Background
In November 2023 the Minister for Water requested a review by the NSW Productivity and Equality Commission (PEC) to identify sustainable, efficient, and equitable approaches for reforming state funding for Local Water Utilities (LWUs).
The PEC report was released in July 2024 and contained a set of recommendations for the NSW Government to consider. The findings and recommendations were informed by 42 public submissions, and a series of roundtables and targeted consultations on the PEC’s Issue Paper.
The PEC emphasises the need to improve the targeting and predictability of NSW Government funding for LWUs, compared to the current capital/project-focused funding model. This is to ensure the sector adequately addresses the current challenges in delivering safe, secure, and affordable services, now and in the future.
- Developing a LWU Funding Policy, including a Community Service Obligation (CSO) funding mechanism to support delivery of basic levels of service for LWUs that cannot recover the cost of efficiently delivering such services from revenue that can be reasonably raised from its customers (based on their ability to pay), developers or other own source revenue.
- Making improvements to regulatory standards and strategic planning requirements and coordination to facilitate the setting of efficient basic levels of service and the identification of efficient solutions to deliver them, resulting in efficient and well-targeted funding support.
- Establishing a Sector Priorities Plan, setting out the NSW Government’s funding priorities for the LWU sector over the short to medium-term (2 to 4 years) based on well-coordinated strategic planning across the LWUs, regional and state level.
- Reviewing delivery and structural models for water supply and wastewater service provision in western NSW.
- Reviewing support schemes to address customer affordability, hardship and financial emergencies, including current pensioner rebates in regional and metropolitan areas, with a view to establish targeted schemes that are fully funded by government.
Report
View the NSW Productivity and Equality Commission’s (PEC) Review of Alternative Funding Models for Local Water Utilities.
Download the PEC's final report (PDF. 2,079KB)Access the PEC review website.
NSW Government response to the PEC recommendations
The NSW Government will develop and publish a response to the PEC’s recommendations in the coming months.
To inform its response, the NSW Government has been consulting with the LWU sector to identify stakeholders’ views and issues on the PEC Review findings and recommendations, focusing on key opportunities and risks.
We developed a Discussion Paper and recently sought feedback from the LWU sector on the PEC’s recommendations. Our Discussion Paper did not introduce new issues or evidence, nor has the NSW Government taken any positions on the PEC’s recommendations; the discussion paper sought to inform the position of the NSW Government.
We have also formed a key agency reference panel to support the development of the response. The panel includes NSW Health, the NSW Environment Protection Authority, the NSW Office of Local Government and NSW Treasury.
The NSW Government, in its response to the recommendations of the Joint Select Committee on Protecting Local Water Utilities from Privatisation, has stated its support for public ownership of regional water supply and sewerage assets. The NSW Government is committed to not privatising or selling-off councils’ water supply and sewerage assets, or forcibly amalgamating councils’ local water utilities. The NSW Government response to the PEC recommendations considers this.
Online briefing session
An online briefing session for local water utility sector stakeholders on the Discussion Paper was held on Monday 4 November 2024.
Watch the video
The session covered the following topics:
- Review of the PEC Report Discussion Paper
- Consultation period and how to make a submission
- Next steps
- Q&A.
Discussion paper
View the Discussion Paper that was developed to prompt feedback from the LWU sector on the PEC’s recommendations.
Download the Discussion paper (PDF. 412KB)What will we do next
The NSW Government will review submissions to the Discussion Paper on the PEC’s final report and will release a ‘What We Heard’ report and develop a response to the PEC’s findings and recommendations, including an implementation plan.
In addition, we will commence the reform process recommended by the PEC to identify and implement the most efficient and effective structure for providing water supply and sewerage services in western NSW (Western NSW reform).
The Minister for Water has committed to comprehensive LWU sector stakeholder engagement in addressing the PEC’s findings and recommendations, including the development of the NSW Government response. Stakeholders will continue to be involved in the subsequent implementation of the NSW Government response.
Western NSW reforms
The NSW Productivity and Equality Commission’s (PEC) Review of Alternative Funding Models for Local Water Utilities has identified the pressing need for action to address the unique challenges faced by LWUs in western NSW. These LWUs are mostly very small and in remote areas, and service some of the most socio-economically disadvantaged communities in NSW.
The PEC has recommended the NSW Government:
- establish a reform process to identify and implement the most efficient and effective structure for providing water supply and sewerage services in western NSW, applying the proposed LWU Investment Framework
- develop a Strategic Business Case (SBC) for CSO funding to western NSW LWUs based on the output of the reform process.
Next steps
A full response to these recommendations will be outlined in the NSW Government response to the PEC report in the coming months.
However, the NSW Government acknowledges the need to address these issues as a high priority. Work is underway by the department to identify and analyse preliminary options for revised service delivery approaches that will be canvassed with the sector. The proposed structural options set out in the PEC report will be the basis for this initial analysis. However, feedback received in response to the discussion paper will also be taken into consideration. discussion paper will also be taken into consideration.
A co-design process with interested councils and relevant sector representatives will be undertaken to explore potential approaches which will be taken to the NSW Government for consideration. This co-design process will also identify councils who are willing to opt-in to participate in the implementation of reforms.