About strategic planning

Murray River at Broken Creek Junction in Barmah, NSW.

From 1 July 2022, the Regulatory and assurance framework for local water utilities PDF, 1613.11 KB applies to local water utilities in regional NSW.

In 2021, we committed to ensuring that those local water utilities progressing their Integrated Water Cycle Management (IWCM) Strategy would not be disadvantaged by the new strategic planning assurance framework. We continue to engage with all local water utilities that are currently undertaking an IWCM Strategy, including those funded under the Safe and Secure Water Program. We will work with utilities individually to develop a clear transition program through to 1 December. We will also publish draft guidance over the coming months, with final guidance in place by October.

Local water utilities’ strategic planning contributes to the water security of their regions and the entire state. The department will work in partnership with local water utilities to support integration of state, regional and local water utility strategic planning. We will play a leadership role and give access to our resources (including models and data) as appropriate.

The department’s assurance role gives assurance of effective, evidence-based strategic planning and effective management of key risks to service provision.

Under this assurance role, the department establishes what outcomes it expects effective, evidence-based strategic planning to achieve (see section 3.2 of the Regulatory and assurance framework for local water utilities PDF, 1613.11 KB) and assesses whether a local water utility’s strategic planning achieves these outcomes to a reasonable standard (see sections 3.3 and 3.4 of the Regulatory and assurance framework for local water utilities PDF, 1613.11 KB).

Prior to 1 July 2022, the department’s preferred approach to local water utility strategic planning was an Integrated Water Cycle Management (IWCM) Strategy. The IWCM Strategy was intended to be the local water utility’s strategic services planning instrument for addressing all water supply and sewerage related priorities and risks and was developed in accordance with New South Wales Government 'Best-Practice Management of Water Supply and Sewerage Guidelines' and the '2019 IWCM Strategy Checklist'.

Under the new Regulatory and assurance framework for local water utilities , while the department sets expectations for the outcomes that strategic planning needs to achieve to be effective and evidence-based, utilities can decide what approach to take to meet them.

Local water utilities can choose to continue to use the IWCM Strategy approach to develop strategic planning.

Strategic planning outcomes

For effective, evidence-based strategic planning to occur, the department expects it to achieve the following outcomes to a reasonable standard:

Understanding service needsĀ 

  • What are customers’ needs, values, and preferences?
  • What current and future demands are placed on water supply and sewerage systems?
  • How will the local water utility consider and address objectives, priorities and evidence of other relevant state or regional strategic planning, including the NSW Water Strategy and regional water strategies?

Understanding water security

  • What is the local water utility’s access to current and potential water supply sources?
  • How will the local water utility address current and future risks around continuity and reliability of access to water supply sources?

Understanding water quality

  • How will the local water utility address current and future water quality risks in its supply systems?
  • How will the local water utility meet relevant regulatory standards, such as on drinking water quality management?

Understanding environmental impacts

  • How will the local water utility address current and future environmental impact risks in its sewerage systems?
  • How will the local water utility meet relevant regulatory standards, such as licence requirements set by the environmental regulator?

Understanding system capacity, capability and efficiency

  • What is the capacity and capability of systems to deliver water (and future capacity and capability needs)?
  • What is the capacity and capability of its systems to collect and treat sewerage (and future capacity and capability needs)?
  • How will the local water utility consider water efficiency in its systems?

Understanding other key risks and challenges

  • How will the local water utility address other key risks in its systems now and into the future?
  • How will the local water utility meet relevant regulatory standards (for example, such as on dam safety)?
  • How has the local water utility considered climate risks?
  • How is the local water utility planning for drought?
  • How is the local water utility planning and preparing for incidents, emergencies, and extreme events and ensuring continuity of service?

Understanding solutions to deliver services

  • How are options for delivering services and managing risks analysed?
  • How are supply and demand side options for water supply identified and evaluated?
  • How are assets managed over their life cycle to ensure service levels are met?
  • How are the preparedness and resilience management during extreme events considered?

Understanding resourcing needs

  • What resourcing is needed to deliver services and manage risks?
  • What are the life-cycle costs of managing assets?
  • What are the technical and operational skills needed to deliver services and manage risks?
  • How does the local water utility do workforce planning?

Understanding revenue sources

  • What are the revenue sources available to fund the delivery of services?
  • What is the customers’ ability to pay for services?
  • What is the customers’ willingness to pay for services?

Make and implement sound strategic decisions

  • Based on its understanding of, and adequate consideration of, service needs, risks, and resources, how does the utility set service levels and efficient revenue requirements for providing services over an adequate forward period to capture asset lifecycle?
  • How are customers engaged in decision-making and informed of choices between service levels, risks, and cost?
  • How does the local water utility ensure its long-term financial sustainability, including managing unexpected financial shocks in future periods without having to introduce substantial or socially destabilising revenue or expenditure adjustments??
  • How does the utility implement service levels and monitor, and report on, performance to understand if it is meeting service levels and managing risks?

Implement sound pricing and prudent financial management

  • How does the utility set and structure its water supply and sewerage pricing to recover its revenue requirement, promote efficient use of water, and achieve equitable and affordable pricing and intergenerational equity?
  • How does the utility implement a cost-reflective and consumption-based tariff structure, long-term stable price path and intergenerational equity?
  • How does the utility set appropriate developer charges to recover the infrastructure cost of servicing growth?
  • How does the utility consider payment of tax equivalents and dividends?
  • How does the utility consider affordable access to essential water services for all customers?
  • How does the utility ‘ring-fence’ the water supply and sewer business fund from council’s general-purpose fund?

Promote integrated water cycle management

  • How are urban water cycle outcomes including water security, public health, environmental and urban amenity and liveability identified, achieved and funded?
  • How does the utility consider opportunities and methods to increase resource efficiency and recovery in urban water management?
  • How is the local water utility supporting customers to increase water literacy and support water efficiency measures?

Achieving outcomes to a reasonable standard

The department will assess whether a local water utility’s strategic planning achieves the outcomes described in above to a reasonable standard.

The department will consider that a reasonable standard for each outcome is met if the utility considers and addresses an outcome in a way that is:

  • sufficient – underpinned by evidence-based analysis that supports the conclusions reached
  • appropriate – underpinned by relevant departmental guidance and industry standard approaches to conduct planning and reach conclusions
  • robust – underpinned by evidence that draws on appropriate sources, and recognises and rebuts potential alternative interpretations.

The considerations we will apply to the reasonable standard test and how these may be addressed are set out in more detail in section 3.3 of the Regulatory and assurance framework for local water utilities PDF, 1613.11 KB.

Importantly, ‘sufficient’, ‘appropriate’, and ‘robust’ are 3 separate but interlinked characteristics we assess when considering whether strategic planning outcomes are achieved to a reasonable standard, rather than tiered levels of assessment outcome.

Reasonable standard diagram

The department will produce guidance that gives more detail on the expectations for achieving strategic planning outcome to a reasonable standard. Guidance will be available in October 2022.

In our advisory and support role, the department is available to give guidance, advice, and support to local water utilities to help them understand and meet strategic planning outcomes to a reasonable standard.