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Legislative Council - Fifty-Fourth Parliament, First Session (54-1)
2018-08-01 Daily Xml
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Ministerial Statement

Water Pricing Inquiry

The Hon. R.I. LUCAS (Treasurer) (14:16): I seek leave to make a ministerial statement on the subject of the terms of reference of an inquiry into water pricing in South Australia.

Leave granted.

The Hon. R.I. LUCAS: The Marshall Liberal government established the inquiry into water pricing in South Australia as part of our election commitments, with Mr Lew Owens appointed to conduct this independent inquiry. The inquiry will provide valuable independent advice to the government on the complex methodology used to determine what South Australians pay. Today, I provide the terms of reference for the inquiry. The terms of reference are as follows:

The Inquiry will consider and report on the following matters relevant to the regulation of SA Water's drinking water services:

a) The reasonableness of the opening value of SA Water's regulated asset base (RAB) established by the Second Pricing Order made by the then Treasurer on 17 May 2013, including:

i. Asset valuations used to establish drinking water prices in the years leading up to 2013;

ii. The process for setting the Initial RAB for 2013;

iii. The treatment of customer contributions in setting the Initial RAB;

iv. The treatment of the capital costs (and Commonwealth funding) for the Adelaide Desalination Plant in setting the Initial RAB;

v. Compliance with the National Water Initiative Pricing Principles in relation to the recovery of capital expenditure;

vi. RABs for drinking water services in other jurisdictions, having regard to the key drivers and variables that may affect the value; and

vii. Any other matter which may contribute to an understanding of the level of the SA Water drinking water services RAB.

b) Whether there should be a change to the value of the Initial RAB (as subsequently adjusted each year since 2013 for depreciation and inflation) for the 2020 Price Determination by ESCOSA.

If there are any changes proposed to the RAB valuation, the inquiry will also consider and report on a possible implementation program and timetable that would ensure a fair and reasonable balance between the interests of consumers and the government, as owner of SA Water.

The inquiry will also consider whether there are issues associated with setting the allowed return on the RAB, including whether the methodology should anticipate inflation and returns expected by the market during the relevant regulatory period to ensure a fair and reasonable balance between the interests of consumers and the government, as owner of SA Water.

The inquiry will be conducted by Mr Lew Owens as independent inquirer. In conducting the inquiry, the independent inquirer:

1. May have regard to and consider reviews and recent developments and practices in the economic regulation of utilities in other Australian or overseas jurisdictions.

2. May undertake consultation with relevant stakeholders.

3. May consider any other matter that is viewed as relevant.

The independent inquirer will provide a report of his findings to the Treasurer by 30 June 2019. This inquiry reflects the Marshall Liberal government's commitment to do what it can to ease cost-of-living pressures for all South Australians.

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