• Licence Fees and Returns
• Offence to contravene licence conditions
• Standard terms and conditions for retail services
• Customer hardship policies
• Appointment of Operator
• Identity cards
• Power to enter land to conduct investigations
• Power to carry out work on land
• Duty to give notice before paving a road etc
• Water meters
• Disconnection etc if entry refused
• Responsibilities of water industry entity
• Fire plugs
• Protection of tenants and lessees of residential premises
   

• Compliance with laws and industry codes
• Information to the Commission
• Sale and supply of retail services to customers 
• Provision of information to customers 
• Restriction, discontinuance and disconnection
• Requirement to participate in an Ombudsman Scheme 
• Accounts and separate businesses 
• Operational and compliance audits 
• Insurance
• Customer concessions and community service obligations
 

• Obtaining a copy of the industry code or the standard contract 
• Customer sale contracts 
• Customer information obligations such as customer charter, dispute resolution, price disclosure, customer hardship policy
• Retailer supply obligations 
• Customer service obligations 
• Restriction of water supply 
• Disconnection of services 
• Restoration of supply 
   

• Prices set based on the National Water Initiative (NWI) Pricing Principles
• Reporting Requirements: Pricing Schedule and Pricing Policy Statement 

Guideline No. 5 - Regulatory reporting requirements for small-scale networks, has been developed to support the implementation of the Commission’s VTA regulatory approach (refer Bulletin no. 6 – VTA approach, below).

Category A licensees are required to provide an annual return, which must contain the following information:

• a list of office holders
• connection and customer numbers
• number of customers on flexible payment arrangements
• number of customers receiving a concession toward their energy or water bill
• number of customers registered as life support customers
• identification of any material changes to operations
• information on all licensee compliance breaches in the preceding 12 months
• information on all licensee material service issues in the preceding 12 months, and
• a signed statement of assurance confirming that it is complying with its obligations

In addition, licensees must also: 

• provide information to the Commission, as soon as reasonably practicably, in relation to any material service issue that arises
• notify the Commission if it commits a material breach of an applicable law or industry code, a material compliance breach, within 3 business days of becoming aware of that breach
• notify the Commission in writing of any changes to its officer holders and major shareholders (if applicable) within 30 business days of that change occurring, and
• provide as part of its annual return a current certificate of insurance certifying that the required insurance is
• adequate and appropriate given the nature of the licensed operations (if applicable).

Category B licensees are required to provide an annual return, comprising:

• all of the above annual reporting obligations identified, and
• any additional specific reporting obligations required by the Commission from time to time and notified to the licensee in writing.

Reporting proformas and sign-off requirements are detailed in the guideline. Licensees should ensure the correct proforma is used and that reports are approved and signed per the guideline requirements.

In accordance with the Minor and intermediate water retailers – Price determination 2013-2017 (clause 2.3), small-scale water networks must provide the Commission, by 30 November each year a:

• Pricing Schedule containing the retail prices, fees and charges for water services and retail services imposed by the licensee, for the current and previous financial year, and
• Pricing Policy Statement demonstrating compliance of those retail prices with the National Water Initiative Pricing Principles relevant to the retail services offered by the licensee.

   

It is a condition of each Water Industry Retail Licence that a licensee must:

• promptly notify the Commission of any significant reduction in its financial capacity which has potential to impact upon the licensee's ability to carry on the operations authorised by the licence.

 A material change means any change to a licensee’s operations that has or may have a substantial impact on customers, including, but not limited to, pricing, quality or viability of the service being provided.

Material changes to operations will include anything that may impact customers, such as pricing or the viability of the service. In determining if a change to operations is material, the Commission is of the view that licensees should be guided by the definition of ‘material’, which is: ‘of substantial import or much consequence’ and ‘likely to influence the determination of a cause.’

Examples of material changes

Licensee A provides a reticulated LPG service to two hundred customers and has expanded into a new housing development. This adds thirty new customers, as well as the necessary supporting infrastructure. Since this expansion is a significant change to operations, increasing the asset stock as well as customer numbers, the licensee determines it is a material change, and informs the Commission in its annual reporting return.

Licensee B publishes a new asset management plan for its sewerage operations, and subsequently increases prices by nine percent. Since this is a significant price increase above current levels of inflation, the licensee determines it is a material change, and informs the Commission through its annual reporting return.

In the following year, Licensee B replaces 13 percent of its pipes. Although this should reduce the number of service issues it records, the licensee determines the upgrade is a material change to its asset base, and informs the Commission through its annual reporting return.

Licensees should have the capability to determine if a change is material in the context of their network and the services provided. If uncertain, a licensee should discuss the matter with the Commission as early as possible, and should err on the side of caution – if uncertain then it should classify the change as material.

 A material service issue means an occurrence that has a substantial impact on a licensee’s ability to deliver its service to its customers (eg a major unplanned interruption, or a matter that causes frequent planned or unplanned interruptions to its service).

The Commission acknowledges that operational issues occur from time to time, and that such one-off events are not themselves probative of competent operation. Rather, it is the licensee’s response and subsequent actions that will inform the Commission’s assessment of, and judgement on, that matter. 

