Water
Metro Pricing

Prices for Hunter Water Corporation from 1 July 2020

Status
In progress
Start Date
Jul 2019
End Date
Jun 2020
PUBLIC HEARING - 19 NOVEMBER IN NEWCASTLE

We are currently reviewing the prices Hunter Water can charge its customers for water, wastewater and stormwater services from 1 July 2020. 

We held a Public Hearing at the Harbourview Function Centre in Newcastle on 19 November 2019.

Transcript, Presentation SlidesAgenda and Issues Paper Update for the public hearing are available to view on our website.

WHAT

 We received Hunter Water’s Pricing Proposal on 1 July 2019 which proposed substantial price increases. Since then it has provided:

In its submission to our Issues Paper, (received 21 October 2019) Hunter Water has altered its proposed expenditure slightly with some clarifications such as increased energy costs and additional operating expenditure related to updated demand forecasts.  Whilst these increase costs, the additional expected demand has a downward impact on prices as it means costs are shared across a greater expected usage.  Hunter Water also has included its forecast of the expected cost of capital (WACC) to apply in April 2020, based on recent market information.  This is lower than the cost of capital used in the 1 July Proposal and would have an overall impact of reducing prices.

In its supplementary submission (received 6 November 2019) Hunter Water has calculated potential costs that it may incur under four possible scenarios of drought and water restrictions, and if the trigger is met, to construct a desalination plant.  It has proposed a 4-year Determination (down from 5 years) to reduce the impact of additional costs that would not be recovered through prices.  It has also considered reduced revenue that may result from lower water sales in periods of water restrictions and potential method to adjust prices to manage revenue volatility

HOW

Submissions to our Issues Paper have closed.  The next step in our review process is a Public Hearing on Tuesday 19 November 2019. The Public Hearing and submissions will inform our Draft Report which we will publish in March 2020.  We will then call for submissions to the Draft Report to inform our final decisions that will be released in June 2020.

MORE INFORMATION

The information below is taken from Hunter Water’s 1 July Pricing Proposal; note that Hunter Water proposed some changes in its submission to our Issues Paper. We have also published an Overview of key issues in our review of Hunter Water’s 1 July Pricing Proposal, along with a detailed Issues Paper. Submissions to our Issues Paper have now closed.

Hunter Water proposed prices that will increase bills over time

Hunter Water's pricing proposal would lead to bill increases in each of the next five years. For typical residential customers, the total increase over five years would be around:

  • 24% for a typical customer in a house receiving water, wastewater and stormwater services from Hunter Water, which is 10% above inflation (assumed at 2.5% per year). Note: not all customers receive stormwater services from Hunter Water. This increase would be 23% (including inflation) for those who don't.
  • 34% for a typical customer in an apartment receiving water, wastewater and stormwater services from Hunter Water, which is 18% above assumed inflation. This increase would be 33% (including inflation) for those who don't receive stormwater services from Hunter Water (ie, they simply receive water and wastewater services).

For non-residential customers, bill increases would range from 17% to 44% over the 5-year period, which is 3% to 27% above assumed inflation. The variation is driven by differences in meter size and trade waste output.

The table below shows the impact on bills for some 'typical' residential customers.

Indicative bill impacts for typical residential customers ($ per year)

impact on bills for some typical residential customers.jpg

Note: The bills include assumed inflation of 2.5% annually.

These bills are based on the following proposed prices for water, wastewater and stormwater services.

Prices for residential customers

The charge for water usage currently makes up around 36% of a typical water and wastewater bill. Hunter Water is proposing that the water usage price increases, and the fixed water charge decreases. The water usage price plays an important role in balancing the amount of water used by the community with the desire to conserve water. Hunter Water’s proposed water usage price is informed by its estimate of the long-term costs of supplying water, including the costs of potential supply augmentation projects and customer feedback that suggested the majority of customers preferred higher usage prices and lower fixed (or service) prices.

