Aither, together with our project partners Oakley Greenwood, were engaged by IPART to undertake a review of cost recovery options for bulk water services provided by WaterNSW (referred to as the cost recovery review hereafter). The cost recovery review involved examining the advantages and disadvantages of a range of options that could be implemented to set prices in situations where full cost recovery is challenging. The options have been developed and assessed within the context of IPART’s legislative obligations, policy commitments and first principles for economic efficiency and regulation.
The objectives of the cost recovery review are to:
- Clearly articulate the issue of cost under-recovery in NSW valleys
- Establish objectives and economic principles for setting prices in NSW valleys
- Identify different options to set prices or manage schemes where full cost recovery is not practical in the long-term
- Undertake a preliminary assessment of the advantages and disadvantages of each option, including with reference to the pricing objectives and principles (without undertaking detailed empirical analysis or recommending an option).
The review is intended to inform future decision-making by IPART, including identifying further empirical and other analysis that needs to be undertaken to inform a future approach to address the issue. Any approach to address under-recovery or comparatively high prices needs to be relevant for all NSW valleys both now and in the future; not just the valleys that are currently experiencing issues.