The Water Services Association of Australia recently released its flagship report for 2014, ‘Improving economic regulation of urban water’. This report supported recent calls from customers, the water industry and the private sector for better economic regulation of the urban water sector.
The Water Services Association of Australia (WSAA), the peak industry body for the Australian urban water sector, commissioned Frontier Economics to review the economic regulation of the urban water industry in Australia and identify improvements that would provide long-term benefits to stakeholders and customers. The resulting report provides a comprehensive assessment of best practice economic regulation in the urban water sector and draws on experience from water and other industries, both from within Australia and overseas.
Senator Simon Birmingham, Parliamentary Secretary for the Environment, officially launched the report. “Best practice regulation should be clearly independent of water utilities and their owners. It should be as light touch as possible, ensure it keeps prices as low as possible, and help drive efficient future infrastructure decisions,” he said.
Keeping prices as low as possible is definitely in the interest of customers and Consumer Utilities Advocacy Centre Executive Officer Jo Benvenuti welcomed the release of the report. “This report acknowledges the central role of consumers in designing the pricing and service reliability of this most essential of all services.”
Customers are the ultimate beneficiaries of reforms to economic regulation, with prices kept as low as possible by providing greater incentives for productivity and efficiency. In addition, services and investments are targeted at areas of highest customer value. Better economic regulation also encourages more transparent decision-making and greater opportunities for customer engagement.
Infrastructure Partnerships Australia also supported the release of the report. Its Chief Executive, Brendan Lyon, endorsed the report for its “unabashed focus on getting the right regulation in place to drive efficient water prices, and preparing the water industry for meaningful microeconomic reform”.
Addressing the shortcomings in economic regulation requires action from government, economic regulators and water utilities. Regardless of the future reform path for the industry, good economic regulation is a foundation for a resilient industry that is able to meet the challenges of urban growth, climate change and the liveability of our cities and towns.
WSAA believes that states acting alone is not enough and that national action is required. “Clear minimum and agreed standards, backed by rewards and sanctions, to be met by all jurisdictions are required regardless of the future reform path for the urban water industry,” said WSAA’s Executive Director, Adam Lovell.
WSAA strongly recommends a national urban water agreement through the Council of Australian Governments to further the reform process. The opportunity must be taken to build on the existing National Water Initiative and put in place clear minimum and agreed standards for economic regulation to be met by all jurisdictions.
Furthermore, WSAA strongly recommends that minimum standards be developed around:
- Establishing regulation that is independent from governments
- Setting clear objectives for regulators to act in the long-term interests of customers
- Establishing incentives for productivity and innovation
- Assessment of financial viability to protect the long-term interests of customers and stakeholders
- Strong and transparent customer engagement within the regulatory framework
- Merits review and appeal mechanisms for water businesses and other stakeholders.
WSAA is the peak industry body for the urban water industry. The industry is critical to Australia’s economy, society and environment, providing water and wastewater services to over 20 million Australians.
Copies of the full report and accompanying WSAA Position Statement are available on the WSAA website, www.wsaa.asn.au.