However, a shift occurred in 2015 when these indicators became part of a mandatory, state-wide reporting and benchmarking framework. This change aimed to improve comparative analysis and encourage efficiency through yardstick competition. Yet, despite these efforts, little has been done to identify the key cost drivers that influence performance outcomes across Queensland’s diverse utilities. This research report examined reporting methodologies and identified cost drivers that could enhance future benchmarking and performance assessments.

The Need for a Better Understanding of Cost Drivers

Urban water and sewerage services in Queensland are predominantly managed by 68 councils and three council-owned entities, collectively responsible for approximately 370 public water supplies. The vast majority (88%) of these supplies meet potable water standards. However, the scale and operational environments of these providers vary greatly.

Recognising these challenges, the Queensland Water Regional Alliances Program (QWRAP) was launched in 2011 as an industry-led initiative to explore regional collaboration models for urban water services. Supported by seed funding from the State Government, QWRAP has driven efforts to enhance efficiencies through cooperative approaches. This report is part of a series of deliverables that provide insights to the Queensland Government regarding optimal strategies for regional reform.

Key Findings of the Report

The research report is structured into four sections, each contributing to a deeper understanding of financial performance and cost drivers within Queensland’s water sector:

1. Review of Financial Indicators: The first section examines commonly used financial performance indicators, both in Australia and internationally, to identify the most relevant metrics for small water and sewerage utilities. This review includes an analysis of efficiency studies and results in a shortlist of key performance indicators.
2. Assessment of Queensland’s Data: The second section evaluates the applicability of Queensland’s existing financial data to these indicators. Special attention is given to capital replacement costs and other financial measures critical for utility management.
3. Data Availability and Quality: The third section assesses the availability and accuracy of Queensland’s data reported under these indicators. Identifying inconsistencies or gaps in data collection is crucial for refining performance assessments.
4. Mapping Cost Drivers to Indicators: Finally, the report details the cost drivers identified by the Queensland water industry. These cost drivers are then mapped to the financial indicators to highlight areas of alignment and gaps in the current reporting framework.

Implications for Future Benchmarking

By aligning financial indicators with the specific cost drivers affecting Queensland’s water service providers, this research offers valuable insights into performance measurement.

The report also underscores the need for improved methods to compare cost drivers across utilities, particularly for small, isolated communities that may not benefit from regional aggregation.

Ultimately, this research contributes to a more robust understanding of financial performance in Queensland’s water sector, ensuring that service providers have the tools needed to enhance efficiency and sustainability in the years ahead.

Read the report here.