Physical Geography
Alice Springs, known as Mpartnwe to its original inhabitants, is a city of nearly 26,000 inhabitants in the Northern Territory of Australia. It is the largest city in the arid desert region of Central Australia and the third largest city in the Northern Territory. It receives on average 11 inches of rainfall each year, and precipitation primarily occurs during the wet season, which lasts from November to February. During the other eight months of the year, Alice Springs receives less than an inch of rainfall per month, on average. As a result, the overwhelming majority of Alice Springs’ water comes from groundwater (Alice Springs Water Allocation Plan, iii). Alice Springs sits on the north side of the Amadeus Basin, a large sedimentary basin that holds a complex system of aquifers and natural resources, including deposits of petroleum and natural gas. Specifically, Alice Springs draws from the Mereenie, Pacoota and Shannon aquifers, which are relatively narrow and deep, so pumps plunge to nearly 185m beneath the surface to access the water. (Power and Water Corporation) Because of the low and scattered precipitation in the region, the aquifers do not replenish quickly, and are subject to about 0.6 meters of water loss per year. (Have Your Say Alice Springs)
Map source: Petroleum Onshore Information NT and author’s additions
Political Geography
Alice Springs is both its own municipality and the regional seat of the Central Desert Region of the Northern Territories. It sits within the Alice Springs Groundwater Control District, which we have selected as the scope for our project, rather than the municipal boundaries of Alice Springs. Groundwater Control Districts are areas designated by the Northern Territory government “where there is a need for improved management of water resources…to avoid overusing groundwater reserves” (Northern Territories). Within the territory, private and public entities require a permit to bore wells and are allocated a specific entitlement of groundwater extraction per year. Private uses, including agriculture, industrial, and mining, represent about 80% of extraction entitlements in the groundwater districts, and public use represents the rest (Groundwater License dataset). However, it is not clear if these allocations are tracked, and if these users are subjected to water metering. Further, those public entitlements are almost entirely attributed to the Power and Water Corporation (known as PowerWater), a corporation owned by the Northern Territory government that provides almost all of the water and power to individuals in the Northern Territory. Where PowerWater’s distribution networks do not cover, their privately owned subsidiary Indigenous Essential Services (IES) works to provide a suite of programs and projects to rural communities.
Demographics
Being the hub of Central Australia, Alice Springs has a wide variety of Aboriginal inhabitants and influences. The original inhabitants of the land are the Central Arrernte people, contributing to 21% of the city’s population. This Aboriginal population also contributes to the city’s rich language diversity which includes 12 distinct aboriginal languages. Nonetheless, 68% of residents speak only English at home. The Northern Territory, and presumably the Alice Springs region, has a large number of small settlements, called stations, scattered outside the primary population centers. The demographics and locations of these stations is not well documented, so the above statistics are not necessarily representative of the overall demographics of the Alice Springs Groundwater Control District (Australian Bureau of Statistics).
Water Problems in the Alice Springs Region
Physical Scarcity
One of the most pressing water issues in the Alice Springs Region is the unsustainable extraction of groundwater. As noted above, the aquifers that Alice Springs relies on for drinking water, agriculture, and economic production are subject to 0.6m of water loss every year, and Alice Springs is expected to run out of drinking-quality groundwater in 2050 (Alice Springs WAP). Because of the limited and sporadic nature of precipitation in the region, groundwater recharge is limited, meaning that groundwater is a highly finite resource. This physical scarcity is exacerbated by Alice Springs huge over-reliance on groundwater.
Managerial Scarcity
As a result of Alice Springs’ limited and diminishing groundwater resources, high water usage in the area is a significant risk factor. And yet “Alice Springs has among the highest rates of water consumption in Australia, with water use by households 2-3 times greater than in Victoria and South Australia” (Arid Lands Environment Center). This suggests that water is not being priced to represent its true value, which would make intuitive sense given that water rates are set across the entire Northern Territory by the Utilities Commission, without taking into account the specific water context of each region. In addition to this high household consumption, the prevalence of petroleum extraction and fracking is of significant concern. Currently, the majority of the Alice Springs region is permitted for fracking. Because fracking consists of injecting amounts of water deep into the earth to extract natural gas, it represents a significant threat to aquifer quality as it could potentially contaminate groundwater with harmful elements within the ground, or chemicals used in the extraction process. Fracking is also highly water intensive, with one fracking well using upwards of 20 million liters of water, which is particularly concerning in a region like Central Australia that has a finite water resource. (ALEC). Additionally, many industrial and mining users of water are currently not being charged for the extraction of groundwater, highlighting a permissive approach to extraction and a managerial water scarcity in Alice Springs.