Hunter Water is also proposing that the fixed wastewater charges increase, to recover its proposed increased expenditure on its wastewater network.

Hunter Water's proposed prices for residential customers are set out in the table below.

Proposed prices for residential customers excluding inflation ($2019-20)

HWC-Table showing proposed prices for residential customers, excluidng inflation - 2019-20.jpg

Prices for non-residential customers

Hunter Water's proposed prices for non-residential customers are set out in the table below

Proposed prices for non-residential customers excluding inflation ($2019-20)

HWC-Table showing proposed prices for non-residential customers, excluidng inflation - 2019-20.jpg

Note: this table only shows a sample of meter sizes available. For the full list, see our Issues Paper or the Hunter Water proposal, Technical Paper 8.

Hunter Water is proposing increasing its expenditure on delivering services

Hunter Water manages dams and bore fields, and a network of pipes, pumps and treatment plants to deliver safe drinking water, and treat and safely discharge wastewater. Hunter Water's activities and services are subject to various conditions such as drinking water quality guidelines, regulatory targets and environmental standards.

Hunter Water proposes increasing both its operating costs and capital expenditure compared to its costs over the past four years. It states this expenditure will help manage emerging challenges and risks such as non-compliance with environmental and service standards, and the risk of failure of critical assets, to maintain service delivery. Hunter Water states that its level of expenditure in recent years has led to increases in risks based on a recent review of its risk framework.

In broad terms, the proposed expenditure aims to:

  • Meet existing and new mandatory standards, including to ensure its environmental impacts are suitably managed and mitigated
  • Address deteriorating assets, moving to a more proactive asset maintenance program, and continuing renewals of critical infrastructure.
  • Upgrade digital technology, to improve cyber security, efficiency and the customer experience (eg, by adding digital billing).
  • Service population growth: by building new infrastructure and increasing the capacity of treatment plants.

We will review all aspects of Hunter Water's proposal, particularly its proposed expenditure plans and prices. We have engaged expert consultants to review Hunter Water's key assumptions and proposed expenditure.

Discretionary expenditure

Hunter Water used a number of methods to engage with its customers in developing its proposal. In addition to paying for mandated service levels, over 70% of the customers surveyed indicated that they were willing to pay more for projects to improve the amenity of stormwater channels and to increase the use of recycled water in the community. Hunter Water has proposed spending $22.8 million on these projects, which would add around $4 to $5 per year to residential customer bills.

Read more in our Issues Paper or Hunter Water's Pricing Proposal

Hunter Water is proposing changes to the way it charges trade waste customers

For businesses that discharge high strength wastewater (trade waste) into the sewer network, Hunter Water is proposing changing the structure of its trade waste disposal fees — increasing administration costs and changing the basis for charging for its treatment costs. The proposed trade waste bills would increase significantly for some customers depending on the type of waste discharged. Click here to see the changes in prices.

Hunter Water is proposing removing discounts for some large customers

Hunter Water proposes to phase out price discounts to some non-residential customers with water use above 50,000 kL per year. Around 19 customers currently receive various discounts depending on their location in Hunter Water's network. Hunter Water is proposing removing this discount, so all customers would pay the same usage price for water. The removal of the discount to large customers would mean Hunter Water could decrease prices by around $10 per year for each residential customer. The bill impact on these large customers would vary based on customer location and water use. Click here to see the changes in prices.

Next Steps

You have the opportunity to present your views or ask questions at our public hearing, or at a drop-in session that will follow the hearing. These will take place at the Harbourview Function Centre in Newcastle on 19 November 2019.  Please register here if you would like to attend the public hearing.

We will release our Draft Report in March 2020, which will outline our draft decisions. We will then consider stakeholder submissions in response to the Draft Report, before releasing our Final Report and Determination in June 2020, for new prices to apply from 1 July 2020.

Media Contact

For media enquiries, please contact Julie Sheather by email to media@ipart.nsw.gov.au or by phone on 0409 514 643.

Key Contact
John Madden
Email
02 9113 7780

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