ACTEW's Managing Director Mark Sullivan.

ACTEW's Managing Director Mark Sullivan. Photo: Graham Tidy

ACTEW says it could be forced to cut jobs and slash spending by $26 million to pay for a proposed $230 per household reduction in water and sewerage bills.

In a draft determination, the ACT Independent Competition and Regulatory Commission flagged a 16.9 per cent cut to water charges and 19 per cent reduction in sewerage fees to take effect from July.

The combined bill for a typical household would fall by about $4.42 a week.

The commission also recommended that the ACT government consider completely separating ACTEW's water and sewerage services from its gas and electricity business.

ACTEW managing director Mark Sullivan said if the draft determination was adopted without changes, the government-owned corporation would cease to be profitable and be forced to reduce operational expenditure by about $26 million over two years.

Mr Sullivan said ACTEW could face a significant loss next year.

''You add up all the losses and all the potential losses, [then] we're going to face a significant impairment on our profit. A number like $100 million is a conservative number, I think. It will a very large number,'' he said.

ACTEW would have only a limited range of options for cutting operational spending. ''The real variable expenditures would be our community support programs, our sponsorships and our staffing.''

However, Mr Sullivan was advising staff not to be too concerned about job security. A consultation process would be undertaken before a final pricing determination was announced.

In making the draft determination, the regulatory commission decided against a $238 million ''catch-up'' for ACTEW to make up for expected revenue it had missed out on during the present five-year regulatory period.

ICRC Senior Commissioner Malcolm Gray said ACTEW was financially strong enough not to need the extra money. ''What would happen to the $238 million if it were paid to ACTEW? Well, it would come back to the government through higher dividends in the future, and therefore the government would either provide more services or charge lower taxes so it flows back to us,'' Mr Gray said. ''So the thing would be a complete circle, and frankly we couldn't seen any benefit in doing that.''

In its report, the commission criticised as ''imprudent'' $50 million worth of spending by ACTEW on the Murrumbidgee to Cotter Pumping Augmentation Project, the Cotter Suction and Discharge Pipelines and the Uriarra Village sewerage project. The draft decision was made on the basis that ACTEW could spend up to $128 million on water and sewerage capital works over the next two years. This was almost $90 million less than ACTEW's proposed capital works allowance.

Treasurer Andrew Barr said the government was broadly supportive of a reduction in water charges but needed to study the draft determination in more detail.

''The trade-offs associated with this will be presumably a reduced revenue stream to ACTEW. It may result in job losses within that organisation and it certainly will impact on the dividend that they [ACTEW] pay to the territory government,'' he said.

ACT Chief Minister Katy Gallagher, speaking on ABC Breakfast radio on Wednesday morning, confirmed that jobs at Actew could be at risk.

But she said issues arising from the determination needed to be worked through and she did not want o cause undue stress on employees.

Opposition water spokesman Zed Seselja welcomed the draft determination and said ACT residents had been paying too much for water.

The ICRC has proposed a six-year regulatory period, with the ability for prices to be reconsidered every two years.

Mr Gray said ACTEW's structure was confusing to the community and difficult for the government and regulator to deal with. It would be preferable for one territory-owned corporation to continue to work with private-sector partners AGL and Jemena while the other focused purely on water and sewerage.