Revenue determination 2016-2020

Revenue determination 2016-2020

Regulatory Business Proposal

SA Water submitted its Regulatory Business Proposal 2016 (RBP 2016) to the Essential Services Commission of South Australia (ESCOSA) in August 2015.

ESCOSA reviewed this proposal and sought public feedback. It then released its Draft Determination in February 2016. After seeking feedback on the Draft Determination, ESCOSA released its Final Determination on 6 June 2016. The Final Determination sets SA Water's allowable revenue from customers for the next four years.

SA Water's RBP 2016 was based on our customers' views and expectations, and our business needs. It explained how SA Water proposed to operate and invest in infrastructure and services.

ESCOSA supported SA Water’s customer focus and its efficiencies to reduce prices. ESCOSA made further adjustments to SA Water’s proposed expenditure but overall ESCOSA’s determination is roughly in line with SA Water’s robust and efficient proposal. ESCOSA’s determination resulted in a 5.2% reduction in revenues compared with the revenue allowance for the first regulatory period. This will mean an $87 reduction in the combined water and sewerage bill for the average metropolitan residential customer in 2016-17. This outcome for customers is a direct result of SA Water’s hard work over the last 3 years to make its business more efficient and save money for customers.

RBP Draft Determination - Residential

RBP Draft Determination - Business

What is the regulatory determination process?

The regulatory determination process enables an independent economic regulator to assess the revenue SA Water requires to provide reliable and efficient water and sewerage services to its customers.

The economic regulator, the Essential Services Commission of South Australia (ESCOSA) initiated this process for the second regulatory period (see below) in 2015. SA Water submitted our proposal in August 2015. This document was known as RBP 2016.

ESCOSA released RBP 2016 for consultation in September 2015 and made its Draft Determination based on RBP 2016, public submissions and its own independent, expert analysis. This was released on 10 February 2016. On 6 June 2016, ESCOSA made its Final Determination after publicly consulting on its Draft Determination.

What is the RBP 2016?

RBP 2016 is SA Water’s proposal to ESCOSA as part of the process for setting the revenue SA Water can earn from customer prices. This process allows ESCOSA to review the prudence and efficiency of our proposed expenditure. It also determines how much revenue we may recover from our customers.

RBP 2016 Engagement “Customer Engagement Program: Your Say”

Our Customer Engagement Program is the first of its kind in both the breadth of customer engagement and the level of detail sought about the needs and expectations of our customers.

Between November 2013 and April 2015, we engaged with residents, businesses and industry groups across our customer base to inform our business strategy and next Regulatory Business Proposal for the period commencing 1 July 2016.

The Customer Engagement Program was delivered over five stages.

The reports of the Customer Engagement Program can be downloaded below.

How long is the regulatory period?

The second regulatory period is four years and runs from 1 July 2016 to 30 June 2020.

What did SA Water propose?

Following a reduction in prices in our first regulatory determination (2013), we again recommended a decrease in both water and sewerage prices. These were proposed to drop in 2016-17, with increases to align with inflation in the three years after that.

We also proposed to continue our strong investment in water and sewerage infrastructure, and to maintain levels of service, including reliability, for our customers.

A digital strategy and investment in Information Technology also formed a large part of RBP 2016. These projects will enhance the customer experience. They will offer more channels of communication and accessibility to information.

How is SA Water's proposal prudent and efficient?

We listened to our customers through our largest ever customer engagement initiative, Your Say, in 2014. You told us you want affordable prices, maintained levels of service and an improved customer experience. You asked for channels of communication and access to more information. Our proposal went through a robust development and review process and is now aligned with these customer requirements.

Our proposal for the second regulatory period was built on strong performance in the first regulatory period, in particular the efficiencies we achieved. These have resulted in lower costs to provide water and sewerage services. Overall, they will result in lower prices for our customers.

How much money does SA Water propose to invest during RBP 2016?

We proposed to invest $1.27 billion of capital over this four-year regulatory period. This included $675.4 million on water infrastructure, $479.7 million on sewerage infrastructure, and $115 million on Information Technology infrastructure.

How does this revenue figure compare to the first regulatory period?

Overall, our proposal results in a lower revenue requirement than the first regulatory period (the past three years). This decision was driven by efficiencies to reduce the required expenditure and a lower rate of return.

How does SA Water decide what to spend money on?

In 2014, we undertook our most extensive customer engagement initiative to date, Your Say. This helped us understand what you value about our services and where you want us to improve. The results from this report were included as part of our proposal.

We also consulted our industry regulators, who set the standards we are required to meet, to ensure our plans met their requirements.

After developing our plans for the second regulatory period, we continued to engage with customers and industry regulators to ensure they supported the direction we proposed to take. Customers told us they broadly supported our proposed direction over the 2016-20 regulatory period.

What are the changes to this RBP and what is SA Water doing differently to the last RBP?

We are building on the efficiencies achieved in the first regulatory period and proposing further efficiencies to keep prices as low as possible. We will continue to invest where and when we need to over the second regulatory period and we will also drive further efficiencies across our capital delivery program.

How will this proposal impact my bill?

Prices are set annually and it is not possible to provide the exact pricing impacts until after ESCOSA releases its Final Determination on total allowable revenue in June 2016.

What are the changes to this RBP and what is SA Water doing differently to the last RBP?

We are building on the efficiencies achieved in the first regulatory period and have proposed further efficiencies to keep prices as low as possible. We will continue to invest over the second regulatory period and will drive further efficiencies across our capital delivery program.

Has ESCOSA reviewed SA Water's RBP 2016?

Yes. ESCOSA has reviewed our proposal and consulted with customers and stakeholders. ESCOSA considered all feedback and released its Draft Determination for RBP 2016 on 10 February 2016 and again consulted on that. ESCOSA has now released its Final Determination which SA Water will implement from 1 July 2016.

What has ESCOSA decided?

ESCOSA released its Final Determination on 6 June 2016. The Final Determination generally found SA Water’s proposal to be prudent, efficient and aligned with customer expectations. It has determined:

  • A reduction in the proposed revenue of less than 1%, which when compared to the first determination in 2013 is an overall revenue reduction of 5.2%
  • A reduction in SA Water’s proposed operating costs of 1%
  • A reduction in the proposed capital investment of approximately 5% capital expenditure
  • A reduction in the rate of return SA water earns on its investments in infrastructure
  • A service standard framework to ensure levels of service customer supported as part of Your Say are maintained in the second regulatory period.

What happens now SA Water has submitted its RBP?

SA Water will now implement the Final Determination with new prices effective 1 July 2016.

The Final Determination results in a combined bill reduction for the average metropolitan residential customer of $87 or 6.7%.

The new prices can be found here.

Over the next 4 years SA Water will be delivering on all its commitments made in RBP 2016 and allowed by ESCOSA in its Final Determination, specifically:

  1. Maintaining safe, reliable drinking water and sewerage services
  2. Maintaining current levels of service through the way SA Water manages its assets and invests in maintaining and renewing them
  3. Increasing assistance to customers in financial hardship through the expansion of its Customer Assist Program
  4. Improving the way customers can interact with SA Water by expanding the functionality of its website, introducing e-billing, improving the way payments can be made and expanding the ways that customers can communicate with SA Water and receive information from SA Water
  5. Investing in new technology to reduce burst rates in certain areas (water pressure modulation)
  6. Seeking investment opportunities in recycled water where it makes commercial sense
  7. Improving regional drinking water quality issues
  8. Ensuring improved security of South Australia’s water supply for residential customers and to support economic growth in South Australia, and
  9. Implementing smart investments in Information Technology to drive further efficiency within the SA Water business and improve customer experience.

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