how will customers be able to see on their bill how much desalination money has been returned to them?

Transcription

1 Returning customers money: Our approach to returning money associated with the VDP to customers Section 1: Purpose The metropolitan water businesses including City West Water, Melbourne Water, South East Water, Yarra Valley Water and Western Water have prepared a joint approach to returning monies collected for the Victorian Desalination Plant (VDP). This paper outlines the approach and associated information, communication and dispute resolution processes available. Preparation of this proposal has been guided by the Essential Service Commission s (ESC) Issues Paper circulated on 11 July 2012 detailing its objectives for the return of money to customers. The ESC paper is contained on the ESC s web site at following sections answer a range of questions associated with the return of money from the VDP and makes sure that the businesses are meeting the standards of the ESC Customer Service Code. These issues include: how much was collected and why? how much will be returned to customers and when? how will customers be able to see on their bill how much desalination money has been returned to them? what interest rate is being proposed to reflect the holding costs of any desalination money paid by customers but not yet paid to the VDP operator? how the concerns of those people who have moved out of Melbourne will be addressed? where can customers find updates and get more information? what are the procedures if a customer wishes to query or dispute an amount on their bill? what will happen if the water businesses are still holding any desalination funds at the end of ? what will happen if there are further delays with the VDP? Over the coming weeks and months, the water businesses will work collaboratively with the ESC to finalise the details associated with the approach recommended in this paper. 1

2 Section 2: How much was collected and why? Each water business in Victoria is required to develop a Water Plan, which sets its service standards and prices for a set period up to five years. The current Water Plan period is set for 1 July 2009 to 30 June 2013 (known as the 2009 Water Plan) and the next plan will be in place from 1 July 2013 to 30 June 2018 (known as the 2013 Water Plan). For each Water Plan, water businesses must consult with their customers on their proposed prices and service standards, which are then reviewed by the water industry regulator, the Essential Services Commission (ESC). Pricing is confirmed by the ESC through what is called a final price determination. Melbourne Water s 2009 Water Plan and subsequent price determination made allowance for the estimated costs to be incurred in relation to the VDP of around $685 million. These costs were passed on from Melbourne Water to the water retailers and in turn to their customers. This allowed Melbourne Water to collect $225 million in with a further $460 million forecast to be recovered in The 2009 Water Plan was based on then current estimates of the costs of the VDP and timing of its completion, as the VDP contract had not been finalised. Since then, construction delays have meant forecast costs accounted for in the 2009 Water Plan did not eventuate, and revenue was collected which was not expended in that year. Table 1 sets out the money to be returned, which totals almost $295M over 2011/12 and 2012/13. Table 1: Forecast VDP Money to be returned (nominal*) Assumed VDP Expenditure Total 2009 Water Plan forecast operating expenditure ($M) Current forecast expenditure ($M) Total Money to be returned * Reflecting forecast inflation for of 1.58%, updated from the 2.75% assumption used in the draft 2013 Water Plan. The current forecast desalination plant cost in is $390M. This reflects an estimated 40GL of commissioning water as well as an assumed four months of fixed costs. The actual amount that will be paid will depend on when key project milestones are achieved and how much water is provided during the commissioning period. 2

3 The assumed VDP expenditure had been allocated to each water retailer on the basis of the water cost allocation approved within the 2009 ESC Determination. Table 2 provides the cost allocation of the assumed VDP expenditure for each retailer. Table 2: Allocation of the assumed VDP expenditure between water retailers (real $ ) Water Retailer Allocation of overrecovery ($M) City West Water 72.8 South East Water Yarra Valley Water Western Water 8.1 Total overrecovery 295 On 31 May 2012, Melbourne Water released its draft 2013 Water Plan for consultation. In it, Melbourne Water proposed returning money collected from the VDP delays to customers over the five years of the water plan period ( ), adding an amount for interest and inflation. This proposal was not acceptable to customers and the community. 3

4 Section 3: How much will be returned to customers and when? On 19 June 2012, the Minister for Water announced that MW and the retail water businesses (including Western Water) would implement a freeze on water and sewerage prices (including trade waste) for 2012/13 at 2011/12 levels. The price freeze will start returning funds to customers even though the final amount to be returned is not yet known as it depends on the completion date of the VDP. As a result of the retail price freeze, the retail water businesses will return approximately $170 million to customers in By freezing prices, an average residential owner will save between $60 and $89 on their annual water bill depending on their water retailer. Similarly, the amount returned will depend on a customer s individual consumption within the billing period and on when customers are billed each billing period. Customer Frequently Asked Questions (FAQs) have been developed to assist in explaining some of the detail (see Section 8). The final amount returned to customers will include inflation and interest to reflect the holding costs of funds yet to be returned. Residential owner occupier 145 kilolitres of water used in Bill with price freeze ($) Bill without price freeze* ($) Estimated reduction due to price freeze ($) City West Water South East Water Yarra Valley Water Western Water For a small non residential customer using 240 kl per year, the price freeze will save the customer between $83 and $148 over depending on their water retailer. Customers who use a greater volume of water or trade waste have contributed more to desalination and therefore will receive a greater level of return, based on their consumption. Likewise, customers using less will receive a smaller return for the same reasons. 4

