Today we again have the Herald’s resident ignoramus Damien Grant sounds off about something he knows nothing about. As usual just looking at numbers without understanding what they represent and leaps to wrong conclusions. For a start he tries to compare the $8000 Watercare charge for a new water supply connection with the much smaller $300 Chorus charge for a phone/data connection.
Let’s start with some simple engineering. It’s MUCH more expensive to supply water than data. One is a physical substance that inherently involves high pressures, flows and energy. The other is electrons or photons. A large 1m diameter pipeline may easily cost $1m to install a length of just 100-200m. It demands a substantial trench, bedding material, lots of large diggers, trucks, and cranes, lots of specialised welding, and concrete blocks weighing many tons at every bend in order to restrain the large forces involved.
A pumping station will cost anywhere between $3-10m to build. It requires large amounts of energy, monitoring and maintenance to keep it running safely and reliably. A bulk water supply plant is a huge investment of civil, mechanical, electrical and automation engineering. It requires a level of staffing and cost to maintain and operate it that is entirely different to a modern data-centric telephone system.
By contrast a new fibre trunk involves a few small trucks and a mole-plough. Well there is bit more to it than this … but fundamentally the costs are much lower. The UF Fibre project is costing something in the order of $3-5b to rollout to the whole country. It would cost at least that much to re-build the water supply to say just Wellington. That’s the fundamental flaw of Grant’s argument. Water and data are quite different things and cannot be meaningfully compared.
Worse still he goes onto compare two different business models. The electricity industry and the water industry have traditionally charged quite differently. Early technology meant it was fairly easy to measure electricity consumption while it was clumsy and difficult to measure water. Besides water supply was always seen more as a fundamental human right than electricity was. It’s only been quite recently that we’ve been metering water. Even so metering is a weak tool in utility industries where typically 50-80% of costs are fixed. For this reason electricity suppliers have been split into energy and line providers; but because water supply cannot be sensibly split in this way there is only a single charge to cover both. Again different models to suit different industries.
For a typical small Auckland household their annual water bill is around $600, while their total power bill is maybe $2400. Of course Vector can low-ball it’s connection fee, because it knows perfectly well that it can re-coup the real cost of providing the connection (which is much higher) with it’s on-going monthly line charges. By contrast water supply charges the total connection fee is upfront at the time of installation. And of course the $8000 fee Watercare charges covers far more than the bit of pipe from the main in the street to your house; it represents your portion of the entire cost of providing the infrastructure upstream of your connection. That’s a pretty fair model.
It also makes the cost of urban sprawl transparent. I’ve sometimes thought that Len Brown’s correct response to the Government’s insane threats forcing expansion of the MUL is to simply say … “sure you can build new suburbs way out there, just don’t expect the rest of city to fund the services you’ll want for them”. Which is probably why the likes of Damien Grant are instinctively uncomfortable with Watercare’s clean, transparent model … because it makes it harder to socialise the costs as usual.
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