Our running costs

Our proposed expenses over the next five years

This website is a summary of Icon Water's revised proposal to the Independent Competition and Regulatory Commission (ICRC) on water and sewerage prices (1 July 2018-30 June 2023). Since this site was launched in July 2017, the ICRC has responded (12 December 2017) with a draft price decision. Read more about the ICRC's draft decision and the timeline for the final decision.

How much to run a water utility?

There's a lot that goes into delivering clean, safe drinking water and removing and cleaning sewage.

For example did you know that on average it costs us more than $45,000 to operate and maintain an urban reservoir for a year - and we have 48 reservoirs throughout Canberra?

We divide our expenses into two categories:

Opex (operational expenditure) describes our day-to-day expenses.
Capex (capital expenditure) describes our bigger one-off or project-based expenses.

Our proposed budgets for each category are outlined below.

Often, the relationship between capex and opex can be a trade-off:

Should we focus on maintaining an asset (opex), or invest in new assets (capex) which often means less maintenance is required?

Everything we do is reviewed and reassessed to make sure we are spending money in the right places .

Capex: capital expenditure

Our capex program

For the next five years, we propose a $408 million capex program including $162 million for investment in water assets and $245 million for investment in sewerage assets. An additional $18 million will be financed through the developer Capital Contributions program.

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What is capex?

Capital expenditure, called capex, is typically an organisation's larger expenses or projects, with benefits that continue over a long period. Examples of capex projects include upgrading to more accurate water meters, introducing hydro-electric power on our sites and replacing the roofs on our reservoirs when they've reached the end of their life.

How you influenced our program

We've sought feedback from you on what types of services and response times were more or less important, and have made adjustments to our program based on this - for example in our Water Mains Replacement Program below.

How much are we proposing to spend?

For the next five years, we propose a $408 million capex program including $162 million for investment in water assets and $245 million for investment in sewerage assets. This doesn't just include new projects though - some projects are already underway and we'll continue those, just as some new projects we're starting in this period won't be finished until after 2023.

What are we focussing on?

The main focus (65%) of our capex proposal is allocated to renewing assets nearing the end of their useful life. We'll also invest significantly in upgrading and expanding the network to support population growth (18%). The remaining 17% will be used to improve assets to make sure we continue to meet our regulatory obligations and respond to opportunities to work more efficiently.

Some of our key capex projects for 2018-23

Explore the carousel below the icons to learn more about what we're planning

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Lower Molonglo bioreactor project

Water meter renewals program

Reservoir roof replacement program

Sewer main replacement program

Hydro-electric power

Digital customer experience project

Water main replacement program

Asset management and maintenance system

Safe work at heights

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Want to know more about capex?

This section is a summary of Attachment 6 Capex in our 2018-23 water and sewerage price proposal.

Download

Opex: operating expenditure

An overview of our opex

Operating expenditure, or opex, is the recurring, day to day costs incurred as we go about our business - providing clean water and removing and treating sewage. Some of our opex is controllable and some is uncontrollable.

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Opex includes everything from maintaining our assets (such as pipes, pumps, reservoirs, vehicles and treatment plants), planning costs (the cost of making sure we are managing our $2.4 billion asset base in the most prudent and efficient way), all our behind-the-scenes expenses (including staffing) in areas like safety, environment, customer service and finance.

All of the above is classified as controllable opex, which means we can influence how much we spend.

We also have costs that are uncontrollable, which makes up approximately 23% of total opex and are charges payable to the ACT Government. These are explained in more detail further down.

Remember, if you would like to know more detail you can download our revised submission.

We need enough opex to

Keep our network running reliably, including the extra costs of new assets we've constructed.
Be ready to meet future demand for water and sewage services, including increases in connections as Canberra continues to grow.
Meet our compliance obligations, like releasing water from our dams to maintain rivers downstream, or cleaning water to particular standards. There are 74 different Acts and codes which control our operations!
Maintain our assets for as long as it's prudent and efficient to do so.

Transforming our business to reduce opex

Over the last few years we've been on a journey to transform our business to make us more efficient and more effective. We're not finished yet but the changes are already bearing fruit.

