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New water pricing approach
27 October 2016
Water corporations will be expected to deliver better value under a new pricing framework released by the state’s economic regulator.
In what has been described as the biggest shake up in water pricing in 10 years, the Essential Services Commission has published Australia’s first framework specifically designed to put customers at the centre of decision making by their water service provider.
The Commission’s Director of Water, Marcus Crudden says while Victorians have benefited from relatively good water prices, more can be done to drive performance and efficiency in the sector.
“Over 12 years, our independent scrutiny of the industry has produced tangible benefits but when we took a step back, we noticed the conversation about what was best for customers was mostly happening between the regulator and the business.
“The customer has been a largely silent passenger with decisions being driven by the need to keep regulators, engineers and accountants happy,” he said.
The new regime provides stronger incentives for the state’s water corporations to deliver better value to customers with the rate of return they claim linked to the level of ambition in their pricing proposals.
Mr Crudden says the new approach offers the sector incentives to pursue cost efficiencies and deliver better services.
“Water businesses will be asked to rank their proposals against new standards from basic to leading which are designed to promote innovation in the sector.
“While a standard proposal will most likely see services and prices remain largely unchanged, we expect leading proposals to demonstrate significant improvement in the value of services delivered to customers, he said.
The new pricing framework will be in place for the next round of water pricing decisions with corporations now consulting with customers on pricing proposals to be submitted to the Commission in September 2017.
Announcing its intention to overhaul the water pricing framework in May 2015, the Commission called on the world’s leading regulatory experts to put forward ideas to drive innovation in the sector.
The new framework incorporates the best ideas from experts as well as input from extensive consultation with the sector and consumer groups with the aim of designing a new approach where “services are delivered at the lowest sustainable price while meeting all quality and reliability standards”.
The Commission is currently consulting on the process for assessing price submissions using the new framework. Submissions should be sent to email@example.com by 4 November 2016.