Advice to the Treasurer

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One of the Commission’s functions is to provide advice to the Treasurer, on request, in relation to any matter (section 5(f) of the Essential Services Commission Act 2002). In that capacity the Commission acts as an advisor to the Government, providing independent advice on economic and regulatory matters.

Competitive neutrality – provision of advice

The Treasurer of South Australia seeks advice from the Commission, from time to time, to assist in the investigation of competitive neutrality complaints under the Government Business Enterprises (Competition) Act 1996 (GBE Act).

Such advice is provided to the Treasurer pursuant to section 5(f) of the Essential Services Commission Act 2002 in relation to any competitive neutrality complaints made under Part 4 of the GBE Act and referred to the Commission by the Department of the Premier and Cabinet.

Local Government rate oversight system - consultation paper

The Local Government (Rate Oversight) Amendment Bill 2018 (the Bill) proposed a statutory framework for a rate oversight scheme (scheme), which did not ultimately proceed. The Treasurer of South Australia (Treasurer) sought advice from the Essential Services Commission (Commission) on:

the preparation of a ‘local government rate capping and variation framework,’ and
the future operational requirements of the scheme. 

The Commission provided the advice to the Treasurer on 29 November 2018. 

Advice to the Treasurer on 1 July 2016 retail electricity price increases

On 21 April 2017, the Commission provided the Treasurer with advice on the justification for the 1 July 2016 South Australian retail electricity price increases announced by AGL, Origin Energy and EnergyAustralia, as requested by the Treasurer.

The advice concludes that the retail electricity price increases announced by AGL, Origin Energy and EnergyAustralia can be justified by movements in the wholesale cost of electricity.

SA Water regulatory rate of return 2016-2020: report to the Treasurer

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 proposed a refined regulatory approach to setting SA Water's rate of return. In particular, it proposed utilising a 10-year trailing average approach to the calculation of the cost of debt. That approach would 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 sought to encourage responsible long-term financing strategies, rewarding only prudent and efficient behaviour by SA Water.

Economic regulation of the South Australian water industry

In December 2010, the Treasurer wrote to the Commission seeking its advice on what it would consider to be an appropriate form of price and non-price regulatory regime to apply to the South Australian water industry were the proposed Water Industry Bill 2010 to be enacted.

The final advice, published in June 2012, provided the Commission's final positions on the matters of principle as sought by the Treasurer, taking into account the final form of the Water Industry Act 2012, passed by the Parliament in April 2012, and the issues raised in submissions made during the Commission’s public consultation process on its draft advice. 

Advice on a regulatory rate of return for SA Water

The Treasurer sought the advice on an appropriate regulatory rate of return to apply to SA Water’s assets, consistent with a pre-tax weighted average cost of capital (WACC) with the cost of equity derived from the capital asset pricing model (CAPM).

The Treasurer requested advice on a single regulatory rate of return to assist in the development of a pricing order for SA Water’s drinking water and sewerage charges for the initial period of independent price regulation of the water industry (which is expected to commence on 1 July 2013).