Conservation Council ACT Region made a submission in September 2017 to the ICRC on Icon Water proposals for water and sewerage tariffs 2018-2023 prepared by Emeritus Professor Ian Falconer, Board member, Conservation Council ACT Region.
The Conservation Council has a long-standing role in commenting on tariff charges for water supply and use.
In collaboration with the ACT Council on Social Service (ACTCOSS), the Conservation Council supported a dual rate charging system at the last review five years ago, which resulted in which low use customers supplied with water at a rate well below that charged to larger users.
Following the draft ACT Independent Competition and Regulatory Commission (ICRC) proposals for water charge revision in March 2017, a submission was delivered to the ICRC that strongly opposed the ICRC’s proposed new tariff structure from 2018, on the basis that it progressively transferred the costs of the utility to small domestic users and householders, while saving substantial costs to big consumers.
This submission has now reviewed the new Icon Water paper on tariffs for the next period, which are more in-line with the intentions of the Conservation Council than the earlier proposals from the ICRC. Icon Water’s proposal supports a dual tariff structure while appreciating that the utility is required to balance its finances and repay capital expended on ensuring supply in drier times.
The relatively modest increase in supply charge reflects the major component of water supply costs, which are those from infrastructure and capital, rather than the actual cost of a volume of treated water. The dual tariff is proposed to be continued with close to ‘cost of living’ increases in cost per unit of water volume supplied (KL).
The two points requiring further evaluation in the Icon Water proposal are the large return on capital, which is quoted at 26%, and the ‘Uneconomic Bypass’ provision.
While profit from Icon Water passes to the ACT Treasury as owners – thus being set against Canberra’s rates – this capital return appears excessive, leading to unnecessarily large profits.
The other issue is the open-ended nature of the new ‘negotiated contracts’ provision for high volume users who have potential for alternative water sources, such as pumping from Lake Burley Griffin. This is currently unspecified by volume, and could comparatively disadvantage other users since the decrease in income is passed on as increased costs to other consumers. The parameters for these contracts need specification.
Overall the Icon Water proposals are sensible, and avoid the major social disadvantages of the earlier ICRC draft. They are welcomed.