http://www.smh.com.au/news/National/New-water-bores-banned-in-southern-Qld/2007/05/10/1178390441315.html

The Queensland government has banned new water bores in parts of the state's drought-hit south.

Queensland Water Minister Craig Wallace said the ban, which takes effect immediately, was needed to help protect underground aquifers which are under stress in the Toowoomba area and Brisbane's south and west.

According to this site, desalination costs $0.8 to $2.1 /kL (wholesale) for 'brackish water'. Desalinating seawater costs 3 to 5 times that much. Then you have to add on distribution and disposal costs.

http://www.crcsalinity.com.au/newsletter/SeaNews/dpap0102.htm

For comparison, I think I am paying $1/kL 'retail'. Note that there are still farms using water that would otherwise be available to cities now considering desalination. So effectively you would be using one of the most expensive options available then tipping the water onto the ground.

Suppose the price of water suddenly went up by a factor of 5 or 10 (a lot more for farmers I think). Would we still need new plants?

---

In response to Sylvia Else on OLO:

If water were to be priced at its marginal cost, that being the cost of desalination, then the water companies (which are proxies for governments) would be receiving incomes far in excess of their costs. The consumers would quite rightly take exception to that.

I wouldn't. I think it is a good idea. It is a good way to raise revenue. Charging anything less is irrational. I personally think they should charge more so that they can retore some more natural flows to rivers. Matching the price to marginal cost or marginal value is not just an 'abstract' outcome of a theoretical free market. It is a rational choice for an provider or consumer considering their only the price and their own interests. Like I said, would you produce something for $2 and sell it for 1$? Should we expect the government to do something equally stupid?

The correct approach to pricing in such a situation is to determine a price that allows supply (rising with price), to match demand (reducing with price) without artificial constraints on consumption, such as water usage restrictions.

The only sensible way to do this is to match marginal cost to price. It does give you a price that allows supply to match demand.

---

In other words, it's actually too expensive to run all the time, but even more expensive to turn off, so they'll just ahve it running slowly. The cost - an extra $2 per week, corresponds to two tonnes (2 cubic meters) of water per week. The house I am in currently pays about $2 per week in total. That's a pretty expensive insurance policy.

Desalination plant 'an insurance policy'

http://www.smh.com.au/news/National/Desalination-plant-an-insurance-policy/2007/09/17/1189881384673.html

The $50 million Sydney consumers will pay every year for the city's proposed desalination plant is not dissimilar to an insurance policy, Water Utilities Minister Nathan Rees says.

Details of the operating contract of the plant, which the state government made public on Sunday, reveal "fixed costs" will be levied on Sydney Water by the plant's operator, Blue Water Consortium, regardless of whether the water was needed.

"Now the engineering advice to us at this stage is that the plan would be to have the plant operating, we'll turn it on all the time, operating at different levels of intensity according to requirements."

The plant had to be kept ticking over because the membranes that removed the salt deteriorated more rapidly if there was a turn on, turn off regime, Mr Rees said.

Mr Rees has said the details of the payments were commercial in confidence, but he confirmed that Sydneysiders would pay an extra $2 a week for their water.

---

Surely water should cost more here. In what way does allowing other users to purchase water 'distort' the market? Trying to stop them from doing so would distort the market.

Murray Valley growers to sue over water

http://www.smh.com.au/news/National/Murray-Valley-growers-to-sue-over-water/2007/09/18/1189881496453.html

Murray Valley farmers have voted to mount a class action against the federal and state governments for failing to provide them with enough water.

But Victorian premier John Brumby says they do not have a strong case.

The case is expected to centre on an alleged mismanagement of irrigation water by federal and state governments.

Mr Cirillo said a large part of the problem was the water market system and the ability of non-growers to trade in it, thereby distorting it.

"Water's reached an unsustainable level, to buy it at $1,000 a megalitre," Mr Cirillo said.