Over the past two days, the Essential Services Commission (ESC) has hosted a water pricing conference to invigorate discussion around the different models that could be used for pricing water.
“Is a regulator in the best position to establish the desired return on assets, or should that be informed by the stakeholders?
I enclose my take away points from the conference, noting the focus on customer engagement and industry collaboration. Please feel free to provide any feedback, ideas or areas of interest.
Ideal Pricing Model Outcomes
- Incentives linked to what customers understand and want
- Creates better output: quality, timeliness, access, number of interruptions – over the long term,
- Encourage & incentivise innovation
- Considers fast tracking or tiering evaluation levels
- Agreed capital investment
Benefits from an efficient pricing model
- Enhanced consumer experience (efficiencies shared with customers)
- Directed appropriate GSLs
- All stakeholders have a voice – therefore buy-in
- Customer needs/value drive focus, ie choose price affordability or network reliability
- Higher transparency
- Underperformance exposed (benchmarks)
- Innovation that transforms
- Affordable and efficient water service
Overall Take always
- What constitutes broad customer engagement?
- It is difficult to engage on difficult issues
- What new innovative ways can you engage with the dis-engaged?
- How do you establish a framework that reconciles the shareholder goals (water plan/wacc), economic regulation (ESC pricing model – price submissions), water authorities corporate plan, customer requirements (consultation/feedback) and long term sustainability?
- Efficient pricing – how do you reconcile all stakeholder requirements? Who pays for what! connect Service levels/standards, delivery KPIs, asset management plans
- Customer insight should be a core competency – having an ongoing deep understanding is good business
- Capacity and resourcing issues with rolling out an engagement strategy
- Having customers identify/agree service levels should create better outcomes than the government or a regulator legislating
Jeff Webb Managing Director