Self Assessment, Ranking and Controllability Principle: The case of water pricing in Victoria, Australia

Seminar abstract

Goal 6 of the United Nation's Sustainable Development Goals recommends stronger participation of local communities in water management.

As economic regulator in Victoria, the essential service commission (ESC) introduced a new approach to water pricing called PREMO (Performance, Risk, Engagement, Management accountability, Outcomes) framework in which water corporations (also knowing as water utilities) are required to engage with customers and reflect this engagement in their price submission.

Prior literature has documented the effects of ratings on organisations (mainly disciplining and liberating in a few instances) and a few studies investigating the production of ratings.

However, no study investigates the interdependence between production and effects of ratings.

The presentation investigates how the water corporations use ratings to set prices for customers and the effects of this new rating practice in Victoria (Australia) by building on data collected from 40 interviews who represent 16 water corporation and stakeholder groups.

By mobilising the Controllability Principle, which stipulates that managers should be held accountable only for results that are within their control, the preliminary findings show that, before PREMO, the Controllability Principle was applied by the regulator; however, after the the introduction of PREMO water corporations are required to self-assess.

Water corporations are encouraged to partially apply the controllability principle by incorporating in their self-assessment more uncontrollable factors such as co-designing outcomes with customers or setting more ambitious targets in terms of efficiency improvements. 

In terms of the effects of water corporations, at an employee level within the water corporations, there was some uncertainty and concern about the ratings and their relation to organisational learning (and adaptability), new services offerings, competition, and the level of sharing among water corporations.

Overall, the results suggest that PREMO bolstered the entrepreneurial spirit of water corporation employees and  led to higher motivation.

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Speaker bio

Dr Edward Tello graduated with a PhD from Macquarie University.

His research portfolio includes two articles published in Accounting, Auditing and Accountability Journal and one article published in the Australian Journal of Environmental Management.

Edward's research interest include;

• Social and Environmental Accounting (with emphasis on water accounting and accountability) (SEA)
• Accounting Information Systems (AIS)
• Essential Services Regulation
• Business Ethics

Regarding AIS, Edward has not only teaching, but also research experience and in terms of SEA, his main focus has been on corporate disclosures and accountability.

More recently, Edward investigated the motivations of companies to donate money to Australian political parties.

In his PhD thesis, Edward investigated the perception of users and preparers of General Purpose Water Accounting (GPWA) reports and the challenges in preparing water (including groundwater) reports.

Edward has co-supervised 3 research students and is an editorial board member of Sustainability Accounting, Management and Policy Journal and the Accounting Forum.

Edward is a member of the Centre for Social and Environmental Research (CSEAR) and a member of the Australasia CSEAR Sub-Committee.