The Allconnex Water Debacle: Lessons in Devising Better Governance Mechanisms for Government Business Enterprises

Abstract

This article examines problems that occurred as a result of the Queensland government’s restructuring of the state’s water industry from 2006 onwards. It focuses on the experience on the Gold Coast, where the forced transfer of water retail and wastewater services from the Gold Coast City Council (‘GCCC’) to a regional water retailer, the Southern SEQ Distributor-Retailer Authority, trading as Allconnex Water (‘Allconnex’), was quickly followed by a large increase in the price of water, causing an extensive public outcry. Ultimately, the Queensland government was forced to grant city councils the option of resuming control over water from the new regional distributor-retailers. The GCCC voted to withdraw from Allconnex on 26 July 2011 and Allconnex ceased to exist on 1 July 2012. This article examines what happened and what went wrong. As part of that examination, this article maps out the relevant laws and regulatory structures that applied to Allconnex and examines the role they may have played in Allconnex’s demise, either by what they affirmatively required, or by what they failed to require. In particular, this article seeks to understand what factors contributed to the inability of Allconnex’s stakeholders to devise a solution short of its destruction. It does so by examining Allconnex’s corporate governance and pricing regimes. Deficiencies in both regimes are identified. In each case, the article suggests steps governments can take to avoid similar problems in the future, including through changes to existing laws and regulations. This analysis is especially relevant since the other two distributor-retailers created along with Allconnex continue to exist. More generally, this article illustrates the dangers of ignoring the extent to which GBEs are expected to act (or at least appear to act) in the public interest. Drawing from public trust theory, this article suggests ways that GBEs can be made more responsive to public concerns and, ultimately, accountable to the public for their conduct. Note: despite the 2012 date on the journal citation, it was actually published at the end of July 2013.