Developer charges explained

Developer Charges Policy from July 1, 2023

Prior to 1 July 2023, all TasWater customers were paying for the cost of capacity upgrades for larger infrastructure driven by new customers. Without a dedicated funding stream, growth-related upgrades competed for priority with other infrastructure investment.

Feedback from the fourth Price and Service Plan (PSP4) statewide forums held between November 2018 and February 2019 told us that the reintroduction of developer charges would provide a more fair, equitable and certain approach to development.

We used this feedback during the development, consultation, and approval of PSP4 which was ultimately approved by the Economic Regulator and came into effect on 1 July 2022.

PSP4 includes a Developer Charges Policy that continued the policy approach of the third Price and Service Plan (PSP3) for 12 months to allow developers an adjustment period prior to implementation.

From 1 July 2023, PSP4 introduces a developer charges approach comprising:

  • A standard charge (also called a Shared Infrastructure Contribution Charge) of $3,514 per equivalent tenement (ET) for existing and planned capacity. The charge applies to all developments that are consistent with our growth and capacity plans and the $3,514 charge remains unchanged for the 2023-24, 2024-25 and 2025-26 financial years.
  • Where applicable, a bulk charge (also called a Bulk Infrastructure Capacity Charge) for any development that requires an unexpected network capacity augmentation (i.e. not system extensions). The bulk charge is a net present value calculation for unplanned network capacity augmentation (not extension), usually applied on a per ET basis, with costs shared proportionally with TasWater and passed on to future developers. Where the augmentation is large cost and high risk, the developer may be required to fully fund the augmentation upfront.

This developer charges policy approach applies for all Planning Permit Applications deemed valid with Councils on or after 1 July 2023. There are no corresponding changes to Council processes.

TasWater's guideline for Developer Charges can be found here.

Please contact [email protected] if you have a specific enquiry.

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  1. FAQs

FAQs

The new developer charges policy approach applies for all Planning Permit Applications lodged with Councils on or after 1 July 2023.

Councils refer Planning Permit Applications to TasWater and TasWater formally advises Councils of its (TasWater’s) conditions for the Planning Permit. TasWater’s conditions include any standard charges or bulk charges applicable to the development.

Once the charges are applied by a condition in the Planning Permit, until paid they are subject to indexation by the Hobart (All Groups) CPI.

1 ET equates to a standard residential lot with a single dwelling in serviced land. Using our technical standards we convert new developments to ETs, and using the same methodology we deduct ETs for existing use, and then apply our charges against the net increase in ETs.

For more detailed information refer to Technical Standards | TasWater.

More information is available from [email protected] or call 136 992.

The first mover disadvantage is addressed through the bulk charge for unplanned network capacity augmentation (not system extensions), with the bulk charge (usually) applied on a per ET basis with costs shared proportionally with TasWater and then passed on by TasWater to future developers.

In instances where the augmentation is large cost and high risk, the developer may be required to fully fund the augmentation upfront.

Where TasWater considers that a bulk charge applies we will communicate this with the developer.

The Developer Charges Policy was a significant change implemented as part of TasWater's Price and Service Plan (PSP4) approved by the Tasmanian Economic Regulator for the period July 1, 2022, to June 30, 2026. This change followed a thorough consultation process.
The process by which customers were informed and consulted on the development and finalisation of this change included:
• Late 2018 – early 2019: PSP4 state-wide forums held with the development community who told us that the reintroduction of developer charges would provide a more fair, equitable and certain approach to development.
• March 2020: TasWater released its Fact Sheet – Developer Charges Options. Forums were conducted by teleconference with stakeholders in Hobart and Launceston and separately with stakeholders seeking further discussions. Formal written submissions were received.
• Early May 2021: finalisation of TasWater survey seeking input on proposed approach to developer charges for PSP4.
• June 2021: TasWater submitted its Proposed PSP4 to the Economic Regulator.
• February – March 2022: the Economic Regulator released for public consultation its Draft Price Determination and Draft Investigation Report into TasWater’s proposed PSP4.
• May 2022: the Economic Regulator publicly released its PSP4 Final Report and Price Determination, with notices published in Tasmanian newspapers.
• June 2022: formal announcements and press releases informing our community that PSP4 had been approved by the Economic Regulator. PSP4 was uploaded to TasWater’s website.
• July 2022 – late June 2023: including, under the Building and Development / Developer Charges website tab, a link to the new policy with advice that “TasWater’s developer charges approach will change from 1 July 2023” and “…  the new approach … will introduce an infrastructure contribution charge (previously referred to as a headworks charge).”
• Mid-June 2023: letter reminding peak bodies and Councils of the change to developer charges approach from 1 July 2023.
• Late June 2023: updated Development / Developer Charges website tab detailing the change to developer charges approach from 1 July 2023.

