VICTORIA'S coal-fired power generators have been dealt a blow in their bid to take a bigger share of the state's water, after an advisory panel told the state government not to give away a ''rare bounty''.
The advice puts the government in an awkward position after Energy Minister Peter Batchelor threw his support behind the power companies' controversial proposals in November.
Latrobe Valley generators use about 125 billion litres of water a year - one-third of Melbourne's annual consumption - and have asked the government for access to a larger volume and more guaranteed supplies.
Central to the bid is a request to tap into a portion of unallocated water in Blue Rock dam, likely to be worth about 20 billion litres a year.
But the panel - hired to advise Water Minister Tim Holding on the development of a 50-year strategy - has named uncertainty in the coal industry as a reason not to give the water to the generators.
The panel, which includes some of the state's top water experts such as Professor John Langford and Christine Forster, said the government should keep the water in public hands.
Ms Forster said this would give the flexibility to use the water where it was most needed at any given time, for environmental flows, recreational purposes or power generation.
The panel also called for the power companies' water rights to be brought into line with those of irrigators and water authorities.
Such a move would compel the power generators to continue pumping their treated waste water into nearby rivers.
Waste water from power stations makes up most flows down the Latrobe River, but the generators have warned that, under current rules, they are not compelled to give their water back to the rivers.
A draft decision over how to allocate the Blue Rock water is due this year.
The fight for more of Victoria's water has raised further questions about the Latrobe Valley generators, some of which are among the most polluting power stations in Australia.
The generators have warned that switching to clean-coal technologies could also increase the sector's drain on water supplies.
But federal Water and Climate Change Minister Penny Wong reiterated yesterday that coal would be crucial in energy production for Australia until at least 2050.