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National Water Initiative pricing principles

Steering Group on Water Charges, 2010

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Introduction

  1. The National Water Initiative (NWI), agreed in 2004 by the Council of Australian Governments, is the national blueprint for water reform.
  2. The NWI represents a shared commitment by governments to increase the efficiency of Australia's water use, leading to greater certainty for investment and productivity, for rural and urban communities, and for the environment.
  3. Under the NWI, governments have made commitments to best practice water pricing including to:
    1. promote economically efficient and sustainable use of:
      1. water resources
      2. water infrastructure assets, and
      3. government resources devoted to the management of water.
    2. ensure sufficient revenue streams to allow efficient delivery of the required services
    3. facilitate the efficient functioning of water markets, including inter-jurisdictional water markets, and in both rural and urban settings
    4. give effect to the principle of user-pays and achieve pricing transparency in respect of water storage and delivery in irrigation systems and cost recovery for water planning and management, and
    5. avoid perverse or unintended pricing outcomes.
  4. A stocktake on approaches to water charging was prepared by the Steering Group on Water Charges (SGWC)1 identified three areas where differences in pricing approaches across jurisdictions were most marked:
    1. approaches to recovering capital expenditure
    2. approaches to setting urban water tariffs, and
    3. approaches to recovering the costs of water planning and management.
  5. The SGWC developed draft pricing principles in each of the above areas to assist jurisdictions in moving towards consistent approaches to pricing as required under the NWI (paragraphs 65 (iii) and 67 refer).
  6. An additional set of pricing principles for recycled water and stormwater reuse have also been developed to assist states and territories to meet their commitments under paragraph 66 (ii) of the NWI to develop pricing policies for recycled water and stormwater reuse that are congruent with pricing policies for potable water.
  7. These four sets of principles:
    1. the principles for recovering capital expenditure
    2. the principles for setting urban water tariffs
    3. the principles for recovering the costs of water planning and management, and
    4. the principles for recycled water and stormwater reuse are collectively referred to in this document as the NWI pricing principles.
  8. The NWI pricing principles do not limit the ability of governments to address equity issues related to the provision of water services.
  9. These NWI pricing principles draw on those in the 1994 Council of Australian Governments (COAG) Water Reform Framework, the 1999 Tripartite agreement, and the NWI as well as the report of the Expert Group on Asset Valuation Methods and Cost Recovery Definitions for the Australian Water Industry (the Expert Group).
  10. These principles have been agreed by Australian governments as the basis for setting water prices/charges in their jurisdictions. Governments agree that if a decision was made not to apply these principles in a particular case, the reasons for this would be tabled in parliament.
  11. A review of the NWI pricing principles will be undertaken in 2010 to ensure consistency between the pricing principles and the Commonwealth Water Act 2007, as well as take into account any further changes required as a result of COAG water reforms.

1 The Steering Group on Water Charges was established by the National Water Initiative Committee to provide technical advice on water pricing to support the implementation of National Water Initiative pricing reforms.

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