Promoting competition in Sydney sewerage markets

Frontier (Australia) were asked by solicitors for Sydney Water to prepare a report on the promotion of competition in Sydney water markets. In particular, Frontier was asked to consider whether recycled water and sewerage collection and treatment services can be defined as being provided in a market that is distinct from the market in which other water and waste water services are provided by Sydney Water; and whether the separation of activities would promote competition in the relevant dependent markets.

Frontier concluded that the proposed market boundaries are not supported by the empirical literature or by the experience of other jurisdictions (e.g. the UK) in attempting to introduce more-competitive models into the delivery of water services. Furthermore the claimed parallels in the organisation of electricity and gas can be very misleading.

Frontier also concluded that the high cost of implementing a common carriage system for the provision of sewage services (compared with its benefits) suggests that a much more-efficient way of securing competition in (a) water catchment or (b) treatment and disposal of wastewater is via contracting out of these services.

This issue is now under appeal and will be heard later in 2005.

For more information, please contact Marita O’Keeffe at m.okeeffe@frontier-economics.com or call on +61 (0)3 9620 4488.

 

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