Economic regulation of the South Australian water industry

Status

Current status is Final

Final

On 27 September 2010, the Treasurer wrote to the Essential Services 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 Treasurer sought that advice under section 5(f) of the Essential Services Commission Act and required the Commission to consult publicly on the matter in accordance with its charter of consultation and regulatory practice.

On 3 December 2010, the Commission submitted to the Treasurer an initial statement of issues, which was subsequently publicly released on 14 December 2010 for stakeholder consultation.  On 14 August 2011, following the introduction into Parliament of the revised Water Industry Bill 2011, the Commission provided the Treasurer with its draft advice, which was subsequently published on 11 November 2012.

The draft advice contained the Commission’s preliminary views on the regulation of SA Water’s prices, other providers’ prices and non-price matters. The Commission had intended to provide its final views on all of those matters in its final advice, to be published once the Water Industry Act 2012 was enacted.

The Water Industry Act 2012 received Royal Assent on 17 April 2012. On 23 May 2012, the Treasurer wrote to the Commission confirming that he would be issuing to the Commission one or more pricing orders under that Act. Such orders permit the Treasurer to direct the Commission on various matters in the making of a price determination.

The Commission must take account of the pricing order in its first price determination for SA Water and the Commission will need time to consider how the pricing order will affect the approach it will adopt in making that price determination. Therefore, the Commission has decided to exclude consideration of its approach to price regulation of SA Water’s drinking water and sewerage from this final advice. The Commission intends to publicly release a statement of approach on the price regulation of SA Water in early July 2012.

The Commission acknowledges the importance of the matters raised in submissions by stakeholders and appreciates the time, effort and enthusiasm put into the preparation of the materials provided to it. The Commission has carefully considered the matters raised and, where relevant to the Commission’s regulatory task, has taken them into account in preparing its final advice to the Treasurer.

The purpose of this Final Advice (and the Statement of Approach to be released in July) is to set out the Commission’s positions on the matters of principle as sought by the Treasurer. The Commission will also shortly release draft regulatory instruments and further detailed Discussion Papers, including a draft Water Retail Code, which will provide more details on the Commission’s price and non-price regulatory frameworks, to facilitate stakeholder consultation, in line with the consultation requirements set out in the Essential Services Commission Act.

Further Information

On 27 September 2010, the Treasurer wrote to the Essential Services 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.

On 14 December 2010, the Commission publicly released an initial Statement of Issues for stakeholder consultation.  The Commission published its Draft Advice on 11 November 2012.

The Draft Advice contained the Commission’s preliminary views on the regulation of SA Water’s prices, other providers’ prices and non-price matters. The Commission had intended to provide its final views on all of those matters in its Final Advice, to be published once the Water Industry Act 2012 was enacted.

The Water Industry Act 2012 received Royal Assent on 17 April 2012. On 23 May 2012, the Treasurer wrote to the Commission confirming that he would be issuing to the Commission one (or more) Pricing Orders under that Act. Such orders permit the Treasurer to direct the Commission on various matters in the making of a price determination. The Commission must take account of any Pricing Order(s) in its first price determination for SA Water. For this reason, the Commission decided to exclude consideration of its approach to price regulation of SA Water’s drinking water and sewerage services from the Final Advice, which was published on 12 June 2012.

On 22 June 2012, a Final Draft Pricing Order was received from the Treasurer. The Commission has now considered how this Pricing Order will affect the approach that it will adopt in making its first price determination, and has published this in a Statement of Approach.

The Commission has also published, as a companion document to the Statement of Approach, a Guidance Paper, which was provided to SA Water in February 2012. This document set out the Commission’s view, based on the best information available at that time, of how it proposed to approach the first price determination, and sets out the minimum information requirements that the Commission would expect to see in SA Water’s Regulatory Business Plan, in order for the Commission to make its price determination. Whilst the Final Draft Pricing Order has provided further clarity on some of the issues raised, the Guidance Paper remains a key document in the revenue determination process and, for this reason, is now published.

The Commission will also shortly release draft regulatory instruments and further detailed Discussion Papers, including a draft Water Retail Code, which will provide more details on the Commission’s price and non-price regulatory frameworks, to facilitate stakeholder consultation, in line with the consultation requirements set out in the Essential Services Commission Act.