Drawing a Line in the Sand: Valuing Regulated Assets of the Australian Water Industry

Abstract

The aim of this paper was to examine the origins of the use of the line‐in‐the‐sand approach in utility pricing in the Australian context. In Australia, this method has only been used in the water and wastewater industry and only to government‐owned water companies in a regulatory context. The object of using the line‐in‐the‐sand method by regulators has been to help create a smooth, but longer, transition, from political to commercially established prices, and to do so with the least community opposition. This has meant consumers initially enjoyed lower prices than may otherwise have been the case; however, prices rose as water and wastewater companies undertook extensive capital expenditure programmes.

Rationality, accounting and benchmarking water businesses

“…Regulatory accounting values reflect the application of price setting rules and are sometimes adjusted to achieve social objectives concerning the affordability water prices in both rural and urban settings (e.g. Abbott and Cohen, 2017;Pawsey and Crase, 2013).…”