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We welcome the Essential Services Commission’s overall approach articulated in their Draft Decision on the Water Price Review 2013. In summary, this submission states as follows:

1. We are pleased that the Commission has:

• Examined the consumer impacts arising from the proposed price paths and increases, including their impacts on vulnerable and low income customers
• Examined the impact of tariff structures on customer groups, including the mix of fixed and variable charges
• Moderated the water businesses’ proposed price increases
• Found cost savings in business costs leading to the proposed downward revision to the water businesses’ proposed expenditure and revenue requirements
• Scrutinised the manner in which Melbourne Water has proposed to pass on the costs associated with the desalination plant to customers

2. We strongly support the Commission’s Draft Decision in relation to the following:

• Allowing an additional $5 million for Yarra Valley Water (YVW), South East Water (SEW) and City West Water (CWW) to help them improve support for low income and vulnerable customers experiencing hardship
• Service standard targets and guaranteed service levels
• Reducing the forecast operating expenditure and capital expenditure, however, we ask that more transparency be provided to consumers about the level of operational expenditure that is actually government revenue
• Reducing Melbourne Water’s proposed waterways and drainage service price rise which was 14.1 per cent over the next five years, to 0.5 per cent over the same period
• Increasing flexibility to reopen a determination where specific events are material
• Requiring Melbourne Water to resubmit an alternative proposal for the recovery of the desalination security costs for further consideration, one which takes into account, the WIRO requirements and developed in consultation with water businesses, end-use customers and their representative bodies.

3. In addition, we are of the view that the Commission should:

• Set the WACC based upon the businesses actual cost of capital (given the fact that they are government-owned), rather than theoretically constructed private businesses
• Ensure that the pass through of desalination water order costs is effected in a consistent manner, so that customers understand the costs of their water use, and any pass through of costs should be included in usage charges
• Ensure that Melbourne Water capitalises as much of the desalination security payments as is possible, and undertake further analysis as to whether Melbourne Water can bear reduced net profits (or indeed net losses) so as to allow for higher capitalisation
• Outline for future regulatory periods what is required for Melbourne Water and water businesses in terms of consultation with their customers

A full copy of the submission can be downloaded here.