Review of prices for the Water Administration Ministerial Corporation

4 The total efficient costs of providing NOW’s monopoly
water management services
While there may be an argument for not allocating some staff time to specific cost
codes, PwC removed 18.3 FTEs whose time is unallocated to specific cost codes
from NOW’s cost base. This was because PwC could not verify that the resources
were being used efficiently and, primarily, to act as a proxy for concerns it had
about the efficiency of NOW’s existing deployment and allocation of staff.
In summary, NOW’s arguments in response to the Draft Determination do not
provide any substantial new information relative to that previously provided to PwC
or IPART. We note that PwC’s recommendations were based on analysis of
information provided by NOW, and that PwC found that, in some cases, the
information provided by NOW was not clear or convincing, or that questions were
left unanswered. We also note that the onus is on NOW to provide IPART and its
consultant with adequate explanation of, and justification for, its cost proposal.
PwC’s overall findings on the information provided by NOW can be summed up as
follows:
…a number of observations remain as unanswered questions because we are unconvinced
about the responses received from NOW. The very fact that a range of ‘loose ends’ remain
unanswered provides support for our conclusion that a portion of NOW’s forecast costs
are not robust. NOW has cooperated in providing information for the review and has
made a genuine effort to substantiate its costs. PwC’s recommendation to accept some of
NOW’s requests for additional resources reflects the fact that an adequate case has been
made in some instances for some activities. However, our overall impression is that NOW
is not exercising a satisfactory level of business planning, performance monitoring or
‘stress testing’, with the shortfalls being more severe in some areas of its business than
others. 62
Responding to stakeholder submission to the Draft Determination and Report
While we have found that NOW’s efficient level of operating expenditure is lower
than it proposed, we consider that NOW has made a case for increases to its
operating expenditure in light of the increasing demands being placed on it as the
water resource manager. NOW argued, and both PwC and IPART accepted, that
water management is necessarily becoming more complex and sophisticated, and
that this requires additional resources. We also note that NOW’s water management
activities will ultimately benefit water entitlement holders through maintenance and
protection of the water property rights system.
62 PwC response to stakeholder comments – explanation letter, 30 June 2010, p 2 (available at:
www.ipart.nsw.gov.au).
Review of prices for the Water Administration Ministerial Corporation IPART 63