ACCC issues draft water market rules and draft advice to the minister

The Australian Competition and Consumer Commission today issued its draft water market rules and draft advice to the Minister for Climate Change and Water on the water market rules for public consultation.  The Minister has requested final advice from the ACCC by December 2008.

In developing the draft rules, the ACCC has considered:

• stakeholder submissions in response to the water market rules issues paper (April 2008) and water market rules position paper (July 2008), and
• the Murray-Darling Basin water market and trading objectives and principles contained in Schedule 3 of the Water Act 2007.

The water market rules form a key component of the Act, which creates new institutional and governance arrangements to address the sustainability and management of water resources in the Basin.  The draft water market rules ensure that policies or administrative requirements of operators of irrigation infrastructure who hold a group water access entitlement on behalf of their member irrigators do not unreasonably prevent or delay transformation arrangements including trade.

The ACCC now seeks submissions on the draft water market rules. As part of the consultation process, the ACCC will also hold public forums throughout the Basin. 

"Consultation on the draft water market rules, prepared by the ACCC, is a final opportunity for irrigation infrastructure operators and irrigators to contribute to the development of the ACCC's advice to the Minister," ACCC Chairman, Mr Graeme Samuel, said today. "Stakeholders are strongly encouraged to participate in this consultation process.

"The draft water market rules seek to provide irrigators with greater flexibility in managing their water rights while balancing the legitimate restrictions of irrigation infrastructure operators.

"A well functioning water market will contribute to improved water use efficiency and inform efficient investment decisions in water infrastructure assets."

Submissions are to be provided to the ACCC by Monday, 10 November 2008. Details on how to make a submission can be found in the draft rules, which are available from the ACCC website: www.accc.gov.au.

Public forums 

As part of the consultation process, the ACCC will also hold public forums throughout the Basin on the draft water market rules and also on the draft water charge rules for termination fees.  Interested stakeholders are encouraged to register their interest in attending one of these forums which will take place in: Renmark, Mildura, Dubbo, Shepparton, Deniliquin and Griffith. Further information on the details of these public forums will be available from the ACCC website, www.accc.gov.au.

Background

The Water Act 2007, which came into effect on 3 March 2008, creates new functions for the Australian Competition and Consumer Commission. These include the development of water charge rules and water market rules for consideration by the Minister; and for the ACCC to monitor compliance with and enforce of these rules. While not yet asked to provide advice, the Act also allows for the ACCC to advise the new Murray Darling Basin Authority on water trading rules.

Water market rules

By virtue of holding the statutory rights to water, an operator can prevent or delay their member from fully realising the benefits of their irrigation right. Transformation arrangements are those arrangements that allow a member irrigator to permanently transform their irrigation right against an operator into a water access entitlement held by someone other than the operator, thereby reducing the share component of the operator's water access entitlement.

The water market rules deal with restrictions imposed by an operator on either transformation, or trade of a transformed irrigation right.

The water market rules provide more flexibility for irrigators. Irrigators can:

• transform (whether or not in association with trade) and retain delivery rights with their existing operator 
• trade, and terminate delivery rights with their operator.

The water market rules do not require operators to transform the irrigation rights of all their customers. Transformation is voluntary and can only be triggered by a request from an irrigator.

The draft water market rules prohibit actions of an irrigation infrastructure operator that prevent or delay transformation arrangements unless the rules identify it as a permissible restriction. The draft water market rules permit restrictions in relation to:

• regulated water charges, including termination fees and unpaid access charges
• security over ongoing access fees (subject to the rules)
• adjustments to take into account conveyance losses (subject to the rules)
• installation of water meters 
• requirements expressly permitted under state law or related instrument.

The draft water market rules also set out actions that an operator will be required to undertake so as to not prevent or unreasonably delay transformation arrangements. These include updating their processes to include how an irrigator would initiate transformation arrangements and timeframes for processing applications to transform.