Because of this, we're expected to come in around 2% below our opex allowance for 2013-14 to 2017-18 and we expect the savings to continue.

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In 2013-14, we spent $149 million on controllable opex. This year (2017-16), our controllable opex is expected to come in at $141 million. By 2022-23, we're forecasting this will come in as low as $131 million.

How have we reduced our opex?

We're on a journey of digital business transformation - some of this is happening now, in the next five years and beyond.

We've been through substantial restructures of our business including amalgamating and rationalising some of our corporate and support functions, some of which are still ongoing. We have also shifted from a corporate structure that had clear distinctions between the water and sewerage businesses, to an approach centred around common functions, such as asset management, network planning and operations.

This is more efficient because many skill sets are the same or similar regardless of whether they are applied to water or sewerage businesses. These changes are expected to reduce our controllable opex by 7% over the next five years compared to the previous five years.

The other core element of our business transformation is the focus on upskilling our staff. For example, we will be adopting enterprise asset management practices that align with ISO 55000, which are the international standards that govern best practice management of organisational assets. This, according to the standards, will "maximise value-for-money and satisfaction of stakeholders' expectations."

So what's our proposed opex budget?

Our total opex for the next five years is expected to be $854 million, which is around 4% lower compared with the previous five years.

Uncontrollable opex

Although we reduced our controllable costs, these efforts have been somewhat offset by an increase in our uncontrollable costs.

These costs are expected to be around 8% higher in the next regulatory period.

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Our controllable costs (dark blue) compared to our uncontrollable costs (light blue), 2018-23.

Uncontrollable opex makes up about 23% of the total, and includes:

The Water Abstraction Charge (WAC) is a charge set by the ACT Government on any organisation with a license to abstract water for the purposes of urban water supply.

Utilities Network Facilities Tax (UNFT) is a tax Icon Water pays as the owners of 'network facilities' (predominantly our pipes) on land in the ACT. It's calculated on the length of the network (in our case, approximately 6600km).

Want to know more about opex?

This section is a summary of Attachment 7 Opex in the 2018-23 Water and Sewerage Price Proposal.

Download

Planning and prioritising our expenditure

How do we decide where to spend your money?

We have a rigorous and robust prioritisation system to make sure we are spending money on the right things.

This process tells us where to invest and how to get the best outcome. We call this being prudent and efficient. This rigorous process gets us to our final expenditure proposal - which leads us to work out what we would need to charge for water and sewerage services.

Click through the accordion below to see all the boxes our projects have to tick before we go ahead.

The TOC Act and our SCI #faq-content-1497400550504

We are governed by the Territory Owned Corporations Act 1990 (TOC Act) which identifies four objectives for how we operate. We also have a Statement of Corporate Intent (SCI) which we build on top of the objectives in the TOC Act, which have additional strategic objectives for the next four years.

Our projects and expenditure have to align to these objectives.

Some of our non-negotiable compliance and governance requirements #faq-content-1498534562559

list of some legislation icon water is bound by

Our investment drivers #faq-content-1497402959815

We have four investment drivers:

growing of our service capability
renewing of our service capability
increasing our efficiency
meeting regulations.

All our projects must also align to one of these. If they don't, we don't do them.

Condition and consequence assessments #faq-content-1497402965670

We undertake condition assessments so we know which assets need to be repaired, upgraded or replaced most urgently, and cross reference this with a rating of the impact (financial, environmental and inconvenience) if the asset failed.

External independent reviews #faq-content-1497402970898

For this submission we engaged external experts to independently review our largest projects (which makes up 75% of our capex proposal in dollars spent).

This helps make sure they have been properly scoped and costed and that each project has an accurate risk profile.

Customer priorities #faq-content-1497402975813

And of course, another important piece of the puzzle is aligning our expenditure to your priorities.

Want to know more about prioritisation?

This section is a summary of Attachment 5 Asset Management Governance in our 2018-23 water and sewerage price proposal.

Download

On to section 4 - Crunching the numbers

Your water and sewerage price

Balancing affordable price and responsive service