Chairperson Gerard Brody's remarks to the VicWater Chairs Forum
08 April 2025
Thank you for inviting me to speak with you.
I joined the commission around six months ago and, in that time, I’ve already had the chance to meet some of you and learn about your businesses. It’s great to see you again, and I’m excited to meet those of you I haven’t had the opportunity to meet so far.
Today, I will:
share some background about myself as the new chair and introduce both our new and experienced commissioners
outline the strategic planning process we have embarked upon since I joined the commission
highlight some current commission priorities, including on our continuing work on safety by design as well as consumer protection.
Background
My career has been dedicated to consumer advocacy and protection. I trained as a lawyer and have worked extensively in the community legal sector. For ten years, I was CEO of Consumer Action Law Centre, a state-wide organisation providing legal advice, financial counselling, and system advocacy in the consumer interest.
I have also served on the boards of key industry ombudsman schemes, including the Energy & Water Ombudsman Victoria, the Telecommunications Industry Ombudsman, and the Australian Financial Complaints Authority. Additionally, I have chaired Community Legal Centres Australia, a peak body for over 160 community legal centres, and now chair the Commission. So I have an understanding of your important roles as chairs of boards.
My engagement with the water sector dates back to the early 2000s when I worked on a research project documenting the experiences of people disconnected from essential services. Hearing firsthand how disconnection led to distress, isolation, and financial hardship shaped my commitment to ensuring fair access to essential services.
I have also followed the water price review process closely for many years, contributing to every review since 2004 as a consumer advocate. This experience has provided me a good understanding of the regulatory framework in which you operate.
I am a strong supporter of the PREMO framework’s emphasis on customer value, engagement, risk management, and performance. When PREMO was initially introduced, I was sceptical about its focus on customer engagement—I'd participated in plenty of poorly designed customer engagement processes where consumer participation has been misused to support a business strategy. However, I’ve been proven wrong and have been very impressed by the meaningful ways businesses have integrated customer engagement into their strategies and culture.
Some changes at the commission
The commission has recently adopted a sponsoring commissioner model, where commissioners are allocated a leadership role in different areas, particularly regarding strategy and engagement. For water, Commissioner Rebecca Billings will be our sponsoring commissioner. I know Rebecca is known to many in the sector, and she'll be a great point of contact for you.
My other two commissioner colleagues more recently joined the commission. Jess Young joined us mid-2024; her background is as a microeconomist working across regulators, government and industry, and she brings particular expertise on economic regulation. Elly Patira also joined us November; Elly has worked as a regulatory lawyer, as a senior executive in government, and the private sector, including on issues like First Nations justice.
Strategic plan development
Since I joined the commission, we've embarked upon strategic planning, and I'm pleased to provide update about it today.
First, we're proposing a new Vision for the Commission and that is "Fair and dependable essential services, today and tomorrow". This reference to both today and tomorrow gives us a clear reminder of our purpose to promote the long-term interests of Victorian consumers with respect to the price, quality and reliability of essential services.
We are also adopting an outcomes-driven approach, focusing on four impact areas: efficient pricing, equitable services, resilience and sustainability, and integrity and trust. Each area will include measurable outcomes to ensure accountability. The updated plan will be in place for next financial year.
The PREMO water pricing framework
The Commission last year published a report by FarrierSwier considering the 2023 water price review process and outcomes, and particularly how well it delivered on the objectives of PREMO. To remind you, those objectives are:
Customers: To promote water business attention squarely on customers.
Autonomy: To provide greater autonomy for businesses, in consultation with their customers, to decide on services, prices and risks businesses assume on behalf of their customers.
Performance: To provide incentives for water businesses to demonstration ambition in the delivery of services and outcomes that matter most to their customers, and to deliver these efficiently as possible.
Simplicity: To avoid focusing on matters that make little difference to the outcomes experienced by customers.
