Move to recover project costs

Media release issued Friday 18 November 2011

Barwon Water has launched a bid to recover the cost of constructing and commissioning the Melbourne Geelong pipeline.

The corporation will seek independent Essential Services Commission (ESC) approval to increase prices by 3.5 per in 2012/13 to recoup more than half the cost of the $80 million project.

The increase would be on top of 7 per cent, plus CPI, already approved by the ESC as part of Barwon Water's 2008 Water Plan.

The ESC is the independent regulator of gas, water and electricity prices in Victoria. All water corporations are required to submit five-year Water Plans, including pricing structures, to the commission. 

A 3.5 per cent increase for the Melbourne Geelong pipeline would equate to 67 cents a week for a typical customer using 165 kilolitres a year.

Of the amount not recovered by the 3.5 per cent, Barwon Water will absorb through debt and business efficiencies.

The major project will link Geelong to Melbourne's supply network.

More than 52 kilometres of the 59-kilometre pipeline connecting Geelong's Lovely Banks basins to the Melbourne system at Werribee have been constructed.

Work is expected to be completed in February, next year.

Barwon Water's Board today endorsed a formal application to the ESC to re-open its 2008 Water Plan. This would be the trigger for introducing the 3.5 per cent increase.

The ESC is expected to hand down a decision in February or March next year.

Chairman Dr Michael King said Barwon Water was seeking to recover construction costs consistent with funding for all critical infrastructure projects.

Cost recovery would be restricted to a single year, 2012/13, reducing the impact on customers. It would also ensure prices in the next Water Plan (2013-2018) were kept to a minimum.

"If the ESC approves the application, it will allow Barwon Water to pay off a portion of debt sooner than anticipated.

"This will not only result in interest payment savings, but it will place the corporation in a better financial position leading into the next Water Plan," Dr King said.

He said the project was initially included in the 2008 Water Plan, but was removed by the ESC. The commission determined that prices could be adjusted to reflect project costs when the pipeline was completed and in service.

The pipeline was not expected to be needed for several years because of recent water security initiatives, such as the Northern Water Plant and Anglesea borefield. These guaranteed supply in the immediate future, Dr King said.