To operate and maintain our services across northern Victoria we utilise both operational and capital expenditure. Operational expenditure are the recurrent costs incurred by GMW as a business to operate.

GMW’s forecast operating expenditure for the next regulatory period (2024-28) is $371.2 million, this is $21 million lower than the approved expenditure of $392.2 million for the current regulatory period (2020-24). These step reductions in expenditure across the regulatory period are still enabling us to:

  • Continue to deliver required service outcomes to our customers while keeping typical customer bills across the four years on average (across all services) below 1 per cent increase before CPI.
  • Implement our service and strategy plans.
  • Absorb any operational increases above CPI through efficiency savings.

Operation Expenditure

Operational expenditure can be categorised into two categories:

  • Controllable

    Controllable operating expenditure is the costs associated with the corporate management of running GMW as a business – including but not limited to; maintenance on all our assets, office/postage costs, insurances, rent and rates, vehicle running costs and labour costs.

  • Uncontrollable

    Uncontrollable operating expenditure includes GMW’s licence fees, environment contribution and Murray Darling Basin contribution which are pre-determined and passed through to GMW

Key considerations

Output growth

Customer growth is not expected over the four year period, which has meant Delivery Shares are assumed to remain constant, and water deliveries on average are expected to remain in line with those experienced in the last eight years. No growth has therefore been considered in the forecast.

Real price growth

Key cost inputs have been forecast to increase by CPI and any cost escalations above CPI will be absorbed by the business. On this basis, GMW are bearing the risk of future price increases above CPI over the four years.

Productivity

Savings are expected in labour, accommodation, electricity, printing, postage, travel and communications costs.

Summary of changes

Operating expenditure savings

  • Labour efficiencies

    Labour efficiencies will be achieved through the implementation of a new Enterprise Agreement and productivity savings.

  • Removal of 2% discount

    The 2 per cent discount currently offered to customers for prompt payment has been removed. This will attribute to savings for all of our customers rather than limiting the savings to those who have the ability to pay on time.

  • Energy savings

    We have installed a 99kW solar system at our Head Office in Tatura which will help contribute to our target of net zero carbon emissions by 2035 and represents a reduction of 22 per cent in our total annual energy usage across that office.

Operating expenditure increases

  • Insurance

    Insurance costs are forecast to continue increasing at a greater rate than inflation. This is across global insurance markets with the expectation of an increasing frequency and severity of natural hazards, increasing inflation, and supply chain issues continuing to put pressure on premiums.

  • Maintenance of modernised assets

    Continued investment is required in the maintenance of modernised assets as the assets progress with age. Mechanical components of automated Flume gates will begin to reach a midlife cycle refurbishment during the four years. Telemetry and electronic components are also deteriorating at a greater rate with age and require maintenance to extend operational life.

  • Cyber security

    Increased investment in IT Cyber Security expenditure to ensure GMW systems and data are secure.

    Further information on these is available within our CAPEX & Maintenance (Irrigation System – Gravity and Water Storages) Consultation Papers.