Given this, licensees are required to provide to the Commission relatively immediate ’real time’ information regarding any material service issues (for example, major unplanned interruptions), their subsequent response to resolving those issues, and the outcome. This information should be reported to the Commission as soon as practically possible, having regard to licensees needing time to respond and resolve the issue.

This encourages the rectification of issues in a timely and efficient way. It also assists the Commission to identify, over time and across licensees, any systemic issues early, through identifying trends and patterns. It further assists in developing constructive relationships between the Commission and licensees, as well as deepening the Commission’s knowledge of the operations of individual networks. 

The Commission has not defined materiality thresholds in the context of service issues. If uncertain, a licensee must communicate with the Commission, and should err on the side of caution, identifying service issues as material if uncertain as to classification.

 A material compliance breach means a breach of a licensee’s regulatory obligations that is material in the licensee’s particular circumstances. In determining whether the breach is material, the licensee should consider (in addition to any further relevant consequences/outcomes of the compliance breach):

• the impact of the breach on customers, or the potential future impact
• whether the breach has a financial impact on customers
• the number of customers affected, and
• the potential (and actual) impact on safety and risk to the public.

The Enforcement Policy outlines matters (refer section 5.2) that are considered by the Commission in determining whether or not to impose any intervention measures, in respect of a breach, and the nature of those measures. The relevance of and weight to be accorded to each matter (or any other factors) will depend upon the particular circumstances of each case. The order of the following matters does not indicate a priority of one over another:

• whether the offence is a trivial infringement
• whether there was a deliberate decision to infringe an obligation
• whether there is a history of non-compliance (or compliance) with the South Australian regulatory regime
• whether the public could realistically expect some punitive action to be imposed as a result of the breach
• whether the offence is remedied quickly or there is a demonstrated willingness to remedy the non-compliance
• whether there was a failure to put reasonable measures in place to avoid a contravention
• whether there is an appropriate compliance program in place
• whether the offence was inadvertent or accidental
• whether a prosecution would be likely to create an incentive for compliance and deter future breaches
• whether the offence was beyond the person’s control, ie as a consequence of a force majeure event or incident
• any gain (financial or otherwise) made as a result of the contravention
• the degree of harm (actual or potential) in the event of continuing non-compliance (including financial loss to consumers)
• whether the person promptly and voluntarily disclosed the offence and co-operated with the investigation of the offence by the Commission
• the estimated length, complexity and expense involved in an investigation and prosecution, and
• the factors set out in section 6 of the Essential Services Commission Act 2002.

Materiality is a relative term, determined by considering the qualitative (quality) and quantitative (amount) factors arising from an event. There are no definitive rules or thresholds (such as percentages or dollar amounts) that can be applied, as materiality must be considered in context of the licensee’s particular circumstances. 

Quantitative assessment

Licensees may consider using a percentage as a numerical threshold may provide the basis for a preliminary assumption that a deviation of less than that percentage is unlikely to be material. This may be used for year-on-year changes in income, expenses, asset values and any other financial or statistical information (eg customer numbers or network length).

In making a preliminary assessment of materiality:

• a change which is equal to or less than 5 percent of the appropriate base amount may be presumed not to be material unless there is evidence, or convincing argument, to the contrary
• a change between 5 percent and 10 percent (inclusive) must be consciously considered by the licensee and determined to be material or not material, and
• a change which is equal to or greater than 10 percent of the appropriate base amount may be presumed to be material.

Example of material changes

If there is a six percent increase in network length or customer numbers as a new sub-division is added to the area of operation, this could be considered material as a new sub-division may change the risk profile of the licensee. This is due to the addition of new assets may increase the risk of operational issues such as increased interruptions due to commissioning issues with equipment.

In considering whether an event is material, licensees may be guided by the definition of material for financial reporting. IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors define materiality as follows:

“Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.”

Qualitative assessment

Qualitative materiality generally includes an assessment of whether the event is significant to the licensee and the effect it has on the licenced operations. Examples of qualitative matters include (but are not limited to):

• omission of relevant information in licensee reports
• serious weakness in governance systems, processes and controls, or
• fraudulent reporting of information.

In determining whether an event is material, licensees should also consider the following: 

Qualitative materiality factor	Guidance for assessment
The impact of the breach of that obligation on consumers, or the potential future impact	The event caused a loss of electricity supply for a protracted period such as greater than 12 hours. A customer experiences nine or more unplanned outages in one financial year.
Whether the breach of the obligation has a financial impact on consumers	metering or billing error which resulted in the overcharging of customers over a period of more than one billing cycle. property damage of more than $5,000 to a customer’s property.
The number of customers affected	incident affected more than one (1) percent of customer base.
The potential (and actual) impact on safety and risk to the public	a person requiring medical assistance resulting from incident. case of a death resulting from the incident. assessment from a Technical Regulator (eg Office of the Technical Regulator, Environment Protection Agency or SA Health).

Please note, the information provided is for guidance only and is not a prescriptive procedure for determining if an event is material. Licensees should consider all factors giving rise to the event and the actual (or potential future) impacts when making a materiality assessment. If uncertain, a licensee must communicate with the Commission, and should err on the side of caution, identifying service issues as material if uncertain as to classification.