Thank you to those that participated in the review, which was very helpful to us. The commission remain committed to the PREMO framework—it is a leading framework in economic regulation. But we're also keen to evolve its application to better meet the objectives and respond to feedback. Overall, the review demonstrated strong support for PREMO and it found general agreement that it is delivering on its objectives. The review also identified also opportunities for improvement, both in our application of it and support for businesses, and in businesses understanding and implementation of the framework.
The commission is planning on releasing a response to the FarrierSwier report hopefully next month, but I’d like to provide you a flavour of that response today.
We have already begun some of the work. For example, we've commenced a review of the new customer contributions framework and, as part of this, we have visited and spoken with every business in the state. We've also made some additions to Regulatory Accounting Statement templates to assist businesses identify expenditure variance against benchmarks approved at the last price review. I understand this has been well received by regulatory managers, and we're keen to continue with this kind of assistance.
Fast-tracking
One issue identified by FarrierSwier relates to fast-tracking of price submission determination. Their report suggested that we could use fast-tracking more effectively to save businesses time and costs. It also highlighted that fast-tracking can serve as a key incentive for submitting high-quality pricing proposals.
We agree that fast-tracking is an important part of the framework, and we're keen to provide further guidance about when we can fast track. There really are not, however, strict criteria to be applied, it's not tick-a-box. But there are ways businesses can put forward a proposal that means it is more likely to be fast-tracked.
I should say, all proposals are considered for fast-tracking, it is not something extra. But we are more likely to fast track in those instances where we can verify proposals in a pricing submission efficiently and effectively—for example, is the proposal clear and is the supporting evidence easily available? In those instances where we ask for supporting evidence, but the business must go away and conduct more work or analysis, then we're unlikely to be able to fast-track.
Another consideration is, if there is to be substantial changes proposed as part of a pricing submission, then we would encourage businesses to engage early with our team, even before the submission goes in. That will help us in considering opportunities to fast-track.
Financial incentive
Another issue raised by FarrierSwier is the role of the financial incentives, that is, the return on equity incentive that is core to the PREMO framework. There was a view that it was seen as perverse because it may increase customer prices. I want to be clear that the commission remains committed to the financial incentive as a central part of the framework, and we want to work with businesses to improve its application.
At its heart, the financial incentive shouldn't be perverse - it should work to align business plans and decisions with customer interests. For example, where a business’s performance has exceeded its promises, and it aims high in delivering customer value, then it can earn higher returns. These higher returns aren't about higher prices but provide an opportunity for businesses to continue to invest in improvements and further ambition to meet consumer and community needs.
I'm sure there are always calls on your business for greater investment in transformation or innovation, and so the framework rewards you with the ability to prioritise this. However, conversely, in those scenarios where a business’s ambition is not high, or it has underperformed against the standards they've set, the allowed returns can be less.
A key part of this approach is shifting risk from customers to water businesses. This means businesses must carefully balance cost savings with service excellence, ensuring a strong focus on customer value. When they succeed, they can earn higher financial returns.
The role of the board is particularly important here. The board has a very important oversight role and ensures accountability of management - both in ensuring business efficiency but also in meeting commitments to customers and service standards.
The board’s role was underscored in a recent speech from ASIC chair Joe Longo, where he talked of the board-management relationship. The ASIC chair made some important points about the critical responsibility of governance, which he says "requires rigorous, diligent back-and-forth between management and the board. The board should support management - but it must also question it".
In the context of PREMO, the board has a really important role in keeping management to account and helping align the interests of the business and customers. After all, the board's primary responsibility is the interests of the company and its purpose, which is about serving consumer and community interests through water and sewerage services.
Customer engagement
A third area highlighted in the FarrierSwier report is customer engagement. As I mentioned earlier, the PREMO framework has been a game changer, and the review recognised it as a success story for putting customers at the centre of the price review process.
I should say that for future water price reviews, we're not planning on raising the bar when it comes to engagement and consultation. What we'd like to see is the right type of consultation and engagement, rather than just more consultation.
