The Tasmanian Economic Regulator (the Regulator) approves prices for regulated services
The Regulator approves prices for regulated water and sewerage services in Tasmania. The Regulator is independent from the Tasmanian Government. TasWater is currently the only regulated service provider in Tasmania.
Regulated water services mean a service provided in connection with the collection, storage, treatment, conveyance, reticulation or supply of water and includes a retail service for the supply of water.
Regulated sewerage services mean a service provided in connection with the collection, storage, treatment, conveyance or reticulation of sewage and includes a retail service for the collection of sewage.
Not all water and sewerage service prices are determined by the Regulator
The Regulator does not approve TasWater's prices for the following services:
- supplying or using water for irrigation purposes;
- supplying or using water in connection with the generation of electricity;
- collecting or using stormwater;
- recycling water; and
- re-using water.
While trade waste services provided to some larger, non-residential customers are regulated, the prices for those services are not ie prices for these services are negotiated between the customer and TasWater.
Prices approved by the Regulator are based on the efficient costs of providing regulated services to customers
Prices for regulated water and sewerage services are determined using a 'building block' approach. Under this approach, the costs of providing water and sewerage services to customers are added together to determine TasWater's annual notional revenue (notional allowable revenue or NAR). Based on the forecast demand for each service (eg the volume of water sold to customers or the number of transactions), prices are determined so that the expected revenue from all regulated services, when added together, does not exceed the NAR.
The Regulator will only approve prices that reflect prudent and efficient costs. Inefficient costs (even if they are actually incurred) are not taken into account when calculating the NAR and determining prices.
Price increases have been capped at 3.5 per cent until 30 June 2025
Under an agreement reached between the State Government, the council owners of TasWater and TasWater, TasWater will set a maximum price increase of 3.5% until 30 June 2025 (unless TasWater's long term sustainability is at risk). TasWater is also proposing a 3.5% price increase for the 2025-26 financial year.
The Regulator assesses TasWater's costs before making its decision
Prior to setting maximum prices, the Regulator must conduct an investigation to assess whether TasWater's proposed prices are based on efficient costs and TasWater has sufficient funds to provide the regulated services over the long term. This involves ensuring TasWater has sufficient funds to invest in maintaining and replacing assets used to provide regulated services.
To provide sufficient information to enable the Regulator to assess TasWater's costs, TasWater must provide a proposed Price and Service Plan to the Regulator. This Plan contains information on how TasWater plans to operate its business to enable it to provide regulated services.
The Regulator reviews TasWater's proposed Price and Service Plan against the requirements set out in the Water and Sewerage Industry Act 2008, the Water and Sewerage Industry (Pricing and Related Matters) Regulations 2021 and the Regulator's Price and Service Plan Guideline, April 2021.
The Regulator then publishes a draft Report on its preliminary decisions on the information in the Price and Service Plan. The Regulator also publishes a proposed Price Determination, which is a document specifying draft maximum prices for regulated services and/or how those prices are to be calculated.
After a period of public consultation the Regulator's publishes a final report and final Price Determination. The Regulator also approves TasWater's Price and Service Plan which must include any changes set out in the Regulator's final report and Price Determination.
Prices are set for the next four years
The Regulator declared that the duration of the fourth regulatory period to be four years, from 1 July 2022 to 30 June 2026. The Regulator's final determination sets annual maximum prices over this period.
How are TasWater's prices structured?
TasWater's water prices must have a fixed charge and a volumetric charge.
Fixed charges should be calculated to recover those costs that can be reasonably attributed to providing the service.
For water, the fixed charge is based on the size of the pipe at the connection point to the customer's property.
The volumetric charge (that varies according to the volume of water delivered) should have regard to the costs of delivering water to customers. Either the long run marginal cost (ie additional output is produced in the long run and no costs are fixed) or short run marginal cost (ie additional output is produced in the short run and some costs are fixed) marginal are considered when assessing these costs.
TasWater's sewerage prices must have a fixed charge and may have a volumetric charge.
What is two-part pricing?
Under two-part pricing, a customer's charges are made up of fixed and variable charges, as set out above. Two‑part pricing for water commenced on a state-wide basis from 1 July 2012.
Can I get a discount on my water and sewerage bill?
Concessions are available for eligible customers. To be eligible, you must be legally responsible for the account and occupy the property as your principal place of residence.
You may be eligible for a concession if you hold:
- a DHS Health Care Card;
- a DHS or DVA Pensioner Concession Card; or
- a DVA Health Card (also known as a Gold Card)
More details about concessions are available on TasWater's website: https://www.taswater.com.au/Your-Account/Concessions-and-Rebates
Who owns TasWater?
Each of the State's 29 local councils owns shares in TasWater and receives returns in the form of dividends.
Over a 10-year period from January 2019, the State Government has committed to providing $200 million to acquire 10 per cent of the shares in TasWater. Under the agreement between TasWater and the State Government, the State Government cannot receive dividends or any other payments from TasWater.
What are target tariffs?
At the start of the reforms, customers were paying a variety of different prices for the same service. To achieve the objective of all customers paying the same price for the same service, the Regulator has approved annual target tariffs for regulated services.
From the second regulatory period, the Regulator required TasWater to move all customers paying more than the target tariffs directly to those tariffs. Customers paying less than the target tariffs have been gradually transitioning to the target tariffs.
What are cross-subsidies?
A cross-subsidy is where one customer pays more for a service than another customer for the same level of service. The higher revenue from the first customer is used to meet the shortfall in revenue from the second customer. At the start of the reform process in 2009, these cross‑subsidies were very large, with some customers paying three or four times the amounts some other customers were paying for the same services.
As customers transition to target tariffs, these cross‑subsidies are gradually being reduced.
Can I disconnect from the water and sewerage infrastructure to avoid paying for the service?
Under the Water and Sewerage Industry Act 2008, TasWater is able to impose service charges if water and/or sewerage infrastructure passes a property, even if the property is not connected to that infrastructure. This includes the situation where the property is vacant land.
A customer may elect to disconnect from the water and/or sewerage network, but service charges may still apply. There also may be environmental and/or planning issues. For instance, disconnecting from the water supply system may have implications for sewage disposal. If you disconnect from the sewerage system, approval will be required from your council for alternative on-site waste treatment arrangements.