As the provider of essential services in water, sewerage, waterways and drainage, our revenue is set by the Essential Services Commission – Victoria’s independent regulator. Learn more about the Price Submission process, who’s been involved, and what it means for you and your water bill.
Melbourne Water and the Price Submission
Melbourne Water is a statutory authority owned by the Victorian Government. We provide wholesale water and sewerage services to Melbourne's retail water businesses, and partner with councils and other organisations to deliver waterway and drainage services to the Greater Melbourne region.
The following map shows the area we service:
In Victoria, prices for water, sewerage and other essential services must be approved by the Essential Services Commission, the independent regulator. To inform their decision, Melbourne Water prepares a Price Submission detailing our proposed service standards, expenditure and prices for a period of up to five years.
Our Price Submission 2021 sets out the key customer outcomes we intend to deliver for 2021-26, and the investments we will make to achieve them. It also includes how we’ll measure and report on our performance, so customers know we’re delivering on our commitments.
For further details about our last Price Submission, visit melbournewater.com.au/2016-price-review
As a wholesale service provider, we work with Melbourne’s retail water companies to provide water and sewerage services to households and businesses. Our water and sewerage costs are paid for by the retail water companies, who pass these on to consumers (along with their own retail costs for water and sewerage) via your water bill.
Our costs contribute to just over half of the water and sewerage portion of your bill – as well as the entirety of the Waterways and Drainage Charge, which is a direct charge from us that your retail water company collects on our behalf. This funds a range of activities to protect and improve waterway health, manage drainage and provide flood protection, as outlined in our Waterways and Drainage Investment Plan.
As the designated waterway and floodplain manager for Greater Melbourne and the surrounding region, Melbourne Water must also prepare a Waterways and Drainage Investment Plan, which supports the waterways and drainage elements of our Price Submission.
The Plan is a requirement of the Statement of Obligations issued by the Minister for Water, and details our responsibilities, goals, levels of service and programs of work for waterway management, flood management and drainage.
Developing our Price Submission
Our Submission is the result of a comprehensive engagement program involving households, businesses, retail water company customers and a broad range of stakeholders – including government, community environmental groups and the development industry – which spanned a period of nearly two years.
We provided opportunities to shape key elements of our submission through a variety of channels and forums, including:
- Water and Sewerage Customer Council appointed, comprising representatives from the metropolitan retail water companies (City West Water, South East Water and Yarra Valley Water – elected Chair), and connected regional water corporations (Western Water, Barwon Water and South Gippsland Water)
- Engagement Advisory Panel established, comprising engagement practitioners from the same retail water companies
- Regulatory Managers Forum met to inform proposals, supporting the Water and Sewerage Customer Council
- Waterways and Drainage Customer Council appointed, comprising representatives from local councils, Werribee Riverkeeper (elected Chair), Yarra Riverkeeper, Port Phillip Baykeeper, State Emergency Services, Victorian Planning Authority and Urban Development Institute of Australia, a water diverter (subject to our Special Services Charge), community groups and a member of the public
- Two community deliberative panels created to draw on diverse and representative community views on specific issues (including measures to address the impacts of the COVID-19 pandemic).
We also conducted detailed community research into service priorities and pricing, recognising they are ultimately consumers of our services. We sought informed and representative views from a diverse sample of the broader community to understand their values, preferences and willingness to pay for different levels of service.
We understand that now, more than ever, affordability is a key focus for customers and the community.
As a provider of essential services, we strive to operate as efficiently as possible while delivering the quality services our customers and community expect. While our five-year planning period provides some flexibility to absorb such shocks, affordability has always been a focus – and our customers have consistently told us this is a priority throughout the development of our Submission. We are acutely aware this will continue to be important as the impacts of the pandemic continue, and that members of the community are feeling significant financial pressures right now.
The COVID-19 pandemic poses uncertainties and challenges which we have carefully considered in finalising our Submission. Our key responses are summarised below.
Easing bill impacts
We undertook additional engagement to test and refine proposals to ease bill impacts on the community, including price smoothing, hardship assistance and related initiatives and expenditure pauses/deferrals with associated price reductions. We engaged with the broader community via a deliberative forum, and with direct service customers where a service/price increase was proposed. The forum endorsed our proposals and reinforced support for our proposed price changes and six customer outcomes, in the context of the COVID-19 situation.
