Water market reforms continue to deliver benefits to irrigators

21 May 2015

The Australian Competition and Consumer Commission has publicly released its fifth Water Monitoring Report. This report will help inform its current review of the Commonwealth’s water charge rules.

The Water Monitoring Report details the impact of water market and charge reforms on irrigators and infrastructure operators in the Murray-Darling Basin (MDB).

Prior to these reforms, irrigation infrastructure operators could prevent or restrict an irrigator’s ability to trade their water outside of their irrigation network. Under the water market rules, irrigators are able to more easily “transform” and trade their water free from any operator restrictions. The water charge rules also limit the fees that can be charged when an irrigator wants to change or “terminate” their water delivery arrangements.

“The report  shows  how the water market rules and water charge rules have reduced barriers to water trade and improved irrigators’ access to water markets outside of their irrigation networks,” ACCC Commissioner Cristina Cifuentes said.

To date, only a minority of irrigation rights have been transformed. This has meant that, while barriers to trade for water users in irrigation networks have been substantially reduced by the reforms, the effect of transformation and termination activities has been manageable for most irrigation infrastructure operators.

The Water Monitoring Report incorporates updated data on regulated water charges, transformations and terminations from the 2013-14 water year. There was a lower number and volume of transformations across the MDB as the Commonwealth Government’s water buyback program slowed. This has reduced a key source of demand for transformation and trade from irrigation networks. The number and volume of terminations was broadly similar to previous years, although maximum termination fees that irrigators can be charged continue to rise in line with the irrigation network charges that they are based on.

Most irrigation network and bulk water charges increased relatively modestly in 2013-14. However, over the last five years, there have been significant increases in charges in many areas.

The Water Monitoring Report also demonstrates that considerable differences remain in the charging practices of infrastructure operators across the MDB. This variation reflects differences in technology, scale, level of service, infrastructure age and type, business model, and applicable regulatory approaches. Tariff structures and the way in which water planning, management, and bulk water charges are passed on to irrigators vary considerably within and between Basin States.

In December, the ACCC was asked by the Minister to review the water charge rules and make recommendations on possible amendments.

“This review of the water charge rules is an opportunity to further improve the efficiency of water charging arrangements in this vital sector. The trends we have identified in this and previous monitoring reports will help inform our review of the water charge rules,” Ms Cifuentes said.

The review will consider how the water charge rules affect the water use, delivery, and trading decisions of water market participants. The review will also explore opportunities to improve regulatory clarity and efficiency, and reduce costs to industry and governments.

“I encourage interested parties to have a look at our  monitoring report to help them in putting together any submission they might make  into our  review of the water charge rules” Ms Cifuentes said.

See also: ACCC water monitoring report 2013-14

See also: Review of the water charge rules: advice development

Release number: 
MR 90/15
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