The Queensland Competition Authority (QCA) today released its draft 2015-20 price monitoring report for the Gladstone Area Water Board (GAWB).
GAWB is owned by the Queensland Government and supplies bulk raw and potable water sourced from Awoonga Dam to industrial customers and the Gladstone Regional Council.
“Price monitoring is an independent assessment of whether GAWB is managing its costs efficiently and recovering no more than the revenue required to sustain the business,” said QCA Chairman, Malcolm Roberts.
“GAWB forecasts a revenue requirement of $417.5 million over 2015-20 to deliver its services. The QCA is satisfied that nearly all of GAWB’s proposed $213 million in capital and operating costs is efficient.
“There is one major exception. On our assessment of the information available, we believe that their costs for one project could be reduced by $10.6 million.
“Besides covering their capital and operating costs, infrastructure owners must also obtain a reasonable return on their investments.
“GAWB’s approach using the data then available produced a rate of return of 6.85%. Using our standard approach, and taking into account the latest market conditions, we have calculated a return of 5.78%.
“Applying the QCA’s lower rate of return would reduce GAWB’s proposed revenue by $34 million.
“Overall, the QCA’s draft report identifies possible savings of almost $62 million over the next five years. As GAWB is proposing an almost identical increase in their revenue, the QCA’s findings would mean a very small increase (0.2%) in GAWB’s revenue compared to 2010-15.
“The QCA is also releasing estimates of 2015-16 prices for all of GAWB’s price zones. These QCA prices are only indicative: the QCA believes that releasing these prices is appropriate to help customers understand how these changes to revenue may translate into prices. GAWB has the discretion to set its own prices. The changes proposed by the QCA would see a further lowering of prices to those proposed by GAWB in the submissions provided to the QCA in September 2014.
The QCA emphasises that the Gladstone Regional Council sets prices for retail customers. This report only pertains to the price that GAWB charges the council for the provision of bulk potable water services.
Submissions are sought on our draft report by Friday 27 March 2015. For more information visit our water industry page at www.qca.org.au/Water.