ICRC Media Release - Report 4 of 2017 Issues Paper - Regulated water and sewerage services prices 2018-2023

Posted 31 March 2017 11:15am

This is a media release issued by the ICRC, and can be found on the ICRC website.


The Independent Competition and Regulatory Commission (the Commission) today released two papers in relation to regulated water and sewerage services prices in the ACT.


Issues Paper on regulated water and sewerage services prices for 2018-2023

The Issues Paper sets out the key matters the Commission will be addressing in its investigation into regulated water and sewerage services prices that will apply in the ACT, for the period 1 July 2018 to 30 June 2023.

The Commission proposes to use the current regulatory model, where it is working well, but will investigate whether improvements can be made for the next regulatory period. This will include consideration of mechanisms to ensure the recovery of prudent and efficient costs, while minimising the potential for significant price fluctuations; the potential for incentive schemes for service levels and for operating and capital expenditure; and any amendments to the tariff structure.

As part of its investigation, the Commission will outline its intended approach to addressing the various regulatory objectives that must be considered during its decision making processes.

The Commission welcomes submissions to the Issues Paper. The timeline and information in relation to the release of reports and receiptA of submissions for this investigation into regulated water and sewerage services are available on the Commissionas website from 10am Friday, 31 March 2017.


Report on tariff structures

The second paper is a report on tariff structures for regulated water and sewerage services prices. This report sets out the Commissionas preferred direction of change and principles that will be considered in making any change to the tariff structures for water and sewerage services prices. The tariff structure refers to the pricing of regulated water and sewerage services where the price paid is calculated by reference to a fixed supply or volumetrically based usage charges or a combination of both.

The analysis undertaken indicates that the existing water tariff structure can be improved for the benefit of the ACT community as a whole. This can be done by making a careful adjustment, over time, to the balance between fixed and usage charges for water. Such an adjustment would balance the economic, environmental and social objectives that the Commission must consider. We have developed a set of guiding pricing principles (see Attachment A) that takes account of the need to use water efficiently and to ensure efficient recovery of revenue to cover the efficient costs of Icon Water while meeting environmental and social objectives.

The Commission has found that typically over 80 per cent of Icon Wateras cost are fixed (i.e. they are incurred regardless of the amount of water used). At the same time only about 10 per cent of Icon Wateras revenues are raised through its fixed charge whilst the remaining 90 per cent are collected through usage charges, with the second tier usage change being the highest compared to eight other water utilities around the country.

There is now more water security in the ACT and changes in the tariff structure could provide some greater flexibility to respond to the circumstances at the time, such as at times of drought.

However, while the Commission is of the view that the direction of change of the tariff structure for water use is appropriate, more consideration is needed on how to address social impacts, particularly for some low income households. The Commission is of the view that gradual change and significant transition period are appropriate for any revised tariff structure. This will be considered during the current price direction for regulated water and sewerage services, once all the relevant information on costs and demand is available to the Commission.

Any change to the structure of tariffs, should it be considered appropriate, will only occur following the Commissionas investigation in relation to a price direction forA regulated water and sewerage services, provided by Icon Water, for the next regulatory period from 1 July 2018 to 30 June 2023.

The Commission has been reviewing the tariff structures for water and sewerage services in the ACT since late 2015; with the release of an Issues Paper (November 2015), Technical Reports on the responsiveness of the demand for water to price (February 2016) and marginal cost pricing (June 2016), and a Draft Report (September 2016). Submissions have been received in relation to these various papers and this report takes account of key concerns that have been raised in developing a preferred course of action.

The Commission is not proposing to make any changes to the sewerage tariff structure, which entails a single fixed charge, as there would be unlikely to be a net benefit from introducing usage based charges. However, the Commission welcomes Icon Wateras commitment to introducing a trade waste pricing regime in the forthcoming regulatory period.

Both papers will be available from 10am Friday, 31 March 2017 on the Commissionas website at www.icrc.act.gov.au or can be obtained by either contacting the Commission on (02) 6205 0799 or via email at icrc@act.gov.au.

Submissions in relation to the Issues Paper can be sent to the Commission by post at GPO Box 161, Civic Square ACT 2608: via email at icrc@act.gov.au or lodged a the Commissionas offices at Level 8, 221 London Circuit, Canberra City.

STATEMENT ENDS


For further information, please contact Joel Wilson on (02) 6205-0799 or email: JoelT.Wilson@act.gov.au

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