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Sunwater Irrigation Price Review: 2012-17 Volume 2 Pioneer River Water Supply Scheme

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Sunwater Irrigation Price Review: 2012-17 Volume 2 Pioneer River Water Supply Scheme Draft Report SunWater Irrigation Price Review: 2012-17 Volume 2 Pioneer River Water Supply Scheme November 2011 Level 19, 12 Creek Street Brisbane Queensland 4000 GPO Box 2257 Brisbane Qld 4001 Telephone (07) 3222 0555 Facsimile (07) 3222 0599 [email protected] www.qca.org.au © Queensland Competition Authority 2011 The Queensland Competition Authority supports and encourages the dissemination and exchange of information. However, copyright protects this document. The Queensland Competition Authority has no objection to this material being reproduced, made available online or electronically but only if it is recognised as the owner of the copyright and this material remains unaltered. Queensland Competition Authority Submissions SUBMISSIONS This report is a draft only and is subject to revision. Public involvement is an important element of the decision-making processes of the Queensland Competition Authority (the Authority). Therefore submissions are invited from interested parties. The Authority will take account of all submissions received. Written submissions should be sent to the address below. While the Authority does not necessarily require submissions in any particular format, it would be appreciated if two printed copies are provided together with an electronic version on disk (Microsoft Word format) or by e-mail. Submissions, comments or inquiries regarding this paper should be directed to: Queensland Competition Authority GPO Box 2257 Brisbane QLD 4001 Telephone: (07) 3222 0557 Fax: (07) 3222 0599 Email: [email protected] The closing date for submissions is 23 December 2011. Confidentiality In the interests of transparency and to promote informed discussion, the Authority would prefer submissions to be made publicly available wherever this is reasonable. However, if a person making a submission does not want that submission to be public, that person should claim confidentiality in respect of the document (or any part of the document). Claims for confidentiality should be clearly noted on the front page of the submission and the relevant sections of the submission should be marked as confidential, so that the remainder of the document can be made publicly available. It would also be appreciated if two copies of each version of these submissions (i.e. the complete version and another excising confidential information) could be provided. Again, it would be appreciated if each version could be provided on disk. Where it is unclear why a submission has been marked “confidential”, the status of the submission will be discussed with the person making the submission. While the Authority will endeavour to identify and protect material claimed as confidential as well as exempt information and information disclosure of which would be contrary to the public interest (within the meaning of the Right to Information Act 2009 (RTI)), it cannot guarantee that submissions will not be made publicly available. As stated in s187 of the Queensland Competition Authority Act 1997 (the QCA Act), the Authority must take all reasonable steps to ensure the information is not disclosed without the person’s consent, provided the Authority is satisfied that the person’s belief is justified and that the disclosure of the information would not be in the public interest. Notwithstanding this, there is a possibility that the Authority may be required to reveal confidential information as a result of a RTI request. Public access to submissions Subject to any confidentiality constraints, submissions will be available for public inspection at the Brisbane office of the Authority, or on its website at www.qca.org.au. If you experience any difficulty gaining access to documents please contact the office (07) 3222 0555. Information about the role and current activities of the Authority, including copies of reports, papers and submissions can also be found on the Authority’s website. i Queensland Competition Authority Table of Contents TABLE OF CONTENTS PAGE GLOSSARY IV EXECUTIVE SUMMARY V 1. PIONEER RIVER WATER SUPPLY SCHEME 1 1.1 Scheme Description 1 1.2 Bulk Water Infrastructure 1 1.3 Network Service Plan 3 1.4 Consultation 3 2. REGULATORY FRAMEWORK 5 2.1 Introduction 5 2.2 Stakeholder Submissions 5 2.3 Authority’s Analysis 6 3. PRICING FRAMEWORK 8 3.1 Tariff Structure 8 3.2 Water Use Forecasts 9 3.3 Tariff Groups 11 3.4 Mirani Diversion Channel 11 3.5 Mirani Weir – Cost Allocation 12 4. RENEWALS ANNUITY 14 4.1 Background 14 4.2 SunWater’s Opening ARR Balance (1 July 2006) 15 4.3 Past Renewals Expenditure 15 4.4 Opening ARR Balance (at 1 July 2012) 43 4.5 Forecast Renewals Expenditure 44 4.6 SunWater’s Consultation with Customers 51 4.7 Allocation of Headworks Renewals Costs According to WAE Priority 52 4.8 Calculating the Renewals Annuity 56 5. OPERATING COSTS 58 5.1 Background 58 5.2 Total Operating Costs 