 

The standard charge is based on TasWater’s growth and capacity plans which ensure ongoing capacity for future developments. The standard charge of $3,514 per equivalent tenement (see FAQ 6) is calculated on forecast incremental growth-related capital and operating expenditure, as well as forecast incremental revenue from new customers over the same period.

The bulk charge applies to network capacity upgrades. It is calculated on the capital and operating expenditure associated with the network capacity upgrade and the forecast revenue stream from new customers projected to connect to the upgraded network.

Accordingly, both the standard charge and the bulk charge relate to capacity, not extension, and the cost of system extension has been excluded from the calculations.

All TasWater customers were paying for the cost of capacity upgrades for larger infrastructure driven by new customers. Without a dedicated funding stream, growth-related upgrades competed for priority with other infrastructure investment.

Feedback from PSP4 state-wide forums held between November 2018 and February 2019 told us that the reintroduction of developer charges would provide a more fair, equitable and certain approach to development.

We used this feedback during the development, consultation, and approval of PSP4 which was ultimately approved by the Economic Regulator and came into effect on 1 July 2022.

The prior developer charges policy approach was continued for 12 months to allow developers an adjustment period to prepare for the change.

Summary of approach
Sufficient system capacity Insufficient system capacity

Works internal

Developer pays all costs

Developer pays all costs

Works external – extension

Developer pays costs of extension required for the development*

Developer pays costs of extension required for the development*

Works external – expansion

Developer pays a standard charge per ET.

Developer pays a standard charge per ET for planned works and an additional bulk charge for unplanned works. **

* Any development connecting to an existing system will, as a minimum, pay for the cost of connecting to the mains of the existing system, in addition to the standard charge and, if applicable, the bulk charge
** We will refer to the system’s GCP (where available) regarding capacity upgrades or other works planned. We will discuss these plans with the developer.

Definition of charges
Charge Type Description

Standard charge

The standard charge will apply to all developments that are included in GCPs for each new equivalent tenement (ET) created. The standard charge aims to cover the incremental costs associated with expected capacity upgrades (i.e. not system extensions) driven by new customers, with remaining costs to be recovered through water and sewerage charges.

The standard charge is to be set with reference to a net incremental cost associated with new customers and is calculated as follows:
+ NPV incremental capex driven by new customers.
+ NPV forecast Opex driven by new customers.
- NPV forecast revenue from new customers.

For water-only or sewerage-only customer connections, 50 per cent of the standard water and sewerage charge will apply.

A standard charge of $3,514 per ET will apply for each of the FY2023-24, FY2024-25 and FY2025-26 financial years.

Bulk charge

The bulk charge will apply to any development that requires an unexpected network capacity augmentation (i.e. not system extensions). This will include developments that require:

bringing forward the timing of a network capacity augmentation that has been planned for building a network capacity augmentation that has not been planned for.

The bulk charge for a specific development will be based on the net incremental costs per ET of the capacity augmentation required for the individual development, and will be calculated as follows:
+ NPV incremental capex associated with the network capacity upgrade required for this development.
+ NPV forecast Opex driven by new customers connected to that upgrade.
- NPV forecast revenue from new customers projected to connect to the network capacity upgrade.

This charge per ET will apply to all subsequent developments that connect to the capacity upgrade included in the bulk charge. Alternatively, where a capacity upgrade is deemed to be a large cost and high risk to TasWater, it may require the developer to fully fund the upgrade upfront.

Where a bulk charge is applied, it will be charged in addition to the standard charge.

The components of developer charges

The components of developer charges

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