Alice Springs Groundwater Control District Demand Portfolio
Based on maximum water entitlements for Grounwater Extraction Licenses. Source: Northern Territory Water Act Licensing and Permit System (WALAPS)
Economic Scarcity
In the rural areas of the Alice Springs region, lack of access to high-quality drinking water is a serious concern. The Guardian reports that in Laramba, a small township about 120 miles north-west of Alice Springs, many individuals suffer from kidney disease, and the drinking water contains three times the allowed levels of uranium. Individuals who want to protect themselves from this threat must either install costly filters, collect infrequent rainwater, or buy casks of water which are most expensive because of Laramba’s rural location (The Guardian). Indigenous Essential Services (IES), a subsidiary of Power and Water, is responsible for providing high-quality drinking water in these rural stations. However, from its annual reports it is clear the IES does not have a comprehensive or safety net approach to rural water access. Instead, it seems to be spending its budget on piecemeal projects. The resulting high price of accessing high-quality drinking water represents both an economic and managerial scarcity.
Our Proposal: Demand-side Management Using an Increasing Block Rate Structure
We have identified physical scarcity due to high water use as the most pressing issue that Alice Springs faces. While difficulty in accessing high quality water is a pressing issue, the drawing down of aquifers could directly exacerbate that issue. As a result, our proposal seeks to target high water usage, while creating opportunities to solve the more complex issues of water quality and groundwater reliance.
We believe that demand-side management could be a particularly valuable strategy to more accurately reflect the value of water in its price. We propose using an increasing block rate structure to ensure a base level of water access, while disincentivizing high intensity uses like fracking or inefficient agriculture. The goal with this proposal is to first shrink the overall size of water use in the region through pricing controls, while also creating a new revenue stream to aid in future infrastructure. The two major components of this proposal consists of metering and then charging a fee on private wells that currently extract groundwater, and household water rate reform.
How We Get There
There are several interrelated steps that need to be taken to achieve demand side management utilizing an increasing block rate structure. These steps first require a policy package that targets water rate setting for both private and public groundwater extractions, followed by water metering efforts, equitable rate setting, and finally the actual charging and collection of fees.
Policy Changes to Implement an Increasing Block Rate Fee Structure
Two distinct policy changes targeting private and public water pricing would need to occur to be able to administer an increasing block rate structure. The first policy change would target private groundwater withdrawals, such as those for agriculture, industry, and mining. Here, the Power and Water Corporation would be authorized to meter and charge fees on wells, which are already located through the Northern Territory’s Water Act Licensing and Permit System database. Because bore construction permits are required for the construction of all bores within the water control district irrespective of their intended use or capacity (Alice Springs WAP), we believe this database to be a reliable source to support policy implementation. We consider this to be a desirable policy plan because industrial users have historically not paid for their water use. This is particularly potent in the oil and gas industries, which are both water intensive. Therefore, Power and Water would create an entirely new revenue stream from their newfound charging. It should be noted that the Northern Territory has announced as recently as October 2022 that industrial users will no longer receive water for free (ABC). However, it is unclear when these users will begin to be charged, and if the pricing structure they will be subjected to will reflect the true price of Alice Springs’ finite water resource.
The second policy implementation that will need to occur will affect public water pricing. As previously stated, water pricing is currently set at the level of the Northern Territory by their Utilities Commission. The Government regulates pricing in accordance with the Water Supply and Sewerage Services Act 2000, which states that a pricing order may regulate prices in any manner the Minister considers appropriate including the following:
- fixing a price or the rate of increase or decrease in a price
- fixing a maximum price or maximum rate of increase or minimum rate of decrease in a maximum price
- fixing a maximum revenue, or maximum rate of increase or minimum rate of decrease in maximum revenue, in relation to specified goods or services
The Act also states that pricing orders for water and sewerage supply “take effect on a date specified in the order, and remain in force for no longer than five years, or in respect of the first pricing order issued, no longer than three years.” ( Water Supply and Sewerage Services Act 2000, 34). To enact an increasing block rate structure, this Water Supply and Sewerage Services Act must be amended to allow for this new pricing structure, instead of a fixed rate which the Act currently supports. We believe this policy change to be desirable for Alice Springs because it would disincentive both public and private users to use excessive amounts of water, but nonetheless has the potential to increase revenue for Power and Water to funnel into other infrastructure projects. Further, because the block rate structure would only be able to occur based on policy changes at the Northern Territory level of government, it would allow other ground water control districts to have more specialized water pricing that reflects the state of water in their area.
