Gladstone Area Water Board 2007-2009

Part (b) – Triggers for Augmentation

The Queensland Competition Authority considers that GAWB's proposed criteria for triggering augmentation in response to drought or to unexpected additional demand are appropriate. This view is contingent upon a separate trigger being applied for the purposes of triggering supply restrictions from that to apply for the purposes of triggering augmentation.

The Authority also notes that GAWB's current target period for deferral of supply failure in the drought trigger (two years) is consistent with GAWB's current assumptions regarding the size of the augmentation, the time taken to construct and the expected inflows. The Authority agrees with GAWB that the assumptions need to be set in consultation with its customers as part of the annual review of its Drought Management Plan. Changing assumptions following these reviews could well result in different target deferral periods from time to time.

So far as the current assumptions are concerned, the Authority's view is that, on the available information, the current inflow assumption is too conservative, a 3% distribution loss factor is more appropriate than the 5% proposed and the proposed contingency reserve of 5% is currently unnecessary.

GAWB's proposed process leading to a triggering of an augmentation is also considered appropriate. Nevertheless, more time is considered necessary to allow for customer consultation and evaluation of options. Where GAWB seeks assurance that the Authority would support its proposed response, the Authority recommends that it be notified at the time of the low supply alert in the case of drought or when GAWB becomes aware of unexpected contracted demand that could require an augmentation and, if the response is likely to increase aggregate revenues by more than 15%, an appropriately drafted Ministerial Direction should be sought.

Conformance with the proposed criteria, customers' acceptance of the relevant assumptions and support for the intended response and adequate lead time for consultation should provide GAWB with certainty in regard to any proposed response when required.

The Authority's Final Report is provided below.

Decision Recommendation

• QCA - Final Report re: Gladstone Area Water Board: Investigation of Contingent Water Supply Strategy Pricing Practices - Part B (Dec 08) (PDF, 320 KB)