Five Surprising Decisions from IPART — And What They Tell Us About Economic Regulation of Water in NSW
The Independent Pricing and Regulatory Tribunal (IPART) has released a series of pricing decisions in 2025 that reveal both a willingness to innovate and a sharp edge when it comes to weak proposals. For water utilities across NSW, these rulings contain valuable signals about where the regulatory bar is being set — and where it’s being raised.
Below, we explore five of the most interesting decisions and what they might mean for future proposals.
1. Reward for Excellence... Deferred
Decision: Hunter Water’s "Advanced" grading uplift applied to the RAB, not revenue
Why It Matters: IPART’s framework allows for a 1.25% revenue uplift for utilities graded "Advanced" under the 3Cs model (customer, compliance, cost). But rather than apply this directly to bills, the Tribunal capitalised the uplift into the Regulatory Asset Base (RAB), reducing near-term bill pressure.
What It Signals: Recognition can still be rewarded, but not at the expense of affordability. For proponents, this underscores the importance of aligning performance incentives with community expectations.
2. $957 Million: Rejected
Decision: IPART excluded 75% of Sydney Water’s $1.28B Pre-Treatment Program at draft stage
Why It Matters: It’s highly unusual for such a large capital program to be excluded at this stage. IPART concluded the case for customer benefit and efficiency wasn’t made.
What It Signals: No matter how large or well-intentioned, capital projects must clear a high bar for justification. Utilities should treat business case development and customer impact evidence as make-or-break.
3. WaterNSW Proposal Replaced Mid-Cycle
Decision: IPART imposed a one year CPI + 5% freeze, freezeing the normal five-year determination
Why It Matters: This is a regulatory intervention. IPART paused the process, citing affordability concerns and insufficient cost justification for a proposed 43% revenue increase.
What It Signals: Regulators are prepared to step in where proposals fall short — not just with cuts, but with structural resets and investigations. Proponents must ensure the fundamentals are solid before reaching for revenue uplifts.
4. Desalination for a 1-in-5,000 Year Event
Decision: Hunter Water’s Belmont desal plant approved despite ultra-rare drought risk
Why It Matters: IPART has typically resisted major spend for very low-probability events. But in this case, broader resilience and bushfire recovery benefits swayed the decision.
What It Signals: Utilities can pursue climate resilience infrastructure — but must frame it in terms of broader system reliability and multi-hazard readiness, not just probability.
5. WACC Divergence Between Sydney and Hunter
Decision: Sydney Water’s WACC cut to 3.2%; Hunter Water’s rose slightly to 3.3%
Why It Matters: This shift — driven by updated market data — had major revenue implications, lowering Sydney Water’s return on capital by hundreds of millions.
What It Signals: The timing of determinations and market updates can materially impact allowable revenue. Utilities should factor timing sensitivity into capital strategy and advocacy.