In April 2015, the Victorian Essential Services Commission (the Commission) embarked on a project to make step change improvements in economic regulation of the Victorian water sector. That led to the development of PREMO in late 2016. This framework was implemented for the first time in the 2018 water price review. In late 2018, the Commission engaged farrierswier to conduct an independent post implementation review. Their report provides a public record of the development and implementation of PREMO, and an early assessment of how well PREMO delivered on its intended outcomes.

You can find the report here: https://www.esc.vic.gov.au/sites/default/files/documents/victorias-water-sector-the-premo-modelfor-economic%20regulation-20190411.pdf This year is the second round of water price review under PREMO framework.

For further information about the review process you can use this link : https://www.esc.vic.gov.au/water/water-pricestariffs-and-special-drainage/water-price-reviews/water-price-review-2023 Assignment questions Your task is to review the farrierswier report and write a briefing paper to the Commissioners outlining the findings of the review. The brief should provide some background on the PREMO framework, its effectiveness as an innovative regulatory framework and suggestions to improve it. In your answer you need to clearly respond to these three questions separately;

1. How does the PREMO framework differ from the past approach in the economic regulation of water? (should outline the justification for using the PREMO framework and discuss some of the objectives of PREMO)

2. Discuss the effectiveness of PREMO in achieving its desired outcomes, the impact on customers, and the effect it had on water businesses' planning and development of their price submissions. (use the evidence and findings of farrierswier and discuss if the framework has achieved its objectives)

3. Discuss the challenges of water price regulation in the current macroeconomic circumstances and discuss if the PREMO framework can be effective in achieving the regulatory objectives. (to answer this question you can use your own economic arguments, discuss both the positive and negative sides of using PREMO)

The major source for answering these questions is this paper: https://www.esc.vic.gov.au/sites/default/files/documents/victorias-water-sector-the-premo-modelfor-economic%20regulation-20190411.pdf 2 Your assignment should:

(1) Provide a short introduction are about to explain

(2) Make sure to answer each question separately and don't combine answers to the questions

(3) Make sure to reference to the question number in your answer so that we know what question you are answering.

(4) Use plain English in your responses

(5) Assume very limited economic knowledge for the readers of your report

(6) Provide a short conclusion

Provide reference if can

Answer rating: 100% (QA)

Introduction The Victorian Essential Services Commission the Commission introduced the PREMO framework in 2016 to enhance economic regulation within the Victorian water sector This briefing paper aims ... View the full answer