Pricing issues

In our first year of operations we inherited several different pricing regimes from the previous council water and sewerage providers. These regimes included:
  • A mixture of one and two part tariffs;
  • Tariffs that were variously calculated on an averaged basis, on a proportional basis with reference to connection size, or on a basis reflective of property value; and
  • Volumetric rates that included free water allowance.

We have the key challenge of transitioning water and sewerage pricing away from the multitude of inherited tariffs towards a fairer, more consistent and transparent methodology.

A first step in achieving pricing reform is the setting of the Interim Pricing Order (IPO). The intention of the IPO is to transition to a regulated pricing regime. The form of the IPO (currently customer price caps) needs to be amended to a total revenue allowance within which we can start to transition prices. This will ensure that a sensible timeframe can be put in place and real progress can be made. Arbitrary capping of price increases at 5% will jeopardise the achievement of desired price reform objectives.

The progress that can be achieved in price reform prior to and throughout the first Price and Service Plan period will be impacted by:

  • the availability of robust customer data;
  • appropriately capturing cost information;
  • understanding of water usage and demand;
  • unbundling cross subsidies between lines of business (water/sewerage) and customer classes (residential/non residential);
  • customer appetite for reform options;
  • the level of revenue trade off acceptable;
  • IPO constraints; and
  • State government policy decisions.

Notwithstanding the fluid nature of a number of these variables, we believe the first area of tariff reform that could be targeted is that of wastewater fixed charges for residential customers.

With respect to unregulated services, we provide recycled wastewater, irrigation water and biosolids services. Pricing of these services is based on a mixture of environmental and market factors. An audit of these services is under way to gain greater understanding of existing and potential markets, with a view to identifying the most appropriate pricing regimes.