Guidance papers

A key element of the initial stages of the SAW RD20 review was the release of various Guidance Papers.

The Guidance Papers provided guidance to all stakeholders of the Commission’s initial positions on principles, requirements and methodology on matters relevant to the determination, and should be read in conjunction with the Framework and Approach paper, released in July 2018.

Stakeholders provided submissions in response to the Commission’s Guidance Papers.

Guidance paper Purpose

1. Overview of economic regulation of SA Water

This paper confirms the process for SAW RD20.

It will enable stakeholders to understand future opportunities to provide input into the determination.

2. Revenue regulation and pricing principles

This paper explains how SA Water’s drinking water and sewerage revenues will be determined, using a cost-based (building blocks) approach and informed by a negotiation process.

It also explains how the Commission will regulate the prices of SA Water’s excluded services.

3. Service standards

This paper explains the Commission’s process for reviewing its principal consumer protection industry code: the Water Retail Code–Major Retailers, which includes customer service standards.

4. Prudent and efficient expenditure

This paper explains the Commission’s approach to reviewing SA Water’s proposed expenditure to assess whether it is prudent and efficient, to feed into the calculation of the maximum revenue allowance. It provides context on the ‘negotiable’ and ‘non-negotiable’ elements of SA Water’s costs, and provides an indication of some of the potential future cost drivers.

It also provides guidance to SA Water on the minimum information that it should provide to the Negotiation Forum to allow it to assess whether proposed initiatives, programs and projects are prudent and efficient.

5. The cost of funding and using assets

This paper explains the Commission’s methodology for determining the efficient cost of funding and using assets to provide drinking water and sewerage services, in particular the return on, and of, regulated assets.

6. Treatment of inflation in the regulatory rate of return

This paper provides further technical guidance related to Guidance Paper 5 – the cost of funding and using assets. In particular, it outlines approaches that could be used to estimate inflation, for the purpose of calculating the regulatory rate of return using a real, post-tax weighted average cost of capital.

7. The averaging period of the risk free rate

This paper presents research that examines different averaging periods that may be used for determining the risk-free rate as part of the regulatory rate of return for SAW RD20.

8. Treatment of capital expenditure - addressing uncertainty This paper discusses the Commission’s proposed treatment of uncertain costs or benefits in SA Water’s capital expenditure plan for the 1 July 2020 to 30 June 2024 period. 
9. Annual updates of the rate of return This paper outlines a proposed methodology for updating the regulatory rate of return on an annual basis. In particular, it outlines the advantages and limitations of the proposal, provides guidance on how the proposed methodology intends to operate, and highlights key questions for stakeholder consideration.


Submissions on behalf of SA Water