Adelaide desalination plant’s standby savings challenged

Putting the Adelaide seawater desalination plant into standby mode will not reduce the amount SA Water’s customers pay by anything like the Aus$ 100 million (US$ 103 million) per year that has been claimed, says a report by the Essential Services Commission of South Australia (ESCOSA) released on 16 October 2012.

Presenting the commission’s Issues Paper regarding SA Water’s regulatory business proposal, commission CEO Dr Paul Kerin said that, while ESCOSA supported the move, it would not result in major savings for customers in the first three years of the regulatory period.

“SA Water does not propose putting the ADP in standby mode until 1 January 2015, after running it at high capacity utilisation rates to the end of 2014 to fulfil warranty requirements,” Kerin said. “Therefore, there will be no savings at all until half-way through the first three-year regulatory period.”

He said that the claimed Aus$ 100 million annual saving would only be relevant if the previously planned alternative was to run the 100 million m³/year plant at 100% capacity.

“The commission understands that the South Australia government’s 2012‑13 Drinking Water and Sewerages Prices Regulatory Statement, which was the basis on which the government indicated that it did not expect water prices to grow significantly faster than inflation, assumed that the plant would run at no more than 25% of capacity after warranty requirements are fulfilled,” Kerin explained.

Placing the desalination plant in standby mode would save only about Aus$ 10 million ($US 10.3 million) a year relative to that alternative, he asserted.

“Therefore, placing the (plant) in standby mode for the last 18 months of the first regulatory period might reduce the amount SA Water’s customers pay by an average of about Aus$ 5 million (US$ 5.2 million) per annum over the first three-year regulatory period – not by $100 million per annum”, Kerin concluded.