Treasury Update on Water and Sewerage Reform

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					     Tasmanian Water and Sewerage Reform
                  A Better Community Solution




                Update on Water and Sewerage Reform
                Tasmanian Audit Office - Client Seminar
                                     23 April 2009




Department of Treasury and Finance
                          Primary Legislation

Two pieces of Legislation brought the new structural and regulatory
arrangements into effect.

Water and Sewerage Corporations Act 2008
•   Established three local government owned Regional Corporations and a
     fourth Common Services Corporation that will supply the water and sewerage
    services currently delivered by local government and bulk water
    authorities.

•   Provides for the transfer of employees, assets and liabilities to the new
    Corporations.

Water and Sewerage Industry Act 2008
•   Established a new regulatory framework for the sector, providing an
    independent economic regulator to supervise service standards and
    pricing.

•   Operational licensing of service providers to integrate the Corporations
    regulatory obligations.


                                                                                  2
     The Structural Reform Model for the Future Delivery of Water and
                           Sewerage Services




   The three regional                                               Owner representation and
   companies and the                                                  Board memberships to
common service provider                                             provide a connection to the
company will be owned by                                              community and allow a
        Councils                 North-West              Northern    state-wide strategic view
                                   Region                 Region
                                  Company                Company      All current Bulk Water
        All companies have                    Common                  Authority and Council
         independent and                       Service                Water and Sewerage
            expert boards                     Provider                  staff to transfer to a
                                              Company                  new companies on a
                                                                      no net detriment basis

             All companies are                    Southern             Common Service
            accountable to the                     Region                Provider will
            community through                                          avoid duplication
                 Parliament
                                                  Company
                                                                        in the regional
                                                                        companies and
                  All owner returns                                    minimise costs to
                     flow back to                                         customers
                       Councils                                                                  3
                 Structural Reform
               Key Remaining Issues

• Preparation and finalisation of Transfer Orders
    • Regional corporations, CSC, State owned assets
    • Key steps and timing:
        •   Negotiated resolution of Orders (30 April)
        •   Legal review of Orders (May)
        •   Arbitration process, if required (May)
        •   Treasurer’s approval of Orders (15 June)
        •   Gazette 1 July 2009 to meet agreed transfer date.

• Treasurer’s Order for allocation of returns to councils.

                                                                4
              Structural Reform
             Key Remaining Issues

• Completion balance sheets:
   • determine actual net asset transfer values.
   • prepared by councils as at 30 June 2009 as part of
     financial statements preparation.
   • will assist councils to meet their disclosure requirements
   • KPMG engaged to prepare detailed instructions.
   • Starting point for Corporations’ revaluation work.




                                                                  5
               Regulatory Reform
• Based on a well tried model appropriate for monopoly
  infrastructure services.

• An independent Economic Regulator plays a central role in
  issuing licences, monitoring regulatory performance and in
  setting prices and service levels.

• The Minister for Water has a co-ordinating policy role and is
  responsible for issuing an interim operating licence.

• The Treasurer has the power to make interim price orders.




                                                                  6
                                 Regulatory Reform
                                                 New
           New                                 Economic
                                               Regulator                    Regulated
         Licence
                                                                              Entity
        Framework

The general licence granted by the                                          The powers and
Regulator to a person who owns or                                           functions, rights and
                                                                            responsibilities of
operates water or sewerage              Water and Sewerage                  persons under the Act
infrastructure and provides water and
sewerage services.                          Industry Act                    are specified by
                                                                            reference to regulated
                                                                            entities


           New
                                                                            Regulated
          Pricing
                                                                             Activity
        Framework                         New Performance
  • Customer Service Code
                                             Monitoring                     A regulated activity is an
  • Customer Contracts                                                      activity for which a person
  • Price and Service Plan                 • Annual performance reporting   is required to hold a
  • Price Determination                      by Regulated Entities          licence under the Act
                                           • State of the Industry Report
                                           • Audits


                                                                                                 7
              Regulatory Reform
• Draft Interim Price Order (IPO)

    • Released for comment by the Treasurer on 15 April 2009.

