FACT SHEET Final Report: Retail water prices – Logan Water

The Competition Authority Our overview fact sheet explains the general findings of monitors the prices, costs and revenues of our review. This fact sheet outlines the findings for Logan five water retailers in , Water. There were no changes to the findings for Logan Water as a result of comments received on the QCA’s including Logan Water. Draft Report. The Queensland Competition Authority (QCA) monitors We found no evidence of Logan Water exercising its retailers to ensure that these businesses are not using Seqwater monopoly power for 2013–15. their monopoly power to set pricesowns and operateshigher the bulkthan water is system necessary. Logan Water provides distribution and retail water and sewerage services to the local government The QCA has released its final 2013–15Water retailersprice monitoring provides water and sewerage services area. These services include distributing treated water to reportUnitywater for the five waterQueensland retailers – Unitywater,Logan Redland Gold Coast homes and businesses, treating and disposing of sewage Queensland Urban Utilities,Urban Utilities Logan Water,Water Redland WaterWater Water and other wastewater, and issuing bills. and . Customers residential and non-residential Five water retailers

Noosa

Maroochy

Kilcoy Somerset Caboolture Esk North Redcliffe Pine Dam

Gatton Cleveland North Stradbroke Lockyer Ipswich Island

Logan City

Beaudesert Surfers Boonah Hinze Paradise Dam LOGAN WATER - GREY

1800 1600

1400 526 526 397 526 ($) l 397 il 1200 397 b 1000 LOGAN470 WATER470 - 608GRE470 Y 800 432 407

sidenal 600 Re 400 Retail water prices – Logan Water 578 662 578 662 578 662 200 18000 4 3 4 3 4 te te te

1600 ba ba ba re re re

1400 with 526 with 526 397with 526 2012–13 2013–1 2012–1 2013–1 2012–1 2013–1 ($) l 397 il 1200 Logan 397Logan Logan b Residential Bills Costs1000 – findings (ex Gold Coast) (ex Beaudesert) 470 470 608 470 Sewerage Retail Distribuon Water Bulk Water The QCA found that residential bills for 2013–14 for The 800QCA found432 that Logan Water’s407 costs of supplying a household using 200 kilolitres of water a year will watersidenal 600 and sewerage activities could be 5.6% ($23m) Re increase by 17.8% in the former Logan City Council area, lower400 for 2013–15. For example, the QCA has lower tax 578 662 578 662 578 662 20% in the former Gold Coast City area and 4.7% in the estimates.200 former area. Only some of the change 0 4 3 4 3 4 Logan Water’ste 2013–15 costste te is attributable to Logan Water: 8.6% in the former Logan ba ba ba (Logan Waterre and QCA calculations)re re

City Council area, 10.6% in the former Gold Coast City with with with 2012–13 2013–1 2012–1 2013–1 2012–1 2013–1 area and a fall of 3.5% in the former Beaudesert Shire 140 Logan Logan Logan area. The remainder is due to bulk water charges and the (ex Gold Coast) (ex Beaudesert) expiry of the bulk water rebate. 120 Sewerage Retail Distribuon Water Bulk Water These increases are higher than the figures published 100 by Logan Water in May 2013: the May figures did not 80 $M include the expiry of the bulk water rebate. 127.6 60 113.5 112.1 To help customers understand changing prices, water 104.1 104.2 103.0 40 retailers should explain the reasons for the change in 69.0 72.2 eachLOGAN part of the bill as WAwell as theTER overall change. - GRE Y 20 1400 Bulk water Other opexReturn Return Logan Water’s residential bill increases in 2013–14 120 on capital of capital Logan Water QCA 100 1800 80 1600 $M Revenues – findings127.6 1400 526 526 397 526 60 113.5 112.1 104.1 104.2 103.0 ($) Logan Water’s revenues are below prudent and efficient l 397 il 1200 397 40 b costs. Logan Water’s revenues are 5.0% below the69.0 QCA72.2 1000 470 470 608 470 MAR140 20In 2013–14 and 5.0% below in 2014–15. Logan 800 432 407

sidenal Water120 is not recovering more revenue than required to 600 0 Re sustain its Bulkbusiness. water Other opexReturn Return 400 100 on capital of capital 662 662 662 578 578 578 We thereforeLogan Water foundQC noA evidence of Logan Water 200 80

0 exercising$M its monopoly power in 2013–15. 4 3 4 3 4 te te te 118 60 112

ba ba ba 110 re re re Logan Water’s103 revenue 40 79 77 85 80 with with with 2012–13 2013–1 2012–1 2013–1 2012–1 2013–1 (Logan Water and QCA calculations) Logan Logan Logan 20 (ex Gold Coast) (ex Beaudesert) 1400 Sewerage Retail Distribuon Water Bulk Water Water Wastewater WaterWastewater 120 2013–14 2014–15 100 Costs Maximum Allowable Revenue (QCA) Forecast Revenue (LW) 80

Part of our role is to establish whether Logan Water’s $M 60 118 costs are both required (prudent) and as low as possible 110 112 103 (efficient). Our estimates of prudent and efficient costs 40 79 77 85 80 determine the maximum allowable revenue (MAR). 20 140 The MAR is a key test for monopoly pricing. If a business’ 0 revenue120 significantly exceeds the MAR for a sustained Water Wastewater WaterWastewater period,100 the business may be using its monopoly power 2013–14 2014–15 to obtain unjustified returns. 80 Maximum Allowable Revenue (QCA) Forecast Revenue (LW) $M 127.6 60 113.5 112.1 104.1 104.2 103.0 40 69.0 72.2 20

0 More informationBulk water Other opexReturn Return on capital of capital For moreLogan Winformationater QCA on water and sewerage prices in your region visit our website:www.qca.org.au/water

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120

100

80 $M 118 60 110 112 103 40 79 77 85 80

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0 Water Wastewater WaterWastewater

2013–14 2014–15

Maximum Allowable Revenue (QCA) Forecast Revenue (LW)