Regulator tells Wannon Water to rein in spending, proposed a $15m cut to proposed budget

And in a bid to keep water bills down, the water authority is increasing its debt rather than passing on extra costs to consumers.

Home-owners will pay an extra $48 more on average for water and sewerage by 2027 under the draft decision handed down by the Essential Services Commission.

But while Wannon Water had said it needed a $384.9 million budget over the next five years, the commission proposed to only approve $370.8 million and said it should "reprioritise and manage costs closely".

The commission said Wannon Water's controllable operating costs were "well above" the benchmark established in 2018 - up by 16 per cent - and a percentage "well above" the industry average of nine per cent.

Wannon Water had not sufficiently justified the reasons for the increase in its controllable costs for 2021-22, the commission said.

It was "unusual" that expenditure had been relatively steady for three years before spiking up in 2021-22 by $8 million - an 18 per cent change, the report said.

"The majority of this increase - about $6 million - is attributed to corporate costs," the commission said.

"We are not satisfied why its operating expenditure rose so suddenly, and why this occurred in the 2021-22 baseline year which is critical for establishing the efficient forecast for setting prices to apply in the next regulatory period."

The delays to the major upgrade of Warrnambool's sewage treatment plant meant customers had been contributing to the costs of the project despite not receiving the underlying service, the commission said.

"We raised issues related to Wannon Water's capital forecasting during the 2018 price review including that we considered its approach would potentially result in customers paying more than they needed to," it said.

Wannon Water will get the chance to justify why it needs a higher budget in its response to the draft review before a final decision is made.

A public forum will also be held online on Thursday, April 27 at 12.30pm to allow people to have their say on the proposed new water bill prices which come into effect on July 1 this year.

Under the proposal, the average residential water bill for home-owners would rise $48 over the next five years, while tenants will fork out an extra $22 over five years.

For home-owners, the average bill will jump from $1106 to $1115 in 2023-24 and then $1154 by 2027-28. For tenants it will rise from $207 to $229 over five years.

"Wannon Water has proposed to charge lower prices than it could under its proposed revenue requirement in order to address affordability," the commission said.

Wannon Water managing director Andrew Jeffers said the submission detailed the water corporation's activities and investments and the maximum prices it would charge customers through to 2028.

"We're planning to keep bills as low as possible and, in a challenging environment, will increase debt rather than pass all costs onto customer bills," Mr Jeffers said.

"We'll consider the draft decision and the matters raised and will respond to the ESC early next month.

"We encourage customers to read the draft decision and participate in the feedback process through the ESC."

Our journalists work hard to provide local, up-to-date news to the community. This is how you can access our trusted content:

Have you signed up to The Standard's daily newsletter and breaking news emails? You can register below and make sure you are up to date with everything that's happening in the south-west.