CENTRAL Victorian water bills will drop for the first time since the millennium drought after the state regulator handed down Coliban Water’s pricing structure for the next five years.
The Esssential Services Commission this week released its final decision on Coliban’s prices for the next five years, with water prices before inflation to drop five per cent through until 2023.
Coliban’s average bills will be the second highest among the 16 water authorities in Victoria at an average of $1365 in 2018/19, $26 less than the average for the current financial year.
A one per cent decrease will be passed on each year until the next water pricing review by the ESC.
Coliban Water managing director Jeff Rigby said the pricing structure represented a fair result for both Coliban and its customers.
“We believe it strikes the right balance between the price of water that’s charged to customers going forward and being able to meet the revenue requirements for the organisation over the next five years,” he said.
All water authorities are required to submit their pricing plan to the ESC every five years, before the regulator makes a final determination.
Coliban’s proposal of a revenue cap as opposed to a price cap was rejected, the ESC report stating the revenue cap model “could result in prices that don’t reflect our assessment of efficient costs”.
Mr Rigby said the organisation had accepted the decision.
“Fundamentally, Coliban Water is only looking to make sufficient revenue over the long run in order for it to be able to meet its operating cost needs, its capital needs and maintain its debt levels,” Mr Rigby said.
The ESC rated Coliban as advanced under its PREMO performance monitoring system.
The pricing structure is a significant departure from that introduced at the start of 2013 when Coliban had recorded a decade of financial losses and passed on a 36 per cent increase in bills in the five-year regulatory period.
“We’ve been able to stabilise pricing off the back of some siginifcant increases that have occurred previously, which came after large-scale investments that were made back during the drought period,” Mr Rigby said.
Among the key financial priorities for Coliban in the next five years are $13 million worth of work to build capacity in the water network to the west and north of Bendigo, $11 million worth of work at the Bendigo wastewater treatment plant and $6m at Kyneton’s wastewater plant.
Those capital costs are being balanced with paying back considerable debt. Coliban’s 2016/17 annual report stated it had paid $3.5m worth of borrowings back to the Treasury Corporation of Victoria last financial year.
“Capital investment for us in terms of sustaining our infrastructure base is absolutely critical for us going forward,” Mr Rigby said.
“But we’re also conscious too that while interest rates are low we can carry debt, but we need to be working away at managing those debt levels down.
“That’s not necessarily saying we need to pay off all the debt, but just pay it down to a level where it’s more sustainable for us should we see increases in interest rates in the future.”
Coliban has not made changes to its tarriff structure for the coming regulatory period, but will explore a possible recreational water tarriff.
Mr Rigby said that could apply to groups and organisations using large amounts of water for recreational purposes such as filling ornamental lakes and community facilities such as pools, which have a “high social value”.