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) which was made on 30 March 2017.
The feedback received challenged core assumptions and scheme design decisions, and the final submission to the ICRC is ultimately more robust and positive. The ICRC will be responsible for review and final approval of the proposed Code.
It is expected that the ICRC will also undertake a public consultation process as part of its process in reviewing and subsequently approving our proposal.
Highlights of Icon Water’s proposal include:
- 2 year transition for sites purchased prior to planned go live date of 1 July 2017
- Key milestones based on date of Development Application (‘DA’) lodged (rather than approved).
- Case by case allowances made for decentralised sewerage reuse systems
- A single application of charges to all ‘brownfield,’ or established areas of Canberra ($1,200 per equivalent population).
What is Icon Water’s Capital Contributions Scheme?
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. Our 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.
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.