reasons why privatisation is a fallacy?

Auckland City residents face a 5.9 per cent rise in water bills from July 1.

Council company Metrowater will add $52 a year to the average household consumer's cost.

Reasons for the price rise include a 5 per cent drop in the volume of water sold compared with last year.

What has that got to do with privatisation?

What you might be mistaking is separate business/accounting entities to make sure costs are assigned to the right place and any subsidies between them are transparent. Presumably the council makes the money off the operations of metrowater which go into funding the council that would otherwise be paid by direct rates.

Properly valuing goods/services discourages wastefulness when set lower than the cost (direct and future provision) and under utilisation when the cost is set too high.

And just because some of you see to think that if im not a raving socialist then i *must* be a right wing nut job - i dont support the sale of core services.

I was stirring for a reaction bob but lets's face it this is a reversal of the usual supply and demand tenet of market forces

well it's a monopoly isn't it? so you wouldn't expect the normal principles/market forces to apply

well that's true so let's just forget the whole bs and get back to basics

it's a rates increase by stealth

How is it a reversal?

Im not sure of the billing break down but the costs go something like

service - providing water infrastructure - high cost, mostly fixed - drop in demand = higher recovery per unit.
Actual water used - extremely low cost.
Future provision of service - expensive.

The same thing happens with petrol, the product is cheap, providing it is expensive.

I wonder to what degree the usage drop affects the price as it only says part of the reason. You also have inflation and provisioning for growth. Isnt water something like 50c a m3?

Buy a water tank and divert our gutter if you are really worried, that'll show them.

So youd prefer a direct rate with no penalty for people who over use? All the money ends up in the council anyway so what is the problem? Think about the size of the water network for a place like auckland.

dude they are increasing the cost to all precisely becausee people are using the service less

thus penalising the savers

where's the sense in that?

The rise is supposedly down to a:
- an increase in capital investment from themselves
- BIG increases in Watercare's charges (to cover their capital investment program)
- an inelastic variable cost that sees a reduction in usage leading to almost zero change in the cost

If their return on investment next year is much higher than it was this year (which WAS well up from previous year but I'm not sure about performance against average or target) then I think there is valid questions as to why water provision is being used as a profit-centre in a monopoly industry.
Of course, they won't exist as a separate entity by the end of next year anyway...

You dont seem to get the concept which has been explained fairly succinctly.

I dont think you are saying there are less people connected to mains water system only that they are using less.

Unless you want to charge people for the actual cost of connection (supply network) and usage (actual water used) separately (like power companies) then you need the cost to be assigned this way. If it were charged in a properly fair way then low users would be penalised severely as it is the cost of delivery that is far higher.

This model favours low users by amortising the costs.

It doesn't penalise them at all, in fact the higher the price the more it promotes and rewards lower users.

you do have fixed charges and usage charges bob albeit under the one umbrella

the report states taht this charge will be across the board so no benefit to savers it would appear