The ACT Independent Competition and Regulatory Commission is considering water prices. Photo: Anthea Russo
Canberra's water prices would increase by about 55 per cent from July next year if all factors being considered by the ACT Independent Competition and Regulatory Commission are adopted.
The commission yesterday issued a paper in which it outlines several factors which it will consider when setting the price of water to 2018. Its decision to continue with a five-year price path was sharply criticised yesterday by Actew Water managing director Mark Sullivan.
He said the price path set by the commission in 2008 had left Actew with a $258 million revenue shortfall because estimating accurately water consumption so far ahead was not possible.
Mr Sullivan said a revenue cap with the price of water adjusted more frequently would be a far better method to ensure Actew recovered its reasonable costs and its customers were not over-charged.
However, Mr Sullivan said the commission had insisted on pursuing its flawed method and had accused Actew of refusing to provide information which it was not capable of providing.
Senior pricing commissioner Malcolm Gray said the most important factor to be considered in the next price determination was how to treat the $238 million revenue shortfall from the current regulatory period.
Mr Sullivan said the figure was $258 million but Actew was not seeking to recover $20 million of that.
In a feud which has developed between Actew and the commission, Mr Gray said Actew's position on the recovery of the shortfall was not clear.
Mr Sullivan said it was - that Actew would not seek recovery for two years and that if recovery were to occur that it be spread over 40 years.
Mr Gray said if the status quo were retained, water bills would increase from 2 to 3 per cent.
If the $238 million were recovered over the next five years, water bills would increase from 26 to 33 per cent. But if the $238 million were recovered over 50 to 60 years, bills would increase by 7 to 9 per cent.
This option would place the burden on future generations and reduce revenue to the ACT government and increase the interest cost.
Mr Gray said in its submission to the commission, Actew had argued for a higher rate of return on its capital.
He said this would increase the price of water by about 2 percentage points.
Actew had also proposed changing the pricing structure to increase the fixed charge by about $30 to about $130 and to reduce from 200 kilolitres to 120kl the point at which the higher charge per litre cuts in.
Average consumption at present is about 200kl.
Mr Gray said this would increase water bills for low-end users from about 5 to 10 per cent and the big users would have a 9 per cent reduction. Mr Gray said under this proposal, the burden would fall most on the average household.
''We are not entirely sure why Actew is proposing this.''
In a proposal which angers Mr Sullivan, the commission has suggested reducing Actew's recovery of the cost of the Cotter Dam. To achieve this it took the initial estimate in 2008 of $145 million from the present $405 million to arrive at $260 million and suggests removing this from the regulated asset base. This would effectively reduce the price of water by about 9 per cent.
Mr Sullivan said Actew would not participate in a public forum being arranged by the commission for September 27 because of the caretaker period before the ACT election.