Balancing price and service for urban water customers
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Last month, Icon Water released its pricing proposal for the five years 2018–23. The CIE was pleased to work with Icon Water on several elements of its proposal, including the quantitative analysis that informed decisions on how to strike a balance between price and service.
Reliable supply and affordable pricing were two of the top customer priorities identified as part of Icon Water’s community engagement. When deciding how much to spend on water and sewerage mains renewal and sewer inspection and cleaning programs, Icon Water is faced with a trade-off between these two customer priorities.
To inform its decisions, Icon Water asked the CIE to conduct a benefit-cost analysis of a range of water and sewerage network management options from a community standpoint.
Key inputs to this analysis were the monetary values customers are willing to trade for changes in service quality. These values were drawn from a stated preference study of 546 customers conducted by Dr Ben McNair, who joined our Canberra office last year, and Professor Riccardo Scarpa.
Benefit-cost analysis informed by stated preference research has been used extensively in the United Kingdom’s water sector and interest in Australia is increasing as water businesses look to engage more closely with their customers.
This type of analysis represents meaningful and influential evidence to set before regulators in support of pricing or service standard proposals or before a citizen jury or deliberative forum grappling with the question of how to balance price and service levels.
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