5 Small business 240 kilolitres of water used in Bill with price freeze ($) Bill without price freeze* ($) Estimated reduction due to price freeze ($) City West Water 1,473 1, South East Water 1,361 1, Yarra Valley Water 1,565 1, Western Water 1,152 1, The price freeze does not apply to the Waterways and Drainage Charge collected on behalf of Melbourne Water and the Parks Charge which retail water businesses collect on behalf of Parks Victoria. This is because these charges did not collect monies for the desalination costs. Through the price freeze, the water businesses have commenced returning the money from the VDP to customers. The remaining money will be returned to customers from the water businesses as soon as possible, following further consultation with the ESC. The amount and possibly timing of this return will change if the VDP incurs further delays or is commissioned earlier. Table 3 sets out the money to be returned by each retailer by the price freeze, which totals $170 million with the remaining $125 million to be returned as soon as possible. Table 3: Allocation of VDP over-recovery between water retailers (real $ ) Water Retailer Allocation of overrecovery ($M) Amount returned by price freeze ($M) Remainder amount to be returned City West Water South East Water Yarra Valley Water Western Water Total overrecovery Figure does not include interest and inflation that will also be returned to customers. 5

6 Section 4: How will customers be able to see on their bill how much desalination money has been returned to them via the price freeze? The industry is aiming to minimise customer confusion and the messages about the return of money will be consistent on customer bills. The following provides a mock-up of what a customer can expect to see on their retailer bill. The bill provides a brief explanation of the return of VDP money and the amount returned to the customer for that billing period. 6

7 In addition the industry has included a bill insert that answers some of the frequently asked questions regarding the return of money from the VDP and the commitment to work with the ESC to return all money with interest and inflation. The following provides a sample insert that will be delivered to customers in the first billing period, from 1 July

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9 Section 5: How will the concerns of those people who have moved and others with special circumstances be addressed? The retail water businesses have established a process to return funds to customers who have contributed in the past to desalination payments but no longer receive a water bill and therefore do not benefit from the price freeze. These customers fall into the following categories: Customers that paid water bills after 1 July 2011 but have since have moved out of Melbourne or Western Water s area and are no longer billed by either City West Water, South East Water, Western Water, or Yarra Valley Water Customers that paid water bills after 1 July 2011 but whose circumstances have changed so that they no longer receive a bill (for example, having sold an investment property) Customers that paid water bills after 1 July 2011/12 but have since passed away (refund via deceased estate). In the above circumstances, customers have paid funds for the desalination plant, but will not benefit or only partially benefit from the return of monies through the 2012/13 price freeze. Customers in the above circumstances are encouraged to the relevant retailer for a return of desalination monies. Full details and application forms are available on the retailers web sites or by contacting the retailer directly as per the details below: Forms and documentation may be submitted either on-line or by mail. Submissions must be received by 30 June Water Corporation Postal address Website Telephone Yarra Valley Water Private Bag 1, Mitcham, VIC, South East Water Locked Bag 1, Moorabbin, VIC, City West Water Locked Bag 350, Sunshine, VIC, Western Water PO Box 2371, Sunbury, VIC, Section 6: What are the procedures if a customer wishes to query or dispute an amount on their bill? Any disputes need to be first raised with your water retailer - City West Water, South East Water, Western Water or Yarra Valley Water. Each of the businesses has a formal process including an escalation process to manage customer queries and complaints as quickly and effectively as possible. The water businesses have also worked with the Energy and Water Ombudsman of Victoria (EWOV) and will continue to provide briefings on processes and activities which assist and support customers. Customers may contact EWOV, but should first contact their water retailer to attempt to resolve the issue, which is the current process for all water customers who have a complaint. Customers wanting to dispute the amount they are returned may contact their retailer to seek a review of their bill using the consumption history at the property. If applicable, the customer will receive an adjustment to the return they received. 9

10 Section 7: What interest rate is being proposed to reflect the holding costs of any desalination money paid by customers but not yet paid to the VDP operator? The interest rate to be used is not yet confirmed and the water businesses are working with the ESC on a consistent approach that should be acceptable to the customer. Section 8: Where can customers find updates and get more information? Customer information will be provided through bills, bill inserts, water retailer websites, call centres, social media (as appropriate and available) and mainstream media. The water industry has coordinated a set of Frequently Asked Questions (FAQ s) on each of its websites, and a process for sharing and updating any additional information or identified gaps in communications that a customer might raise. These are continually refreshed on websites and in contact centres. The following provides an example of these FAQs: 10

11 In addition each business has trained customer contact staff, so they can respond to customer queries related to this issue. The industry is also proposing to prepare fact sheets and a video/animation that informs customers in an open and transparent way how this situation occurred, the impact of the VDP on pricing and the Water Plan process. 11

12 Section 9: what will happen if the water businesses are still holding any desalination funds at the end of ? Any desalination funds still held at the end of will be returned in The water businesses are currently working with its regulator - the Essential Services Commission to determine the best way to return money to customers. Section 10: what will happen if there are further delays with the VDP? Commissioning of the VDP could occur earlier or later than currently assumed, which may mean that less or more money may be required to meet contractual obligations in As more information becomes available about the commissioning date for the VDP, the water businesses and the ESC will revise their estimates to make sure that the correct amount is returned to customers. 12