A NSW Government website

Improve the regulatory and assurance framework

Review of local water utility dividend requirements

The department is reviewing the eligibility criteria, calculation methods and other requirements that apply to dividend payments by local water utilities.

Review of local water utility dividend eligibility criteria, calculation methods and other requirements

The department is reviewing the eligibility criteria, calculation methods and other requirements (‘dividend requirements’) that apply to dividend payments by local water utilities. The review will identify opportunities to improve local water utility dividend requirements to ensure they receive an appropriate return on investment, can cover their costs and provide value-for-money services to customers.

About the consultation paper

The Local water utility dividend criteria, methods and other requirements consultation paper seeks stakeholder views on what dividend requirements (including dividend eligibility criteria, calculation methods, caps and related requirements) should be in place for local water utilities. The paper outlines the contextual information and current criteria, methods and requirements that are under review and open to submission.

Consultation paper

Download and review the Local water utility dividend criteria, methods and other requirements consultation paper.

Download the paper (PDF. 626KB)

The department invites submissions in response to the issues and proposed changes raised in the consultation paper, along with any other feedback relevant to this review.

Submissions are due by Friday, 16 December 2022. You can send your submission to regional.town.water@dpie.nsw.gov.au

Stakeholder workshops

During the consultation phase, we will hold targeted workshops with key stakeholders such as Local Government NSW, the NSW Water Directorate and the group of county councils.

Virtual stakeholder workshops will also be held on:

  • Monday, 5 December 2022, 2pm to 4pm
  • Wednesday, 7 December 2022, 10am to 12pm

Please email regional.town.water@dpie.nsw.gov.au to register your attendance at a virtual workshop.

Why we are we reviewing dividend requirements?

Under section 409(5) of the Local Government Act 1993 (NSW), a council may pay an annual dividend from its water supply and sewerage business surplus to its council as a return on investment paid to the ‘shareholder’.  This allows the council to manage and invest in the local water utility’s water supply and sewerage functions. Dividends may be paid at the end of the financial year after meeting the guidelines of section 4 of the regulatory and assurance framework for local water utilities (see section 409(7)(a) of the Local Government Act).

During the development of the regulatory and assurance framework for local water utilities, various stakeholders commented on the dividend requirements and the need to review them. While expressing broad support for the department setting requirements and restrictions for dividend payments, several stakeholders noted that only 9 of 89 council-owned local water utilities have paid a dividend in the last 6 reporting years. Respondents proposed that the cap on dividends and meeting the eligibility requirements may be a disincentive to paying a dividend.

The review is not intended to compel local water utilities to pay dividends nor specify the level of dividends that should be paid. It aims to remove any unnecessary regulatory impediments to paying dividends, while seeking to ensure that local water utility dividend payments do not come at the expense of efficient pricing or service levels to customers.

Recommend changes to the guidelines of section 4 of the regulatory and assurance framework for local water utilities will be finalised in early 2023 and are due to be approved and gazetted before the 2023 state election commences. The changes are to apply from the 2023/24 financial year.