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Review of Water Pricing Approach

The Commission has completed an 18-month review of the Victorian water pricing approach . The review commenced in April 2015 with the release of an initial consultation paper. This followed the October 2014 revision of the Water Industry Regulatory Order (WIRO), which allows the Commission to consider a broad range of pricing approaches to deliver efficient pricing and service outcomes for Victorian water and sewerage customers.

The October 2016 Water Pricing Framework and Approach paper describes the approach that will underpin Victoria’s water price reviews to establish prices from 1 July 2018. The new framework puts customers at the centre of decision making by their water service provider, informed through meaningful engagement with customers. It provides stronger incentives to deliver better value to customers through the new PREMO incentive mechanism, which links reputation and financial outcomes to the level of ambition in a water business’s price proposal, in terms of Performance, Risk, Engagement, Management and Outcomes. It also holds water businesses accountable for the actions and decisions they make and for delivering the service outcomes proposed.

Our consultative 18-month review spanned:

  • April 2015 – release of our initial consultation paper outlining our review process.
  • June 2015 – release of a number of papers prepared by regulatory experts to assist in the ideas generation process.
  • November 2015 – the Commission’s Water Pricing Conference, which featured a number of Australian and international speakers.
  • May 2016 – release of our position paper proposing our new pricing approach at a high level based on the cumulative consultation undertaken so far.
  • September 2016 – release of a commissioned KPMG paper, and a workshop with the water businesses, to explore how the proposed PREMO framework could apply in practice.
  • October 2016 – release of a staff consultation paper on the proposed PREMO assessment and rating criteria.

We invited and received a number of submissions from water businesses, consumer groups, industry groups and other interested parties, in response to the above papers and events.

All papers, submissions and slide presentations from our review are available below.


Associated Documents

KPMG papers – A practical application of the PREMO framework (4)
22 Sep 2016 Implementing PREMO presentation
22 Sep 2016 PREMO Assessment tool
22 Sep 2016 Detailed sub-questions and lessons from the UK
22 Sep 2016 A practical application of the PREMO framework
Review of Water Pricing Approach – Position Paper (6)
24 May 2016 Review of water pricing approach – Position Paper
(24) Submissions
24 May 2016 Review of water pricing approach – position paper (without appendices)
24 May 2016 Proposed water pricing approach 2018 – Fact Sheet
24 May 2016 Review of water pricing approach – Position Paper Summary of References
24 May 2016 Review of Water Pricing Approach – Post-conference survey results
24 May 2016 A new model for pricing services in Victoria’s water sector – presentation by ESC
Post Conference Submissions (11)
22 Mar 2016 South East Water
15 Mar 2016 Westernport Water
16 Dec 2015 Yarra Valley Water
16 Dec 2015 Wannon Water
16 Dec 2015 Southern Rural Water
16 Dec 2015 North East Water
16 Dec 2015 Gwmwater
16 Dec 2015 Goulburn Valley Water
16 Dec 2015 Coliban Water
16 Dec 2015 Central Highlands Water
16 Dec 2015 Barwon Water
Presentations At Water Pricing Approach Conference (16)
10 Nov 2015 Rolling Price Reviews (Yarra Valley Water )
10 Nov 2015 ESC Water Pricing Conference (Wsaa)
10 Nov 2015 Measuring Customer Satisfaction (Csba)
10 Nov 2015 Not The Usual Crowd – Customer Engagement With Actual Customers (Vcoss)
10 Nov 2015 ESC Victorian Water Pricing Approach – An Alternative Model for Victorian Water Businesses
10 Nov 2015 A New Method for Determining The Revenue Allowance (Sapere)
10 Nov 2015 Community Engagement Supporting 2016 Price Submission (Melbourne Water)
10 Nov 2015 Self-Regulation and The Sharing Economy – Lessons for The Victorian Water Sector (Deloitte)
10 Nov 2015 Engaging With Our Customers In Jemena’S Gas and Electricity Network Price Reviews
10 Nov 2015 Consumer Engagement – The What, The Why, and The How (Calc)
10 Nov 2015 ESC Water Pricing Conference (St. Vincent De Paul)
10 Nov 2015 Alternative Approaches for Establishing A Water Entity’S Revenue Requirement (Frontier Economics)
10 Nov 2015 Potential for Direct Negotiations for Price Setting The Water Sector (Frontier Economics)
10 Nov 2015 Consumer Engagement: International Developments and Ideas for Water Regulation In Victoria (Cme)
10 Nov 2015 ESC’S Current Approach to Price Reviews
10 Nov 2015 Essential Services Commission – Water Pricing Conference
Ideas Papers Prepared for The Commission (7)
19 Aug 2015 Stephen Littlechild and Bruce Mountain – Customer Engagement Methodologies In Water Price Setting
31 Jul 2015 Generating Ideas On The Pricing Approach for Victoria’s Water Sector
30 Jul 2015 Cme – Regulatory Arrangements for The Cost of Capital and Tax In The Regulation of Victorian Water C
30 Jul 2015 Frontier Economics – Alternative Approaches for Establishing A Water Entity’s Revenue Requirements
30 Jul 2015 Kpmg – Application of The Uk’s Riio Reforms to The Victorian Water Sector
30 Jul 2015 Sapere Research Group – A New Methodology for Establishing A Water Entity’s Revenue Allowance
30 Jul 2015 Synergies Economic Consulting