Veolia Water company sued by South Aust. government for massive overcharging ...

The Australian:

State sues water firm for millions

1 September 2009

One of the world's largest water companies has been accused of misleading and deceiving South Australians over a contract signed 14 years ago, prompting the Rann government to launch legal action for damages that could run into tens of millions of dollars.

Acting Premier Kevin Foley yesterday announced the unprecedented legal action by a state government after a statement of claim was filed in the SA Supreme Court against United Water, owned by giant French company Veolia.

The legal case has been lodged by SA Water -- the government agency that manages the United Water contract.

Veolia Water is involved in the construction of the Sydney desalination plant and is running southeast Queensland's desalination plant on the Gold Coast. It is a branch of Veolia Environment, which has business arms in public transport, energy and waste management.

South Australian Water Minister Karlene Maywald said any damages won if the case were successful would be passed on to consumers through reduced increases in future water prices.

"We're on a pathway to double our prices of water, and any return of dollars will of course reduce the ... quantum of that increase," she said.

The contract at the centre of the dispute was signed in 1995 by the then Liberal government when it privatised the management of South Australia's water and waste water systems. The pricing structure was signed off again by the Liberals during a 2001 review.

Opposition finance spokesman and former Liberal treasurer Rob Lucas said yesterday the Rann government renegotiated SA Water's contract with United Water in 2003.

"If they are saying it's a bad contract, why didn't they do something about it in 2003?" he asked. "If it was so obvious, why didn't they renegotiate then?"

However, The Australian understands that while the amendments to the contract were signed in 2003, they were first agreed to under the Olsen Liberal government in 2001.

In its statement of claim, SA Water alleges that United Water improperly included research, business and industry development costs in its lump sum service charges from about January 2000.

It claims the water company included all of its corporate overhead costs, including costs that related to United Water's other operations, such as those those in New Zealand and Ballarat.

Under the terms of the contract with South Australia, there is a pricing review every five years. The 15-year contract comes up for renewal next year.

Mr Foley said it was not until the 2006 review, the first conducted by the present Labor government, that "serious concerns" about elements of the contract were raised.

"We have been in negotiation and discussion with United Water since that period, and have been unable to resolve or reach a point where we can move forward with an agreed pricing formula," Mr Foley said.

"This is an unprecedented action by a state government, but it is in the interests of the South Australian taxpayer and South Australian water users.

"It is our view and strong case that will be argued that the effect of this behaviour by United Water leads into the tens of millions of dollars in terms of overcharging for services."

See - The Australian - State sues water firm for millions.