Water and Sewerage Industry Act 2008

For the purposes of this Division, the following pricing principles apply in relation to the price for the provision of a regulated service:a regulated entity is to be provided with a reasonable opportunity to recover the efficient costs which the regulated entity incurs in – providing a regulated service; and complying with a regulatory obligation or requirement or making a regulatory payment under this Act, except where this Act otherwise provides; the price is to provide for efficient pricing through – two-part pricing for water services based on the recovery of fixed costs and variable costs by way of separate charges through voluntary metering, mandatory metering or in such other manner as determined by the Regulator; and variation between locations, regions or schemes to reflect the costs of servicing particular customers or classes of customers; the price is to provide effective incentives to promote economic efficiency, reduce costs or otherwise improve productivity with respect to a regulated service; the price is to allow for a return to the regulated entity, on assets that are required in the provision of the regulated service to which that price relates, in accordance with subsection (1A); to the extent that it is commercially and technically reasonable, the price charged to a particular customer or class of customers is to reflect at least the costs that are directly attributable to the provision of the regulated service to that customer or class of customers.

For the purposes of subsection (1)(d), the determination of the return to a regulated entity on assets is to take into account the following assumptions:that the regulated entity has, in relation to assets, required in the provision of a regulated service, that are transferred to the regulated entity under Part 3 of the Water and Sewerage Corporations Act 2008 before 1 July 2011, the ratio of debt to equity that would be expected of a prudent business of a similar kind and scale to that of the regulated entity; that the return to the regulated entity on those assets of the entity – that are referred to in paragraph (a); and in relation to which the entity is to be taken under paragraph (a) to have incurred debt – is to take into account the prevailing rate of interest for commercial loans that a business of a similar kind and scale to that of the regulated entity would be required to pay to service that debt; that the return to the regulated entity on those assets of the entity – that are referred to in paragraph (a); and in relation to which the entity is to be taken under paragraph (a) to have equity – is to be taken to be a pre-tax rate, not taking into account inflation, of – 3%; or if another percentage rate is determined in regulations for the purposes of this paragraph, that percentage rate; that the return on those assets of the regulated entity, required in the provision of a regulated service, that are not referred to in paragraph (a) is to be not more than a rate that reflects the regulatory and commercial risks involved in providing the regulated service.

The regulations may prescribe additional pricing principles in relation to the provision of a regulated service.