Thank you for providing your valued feedback on the Capital Contributions Consultation.
The consultation period for Capital Contributions has now closed. Thank you to members of the community who have provided feedback on Icon Water’s proposal. We have summarised comments received, provided responses and specified where feedback has assisted us in shaping our submission to the Independent Competition and Regulatory Commission (ICRC).
Icon Water is proposing to introduce a new and fairer way of determining funding arrangements for water and sewerage infrastructure upgrades that are triggered by development projects in brownfield sites. Currently there is a potential inequity in the way development triggered asset augmentation costs are recovered. If a developer triggers an upgrade they will be asked to pay for the full cost of new water and sewerage infrastructure. This rule applies no matter the development size. Developers who build before or after an upgrade do not pay any contribution.
The proposed arrangements are intended to address costs associated with asset upgrades required to service suburbs where brownfield developments occur. It is our intent to share these costs in a clear and equitable manner, making it easier to determine the full cost of a project up front. For more information, download our Water and Sewerage Capital Contributions - Information Paper.
The new arrangements would be introduced as a Utility Code - Water and Sewerage Capital Contributions Code (Draft for consultation) - in the Australian Capital Territory (ACT) under the Utilities Act 2000. In the ACT these codes require the review and approval of the Independent Competition and Regulatory Commission (ICRC).
Read more about feedback received relating to transition and precincts:
You can also view our Consultation FAQs (as of 10 March 2017).
Feedback received suggests that transition should be lengthened to avoid disadvantaging developers who have purchased property prior to details of this scheme being made public.
We are now proposing that transitional allowances will be made for any blocks purchased prior to the go-live date (potentially 1 July 2017). The below diagram illustrates the proposed revised transition arrangements.
Icon Water’s proposed arrangements included 11 precincts. The precincts represent a direct correlation to Icon Water’s sewerage catchments. Based on the current capacity and expected development for these precincts, our proposal included charges to four of the 11 precincts.
Feedback from the developer community indicates significant support for the removal of the precincts and a blanket application of the code and related charges to all established areas within Canberra. The impact of applying the code to Canberra as a unified whole would be charges being applied to areas where charges have not previously been proposed under the precinct model.
Our submission to the ICRC will be reflective of the above feedback from the developer community.
How have costs been calculated? What is EP?
Icon Water proposes to fund 50% of planned growth infrastructure, with the remaining shared between all developments in the relevant precinct. This means that the costs are no longer borne solely by the developer that triggers augmentation, but all parties who develop properties within a precinct.
We are proposing 50-50 sharing based on our analysis of new customers that are able to connect to our network as a result of network augmentations.
Costs will be calculated over a 20 year horizon, based on Equivalent Population (EP). EP is an industry measure of network flow/impact and takes into account different property uses.
Why is this an issue now?
As Canberra grows, we will be required, more and more, to upgrade the capacity of our existing water and sewerage network.
We are now in a situation where brownfield development is more prevalent and our infrastructure is nearing capacity in many areas.
A new funding model guided by a clear set of principles will provide fairness and clarity for the industry and Icon Water.
How do the charges compare to other states?
Most other cities in Australia have a code in place to manage these types of upgrades. Each scheme works across different network class, and recovers different types of costs. This makes them difficult to compare.
Despite these differences, we believe that our scheme is comparable to other cities and regional councils when comparing similar developments. Our analysis indicates that this charge will cost less than approximately 0.3-0.8% of a typical development’s revenue in the ACT. Across Australia similar schemes have an average cost of 0.2-1.0% depending on jurisdiction.
Isn’t this just another charge on developers?
These changes are about increasing clarity and fairness. Right now, a developer may be left as the last person standing and have to foot a bill for an entire suburb. If we can implement a fairer code then everyone will contribute a smaller amount – and know what this amount is up-front.
We propose that Icon Water and developers each fund 50% of costs relating to medium sized shared infrastructure. This means that costs are no longer borne solely by the developer that triggers augmentation, but all parties who develop properties within a precinct.
The introduction of the Code will also bring the ACT into line with other jurisdictions.
Will these charges be regulated?
Yes, the final price structure will be approved and independently regulated by the ICRC.
Are the proposed charges GST exempt?
The proposed capital contributions developer charges are exempt from GST (per section 81-5 of the GST Act), as these charges are levied under the Utilities Act 2000.