A Review of Melbourne's Water Tariffs: Report for the Department of Natural Resources and Environment
1 October 2001
Since the restructuring of the Victorian water industry in 1995, there have been three major price reviews of the urban water businesses, in 1997, 1998/99 and 2001. The current "user pays" system was fully implemented on 1 January 1998, replacing a system based on property values. This implementation resulted in the reduction of overall charges by 18%, minimizing the customer impact of this change. In addition, the growth in annual water use has slowed over the last decade, as has the volume of water used on hot days.
The Department of Natural Resources and Environment asked NERA to evaluate the structure of existing bulk and retail water tariffs in metropolitan Melbourne, and to canvass tariff options that would assist in improving the medium term supply/demand balance. In this report, NERA considers these tariff options within the "triple bottom line" framework, taking into account economic, social and environmental impacts. By evaluating the existing tariff structures against both the principles of marginal cost pricing and consideration of environmental and social impacts, NERA identifies five possible tariff options whose merit warrant further investigation. These options include:
developing robust estimates of the marginal social cost of increased water consumption; |
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increasing retail water usage charges, at least until storage levels are replenished; |
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reducing the differential between bulk and retail volumetric water tariffs; |
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increasing the disaggregation of retail tariffs, for large industrial customers in particular; and |
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simplifying the sewage disposal charge for residential customers. |
To learn more about the tariff structure options evaluated please download the report by following the link below.
