PROJECTS

Regulatory Reform of Water Sector Victoria, Australia

The problem

Regional water utilities in the State of Victoria, Australia, were weakly regulated and provided variable quality services. They posed fiscal risks for the state government, since they were not doing professional asset management and capital expenditure planning, and did not have sustainable financing plans in place, increasing the risk of unexpected calls on state budget for emergency capital expenditure.

How we helped

Castalia advised Victoria’s Department of Natural Resources and the Environment on bringing the state-owned regional water utilities under the jurisdiction of the State’s utility regulator, the Essential Services Commission (ESC). This required an adaptation of the existing regulatory model, since the regional water utilities were not run as businesses and had no shareholders to take residual financial risk.

Impact

The regional water utilities were brought under the jurisdiction of the ESC. One key outcome was transparent financial reporting. By providing transparent and comparative financial information the Victorian Government ensured that the Victorian water sector maintained downward pressure on costs.