Burying power-lines benefits affluent streets

by Peter Kerr

A subsidised program to install underground power lines in Perth has driven up property values in rich suburbs, a study by Western Australia’s top economic adviser shows.

The report by the state Economic Regulation Authority, released yesterday, shows property values in some suburbs rose by almost $30,000 after power lines were buried, and home owners had paid only a fraction of that amount for the program.

Property values in suburbs across the entire scheme increased by an average of about $10,000, according to the study.

The ERA called for home owners in wealthier areas to pay more for “undergrounding" power lines and for contributions to be more closely aligned with property values, not a fixed percentage as they are now.

“There is no justification [on efficiency or equity grounds] for the government to continue to provide a 25 per cent contribution for high-value suburbs that benefit most through improved amenity values, as measured by increased house prices," the ERA said.

“Consequently, the contribution from the government could then decrease as median property prices increase, with the highest-value suburbs receiving a state government contribution of 5 per cent."

The program began in 1996 following a devastating storm in Perth in which falling trees cut power to a third of homes and left some families without electricity for a week.

About half of Perth’s suburbs have had wires buried. A big chunk of the work has been in new subdivisions or affluent areas.

Since 1996, the ERA estimates the program has produced benefits of more than $850 million. Local government spent $142 million on underground power lines over the period which they, in part, recouped from households. The ERA estimates local councils also saved $9 million in reduced tree-pruning costs.

The ERA said reducing the government subsidy to households in affluent suburbs would mean the program could be stretched further in poorer suburbs and provide better value for money for taxpayers.

State Energy Minister Peter Collier said he would consider the recommendations for the “very popular program". He said the government remained committed to the program but funding was always a delicate issue. “Everyone wants it and no one wants to pay for it," he said.

State opposition spokeswoman Kate Doust said the government should ensure any changes were made on the basis of improving the power supply. “We can’t assume that just because people are living in a suburb described as affluent, that they themselves are affluent and would be able to afford such a sudden increase in fees and charges," she said.

The Australian Financial Review