Discussion paper

Price review 2013: greater metropolitan water businesses

Water Business Sector regulation Australia Victoria

This publication presents an overview of the Victorian Essential Services Commission's approach and assessment of water businesses' proposals.

In October 2012, Melbourne Water, City West Water, South East Water, Yarra Valley Water and Western Water submitted their Water Plans to the Essential Services Commission for assessment. This assessment relates to the third regulatory period for Victorian water businesses, for the five year period commencing 1 July 2013. The Water Plans set out the prices that each of the businesses propose to charge for their water, sewerage and other related services during the period. The plans also include information about the proposed expenditure and the revenue needs of the businesses from 2013-14 to 2017-18.

The Commission is required to assess the Water Plans and to decide whether to approve the prices proposed by the businesses. This draft decision outlines whether the Commission intends to approve or not approve the revenue requirements and prices proposed by each water business, and any suggested amendments or actions required for the proposal to be approved.

This draft decision proposes reductions to the operating and capital expenditures proposed by each business. It also contends with the appropriate regulatory treatment for the recovery of Melbourne Water’s costs associated with the Victorian desalination plant. These costs are the single largest driver of the price increases proposed by the water businesses. The Commission has identified important trade-offs (chapter 21) that need to be taken into account if desalination costs were to be recovered over a longer period. Melbourne Water is required to consider alternative proposals and consult on the results of its analysis before resubmitting its pricing proposal for the recovery of desalination costs.

Volume II of this draft decision summarises the Commission's proposed outcomes business-by-business, including any actions that may be required prior to the final decision in June 2013.

Each water business is required to respond to this draft decision by no later than 20 May 2013, including a revised schedule of tariffs giving effect to any required amendments set out in this draft decision.

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