New South Wales Government
Water and Energy

• Urban water
• Metropolitan water
• Country town water
  • Local water utilities
  • Programs
  • Planning and best practice
    • Strategic planning
    • Pricing
    • Demand management
    • Performance monitoring
    • Integrated Water Cycle Management
    • Liquid trade waste
  • Technical support
• Saving water
• Recycling water
• Plumbing
• Review and reform

1. Home
2. Urban Water
3. Country town water
4. Planning and best practice
5. Pricing

Urban Water

Pricing

Best practice pricing for water supply, sewerage and trade waste provides appropriate pricing signals to enable each customer to balance the benefits and costs of their use of water services and ensures efficient use of water resources. It is required for effective and sustainable management of water supply and sewerage businesses and minimisation of customer bills. Best practice pricing is a key aspect of the National Water Initiative, the Council of Australian Governments' Strategic Framework for Water Reform and National Competition Policy.

The Department of Water and Energy provides financial planning and pricing software, expert advice, training, user support and facilitates the use of these tools by each local water utility (LWU) to achieve best practice pricing.

Water Supply Pricing

With water becoming an increasingly scarce resource both locally and globally, it is appropriate that LWUs focus on influencing water demand through increasing emphasis on usage based pricing. Best practice water supply pricing requires that the usage charge recover those costs that vary with demand in the long-term (ie. long-run marginal cost), through a water usage charge.

Sewerage Pricing

Best practice sewerage pricing involves a uniform annual sewerage bill for residential customers. For non-residential customers, an appropriate sewer usage charge is required for the estimated volume discharged to the sewerage system, together with an access charge based on the capacity requirements that their loads place on the system relative to residential customers.

The Department has an intensive focus on best practice water supply and sewerage pricing and has continued to assist LWUs to introduce such pricing. Of particular importance has been the abolition of annual water allowances, which lack an incentive for customers to conserve water. Further, such allowances lead to significantly higher fixed charges which disadvantage low water users.

All LWUs have now abolished their water allowance for potable water supply in compliance with the National Competition Policy and the National Water Initiative. Ninety per cent of the utilities are now achieving full-cost recovery for their water supply and sewerage businesses and the remainder of the utilities have committed to achieving full cost recovery by June 2009, as required by the revised Best practice Management Guidelines.

Developer Charges

Developer charges are up-front charges that a LWU can levy under section 64 of the Local Government Act 1993 to recover part of the infrastructure costs incurred in servicing new development or additions and changes to existing development.

Developer charges provide a source of funding for infrastructure and provide signals to the community regarding the cost of urban development. In essence, where the costs of serving new urban development are in excess of the current and expected costs of servicing existing customers, then the additional costs should be recovered from new entrants in the form of an up-front contribution.

DWE has issued Developer Charges Guidelines for Water Supply, Sewerage and Stormwater, December 2002 pursuant to section 306 (3)(C) of the Water Management Act 2000.

NSW local water utilities are required to prepare a Development Servicing Plan and to levy developer charges in accordance with these guidelines. A Development Servicing Plan documents all the relevant information used to calculate its developer charges per lot. The Guidelines define the elements of Best practice developer charges and provide guidance on the development, analysis and implementation of appropriate developer charges to ensure that new development meets a fair share of the cost of service provision.

LWUs with growth of fewer than five lots/annum are exempted from preparing Development Servicing Plans and need only prepare a brief Exemption Document in accordance with the Developer Charges Guidelines. An LWU with growth of five or more lots/annum that resolves not to levy developer charges needs to prepare a Policy Document in accordance with the Developer Charges Guidelines. However, such an LWU would fail to comply with these best practice guidelines and is therefore ineligible for dividend payment from the surplus of its water supply or sewerage businesses.

The Minister for Water requested the Independent Pricing and Regulatory Tribunal (IPART) to review the Developer Charges Guidelines. As part of the review IPART released an issues paper (PDF 565KB) and undertook public consultation involving stakeholders. In September 2007, IPART submitted a report on its review to the Minister.