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Seqwater Bulk Water Prices 2015 to 2018 Submission to the Queensland Competition Authority

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Seqwater Bulk Water Prices 2015 to 2018 Submission to the Queensland Competition Authority Seqwater Bulk Water Prices 2015 to 2018 Submission to the Queensland Competition Authority Issued: 31 July 2014 Final Contents Executive Summary ............................................................................................................ 12 PART A – INTRODUCTION AND OVERVIEW .................................................................... 17 Chapter 1 Introduction ................................................................................................. 17 1.1 Purpose ............................................................................................................. 17 1.2 Ministerial Referral Notice .................................................................................. 17 1.3 Submission Outline ............................................................................................ 18 Chapter 2 Seqwater .................................................................................................... 20 2.1 The Entity .......................................................................................................... 20 2.2 Customer Base .................................................................................................. 20 2.3 Assets ................................................................................................................ 21 2.3.1 Water Storages ........................................................................................... 22 2.3.2 Groundwater Bores..................................................................................... 24 2.3.3 Water Supply .............................................................................................. 24 2.3.4 Unregulated Assets and Services ............................................................... 25 2.4 Operations Approach ......................................................................................... 25 2.5 Roles and Responsibilities ................................................................................. 26 2.5.1 Water Supply Strategy and Policy (WSSP) ................................................. 27 2.5.2 Asset Portfolio Development and Delivery (APDD) ..................................... 27 2.5.3 Operations Catchments and Raw Water (OCRW) ...................................... 28 2.5.4 Operations Treated Water (OTW) ............................................................... 28 2.5.5 Service, People and Technology (SPT) ...................................................... 28 2.5.6 Corporate Finance ...................................................................................... 28 2.5.7 General Counsel ......................................................................................... 28 2.5.8 Office of the Chief Executive ....................................................................... 28 2.6 Strategic Direction ............................................................................................. 28 Page 2 of 298 2.7 Financials .......................................................................................................... 31 2.7.1 Capital Structure ......................................................................................... 31 2.7.2 Financial Sustainability ............................................................................... 31 Chapter 3 Service and Regulatory Obligations ............................................................ 32 3.1 Registered Services ........................................................................................... 32 3.2 Regulatory Obligations....................................................................................... 33 3.3 Service Requirements ....................................................................................... 35 3.3.1 Cost ............................................................................................................ 35 3.3.2 Supply Security ........................................................................................... 35 3.3.3 Water Quality .............................................................................................. 37 3.3.4 Supply Reliability ........................................................................................ 39 3.3.5 Demand Management ................................................................................ 41 3.3.6 Non-Service Regulation and Compliance ................................................... 42 PART B – WATER SUPPLY................................................................................................ 43 Chapter 4 Operating Strategy...................................................................................... 43 4.1 Demand Forecast .............................................................................................. 43 4.1.1 Average Demand ........................................................................................ 44 4.1.2 Other Demand ............................................................................................ 46 4.1.3 Summary- Forecast Average Demand ........................................................ 46 4.1.4 Peak Demand ............................................................................................. 47 4.1.5 Major Growth Areas .................................................................................... 48 4.1.6 Demand forecasts for pricing purposes....................................................... 49 4.2 Interim Operating Strategy ................................................................................. 49 4.2.1 Water Security ............................................................................................ 54 4.2.2 Western Corridor Recycled Water Scheme (WCRWS) ............................... 54 4.2.3 Gold Coast Desalination Plant (GCDP) ....................................................... 55 Page 3 of 298 4.2.4 System Operating Summary ....................................................................... 56 4.2.5 Operational Decision Making ...................................................................... 59 Chapter 5 Delivery ...................................................................................................... 62 5.1 Asset Management and Planning Processes ..................................................... 62 5.1.1 Current Situation ......................................................................................... 62 5.1.2 Consolidation Post-Merger ......................................................................... 67 5.1.3 Planning ..................................................................................................... 70 5.1.4 Future Arrangements .................................................................................. 75 5.2 Operations Delivery ........................................................................................... 77 5.2.1 Operations- Catchments and Raw Water (OCRW) ..................................... 77 5.2.2 Operations- Treated Water (OTW) .............................................................. 80 5.3 Investment Support and Governance ................................................................. 86 5.3.1 Investment Decision Process and Approvals .............................................. 86 5.4 Procurement ...................................................................................................... 89 5.4.1 Procurement Strategy and Governance ...................................................... 89 5.4.2 Procurement Initiatives ............................................................................... 89 PART C. BULK WATER COSTS ......................................................................................... 92 Chapter 6 Cost Development ...................................................................................... 92 6.1 Scope of Bulk Water Costs ................................................................................ 92 6.2 Long-Term Cost Forecasting ............................................................................. 93 6.3 General Considerations ..................................................................................... 93 6.4 Forecast Capital Costs....................................................................................... 93 6.4.1 Infrastructure Assets ................................................................................... 94 6.4.2 Non-Infrastructure Assets- Gold Coast Desalination Plant ........................ 103 6.4.3 Non-Infrastructure Assets- Western Corridor Recycled Water Scheme .... 104 6.4.4 Non-Infrastructure Assets- Information and Communications Technology 106 Page 4 of 298 6.4.5 Non-Infrastructure Assets- Property, Fleet and Facilities .......................... 107 6.5 Forecast Operating Costs ................................................................................ 108 6.5.1 Base Year Budget .................................................................................... 108 6.5.2 Base Year Cost Components and Assumptions ....................................... 109 6.5.3 Future Year Cost Build-up ........................................................................ 113 6.6 Escalation Forecasts ....................................................................................... 117 Chapter 7 Forecast Capital Expenditure .................................................................... 119 7.1 Infrastructure Capital Program Summary ........................................................
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