A guide to the water market rules and water delivery contracts
October 2012
© Commonwealth of Australia 2012
This work is copyright. Apart from any use permitted by the Copyright Act 1968, no part may be reproduced without permission of the Australian Competition and Consumer Commission. Requests and inquiries concerning reproduction and rights should be addressed to the Director Publishing, Australian Competition and Consumer Commission, GPO Box 3131, Canberra ACT 2601.
About this guide
This document “A guide to the water market rules and water delivery contracts, October 2012” replaces “A guide to the Water Market Rules 2009 and water delivery contracts, June 2009”.
This document provides guidance on the application of the Water Market Rules 2009 and incorporates amendments to the rules[1] made by the minister.
The ACCC has released other guides for rules made under the Water Act 2007 (Cth):
§ A guide to the water charge (termination fees) rules, October 2012;
§ A guide to the Water Charge (Planning and Management Information) Rules2010, July 2010; and
§ Water charge (infrastructure) rules guides for Tiers 1, 2 and 3 operators.
The ACCC has also released two introductory guides for irrigators:
§ Transforming your irrigation right and maintaining water delivery; and
§ Permanently selling your water and terminating your delivery right.
The ACCC has published an enforcement guide which outlines its approach to enforcing the water charge rules and water market rules.
All the guides released by the ACCC can be found on its website www.accc.gov.au/water.
The ACCC welcomes feedback on this guide. Comments can be made in writing to .
Inquiries about the water market rules can be made by:
§ phone: 1300 302 502
§ mail: GPO Box 520, Melbourne, Victoria, 3001
§ email: .
Contents
Contents iv
Abbreviations 1
Glossary 2
1 An operator checklist 1
Commencement and Transition 1
Irrigation rights 1
Delivery rights 1
Security 2
Dispute resolution 2
Applications for transformation or trade 2
2 What is the purpose of this guide? 3
2.1 Who is this guide for? 3
2.2 What does this guide cover? 4
2.3 What does this guide do? 4
2.4 What does this guide not do? 4
3 Application of the water market rules 5
3.1 What is an irrigation infrastructure operator? 5
3.2 Can an operator give effect to transformation arrangements? 7
4 What were operators required to do during the transitional period? 11
4.1 What were small operators required to do during the transitional period? 11
5 Irrigation rights 12
5.1 What is an irrigation right for the purposes of transformation? 12
5.2 Can operators require a contribution to fixed network losses? 14
6 Delivery rights 27
6.1 Can operators terminate delivery when an irrigator transforms? 27
6.2 What must operators do when an irrigator wants to continue delivery after transforming? 28
6.3 When can operators require security from transforming irrigators? 28
6.4 Is there a limit on the amount of security an operator can require? 32
6.5 Can an operator specify the form of security? 32
7 Dispute resolution 38
7.1 In what circumstances can dispute resolution be used under the water market rules?...... 38
7.2 What is the process for resolving a dispute under the water market rules? 38
7.3 How does mediation work? 41
7.4 How are the costs of formal negotiation shared? 43
7.5 What is the ACCC’s role in disputes? 43
7.6 What if an operator is unable to meet timelines of formal negotiation? 44
8 Applications for transformation or trade 45
8.1 How do operators process applications for transformation and/or trade? 45
8.2 What fees can operators impose on irrigators for transformation or trade? 49
9 Water delivery rights – explicit contracts 52
9.1 What are the benefits of explicit delivery contracts? 52
9.2 What matters should parties consider in water delivery contracts? 53
9.3 How should non-delivery terms and conditions be dealt with? 64
Appendix A—Terms and conditions of water delivery rights 66
1. Definitions 66
2. Operator’s network 67
3. Rights and responsibilities of the irrigator 67
4. Rights and responsibilities of the operator 72
5. Management of the operator’s network 79
6. Installation and connection to operator’s network by irrigator 79
7. Maintenance arrangements 80
8. Requirements for the keeping and exchange of information 82
9. Ownership of delivery rights/entitlement 85
10. Compliance with various laws and regulations 86
11. Fees and charges 87
12. Dispute resolution process 92
13. Contract termination provisions 94
14. General 94
15. Conditions that must not be contained in this contract 95
Appendix B – Terms and conditions relating to irrigation rights 96
1. Irrigation rights and allocations 96
2. Transformation or trade of irrigator right/water entitlement 98
