Price Monitoring Submission 2013-15 Gold Coast Water Price Monitoring Submission 2013-15 Submitted to the Queensland Competition Authority 30 September 2013 1 Table of Contents 1. Executive Summary ......................................................................................................................4 2. Introduction ...................................................................................................................................7 2.1. Purpose and background...................................................................................................7 2.2. Business overview.............................................................................................................7 2.3. Assets................................................................................................................................9 2.4. Service area and customer base.....................................................................................10 2.5. Operational and regulatory environment .........................................................................12 3. Customer Service Plan ...............................................................................................................15 3.1. Overview..........................................................................................................................15 3.2. Level of service................................................................................................................16 4. Capital Expenditure.....................................................................................................................19 4.1. Overview..........................................................................................................................19 4.2. Renewals and compliance programs...............................................................................19 4.3. Renewals and compliance planning process...................................................................19 4.4. Renewals and compliance capital expenditure (capex) forecasts ...................................21 4.5. Growth .............................................................................................................................21 4.6. Growth planning process.................................................................................................21 4.7. Growth capex forecasts...................................................................................................23 4.8. Top five capital projects...................................................................................................23 5. Operating Expenditure................................................................................................................26 5.1. Overview..........................................................................................................................26 5.2. Bulk charges....................................................................................................................26 5.3. GCW operating expenditure ............................................................................................27 5.4. Employee expenses ........................................................................................................27 5.5. Chemicals........................................................................................................................28 5.6. Sludge handling costs......................................................................................................29 5.7. Electricity .........................................................................................................................29 5.8. Materials and services.....................................................................................................31 5.9. Corporate costs ...............................................................................................................32 5.10. Efficiencies and growth....................................................................................................33 6. Annual Revenue Requirement ...................................................................................................34 6.1. Overview..........................................................................................................................34 6.2. Regulatory assets base ...................................................................................................34 6.3. Developer contributions, contributed assets and disposals.............................................34 6.4. Indexation ........................................................................................................................35 6.5. Regulatory depreciation...................................................................................................35 6.6. Weighted average cost of capital.....................................................................................36 6.7. Taxation...........................................................................................................................36 Page 2 of 59 6.8. Maximum allowable revenue ...........................................................................................36 7. Forecast Demand ........................................................................................................................38 7.1. Overview..........................................................................................................................38 7.2. Historical demand............................................................................................................38 7.3. Water demand .................................................................................................................39 7.4. Growth and population.....................................................................................................40 7.5. Bounce back effect ..........................................................................................................42 7.6. Price elasticity:.................................................................................................................44 7.7. Bulk purchases ................................................................................................................45 7.8. Infrastructure Leakage Index...........................................................................................46 7.9. Sewage and trade waste .................................................................................................47 8. Prices and Tariff structures........................................................................................................48 8.1. Overview..........................................................................................................................48 8.2. Pricing principles..............................................................................................................48 8.3. Pricing: 2012-13 to 2013-14 ............................................................................................48 8.4. Customer impacts............................................................................................................49 8.5. Recovery of MAR.............................................................................................................50 8.6. 2014-15 GCW tariff review ..............................................................................................50 Glossary of Terms..............................................................................................................................51 List of Attached Documents..............................................................................................................58 Attachment 1 - GCW detailed 2013-14 pricing schedule.........................................................58 Attachment 2 - GCW NetServ Part A ......................................................................................58 Attachment 3 - GCW Water and Wastewater Customer Service Charter and Standards.......58 Page 3 of 59 1. Executive Summary Gold Coast Water’s (GCW) Price Monitoring Submission presents the information required by the Queensland Competition Authority (QCA), to understand the resources GCW requires to deliver safe, reliable and sustainable water and sewerage services to customers over the two year regulatory period from 2013-14 to 2014-15, including the proposed revenue for those services. GCW’s primary service objectives are to: protect the health and safety of ourselves, and our community provide safe and reliable services for drinking water, sewerage and recycled water perform regulatory requirements ensure prudent and efficient expenditure prevent unacceptable impacts on the natural and built environment. To meet these service objectives GCW has defined specific service outcomes that it aims to achieve over the two year regulatory period. This will provide focus for GCW staff and a framework against which to prioritise available resources. These service outcomes are outlined in Chapter 3. Capital expenditure over the two year regulatory period is projected to be around $126 million (m). As set out in Table 1.1. capital expenditure (capex) is attributable to GCW’s requirements to: service growth (i.e. new capacity and or extensions) excluding assets provided by developers maintain our service commitments and service standards prudently manage the risk