SA Water regulatory determination 2020

Status

Current status is Final

Further info

The Commission engaged Dr Patrick Walsh, a former Chairperson of the Commission, to conduct a post-project review to gather stakeholders views on the process used to undertake SA Water Regulatory Determination 2020 (SAWRD20).

Dr Walsh’s report presents a comprehensive account of the views expressed by stakeholders through interviews undertaken with stakeholders between August and October 2020. Those stakeholders included SA Water, consumer representatives, other bodies regulating aspects of SA Water’s operations and the State Government.

The Commission thanks all stakeholders for being generous with their time and is grateful for the robust responses provided.

The feedback provided through Dr Walsh’s report will be used to assist the Commission to establish the framework and approach to be used for the next regulatory determination for SA Water, to apply from 1 July 2024 (SAWRD24).

The Commission is intending to hold a series of stakeholder workshops to agree on the issues that need resolving and to identify and discuss options for resolving those issues.

Following this round of consultation, the Commission will release a draft Framework and Approach paper, for public consultation, early in 2021.

Further info

The Commission has updated the Water Industry Guideline No 2 - Water Regulatory Information Requirements - Major Retailers. Specifically, the Commission has updated the information requirements applicable to major retailers (SA Water) to reflect the outcomes of the final Regulatory Determination to apply to SA Water for the period 1 July 2020 to 30 June 2024 (SAWRD20).

The Guideline reflects the consequential decisions arising from SAWRD20 and the Water Retail Code - Major Retailers made by the Commission for SA Water in June 2020.

A clear message from consumers and stakeholders that emerged through the regulatory determination process was a desire for increased public transparency and accountability on SA Water. As foreshadowed in SAWRD20, the Commission will be consulting, from October 2020, on the final form of the monitoring, evaluating and reporting framework. Further consequential amendments to the Guideline may therefore be required to give effect to the decisions arising from that review. 

• Changes to the water regulatory information requirements - fact sheet

Final

The Commission has released the final Regulatory Determination to apply to SA Water for the period 1 July 2020 to 30 June 2024 (SAW RD20).

The Determination establishes reductions to the total revenue that SA Water may recover during the four-year period commencing 1 July 2020, of 16 percent ($494 million) and 4 percent ($54 million) for drinking water and sewerage retail services respectively, as compared to the amounts determined for the current four-year period (2016-2020).

On the Commission’s analysis, the revenue outcomes will provide SA Water with sufficient revenue to fund efficient operations, finance prudent investments on a long-term basis and meet the health, safety, environmental and customer service standards that will apply to SA Water over the coming four years.

The Final Determination is consistent with the expectation that SA Water should deliver drinking water and sewerage retail services at the quality and reliability levels that customers value for the lowest sustainable long-term cost to them. It passes through to customers the benefits of the lower financing costs that SA Water currently faces, while allowing for a 28 percent increase in capital expenditure and two percent increase in operating expenditure, compared to those incorporated into the current regulatory determination.

While acknowledging the business and operational transformations achieved by SA Water for its customers over the past four years, the reductions are consistent with stakeholders‘ submissions that some of the expenditure proposed by SA Water was neither justified nor consistent with customers’ priority that prices should be kept as low as possible while at least maintaining current levels of service. 

The Determination also takes account of the State Government’s reduction in the value of SA Water’s regulated asset base for drinking water assets from $7.77 to $7.25 billion (at July 1, 2013, in December 2012 dollars). 

The Commission is aware that the determination has been made at a time when there is uncertainty about the extent to which the COVID-19 pandemic may impact SA Water’s costs. The determination has taken potential COVID-19 impacts into consideration in determining SA Water’s regulatory rate of return (by assuming a longer-term return to the Reserve Bank of Australia’s two to three percent inflation target band) and includes a mechanism to accommodate any material new COVID-19 costs in the 2024-2028 regulatory period.

The Final Determination builds on the positive outcomes achieved in previous regulatory periods and is expected to deliver and enable further consumer benefits, encouraging SA Water to find and deliver strong customer service, asset management, planning and public accountability outcomes, resulting in additional efficiencies for customers over the coming four years and beyond.

The Commission acknowledges the strong stakeholder engagement and inputs received through the SAW RD20 process, which have added tremendous value to the outcomes of the regulatory determination. The Commission thanks those who made public and stakeholder submissions during the review process, all of which were carefully considered and have provided valuable information and insights.

Further details

Further details on the initial stages of this review.

The Commission has given effect to the decisions in the final Regulatory Determination by making the final Price Determination, varying the Water Retail Code, and revoking Water Industry Rule No 1. 

Note that the Water Retail Code was updated after its publication on 11 June 2020 to address typographical errors in the service standard schedule.