Abbreviations
ACCC / Australian Competition and Consumer CommissionBasin / Murray–Darling Basin
minister / Minister for Sustainability, Environment, Water, Population and Communities (formerly, Climate Change and Water)
ML / megalitre (1 million litres)
NICWER / National Irrigation Corporations Water Entitlement Register
NOW / New South Wales Office of Water
NSW / New South Wales
operator / irrigation infrastructure operator
SA / South Australia
WAL / water access licence
Water Act / Water Act 2007 (Cth)
water charge (infrastructure) rules / Water Charge (Infrastructure) Rules 2010
water charge (termination fees) rules / Water Charge (Termination Fees) Rules 2009 (including amendments)
water market rules / Water Market Rules 2009 (including amendments)
WMR / water market rule
Glossary
This glossary endeavours to provide practical meanings of relevant terms used in this guide; however, readers may need to consider the meaning of some terms under the Water Act 2007 (Cth) and obtain legal advice on these definitions, if required.
access fee / A fee imposed by an operator for the provision of access to its irrigation network.civil penalty / A court-ordered pecuniary penalty (sum of money) to be paid where a person has been found to contravene the water market rules.
network loss / Water lost in the operator’s network through evaporation, seepage etc, also known as conveyance loss. This loss represents the difference between the volume of water that is diverted by an operator (from the water source) for distribution to customers and the volume of water actually delivered by the operator to customers. The loss is likely to consist of both fixed and variable components, and can vary substantially between networks and between seasons.
disconnection fee / A fee to recover the costs incurred in physically disconnecting an irrigator from an operator’s irrigation network.
fixed costs / Costs that do not vary with the volume of water delivered.
irrigator / A person who receives water delivery services from an operator. This may include a person who receives water for any reason, such as for stock and domestic purposes.
irrigation district / An area or district that is primarily supplied with irrigation water via water service infrastructure.
irrigation infrastructure operator / A person who owns or operates water service infrastructure for the purpose of delivering irrigation water to another person (see chapter 3).
irrigation network / Water service infrastructure operated by an operator to deliver and drain irrigation water.
irrigation right / A right that a person has against an operator to receive water that is not a water access right or a water delivery right.
regulated water charge / A charge of a kind referred to in s.91 of the Water Act or prescribed in the Water Regulations, such as access fees.
terminating irrigator / A person who terminates the whole or part of a right of access to an operator’s irrigation network.
termination fee / A fee payable to an operator by a holder of a right of access for terminating access or surrendering a water delivery right.
trade / Includes transfer.
transformation arrangement / The process by which an irrigator permanently transforms their entitlement to water under an irrigation right against an operator into a water access entitlement held by the irrigator (or someone other than the operator), thereby reducing the share component of the operator’s water access entitlement.
transitional period / The period between 23 June 2009 and 31 December 2009.
water access right / Any right conferred by or under a law of a state to hold or to take water from a water resource (refer to section 5.1).
water access entitlement / A perpetual or ongoing entitlement, by or under a law of a state, to exclusive access to a share of the water resources of a water resource plan area.
water allocation / The specific volume of water allocated to a water access entitlement in a given season, defined according to rules established in the relevant water plan. This does not include an allocation of water against an irrigation right.
water delivery right / A right to have water delivered by an operator.
water entitlement / The number of units or volume of water a person is entitled to under their irrigation right held against an operator.
water service infrastructure / Infrastructure for the storage, delivery or drainage of water.
3
1 An operator checklist
The water market rules are quite detailed and complex. This checklist should assist operators in understanding their rights and responsibilities to irrigators and the actions they must undertake to fulfil their obligations under the water market rules.
