Households and businesses could be spared water price rises of hundreds of million of dollars over the next three years as a result of a landmark decision by the utility regulator on electricity charges which is expected to flow through to water.
The Economic Regulation Authority last week ruled that electricity distributor Western Power would be allowed to recoup $6.7 billion until 2017 from customers who access its network.
The figure was sharply lower than the $10.3 billion Western Power had been seeking and means network costs, which account for about 40 per cent of the average power bill, will barely rise in real terms.
Under Western Power's proposal, network costs would have rocketed more than 60 per cent between 2012 and 2017, or almost $500 for a typical household.
According to the ERA, the main reason for the difference between its decision and Western Power's request was limiting the utility to a much lower rate of return on its multibillion-dollar asset base.
The State-owned utility had asked for a rate of return of almost 9 per cent but the ERA clipped this to just 3.6 per cent.
The decision sets a precedent that is likely to be repeated when the ERA releases a draft report this month on what tariffs the Water Corporation should be able to charge between 2012 and 2015.
Unlike Western Power, whose tariffs the ERA sets, the authority can only recommend what prices the Water Corporation should be allowed to charge, with the Government responsible for any decision.
However, the rate of return calculated by the authority is likely to have a huge bearing on its overall recommendation to the Government, which generally heeds the watchdog's advice.
A suggested rate of return in line with the Western Power decision would put pressure on the Government to pass through lower water price rises in future.The Water Corporation acknowledged the Western Power precedent, saying it expected a lower rate of return than the 6.62 per cent recommended by the ERA in 2009.
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