The Quiet Power Behind the Regulator: What Utilities Should Learn from the Independent Reviewer

In the regulatory world, the most consequential player in a price review may not be the utility… or even the regulator. Increasingly, it’s the expert advisor sitting behind the scenes — reviewing capex and opex line by line, testing assumptions, and shaping the outcomes that define the next five years of customer bills and infrastructure investment.

This was especially true in the 2025 NSW water price reviews, where the regulator’s external consultant played a critical and visible role. Their work didn’t just support decision-making — in many cases, it defined the contours of the final determination.

So what do they do? And more importantly, how should regulated businesses prepare?

The Role: Forensic Review Meets Strategic Testing

The external advisor’s mandate is clear: provide independent, technical advice on the efficiency and deliverability of capital and operating expenditure proposals. But the way they approach that task is anything but superficial.

In 2025, their reviews focused on four key dimensions:

Review Focus - What It Means for Utilities

Materiality Focus: Expect detailed scrutiny of large, high-risk projects. Smaller items are grouped and benchmarked.

Efficiency Testing: Internal productivity trends, historical delivery, and external benchmarks are all used to detect overestimation or padding.

Delivery Risk: Step changes in spend (e.g. digital uplift, resilience) require a credible delivery pathway. Ambition is not enough.

Justification Discipline: If a program lacks regulatory or customer value — or looks like a placeholder — expect it to be cut.

The Impact: Cuts That Redefined the Proposals

This review approach translated into substantial impacts:

• Sydney Water: Over $5.9 billion in capital expenditure (~35%) was removed following the consultant’s recommendations. Most notably, large portions of the pretreatment and digital portfolios were found to be insufficiently justified or deliverable within the period.

• WaterNSW: The proposal was effectively set aside. IPART issued a 1 year holding pattern, citing poor cost justifications, affordability concerns, and flagged risks — many of which were first raised through the consultant’s analysis.

The message is unmistakable: if the external advisor isn’t convinced, the proposal is unlikely to survive intact.

What Regulated Businesses Should Do

If you're a utility preparing for review, here's how to meet this moment:

1. Front-Load the Justification

Don’t rely on internal logic or history to carry a program. Frame every investment in terms of its regulatory relevance, customer value, and risk-adjusted benefit. Vague language or assumed alignment won’t survive a forensic lens.

2. Show You Can Deliver

Ambition is not strategy. If you’re proposing a step-change in spend — whether for digital transformation, climate resilience, or renewal — be ready to demonstrate internal capacity, market bandwidth, and a realistic timeline. Delivery risk is a kill-switch.

3. Understand the Benchmarking Game

Efficiency isn’t judged in isolation. Expect comparisons against other utilities, prior performance, and industry standards. If your costs or productivity metrics are out of step, you need a clear and evidence-backed explanation.

4. Treat the External Advisor as a Real Audience

Yes, the submission is addressed to the regulator. But in practice, the technical advisor is your first (and often final) reviewer. Understand how they think, what they look for, and how they’ve treated similar programs in the past. Build your business case accordingly.

Final Thought: Rigour Is Now the Baseline

The 2025 reviews showed that external technical reviewers are not just a quality control layer — they are co-architects of the outcome. Their role is growing, and their expectations are rising. For utilities, this is both a challenge and an opportunity.

The best response? Treat the review not as a threat, but as a test of readiness. If your investments are justified, deliverable, and well-communicated, they will survive scrutiny. If they aren’t, it’s better to find out before the customers — or the regulator — do.