icon-water SA Water regulatory rate of return 2016 - 2020: Report to the Treasurer

  • Project Released: 21 Nov 2014
  • Project Closes: 17 Apr 2015
  • Contact: Nathan Petrus

Overview

As a part of the statutory framework for the regulation of SA Water’s revenues, the Commission is to prepare a report for the Treasurer setting out a proposed approach to the calculation of the rate of return to be applied to SA Water’s regulated assets from 1 July 2016. That report is to be finalised by the end of March 2015.

Status

Current status is Final

  • Initiate
  • Submissions
  • Final

Final

On 31 March 2015, the Commission submitted to the Treasurer a final report on its proposed methodology for calculating a regulatory rate of return to apply to SA Water’s regulated assets as part of the 2016-2020 SA Water Price Determination (SA Water PD 2016).

The final report proposes a refined regulatory approach to setting SA Water's rate of return. In particular, it proposes utilising a 10-year trailing average approach to the calculation of the cost of debt. That approach will continue to provide SA Water with strong incentives for future investment and refinancing, by reference to forward looking market conditions. At the same time, however, recognising the need to reduce volatility and hence costs for consumers over the long term, it seeks to encourage responsible long term financing strategies, rewarding only prudent and efficient behaviour by SA Water.

The proposal is consistent with the statutory framework within which SA Water PD 16 will be conducted and also with the most recent trends in regulatory practice within Australia.

An expert report, prepared by HoustonKemp Economists, has been released to accompany the final report. That report explains the broader regulatory and economic context which supports the evolution of the rate of return methodology.