We are currently consulting on draft prices that Water NSW can charge Sydney Water Corporation (Sydney Water), three councils, and around 60 raw and unfiltered water customers in the Greater Sydney area from 1 July 2020 to 30 June 2024. We have released our Overview, Draft Report and Draft Determination for stakeholder consultation, which will close on 27 April 2020.
Customer bills are lower under our draft prices
Under our draft prices, customer bills would be 4% lower by the end of the next four year pricing period when compared to current 2019-20 customer bills. This assumes a forecast inflation rate of 2.5% per year and annual forecast water sales based on 2019-20 levels.
The table below shows the annual bills for different customers over the 2020 to 2024 period.
a Bills for raw water customers with average consumption. Bills for filtered water customers with average consumption and a 20mm meter connection.
If you are a Sydney Water customer, please refer to our concurrent review of Sydney Water’s prices
to understand how your bills and prices would change from 1 July 2020. If you receive water services from Wingecarribee, Shoalhaven City or Goulburn-Mulwaree Council, please contact your council for water pricing and billing information.
Our draft prices are falling by 14%, excluding inflation
Under our draft decisions, Water NSW’s prices to Sydney Water, the councils and raw and unfiltered water customers would fall by about 14% compared to 2019-20 prices, excluding the effects of inflation. This is largely driven by our draft decisions on the efficient level of capital and operating expenditure and the low interest rate environment.
A flexible pricing approach
We have introduced a flexible pricing approach to provide Water NSW with the ability to cope with weather variability. Our approach ensures Water NSW continues to recover its efficient costs, which are largely fixed and independent of the volume of water supplied, under drought conditions and the operation of the Sydney Desalination Plant (SDP).
Under this approach, fixed prices will remain the same for all scenarios. However, the usage price will change depending on whether Water NSW is operating under drought conditions (ie, they will increase when dam levels fall below 60%, to ensure Water NSW still recovers its efficient costs). Water NSW’s usage price to Sydney Water will also increase when SDP is operating and providing water to Sydney Water. Currently, dam levels for Water NSW Greater Sydney are above 60% (they are in fact above 80%) and therefore the unrestricted usage price would apply.
For all three scenarios, assuming demand forecasts are accurate, customer bills (excluding Shoalhaven transfer costs) are expected to remain much the same in aggregate. This is because the increase to usage prices is expected to be fully offset by lower water sales and therefore result in no net impact on Water NSW’s revenue or customer bills. If Water NSW pumps water from Shoalhaven to Sydney, the efficient cost incurred by Water NSW will be passed through to Sydney Water by way of a further increase to the usage price.
Setting efficient costs
Managing uncertainty during the determination period
An update to Water NSW’s pricing proposal
We received an update to Water NSW’s pricing proposal on 10 March 2020 relating to two specific issues:
- The method in which it allocates corporate capital expenditure across its business segments. Water NSW has several business segments, including Greater Sydney (the subject of this price review), Rural Valleys and part of the Water Administration Ministerial Corporation (WAMC). Water NSW’s supplementary information on the allocation of corporate capital expenditure is published on our website.
- Adopting disaggregated asset lives (which is in line with our draft decisions) for capital expenditure, rather than a single weighted average asset life (as originally proposed by Water NSW), when calculating regulatory depreciation. Water NSW’s supplementary information on using disaggregated asset lives is published on our website.
We have summarised these updates in Chapter 5 and Appendix H of our Draft Report. We seek stakeholder views on these updates.
Leave us a comment below or make a submission to our Draft Report here.
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