Commencement and Transition
§ The water market rules provided for a transitional period between 23 June 2009 and 31 December 2009. The transitional period has now expired and all operators are expected to fully comply with the water market rules.
§ Small operators (as defined by WMR 6(3)) were not required by the water market rules to develop clear procedures for transformation by 31 December 2009. However, small operators must update their processes to reflect the requirements of the water market rules when they first receive an irrigator’s written notice that they intend to apply for transformation or an irrigator’s request for transformation (WMR6(2)).
Irrigation rights
§ Must provide irrigators with details of their irrigation right (including details necessary to determine the accuracy of the operator’s calculations) on request within 20 business days (WMR 7).
§ Should inform irrigators about any conditions that may attach to the irrigation right when it becomes a water access entitlement following transformation (optional).
§ Can be required to engage in a dispute resolution process if an irrigator believes the details of their irrigation right are not complete or are incorrect (for example, WMR 7(5)).
Delivery rights
§ Must provide details of the contractual terms and conditions of an irrigator’s delivery right, within 20 business days of receiving notice, if that irrigator requires the continuation of that right after transformation (WMR 8(1)).
§ Must provide delivery services on the same terms and conditions as those that applied prior to transformation unless varied as a necessary consequence of transformation or as agreed in writing with the irrigator (WMR 8(2) and 9).
§ Must not terminate or require an irrigator to terminate their water delivery right as a condition of approving an application for transformation (WMR 19).
§ Can be required to engage in a dispute resolution process if the irrigator does not agree to the terms and conditions of delivery (including conditions regarding security arrangements) (WMR 8(3)).
Security
§ May seek security from an irrigator before allowing transformation in some circumstances (WMRs 10(1), 10(1A) and 10(1B)).
§ Cannot require security for a value greater than the applicable termination fee or, if the operator does not charge a termination fee, the total network access charge in the year that security is given (WMR 10(2)).
§ Must not refuse to accept an offer of security by an irrigator where it is offered in the form of a charge over an irrigation right or unencumbered water access entitlement, bank guarantee or a security deposit (WMR10(3)).
Dispute resolution
§ If participating in a formal negotiation, must make a genuine attempt to reach agreement with the irrigator within 30 business days (WMRs 7(7) and 8(5)).
§ Must notify the ACCC in writing if an agreement cannot be reached during formal negotiation and the reasons that it could not be reached (WMR 15(1)).
Applications for transformation or trade
§ May impose an administrative fee for processing applications based on the recovery of the reasonable and efficient costs incurred (WMR 13).
§ Must write to the applicant if:
§ the application is incomplete because the irrigator has not provided all the necessary information, or
§ the application is not accompanied by the relevant application fee, or
§ there are any outstanding charges or fees payable by the irrigator in respect of their irrigation right, and
§ specify the further information required, the applicable fees or the outstanding charges payable (WMR 14(1)).
§ Must generally be processed within 20 business days after receiving the application (WMR 14(3)).
§ Must advise an applicant in writing within five business days of the end of the relevant 20 business day processing period if their application for transformation has been approved or that it cannot be approved for one of the reasons set out in WMR 14(2).
§ Must notify the ACCC in writing if an application for transformation has been not been approved and the reason for not approving (WMR 15(2)).
3
2 What is the purpose of this guide?
The purpose of this document is to provide guidance on the application of the Water Market Rules 2009 (water market rules).
The water market rules were made by the minister on 10 June 2009 under the Water Act, and came into full effect on 1 January 2010.
The water market rules were amended by the Water Market Amendment Rules 2012 on 16 October 2012 to:
§ clarify that operators must provide irrigators with sufficient detail to confirm the accuracy of the calculation of irrigation rights (refer to section 5.1)
§ allow operators that provide water delivery services on a flow rate or other basis to require security from transforming irrigators (refer to section 6.3).
This guide should be read in conjunction with the water market rules, the amendments to the rules, the accompanying explanatory statements and the final advices about the water market rules and the amendments from the ACCC to the minister.[2]