Legislative Assembly for the ACT: 2008 Week 08 Hansard (Thursday, 7 August 2008) . . Page.. 3160 ..
Given that the ACT sells water to Queanbeyan at a bulk price rate, (a) how often is the price renegotiated, (b) how does this price compare with the price paid by large users in the ACT, (c) what principles guide the setting of the price and (d) at what level do these negotiations take place.
Mr Stanhope: The answer to the member’s question is as follows:
a. ACTEW and Queanbeyan City Council (QCC) entered into a Service Level Agreement (SLA) on 8 January 2002 for the supply of potable water to the City of Queanbeyan. Schedule 8 of the SLA allows for the negotiation of a Pricing Agreement for the supply of water by ACTEW to QCC.
ACTEW and QCC entered into a three-year agreement for pricing bulk water for the period 2005 06 to 2007 08 on 29 June 2004. Changes to the bulk water price during this period were negotiated annually in accordance with the principles of the overall three year agreement. A five year pricing agreement between ACTEW and QCC for 2008 09 to 2012 13 was finalised on 7 July 2008. In accordance with the commercial arrangement between QCC and ACTEW, this agreement is aligned to the new price path set out in Independent Competition and Regulatory Commission’s 2008, Water and Wastewater Price Review: Final Report and Price Determination which was released on 7 June 2008.
b. It would not be appropriate to compare Queanbeyan City Council’s bulk water supply with ACT large users, as Queanbeyan City Council provides and is responsible for its own reticulation and storage system within Queanbeyan, as well as metering and billing.
The current pricing is based on the current ICRC price determination for the ACT. The price paid by Queanbeyan City Council is subject to a contract between the parties and is therefore commercial-in-confidence.
c. A number of principles guide the setting of the price. The Independent Competition and Regulatory Commissions 2008, Water and Wastewater Price Review: Final Report and Price Determination provides the following guidance on the prices for provision of bulk water services on pages 160 161.
– ACTEW must provide bulk water and reuse water on the basis that customers pay at least the avoidable cost of supply, and less than the stand alone cost of supply. Furthermore, bulk water prices should be set on the basis of the following principles:
• Prices should seek to recover avoidable costs.
• Prices should provide for a fair and reasonable rate of return on capital invested.
• Prices should discourage uneconomic bypass.
• Prices should be set according to a well defined and clearly explained methodology.
As well, Schedule 8 of the Service Level Agreement sets out a number of pricing principles. These are as follows: