Msmaryannehartleyq.C.President,Industrypanelgpobox158

ACTEW

ActewAGLHouse

Level5,40BundaStreet

CanberraACT2600

12HoskinsStreet

MitchellACT2911

GPOBox366CanberraACT2601

Tel. (02)62483111

Fax.(02)6242 1459

23January2015

MsMaryAnneHartleyQ.C.President,IndustryPanelGPOBox158

CANBERRAACT2601

DearMs Hartley

ApplicationtoalterthecurrentPriceDirectionforregulated waterandsewerageservices

IconWaterLimited(IconWater)iswritingtoapplyforalterationofthePrice Directionof26June2013forregulatedwaterandsewerageservicesfortheperiodfrom1July2013to30June2019(PriceDirection)inaccordancewithsection 24SoftheIndependent CompetitionandRegulatoryCommissionAct1997.IconWaterrequeststheIndustryPanel(Panel)todeferorremovetheneedforthefirstbiennialrecalibrationunderthePriceDirectionpendingtheissueofthefinalreportbythePanel.

Asyouwouldbeaware,theIndependentCompetitionandRegulatoryCommission(ICRC)hascommenceditsfirstbiennialrecalibrationprocessinaccordancewiththetimetablesetoutinthePriceDirection.OnMonday1December2014,IconWaterlodgeditsinformationreturnwiththeICRC.ThenextstepintheprocesssetoutunderthePriceDirectionisfortheICRCtoprepareitsdraftreportinreadinessforreleaseon1April2015.

BasedonrecentexperienceandIconWater's internalresourcingrequirements,weanticipatethatthefurthercoststobeincurredbyIconWaterandtheICRC inrelationtocontinuationofthebiennialreviewprocesswouldbeupto$1million.

WehavenotedfromthePanel'sdraftreportreleasedon3December2014that“thePanel'sdraftdecisionistosubstituteanewpricedirectionthatsetspricesuntil30June2018,withouttheneedforarecalibrationprocess.”1IconWaternotesthat“thePanelisnowconsultingwiththeACTcommunityaboutitsdraftpricedirection"2andthatdetailofthesubstitutePriceDirectionwilldependonthisconsultation. However,itappearsmostlikelythatthePanel'ssubstitutePriceDirectionwillsetpricesfor2015-16and2016-17.

Ifthisoccurs,thecurrentbiennialreviewwouldnotberequiredandthefurthertimeandresourcesspentontheprocessbybothIconWaterandtheICRCwouldprovidenorealvaluetocustomers.IconWaterisconsciousoftheamountofmoneyspentinrecentyearsonpricedeterminationsforwaterandsewerage,whichisultimately bornebythecommunity.

IconWaterisalsoacutelyawareofthelargenumberofreviewsandenquirieswithrespecttowaterandseweragepricesinrecentyearstogetherwiththeirassociatedpublicengagement.WerecognisethevaluefortheCanberracommunityofclarityregardingthereviewprocess.Inouropinion,thecontinuationoftwoparallelprocessesatthistimewouldcause unnecessaryconfusionanduncertainty. Thiswouldbefurtherexacerbatedifdifferent approachesaretakenbyeachofthePanelandtheICRCorifdifferentoutcomesweretobereached. IconWaterisconcernedthatthecontinuationofdual

1IndustryPanel2014,ReviewoftheICRC's2013PriceDirection-DraftReport,December,pl.

2IndustryPanel2014,ReviewoftheICRC's2013PriceDirection-DraftReport,December,p13.

ACTEWWaterabusinessnameownedbyIconWaterLimitedABN86 009381960.

processesoverthenextfewmonthsmaynegativelyimpact onpublicconfidenceinthe regulatory system.

Forthesereasons,wefeelthatitisincumbentonustorequestthatthePaneldeferthecurrentbiennialrecalibrationprocessuntilafterthePanel'sfinalreporthasconfirmedwhethertheprocessisneededor removetheneedfortheprocess.

Ifitisnecessarytospecifyaplaceholderpricethatwouldapplyfrom1July2015,IconWaterproposesthatitbebasedonachangetothecurrentprice,inlinewiththechangeintheconsumerpriceindex.Our presumptionthoughisthatafinalPaneldecisionwillbeeffectiveforimplementation on1July 2015.

IconWaterismakingthisapplicationwithaviewtothebestinterestsofcustomersthroughminimisingunnecessarycostsandfurtherpublicconfusioninthedeterminationofwaterandsewerageprices.

IconWaterwouldbewillingtodiscusswiththePanelthespecificalterationstothePriceDirectionthatcouldbemadetogiveeffecttothedeferralrequestedinthisletter,ifthatwouldbehelpful.Ifyouwouldliketotakeupthisoffer,pleasecontactDrBenMcNair,PrincipalEconomist,on0262483386.

Yourssincerely

JohnKnoxManagingDirector