Consultation is an important part of the price review process, but not the only factor. It cannot be used to justify poor business decisions. In some cases, we have seen businesses engage and consult only minimally - for example, on NCCs. Our goal is to integrate engagement and consultation into routine business planning rather than treating them as activities solely for the price review process.
Late last year, we held sessions on effective and inclusive engagement, where businesses shared insights from the 2023 and 2024 price reviews. These sessions were recorded and are available on our website. Over the next 12 to 18 months, we will continue sharing good practices across different aspects of the price determination process.
Short versus long-term
I don’t have time to cover all of FarrierSwier’s findings, but I want to address one concern - the idea that PREMO places too much emphasis on short-term price impacts while not giving enough attention to the sector’s long-term challenges.
First, I reiterate that the long-term interests of consumers is the primary focus of the commission. Also, as I flagged earlier when mentioning our strategic planning, our strategy is to ensure essential services remain just, reliable and cost-effective as they respond to long-term challenges, including relating to climate and growth. We want to ensure the PREMO framework,and our broader regulatory approach supports businesses to actively and effectively adjust to major forces, trends and transitions - whether through innovation or efficient investments, with a focus on maintaining service dependability for customers and the community.
We also consider the PREMO framework balances both short-term and long-term consumer interests. During the 2023 and 2024 reviews, amid high inflation and cost-of-living pressures, it was appropriate for the commission to scrutinise businesses to ensure they considered the economic climate. However, the framework also allows businesses to plan for the long term, proposing efficient and prudent investments that align with customer and community needs.
It is a propose-respond model of regulation. It is up to the businesses to establish a suitable short-long term balance for them. This should be developed by the business themselves, in consultation with its customers and other stakeholders. The commission is certainly not seeking to reduce capex forecasts or interfere with investment plans, and experience in the last review is that we approved 99% of total proposed capex.
But the PREMO framework invites businesses to tell the story behind your proposal—in terms of the performance over the current period, your proposals for the next period, and this can include how the business has considered the long-term needs of both current and future customers.
As part of their submission, businesses can include expenditure estimates for periods beyond the next regulatory cycle. We strongly encourage long-term planning. However, businesses must consider who bears the risk of uncertainty. Under PREMO, businesses should take on this risk by excluding uncertain expenditures from the revenue requirement. These costs can then be included in the next price review once they are confirmed. Our pricing decisions specify the excluded amounts and clarify that they can be added to the asset base in the next period, provided businesses demonstrate prudence and efficiency in their next pricing submission.
Other priorities
The commission’s focus over recent years on family violence protections for utility customers continues. The focus today is on supporting industry improvement, including through our Safety by Design project and associated updates to industry guidance.
Thank you to the many businesses that have contributed to this important work. Unfortunately, the misuse of billing and credit systems as a form of control occurs across multiple consumer sectors, including banking, insurance, telecommunications, and utilities. Those delivering essential services cannot be passive observers. Strengthening systems and processes to prevent harm must remain a priority.
Many in your industry have taken a proactive approach, leading to meaningful progress, particularly in recognising family violence risk as seriously as broader workplace health and safety risks. Your efforts can make a real difference, and I sincerely thank you.
The commission remains committed to upholding customer service standards. Public expectations of regulators are high, as seen in the wake of the Financial Services Royal Commission.
I was closely involved in that inquiry. At Consumer Action Law Centre, we represented several of the consumer witnesses who gave direct evidence. That experience shaped my perspective on the role of regulators. While I’d rather not be using the ‘big stick’ all the time, active compliance and enforcement are essential. Consumers rely on regulators to step in when systemic issues arise and we must be ready to act, using the full range of our regulatory tools when needed.
Finally, the commission is committed to listening and responding to both industry and the broader community on what our priorities should be. We are working to strengthen engagement at the commission level and welcome opportunities to meet with you and your organisations - whether in forums like this or separately.
We believe open communication and collaboration lead to better outcomes.
