Australia’s first flow-based water network tariffs

For more than a decade (!) we’ve been helping the Gladstone Area Water Board (GAWB) think about the way it charges for its services.  At the end of this month GAWB will send out bills with the “delivery” component based on customers’ contracted maximum daily quantities (MDQ).

Pricing use of networks based on the maximum rate of use (rather than total volumes) is common in the electricity and gas industries.  But we think this is the first flow-based bulk water pricing in Australia.

GAWB has worked with its customers and economic regulator to make this happen.  “Shadow billing” was in place for most of last year, so customers knew the likely impact of the change.  Customer protection measures and grandfathered volume-based tariffs will further ease the transition for customers that are currently very “peaky”.

Flow-based pricing is fairer: customers will pay for the network capacity they use.  And early indications are that customers are responding to the price signal by changing behaviour.   One customer has modified its use (even before the first bills were sent out!) to reduce demand on the network.   This has already released capacity that could be contracted by other customers, thereby reducing the future price to all customers.

That customer is quite small by GAWB standards.  It will be interesting to see whether larger customers can change their consumption profile too.  If so, it will be compelling evidence for other utilities considering pricing reform.

Paul Webber