The water industry in the state of Victoria, Australia underwent significant structural and pricing reforms in the 1990s. Now, attention is focussed on introducing independent economic regulation, and on the sustainable management of water resources. Experience in Victoria, Australia, provides an interesting opportunity to consider the challenges of reconciling independent economic regulation of profit focused businesses while meeting goals for sustainability in the most efficient way. We conclude that effective integration of sustainability and economic regulation requires consideration of the incentives in economic regulation; investment in defining and collecting data and information to support decisions; greater utilisation of market based instruments; wider and extended use of existing evaluation tools and more explicit linking of these tools to decisions about allocation of resources. However we consider that priority should be given to institutional arrangements; we consider that reform will be required to align arrangements with objectives and thus facilitate efficient and consistent decision-making.

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