18 January 2017
The Independent Competition and Regulatory Commission (the ICRC) has recently produced a draft Tariff Review (available here) as the basis for determining the prices that Icon Water (ICON) will be able to charge for its water and sewerage services.
This document outlines the current water tariff structure and proposes a set of changes based on altered circumstances in the ACT since the last review. In particular it notes:
1. The ACT is now more water secure as a consequence of substantive investment in infrastructure, in particular the enlarged Cotter Dam
2. Despite the end of the Millenium Drought in 2010, there has been no clear bounce back in per capita water consumption.
The current structure has a low basic supply charge, and then two levels of quantity charge. The lower charges apply to the basic quantity of water an average household consumes, then additional water above this volume costs a higher rate. It is concluded in the Review that the current tariff structure is not appropriate for today’s conditions.
Background to Canberra Business Chamber’s Position
The current water tariff structure excessively penalises large commercial users when the intent is to provide an incentive for efficiencies by domestic water uses. This has resulted in large users moving to off-network water supply options (e.g. recycling) to reduce their costs, leading to reduced demand for water and reduced income for ICON. ICON’s income is a simple product of the water demand by the tariff cost per unit of water. A continuation in the trend of reduced volumes of purchased water by large users affects the viability of ICON and its ability to maintain and develop infrastructure (see ICON Water submission here).
High basic utility costs represent an opportunity cost in business investment that could otherwise be redirected to target business growth and increased employment. For small and medium businesses with high water needs that cannot move to off-network options, this imposes an unreasonable cost which reduces national and international competiveness.