Wholesale pricing for Sydney Water and Hunter Water

IPART has completed its first review of the prices Sydney Water and Hunter Water can charge for wholesale water and sewerage services. Prior to this, prices for these services were privately negotiated.

Wholesale customers purchase these services and on-sell them to their end-use customers, such as households and businesses.  As on-sellers, these businesses compete with Sydney Water and Hunter Water for end-use customers.

Many wholesale customers also supply recycled water.

The wholesale prices we set apply to new schemes from 1 January 2018. The prices do not apply to  schemes that:

• have a supply agreement or connection with Sydney Water or Hunter Water before 1 January 2018, or
• operate a recycled water plant. 

For these schemes, parties can privately negotiate prices, or request that IPART set scheme-specific prices. We have outlined a 4-month process for scheme-specific reviews, which could be undertaken at the same time as a wholesale customer’s licence application review.

We will consider the cost impacts of recycled water plants in our scheme-specific reviews. Under our framework, the larger the cost saving to Sydney Water or Hunter Water from a wholesale customer’s recycled water plant, the lower the wholesale price (all else being equal).

Competition in the NSW water market has emerged in recent years due to the Water Industry Competition Act 2006. We support competition where this will ultimately deliver benefits to customers. 

We have adopted a retail-minus pricing approach for on-selling to ensure that:

• Sydney Water, Hunter Water and on-sellers are on a level playing field in competing for end-use customers
• signals for efficient investment are sent to on-sellers so that investment decisions do not result in customers paying more, and
• services provided to on-sellers are not at the expense of Sydney Water’s or Hunter Water’s customers.

We support cost-effective recycled water initiatives.  Inefficient investment leads to customers paying higher prices over time.

Our decisions treat the funding of recycled water plants the same, regardless of who operates them (ie, a private on-seller, Sydney Water or Hunter Water), to ensure investment in cost-effective recycled water schemes.

In making our decisions, we considered the impacts on on-sellers, Sydney Water, Hunter Water and end-use customers.

Our regulatory framework for wholesale prices comprises three components: 

• system-wide prices for on-selling water and sewerage services for new schemes without a recycled water plant, to apply from 1 January 2018 to 30 June 2021
• scheme-specific price reviews, and
• unregulated pricing agreements.