Rate Setting & Charging
To ensure that water is priced equitably yet rigorously, the first pricing block of this pricing scheme should be free to ensure all people are able to access their basic water needs without financial burden. However, as more water is used, in both public and private arenas, this will result in more steep water charges. This is particularly essential in public water usage, as Alice Springs residents are some of the highest water users in Australia, consuming three times more water than a resident of Victoria (ALEC). Further, industrial users who rely on water could be incentivised to use less water in their activities, or pay into a water pricing system that will benefit the Water Control District in other arenas. Metering efforts however may be more difficult in rural contexts within the Water Control District. Rural metering efforts may be complemented by smart metering technologies that don’t rely on a power grid, and can send data wirelessly.
Once this two-part policy change is implemented, it is essential to create metering infrastructure to charge water usage to allow for Alice Springs’ new pricing structure to be carried out. The Northern Territory’s Water Act Licensing and Permit System database would be especially helpful with implementation as it has already created a record of all bores that will be affected by this implementation. It would therefore be a smaller research lift for Power & Water to find all wells within the Alice Springs Water Control District. Funding for these meters may be collected through bonds. Because of this project’s bankability through its guaranteed revenue source, it should be relatively easy for Power & Water to receive this bond. Further, because the metering will be implemented on industrial users who have historically not paid for water in the Northern Territory, their metering will create a new revenue source that could not only pay for this bond, but allow for funding in other areas within the Water Control District, expanding the reach and benefit of the initial water pricing implementation.
Next Steps
Image source: ANZC, by Eason Liu on Flickr (CC BY-NC-ND 2.0)
Although the increasing block rate structure water pricing does not address all of the issues present in Alice Springs water infrastructure, we believe the pricing scheme’s ability to create new sources of revenue will address issues beyond the immediate scope of its implementation. First, we hope to address rural water quality issues through new financial resources created from the increasing block rate structure. Currently, almost all remote communities are reliant on bore water, despite concerns of groundwater being exposed to large amounts of minerals, particularly heavy metals. These large amounts of minerals present in drinking water are reflected through disproportionate rates of kidney disease in rural communities, often inhabited by indigenous Australians (ABC). Addressing this public health issue, which is disproportionately affecting these indigenous communities should be an essential mission for the Alice Springs Water Control District. The increased revenue from this plan can be used to implement increased water treatment facilities in these rural communities. Reverse osmosis may be a particularly effective method for removing a wide range of impurities from rural water, including minerals, chemicals, and other contaminants. Because it is commonly used in both residential and commercial settings, the implementation of this technology may manifest in either private home water treatment, or for more communal water sources, which many rural communities rely on.
A second project we hope to fund with this new revenue stream is water portfolio diversification with recycled water. This is an essential aspect to strengthening Alice Springs’ water infrastructure because, although increasing block rate water pricing will promote sustainability, it does not change the fact that the Water Control District’s water source is finite. Efforts to recycle water could be particularly useful for industrial users who do not rely on potable water for their activities. Because these industrial users make up roughly 80% of water usage in Alice Springs, there would be a significant use and availability of recycled water.
Conclusion
Alice Springs’ finite water source calls for demand-side implementations that can help promote a more intentional approach to water use. We believe executing an increasing block rate structure will help reflect the true price of water within the Water Control District, promote water conservation, and create increased revenue, particularly with its enforcement on industrial users. The bankability of this project, highlighted by its ensured revenue source, would not only allow it to receive bonds for initial funding, but may contribute to increased water infrastructure to address issues the water pricing scheme fails to. The implementation of this plan is therefore a financially sound infrastructure and policy change that aims to share financial resources across various aspects of the Alice Springs Water Control District.