    • Sets out the maximum allowable price increases for the
      new Water and Sewerage Corporations on a municipal
      basis.

    • Provides a balance between moving to full cost recovery
      and cushioning the impact on customers.

    • Price increases capped at 10 per cent per year, including
      inflation.



                                                                  8
              Regulatory Reform
• Draft Interim Price Order (IPO)

    • Concessions for low-income earners and pensioners.

    • Provides sufficient revenue for Corporations to return a
      dividend to owner councils who earned a legitimate
      return on W&S activities.

    • Finalised following consideration of public submissions,
      15 May 2009




                                                                 9
               Regulatory Reform
              Key Remaining Issues

• Development of CSO policy and legislation development
• Service standards regulations
• Analysis of metering arrangements, including detailed cost
  benefit analysis and consultation program
• Connections and extensions policy, including criteria for
  prioritisation
• Pricing policy and legislation development




                                                               10
                                                                                        High Level Schedule
Board Meetings                                  6 Mar                    2 Apr                           7 May                         4 Jun

ORCG Meetings                                  4 Mar                     1 Apr                          6 May                          1 Jun

Combined IJSC/ORCG Joint Readiness Meeting                                                                         13 May

IJSC Meetings        29 Jan                                17 Mar                              23 Apr                                                  16 Jun                                                                 TBC Jul            TBC Aug               TBC Sep


Structural Reform
                        Transfer and Transition Plan finalised (Feb 09)




                                                                                                                                                                Target Date for Full Transfer (1 July 09)
                              Draft Transfer Orders issued (Feb 09)
                                              SLE finalised (Feb/Mar
                                              09)
                                                     Treasurer’s Order – allocation of returns to owners                    (Mar 09)

                                                        Council Separation Plans complete (Mar 09)
                                    Interim funding arrangements finalised (April 09)
             Arbitration process for unresolved Transfer Orders         (15 Apr –
                                                                         30 May)
                                                                                                                                                                                                            Gazette finalised Transfer Orders    (Jun 09)

                                                                                                         Treasurer’s Instructions finalised (Jun 09)

                                                             Councils prepare completion balance sheet                 (Jun 09)

                                                           Corporation’s establishment and implementation plan complete (Mar 09)
                                                                                                                                                                                                            Treasury allocation inputs report finalised (Jun 10)
                                              Operating model designed              (Feb 09)
                                                                                                                                                                                             Indicative final transfer asset values reported                (Oct 09)
                                                           Regional and CSC Organisational structures designed – including agreement
                                                           on services delivered by CSC (Mar 09)                                                                                                                          Post implementation review (Oct 09)

                                                                                                    Corporation’s leadership teams in place (Apr                                                                            Finalisation of transfer valuations
                                                                                                    09)                                                                                                              including distribution allocations (Oct 09 –
                                                                                                    Facilities plan complete (Apr 09)                                                                                                                       Jun 10)


                                                            Finalise Service agreements between Corporations
                                                                                     and councils (May 09 - TBC)                                                                 Opening balance sheet completed (Jun 09)

                                                                                    Corporate Plans complete (May 09 )
                                                              1/                                                                                     1/                                                                                          3/
                                                                    4                                                                                     2                                                                                           4
         J                    F                        M                            A                              M                           J                                                               J                        A                      S
Regulatory Reform
                                                                        Interim Licences issued (Mar 09)
                                                                                                                                                                                                                               Year 2 Interim Price Order       (Dec 09 )
                                                                        Consequential and Transitional Regulations
                                                                        (Mar 09)                                                                                                                                                        Pricing Regulations     (Dec 09 )
                                                                                                        Interim Pricing Order issued (Apr 09)
                                                                                                        Service Standards framework & general                                                                             Customer Service Code issued (Dec 09 )
                                                                                                        Industry Act regulations (Apr 09)
                                                                                                        State of the Industry Report released
                                                                                                        (Apr 09)
                                                                                                     CSO Tabled (Apr 09)                                                                                                        Full Proclamation of Industry Act (Jul 09)
                                                                                                   Service Standards connections regulations
                                                                                                                                                   (Jun 09)

                                                                                                                                                                                                                                as at 3 October 2012

				
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