.

'During the crisis they didn't respect the internal expertise that understood the system. Insiders were belittled because they were said to be too close to the 'old culture.'

Culture of secrecy

It is not just the run down state of Sydney Water that concerns observers but also the secrecy and lack of accountability.

This is typical of many contracting out and privatisation schemes says Mick Paddon of the Public Sector Research Centre.

'Sydney Water is responsible under its consumer charter for the supply of safe water. Yet it has privatised the link in the chain of the supply process which allows it to meet its responsibilites,' he said.

'These processes are shielded from public scrutiny by laws of commercial confidentiality.'

Alison Peters says the ASU has been saying this for years.

'Sydney Water's reaction during the contamination scare was symptomatic of our concerns. They tried to hide it. Both the privatised filtration plant and Sydney Water went for the lawyers to cover themselves rather than trying to solve the problem. Meanwhile the politicians tried to make political capital out of the failure after having passively watched the gutting of the organisation,' she said.

'The crisis showed that profits took precedence over other things.'


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*   Issue 23 contents

In this issue
*  Interview: An Economic Wet
Dr Christopher Sheil on economic rationalism and the 1997-98 water failures in Adelaide and Sydney.
*  Unions: The Stench from the South
In 1997 the entire Adelaide metropolitan area was drenched in foul, sulphorous, sewerage odours, emanating from the Bolivar waste water treatment plant.
*  Environment: Trading into Trouble
Seattle, USA, is shaping up as demonstrator mecca in the lead up to World Trade Organisation talks.
*  History: Eveliegh Rail Reunion
Former workers and their families from the historic Eveleigh Railway Workshops in inner-Sydney are holding a picnic reunion and folk music festival on the site on Sunday, August 29.
*  International: Bosses Use Armed Gangs to Break Russian Picket
On 9 July 1999, eighty masked, uniformed gunmen accompanied by the local prosecutor and other officials tried to storm the Vyborg Pulp and Paper Mill, under occupation by workers for the past eighteen months.
*  Satire: New Refugee Crisis: Journalists Flee Peace Zone
The camps are once again full in the Albanian border town of Gruntiez.
*  Review: 10 Reasonably Interesting Moments in Film
Cultural theorist Snag Cleaver flies off the handle again..

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