Comptroller: Reconsider water price hike

Lindenstrauss Reconside

By EHUD ZION WALDOKS
December 30, 2009 10:28

State Comptroller Micha Lindenstrauss on Wednesday recommended rethinking the increase in water prices which is set to take effect January 1, 2010, because of its potentially damaging ramifications for the weaker sectors of society. His recommendation was made at a meeting of the Knesset's State Control Committee. Prices are set to rise 40 percent between January 1, 2010 and January 1, 2011. The committee had requested the opinion of Lindenstrauss's office in mid-November and asked him to prepare it by January 1. Welfare and Social Affairs Minister Isaac Herzog declared that the comptroller's opinion verified what he had been saying about the potential danger to the poor and elderly. Herzog added that he expected an interministerial committee to return clear conclusions about the effect on the weaker segments of society as soon as possible. Upon Herzog's demand, the committee was established at the beginning of the week and was charged with returning its conclusions by week's end. During Wednesday's meeting, Lindenstrauss highlighted the bottom line of his report. "In light of the potential impact on the weaker sectors of society, and the fact that the increase does not seem to include all the production costs of water, it would be prudent to reconsider the increase and delay it until after a discussion of all of the relevant issues." Lindenstrauss's analysis made reference to the recent government poverty report that cited hundreds of thousands of children living below the poverty line as well as many single parent families. MK Miri Regev, who initiated the committee's request to Lindenstrauss to prepare an opinion, told the committee that "water is not meat. The public should not be paying for water what it pays for meat." She called on the Knesset to adopt the bill she had proposed which would place oversight of prices and the Water Authority under a Knesset committee and the National Infrastructures Ministry. "The Water Authority must stop being the forward position of the Treasury," she said. In line with one of the findings of the report, she also called for more public representation on the Water Authority Council which approves water prices. The Council has six government representatives and two public representatives. The National Infrastructures Ministry said that Lindenstrauss's opinion confirms the National Investigation Committee Regarding the Water Crisis's interim report that a guiding hand was necessary to direct policy regarding water economics. While setting water prices was within the purview of the Water Authority Council, once the issue began to have serious repercussions for large segments of society, it rose to a level of policy which demanded that the government make the operative decision, a ministry spokesman told The Jerusalem Post. Water Authority Head Prof. Uri Shani warned, however, that without implementation of the price hike, critical water infrastructure projects like desalination would not be executed in the coming year. He warned that more than 20 water corporations were on the verge of collapse and without the funds from increased water prices they would be unable to procure water from the Mekorot water authority. The potential collapse of the water corporations threatened the continued regular supply of water to residents throughout the country. Shani did not object however to Committee Chairman Yoel Hasson's distinction that if the funds were to come from the Treasury temporarily, then the price hike could be spread out over a longer period of time. At present, the increase is set to be divided into three segments - 25% on January 1, 14% in June and another 2% on January 1, 2011. While Shani said he personally thought it was not the right way to handle the costs of the water economy, he said that from a professional perspective it did not matter to him where the funds came from so long as they arrived immediately. Finance Ministry representative Amit Lang stridently urged the Knesset not to play around with the price of water itself, but instead, to offer stipends as needed to offset the cost for those segments of society which required assistance. The rationale for increasing the water prices was to ensure that it reflected the real cost of water, the comptroller's office wrote in its opinion. No one disputed that the current price of water does not reflect the cost of its production particularly in the age of desalination. However, even this price hike does not seem to include all of the production costs, the comptroller wrote, which means there could be similar drastic increases in the future as well - which posed a serious threat to lower income families. The report broke down the new water prices into its various components and found that the major elements the new price was supposed to cover were: Value Added Tax (VAT), sewage treatment and the distribution costs of the water corporations. The incremental shift to water corporations as providers means that VAT is now charged. However, the report pointed out that some municipalities that are still supplying water are illegally charging VAT. The other part of the cost was for maintaining sewage infrastructure. Instead of paying a separate sewage charge as residents do today, they would pay a flat fee for water which included that charge. Finally, the distribution costs of the water corporations had to be covered. However, the original goal of the water corporations reform was to have no more than 30 corporations across the country which would enable them to collect enough fees to be profitable. Nevertheless, several smaller corporations had been set up which did not have enough customers to make a profit and so were suffering financially, according to the report. The Water Authority had also wanted to include a development levy which the corporations now charge to fund their infrastructure projects into the new prices. However, because of pressure from the corporations, that levy will continue for at least another year, the report summarized. That being the case, there were yet still more costs of production which could drive prices even farther up in the future. Shani, however, assured Lindenstrauss that he did not predict any sort of similar drastic increase in the future. "There could be a few adjustments, but nothing like this in the future," he told the committee. Shani even pointed out that prices could go down a bit in the future. Israel Union for Environmental Defense head Tzipi Iser Itzik said that increasing water prices in effect lends a hand to a "failed government policy. "Rather than going with the easy solution of desalination, the government should focus on cleaning up wells and treating sewage water and encouraging green building, which conserves water." She also pointed out that while the price hike for the public was supposed to take place within six months, there was no such expedited process for adjusting the price of water for industry and agriculture. Friends of the Earth Middle East Israel Deputy Director Yuval Arbel suggested that since there would now be two tariff levels, one be used to provide enough cheap water to meet basic needs and the more expensive one to cover "extras" like gardening, long luxurious baths, and swimming pools. "The base price should be extremely cheap so everyone can have water to drink and to shower. The higher tariff should cover the extras. That way, those who want to use more water can pay for those who need help covering the basic costs," he told the Post.


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