Gladstone Area Water Board 2007-2008
Stage A – Preparatory Expenditures: Final Report
The Authority released its Final Report of the GAWB: 2007 Investigation of Contingent Water Supply Strategy Pricing Practices (Stage A) to the relevant Ministers in December 2007. A copy of the Report has also been forwarded to GAWB and is available to interested parties.
In brief, on the key matters referred for consideration, the Authority considers that:
- it is prudent for GAWB to continue working towards implementing the Fitzroy Pipeline option due to the possibility of even lower inflows, or failure of inflows, in the coming wet season;
- under the worst case scenario postulated by GAWB there is time to undertake further investigations of other options such as desalination, air and sea water cooling and alternative supply restrictions before committing to the Fitzroy Pipeline option;
- GAWB should ensure that there is a significant level of customer support for the preferred option before proceeding with significant asset creation expenditure;
- preparatory expenditures on items such as project management, approvals, consultation and communication, engineering and investigations and land acquisition are appropriate if there is a high probability of project commencement in the next few years, however asset creation should be deferred, except where demonstrated to be necessary;
- the levels of preparatory expenditure should be subject to ex-post review;
- efficient preparatory costs should be taken into account when determining prices at the next regulatory reset;
- depreciation of efficient preparatory expenditure should not commence until the assets are commissioned, or if it is certain that assets will not be commissioned because of changing circumstances, when that decision is taken; and
- preparatory costs should not be optimized out of the asset base without compensation.
Decision/Recommendation
