Review of prices for the Water Administration Ministerial Corporation

1 Executive summary
We adopted NOW’s proposed entitlement volumes for all water sources and valleys,
including those for the major water utilities, Hunter Water Corporation (HWC) and
the Sydney Catchment Authority (SCA). These volumes were extracted from NOW’s
2009 licence billing database, and we consider that they represent the best-available
information. We note that for many water sources and valleys, these volumes vary
considerably from the volumes used in making the 2006 Determination.
For example, the entitlement volumes for groundwater are 24% lower than those
used in making the 2006 Determination. This means that the costs allocated to
groundwater have been divided by a smaller number of units, resulting in an
average increase in the fixed charge for groundwater users of 41% (when all other
determinants of price are held constant).
Changes in usage forecasts
To set the usage charge for each water source and valley, we needed to make
assumptions about the forecast metered water usage in each valley. For regulated
rivers, we used the same usage forecasts as were used in making the 2010 State Water
Determination. While we recognise that some stakeholders will not support this
decision, no compelling case has been made for using different usage forecasts for
what is essentially the same water resource. For unregulated rivers and
groundwater, we used usage forecasts equal to 100% of the entitlement volume,
given limitations in the information available from NOW. 20
1.3.4 How has IPART mitigated price impacts?
Given the significant percentage increases in prices for some water sources and
valleys, we decided it was necessary to mitigate price shocks for water users.
Therefore, in setting prices, we ensured that the annual increase in the forecast bill
for most water sources and valleys does not exceed 20% (based on forecast usage
levels). The only exception was for prices for groundwater users in unmanaged
areas currently subject to a fixed charge only. Those prices will not be capped in the
first year, but will be capped in subsequent years.
The 20% cap on forecast annual bill increases is broadly consistent with the 20% cap
applied in the 2006 Determination for unregulated river and groundwater actual
annual bill increases (for the same volume of water extracted).
We decided not to include a cap on actual bills in this Determination, as had been
done for unregulated and groundwater users in the 2006 Determination, given the
costs and the difficulties faced by NOW in correctly administering the cap
mechanism.
20 These limitations are discussed in Chapter 8.
14 IPART Review of prices for the Water Administration Ministerial Corporation