Our draft decision is to maintain the regulated charges for 2018-19 as set under the 2017 Determination. Although WaterNSW’s pricing application requested a variation of regulated charges for 2018-19, our view is that it is not reasonably necessary to make variations to the regulated charges set out in the 2017 Determination, having regard to changes in demand set out in WaterNSW’s application and pricing stability.
Specifically, we consider that changes in demand (ie, changes in usage volumes, water allocation ratios and entitlement volumes) are not of sufficient scale to justify a price change, which would in turn involve a reduction in price stability. This draft decision was made in light of consideration of the following key factors:
the expected variation in WaterNSW’s revenue from what was allowed in the 2017 Determination and WaterNSW’s revenue volatility risk associated with demand volatility
whether updated demand data provides evidence of a sustained shift in demand and if so, the size of that shift, and
whether there is a case to reduce price stability in order to respond to changes in demand.
We found that:
Revenue variation, measured as the difference between WaterNSW’s forecast revenue for 2018-19 using 2017 Determination prices compared to updated prices (to reflect updated forecast sales volumes), was small.
WaterNSW has received a revenue volatility allowance for the purpose of reducing revenue volatility risk associated with business as usual demand volatility.
We did not find evidence to suggest that updated data reflects a sustained shift in demand.
Maintaining price stability outweighed any benefits of updating demand forecasts.
Independent Pricing and Regulatory Tribunal (NSW) 2018