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Water Bill 2007

Part 3 Water charging principles


3   Water storage and delivery

             (1)  Pricing policies for water storage and delivery in rural systems are to be developed to facilitate efficient water use and trade in water entitlements.

             (2)  Water charges are to include a consumption-based component.

             (3)  Water charges are to be based on f ull cost recovery for water services to ensure business viability and avoid monopoly rents, including recovery of environmental externalities where feasible and practical.

             (4)  Water charges in the rural water sector are to continue to move towards upper bound pricing where practicable.

             (5)  In subclause (4):

upper bound pricing means the level at which, to avoid monopoly rents, a water business should not recover more than:

                     (a)  the operational, maintenance and administrative costs, externalities, taxes or tax equivalent regimes; and

                     (b)  provision for the cost of asset consumption; and

                     (c)  provision for the cost of capital (calculated using a weighted average cost of capital).

             (6)  If full cost recovery is unlikely to be achieved and a Community Service Obligation is deemed necessary:

                     (a)  the size of the subsidy is to be reported publicly; and

                     (b)  where practicable, subsidies or Community Service Obligations are to be reduced or eliminated.

             (7)  Pricing policies should ensure consistency across sectors and jurisdictions where entitlements are able to be traded.

4   Cost recovery for planning and management

             (1)  All costs associated with water planning and management must be identified, including the costs of underpinning water markets (such as the provision of registers, accounting and measurement frameworks and performance monitoring and benchmarking).

             (2)  The proportion of costs that can be attributed to water access entitlement holders is to be identified consistently with the principles set out in subclauses (3) and (4).

             (3)  Water planning and management charges are to be linked as closely as possible to the costs of activities or products.

             (4)  Water planning and management charges are to exclude activities undertaken for the Government (such as policy development and Ministerial or Parliamentary services).

             (5)  States and Territories are to report publicly on cost recovery for water planning and management annually. The reports are to include:

                     (a)  the total cost of water planning and management; and

                     (b)  the proportion of the total cost of water planning and management attributed to water access entitlement holders, and the basis upon which this proportion is determined.

5   Environmental externalities

             (1)  Market-based mechanisms (such as pricing to account for positive and negative environmental externalities associated with water use) are to be pursued where feasible.

             (2)  The cost of environmental externalities is to be included in water charges where found to be feasible.

6   Benchmarking and efficiency reviews

             (1)  Independent and public benchmarking or efficiency reviews of pricing and service quality relevant to regulated water charges is or are to be undertaken based on a nationally consistent framework.

             (2)  The costs of operating these benchmarking and efficiency review systems are to be met through recovery of regulated water charges.