Sydney Water’s Cost Allocation Manual

The Water Industry Competition Act 2006 (WIC Act) provides for private sector participation and competition in the NSW water and wastewater industry.

To facilitate this, infrastructure services can be ‘declared’ under the WIC Act.  This means that a third party must be granted access to these services, subject to certain criteria and the establishment of an access agreement or determination.  Such ‘third-party access’ can allow new entrants to compete with incumbent suppliers in the provision of water and/or wastewater services to end use customers.

Under the WIC Act, the provider of a declared service must develop a cost allocation manual, which sets out the basis on which the service provider will establish and maintain separate cost accounts for each of its declared services.  

Sydney Water is a provider of declared services, and has submitted its cost allocation manual to IPART to consider for approval. Before we make our assessment, we are seeking stakeholder comments on Sydney Water’s proposed cost allocation manual. 

The WIC Act does not specify the purposes of a cost allocation manual.  We consider the purposes include:

• improving transparency and helping overcome information asymmetry between the service provider and potential access seekers, in order to facilitate the commencement of negotiations on access terms
• supporting access prices that would lead to appropriate incentives for entry in services potentially open to competition, and be in the long-term interest of end users, and
• assisting an arbitrator (eg, IPART) if requested to arbitrate a dispute over access terms.

Key stakeholders in our review of Sydney Water’s cost allocation manual include potential access seekers and new suppliers of water and wastewater services.

To assist service providers in preparing cost allocation manuals, we published a Cost allocation guide.  The guide is available here.

We are allowing stakeholders four weeks to submit their comments on Sydney Water’s cost allocation manual.

We will then consider all stakeholder comments before making our assessment of the cost allocation manual.  We may approve the manual as submitted, or we may require Sydney Water to amend the manual and resubmit it to us before we reconsider it for approval.

We are inviting stakeholder comments on Sydney Water’s cost allocation manual by 20 August 2018.  You can make a submission here.

Following stakeholder submissions, we will make our assessment of Sydney Water’s cost allocation manual, and decide whether amendments are required prior to approval.  We will publish our decision by the end of September 2018.