The NSW Independent Pricing and Regulatory Tribunal is currently reviewing the prices for wholesale water and sewerage services provided by Sydney Water and Hunter Water to new private and other participants in the NSW water industry.
This review is important because it is the first detailed examination of pricing for competition in the urban water industry. It will set some important precedents for the prices paid for wholesale water and wastewater services by new entrants and frame how regulators are likely to look at competition issues in the sector.
WSAA’s interest in this review stems from its potential implications for the urban water sector nationally.
The key findings from our submission are:
- IPART’s review of wholesale prices is an important first step in developing pricing approaches to support competition in the urban water industry
- WSAA supports IPART’s position that the objective of access or wholesale pricing is to promote efficient entry when competitors are more innovative or lower cost than incumbents. It is not to encourage competition for its own sake.
- regulation of wholesale services is one step to promote effective competition in the urban water sector in the short to medium term. But much more work remains to be done to design a competitive framework that will benefit customers in the long term.
- a retail minus approach to setting wholesale prices is necessary to protect utility customers under a postage stamp pricing system.
- A wholesale price will primarily allow competition or contestability for the market in specific geographic areas. However, new entrants will have monopolies over their customers in those areas. To protect customers the same retail price regulation should apply to new entrants as applies to existing water utilities.