Pricing
The water and sewerage reform program provides for the introduction of independent price regulation for the sector from 1 July 2012. The Water and Sewerage Industry Act 2008 also requires that two-part pricing apply from the first price determination.
Guidance on the pricing objectives of the Government will be provided through pricing regulations which, in turn, will enable the Regulator to develop Price and Service Guidelines.
Following the finalisation of the pricing regulations and Price and Service Guidelines, the water and sewerage service providers will be in a position to accurately assess their service requirements and capital expenditure that is required. This will allow them to cost the provision of such services. This information will then form a Price and Service Plan which, in accordance with the Industry Act, is to be submitted to the Regulator. The Price and Service Plan will be the basis upon which the Regulator makes a price determination.
Prior to 1 July 2012, section 88 of the Industry Act provides the Treasurer with the power to issue interim pricing orders. The intention of any IPO is to transition the prices paid by customers closer to levels they will face under direct price regulation from 2012 and thereby ensure that customers do not face a price shock when the first regulatory period starts. The process is also intended to ensure that the new regional water and sewerage corporations have adequate revenues to commence priority capital works in the interim period.
In August 2008, the Regulator was requested by the Government to conduct an inquiry into the options available for interim pricing arrangements for water and sewerage services, focusing on achieving an initial municipality based revenue requirement path over a three year transition period. The  Inquiry Report was provided to the Government in November 2008.
In February 2009, the Government provided the Regulator with updated data, from the due diligence process undertaken in relation to current water and sewerage assets and additional information in relation to capital expenditure and returns to owners, and requested that the Regulator review its interim pricing analysis. This revised analysis was provided to the Government prior to the end of February 2009.
On 15 April 2009, the Treasurer released the draft IPO, along with both sets of advice from the Regulator, for public comment.
The final Order to apply to the Tasmanian Water and Sewerage Sector was published by the Treasurer on 1 July 2009. The IPO may be subject to further review on an annual basis. |