Major consumers framework

In this section you will find out how our Major Consumers Framework operates across WA.

As part of our Water Services licence we can supply any customer in WA, provided it is on commercial terms.

The legislation under which we operate allows us to negotiate charges and terms with customers instead of regulated charges set by the Government. This guides our agreement framework with our major consumers in regional areas.

The agreements we enter with large water consumers in regional areas aim to recover the cost of providing water services to their location, define risk and responsibility, ensure the risk of stranded assets is managed and ensure they support efficient water use.

The agreements define the terms and conditions of the supply arrangement which are guided by our framework.

Major consumers are defined as customers who:

  • require water for mining and non-residential purposes and have a peak daily water demand of more than 49,000L
  • the cost to supply over 15 years exceeds $2 million on a present value basis
  • require water supply services in regional areas.

Find out more information about the framework:

We endeavour to align the terms and conditions of provision of water to major consumers with private sector market practice for similar services.

The core elements of the framework consider:

  • recovery of infrastructure costs
  • term of agreements
  • our criteria for being considered a major consumer.

Major consumers are able to negotiate the terms of their agreements directly with us. This helps ensure economic efficiency, appropriate allocation of cost and risk, as well as allowing for innovation and commercial opportunities.

Item Current position
Recovery of infrastructure costs Net present value calculation
The term of agreements 10 to 15 years
The definition for being treated as a major consumer Threshold 1: receive a supply of greater than 49,000L per day.
Threshold 2: the cost of supply over 15 years exceeds $2 million on a present value basis.
 

Recovery of infrastructure costs

Capacity charges for major consumers are calculated so that they achieve full cost recovery of capital expenditure by using depreciation and a return on capital method.

Capital expenditure includes:

  • existing assets
  • expenditure for replacement of existing assets
  • new assets.

The capacity charge will be the present value of the customer's share of costs.

The forecast period for the assessment of the future costs will align with the term of agreement, being from 10 to 15 years.

The major consumer agreement generally includes a requirement for payment of capacity charges up-front. We will however consider the payment of this charge over the term of the agreement, as long as the customer meets credit risk assessment criteria. Credit support may also be required in the form of a bank guarantee or bond.

Consumption Charges

Major consumers also pay a consumption charge based on average operating costs of the scheme.

The standard term for a major consumer agreement is 10 to 15 years and has been guided by:

  • alignment with private sector market practice for similar services
  • balancing the risk associated with growth, price and cost projections
  • alignment with project life expectations.

Volume threshold

The peak daily demand trigger of 49,000 litres used to define a major consumer has remained since the review.

Cost threshold

We also apply the framework to all mining and non-residential customers in regional areas who use less than 49,000 litres per day where the total cost of providing the water service over 15 years exceeds $2 million dollars (in today's dollars) on a present value basis.

We believe this represents a significant threshold above which it is very likely that alternative cheaper supply options are available to the customer.

In this context, it is important to ensure the customer receives a price signal that reflects the true cost of service, so that the customer's water service selection is the most economical choice.