58 5.3 Non-Direct Costs 63 5.4 Direct Costs 68 5.5 Cost Allocation According to WAE Priority 79 5.6 Summary of Operating Costs 80 6. DRAFT PRICES 83 6.1 Background 83 6.2 Approach to Calculating Prices 84 6.3 Total Costs 84 6.4 Fixed and Variable Costs 84 ii Queensland Competition Authority Table of Contents 6.5 Allocation of Costs According to WAE Priority 85 6.6 Cost Reflective Prices 86 6.7 Queensland Government Pricing Policies 86 6.8 The Authority’s Recommended Prices 87 6.9 Impact of Recommended Prices 87 REFERENCES 88 APPENDIX A: FUTURE RENEWALS LIST 102 iii Queensland Competition Authority Glossary GLOSSARY Refer to Volume 1 for a comprehensive list of acronyms, terms and definitions. iv Queensland Competition Authority Executive Summary EXECUTIVE SUMMARY Ministerial Direction The Authority has been directed by the Minister for Finance and The Arts and the Treasurer for Queensland to recommend irrigation prices to apply to particular SunWater water supply schemes (WSS) from 1 July 2012 to 30 June 2017 (the 2012-17 regulatory period). A copy of the Ministerial Direction forms Appendix A to Volume 1. Summary of Price Recommendations The Authority’s recommended irrigation prices to apply to the Pioneer River WSS for the 2012-17 regulatory period are outlined in Table 1, together with actual prices since 1 July 2006. Table 1: Recommended Prices for the Pioneer River WSS ($/ML) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 River (Pioneer Valley Water Board) – High B Priority Fixed 6.24 7.88 9.64 9.92 10.24 12.60 12.09 12.39 12.70 13.02 13.35 (Part A) Volumetric 4.86 6.15 7.50 7.74 7 97 8.26 1.85 1 90 1.95 2.00 2.05 (Part B) Note: 2011-12 prices include the interim price increase of $2/ML in addition to CPI. Source: Actual Prices (SunWater, 2011al) and Recommended Prices (QCA, 2011). Draft Report Volume 1 of this Draft Report addresses key issues relevant to the regulatory and pricing frameworks, renewals and operating expenditure and cost allocation, which apply to all schemes. Volume 2, which comprises scheme specific reports, should be read in conjunction with Volume 1. Consultation The Authority has consulted extensively with SunWater and other stakeholders throughout this review. Consultation has included: inviting submissions from, and meeting with, interested parties; the commissioning of independent reports on key issues; and publication of Issues Papers. Comments on the Draft Report are due by 23 December 2011. All submissions will be taken into account by the Authority in preparing its Final Report due by 30 April 2012. v Queensland Competition Authority Chapter 1 Pioneer River Water Supply Scheme 1. PIONEER RIVER WATER SUPPLY SCHEME 1.1 Scheme Description The Pioneer River Water Supply Scheme (WSS) is located near the town of Mackay. An overview of the key characteristics of the scheme is provided in Table 1.1. Table 1.1: Key Scheme Information for the Pioneer River WSS Pioneer River WSS Business Centre Mackay Irrigation Uses of Water Sugar cane Urban Water Supplies Mackay and surrounding townships Source: Synergies Economic Consulting (2010). The scheme has a total of seven customers, of which only one has a water access entitlement (WAE) for irrigation purposes. Under the Pioneer Valley Resource Operations Plan (ROP), the Pioneer Valley Water Board (PVWater) holds a Distribution Operations Licence (DOL) to pump water from the river and deliver it to irrigation customers in the Pioneer River WSS. Approximately 250 irrigators are serviced by PVWater, which is responsible for the construction and maintenance of infrastructure associated with supplying water to these customers. The volume of WAE in the Pioneer River WSS is detailed in Table 1.2. There is nominally no medium priority entitlements in the scheme – urban and industrial sectors hold High A priority and the irrigation sector holds High B priority. Table 1.2: Water Access Entitlements (ML) Customer Group Irrigation Total High B1 Priority 47,357 47,357 High A Priority 0 30,753 Total 47,357 78,110 1All irrigators are supplied High B priority water through PVWater. Source: SunWater (2011am). 1.2 Bulk Water Infrastructure The bulk water service involves the management of storages and WAEs in accordance with regulatory requirements, and the delivery of water to customers in accordance with their WAE. Stakeholder Submissions SunWater The main infrastructure in the scheme is the Teemburra Dam, completed in 1996. It is the primary source of water supply releasing water to a series of downstream weirs and supplying water to channel systems. The other storages are Dumbleton Weir (1982), Mirani Weir (1987) and Marian Weir (1952). Table 1.3 details the full supply storage capacity and age of the key infrastructure. 1 Queensland Competition Authority Chapter 1 Pioneer River Water Supply Scheme Table 1.3: Bulk Water Infrastructure in the Pioneer River WSS Storage Infrastructure Capacity (ML) Age (years) Teemburra Dam 147,500 15 Dumbleton Weir 8,840 29 Mirani Weir 4,660 24 Marian Weir 3,980 59 Source: SunWater (2011) and QCA (2011).
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