We will continue to monitor the emerging situation, including via engagement with the retail water companies and monitoring of related industry research to understand how COVID-19 impacts customer affordability as the economic effects of the pandemic evolve. This will include continuing to survey household and business customers at regular intervals (currently fortnightly), with a series of questions focused on service affordability, to aid our understanding of the community pressures arising from the pandemic.
We will use the insights we gather to actively monitor the case for setting our prices to a fair level (lower than the regulatory price cap) in any given year. In our engagement with the deliberative panel we outlined options such as temporary pauses in scheduled price rises (waterways and drainage charge) and/or revisiting of customer-derived levels of service, as possible responses to ensure our prices remain as “fair” as possible across the period in light of evolving COVID-19 impacts.
Our original demand forecasts for the regulatory period are based on state government population projections (Victoria in Future 2019), which were released prior to the pandemic. We therefore considered an alternative population growth scenario with reduced immigration in the short term.
Overall, the revised demand scenario has a negligible impact on our proposed expenditure. This is because projects with a growth driver are proposed on a ‘just-in-time’ basis to deal with the recent past growth Melbourne has experienced. However, the revised demand scenario results in a potential increase in the impact of our prices on water bills because there would be less customers to spread the price across.
We therefore elected to base our submission on our “original best estimates” of forecast demand and expenditures. Melbourne Water will bear the revenue risk should actual (post-submission) demand be lower than our forecasts. This decision enables us to keep prices lower than they otherwise would be under the revised growth scenario and is in line with customer feedback, particularly from the retail water companies, who were strongly of the view that we should seek to minimise any upward price pressures arising from COVID-19. Our customers expect us to accept higher revenue risk, rather than pass that risk on to them via revised forecasts and higher prices.
Price Submission 2021
Our water and sewerage wholesale prices are proposed to reduce by 0.6 per cent (plus CPI), factoring in customer growth and desalination schedules. This excludes an expected reduction in the cost of debt, which is also expected to place further downward movement in prices over the regulatory period.
For metropolitan Melbourne customers (City West Water, South East Water, Yarra Valley Water), we are proposing an average reduction of 1.5 per cent each year over the five-year Submission period. These three retail water companies combined account for 98.7 per cent of our revenue requirement.
Across the Submission period, our wholesale water and sewerage prices will decrease for customers of:
- City West Water (-2.12%)
- South East Water (-1.43%)
- Yarra Valley Water (-1.24%)
- Barwon Water (-0.79%)
- Westernport Water (-0.64%)
- Gippsland Water (-3.41%).
Due to growth in demand, our prices will increase for customers of:
- Western Water (0.14%)
- South Gippsland Water (1.50%).
The impact on individual households and businesses will depend on your water usage and the fee structure of your retail water company.
Our Waterways and Drainage Charge is proposed to increase by 5 per cent (plus CPI).
This increase is based on extensive feedback from customers and the community, which indicated a willingness to pay for additional investment to provide an uplift in waterway management and drainage services.
In light of the immediate affordability challenges posed by COVID-19, we have spread this proposed increase across the five-year Submission period to smooth the impact. This results in a gradual increase of 1 per cent each year for residential, non-residential and rural charges (from bases of $104.32, $156.72 and $57.28 per annum respectively), rather than a larger one-off increase in the first year of our Submission.
When combining the impact of our proposed water and sewerage price decrease with the slight increase in our Waterways and Drainage Charge, our Price Submission 2021 proposes to reduce our average impact on a typical water bill by around $3.
We lodged our Submission with the Essential Services Commission on 9 November 2020. The Commission will conduct a formal review process, including asking for public comment, and is expected to release their draft determination in March 2021.
Once we have responded to this, the Commission will issue their final price determination (expected in June 2021), and our new prices will come into effect on 1 July 2021.
For further details or to follow the process, please visit the Essential Services Commision's website.
Following lodgement of our Submission with the Essential Services Commission, their public consultation process is now the forum through which to provide further feedback.
For details or to participate, please visit the Engage Victoria website.
Our Price Submission 2021 marks a significant shift in the way we engage customers in service planning and delivery. As part of our commitment to being more transparent and accountable, we are proposing to publish an annual report on performance against Customer Outcomes on our website.
We are also seeking to maintain an ongoing conversation with our customers through a forum of customer representatives. This will be used to report on our performance and ensure our priorities continue to align with customer preferences, informing our services throughout the Price Submission period.