ACCC 2015-16 Water Monitoring Report shows rural water sector adapting to change

21 June 2017

The Australian Competition and Consumer Commission’s seventh annual Water Monitoring Report, covering 2015-16, shows the effects of structural changes in the Murray-Darling Basin rural water sector on regulated charges and terminations, transformations, and trades.

“This year’s report highlights that operators and customers are responding to change in a variety of ways,” ACCC Commissioner Cristina Cifuentes said.

“For example, infrastructure operators have been upgrading existing services or offering new services. Customers are using market mechanisms in innovative ways to adjust their water holdings and access to infrastructure, signaling greater confidence in using markets. ”

“We’ve seen substantial volumes of ‘temporary’ trade this year which suggests that temporary water markets are an important tool for customers. However, some operators continue to place restrictions or high transaction costs on the temporary trade of water available under irrigation rights, which can reduce the benefits of trade,” Ms. Cifuentes said.

“This year also saw an increase in the volume of water delivery right traded independently of the trade of water rights, indicating that water delivery right markets are maturing over time. This is an encouraging development for customers, as water delivery right trade represents an important alternative to terminating and paying termination fees”

There was a smaller volume of terminations reported in 2015-16 but, in contrast to past years, operators levied termination fees in the majority of cases. This may reflect the fact that that there were relatively fewer infrastructure rationalisations driving terminations and more individual terminations than in previous years.

In permanent water markets, government policy to recover water for the environment has been a key driver of irrigator participation in recent years. However, reflecting the government’s commitment to cease large-scale buyback, in 2015-16 there has been a decrease in the number of transformations overall and in transformations involving trade directly to an environmental water holder.

The report also provides information on the level of water infrastructure charges that irrigators and other customers face in the Murray-Darling Basin. ACCC analysis indicates that for on-river customers, estimated bills have increased, except in the southern Murray-Darling Basin. For off-river customers, estimated bills increased in about two-thirds of monitored networks this year, although these changes were small and close to inflation. In some networks, infrastructure upgrades have resulted in significant increases in customer charges.

“Compliance outcomes for this year indicate that operators are broadly familiar with the rules. The few instances of alleged non-compliance with the water rules enforced by the ACCC were resolved administratively, which is a positive outcome for operators and their customers,” Ms Cifuentes said.

Click here for the full report: 2015-16 Water Monitoring Report.

Notes to editors

The report covers data gathered by the ACCC on:

  • Revenues and costs of water planning and management (WPM) activities undertaken by or on behalf of governments.
  • Levels and changes in regulated charges levied by operators and WPM entities, as represented by the ACCC’s hypothetical bill analysis. This analysis for regulated water charges indicates that:
    • For on-river customers, estimated bills have mostly increased this year. There were real decreases in only the following cases: GMW’s private diverters, and WaterNSW customers in the Murray, Murrumbidgee, Namoi and Gwydir valleys. These areas are concentrated in the southern Murray-Darling Basin.
    • For off-river customers, estimated bills increased in about two-thirds of monitored networks this year. Changes were mostly small, close to inflation. However, increases of around 20 per cent were observed in Tenandra, following a substantial infrastructure upgrade. In contrast, there was a substantial decrease (around 18 per cent) in Coleambally, due to a reduction in fixed charges, funded by revenues from sales of water available from water efficiency measures.
  • The number and volume of transformations occurring in irrigation infrastructure operators.
    • In total, 35 GL of irrigation rights were transformed in 2015-16, the lowest annual volume since monitoring began in 2009-10.
  • The number and volume of terminations occurring in irrigation infrastructure operators.
    • Terminations of water delivery rights were low in 2015-16 compared to previous years. Termination fees were levied for 60 per cent of the total volume terminated, which is a significant increase from previous years.
  • Annual statistics on the trade of tradeable water rights within, into and out of off-river networks.

Background

The ACCC is required to monitor regulated water charges, transformation arrangements, and compliance with the water charge and market rules.

‘Transformation’ is the process whereby a customer transforms their irrigation right held against an irrigation infrastructure operator into a water access entitlement. Transformation can give an irrigator more control and flexibility over their water rights, especially in relation to external trade. Transformation arrangements are regulated by the Water Market Rules 2009.

‘Termination’ is where a customer reduces (whether partially or fully) their right of access to an irrigation infrastructure operator’s irrigation network, usually represented by their ‘water delivery right’. Customers may be required to pay a ‘termination fee’ when terminating, to contribute towards ongoing unavoidable costs of maintaining the network. The maximum amount of termination fees is regulated by the Water Charge (Termination Fees) Rules 2010.

Release number: 
MR 94/17
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