Opinion report – return of additional desalination payments

Abstract

This report provides an opinion on whether it is appropriate to return additional amounts to customers on top of funds that are being returned via the price freeze.The revenue we approved in 2009 for Melbourne Water included a maximum component of $684 million (in nominal or dollars of the day terms) in the period to June 2013 ($225 million in 2011‐12 and $459 million in 2012‐13) to cover costs of the desalination plant. These costs were also reflected in the prices we approved for the water retailers. In our July 2012 report, we noted that the water businesses required substantially less—possibly around$300 million less—than was built into maximum prices to cover costs associated with the desalination plant in the period to June 2013. This later estimate was based on the desalination plant being completed on 28 February 2013, which follows a reliability testing period. This completion date is consistent with the timing specified in the Auditor‐General’s Annual Financial Report of the State of Victoria 2010‐11