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Drawing a Line in the Sand: Valuing Regulated Assets of the Australian Water Industry
Author(s) -
Abbott Malcolm,
Cohen Bruce
Publication year - 2017
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/1759-3441.12164
Subject(s) - opposition (politics) , water industry , context (archaeology) , business , wastewater , politics , capital (architecture) , capital expenditure , economics , industrial organization , finance , engineering , environmental engineering , water supply , political science , law , geography , archaeology
The aim of this paper was to examine the origins of the use of the line‐in‐the‐sand approach in utility pricing in the Australian context. In Australia, this method has only been used in the water and wastewater industry and only to government‐owned water companies in a regulatory context. The object of using the line‐in‐the‐sand method by regulators has been to help create a smooth, but longer, transition, from political to commercially established prices, and to do so with the least community opposition. This has meant consumers initially enjoyed lower prices than may otherwise have been the case; however, prices rose as water and wastewater companies undertook extensive capital expenditure programmes.