Governance and Institutional Frameworks David Downie Strategic Advisor Centre for Regional and Rural Futures, Deakin University

Australia Annual Rainfall

Forecast of Total Inflows in the Murray System Over next 50 Years

Irrigated Agriculture in Australia

70-80% of water use

0.4% land irrigated, 99.6% non irrigated

25% gross value of agriculture

Agriculture 3% GDP

- 22% total exports ($33.6b)

Irrigation mainly in MDB

Typical crops are (NSW) rice, cotton, (Vic) dairy less than 20% on horticulture, viticulture, permanent plantings

Water Supply and Use

Irrigated Agriculture Financial Return on Water Input

Aim to have prosperous irrigated agriculture

For secure future, rivers must be healthy:

More production from less water

Reduce salinity & nutrient side-effects

Water Management History

Prior to the 1980s, water management was largely conducted by local authorities, with separate trusts being responsible for water delivery and sewerage services

Strong connections to municipal councils

Victoria, geographically small with a relatively low population, had around 370 regional water authorities, yet no overarching integrated policy and planning body

Melbournes water supply was managed by the MMBW, with rural supply managed by the State Rivers Commission

Recent Water Industry Reform

1980 Public Bodies Review Committee (Victorian Parliament) 1983 Water & Sewerage Authorities (Restructuring) Act

370 authorities restructured to 105 water boards, 7 sewerage authorities and 43 municipalities with water supply functions

1989 Water Act Statutory rights to water (continued) Decision making in hands of Minister not bureaucracy Consultation processes for Ministerial decisions Bulk water entitlements Water trading at bulk and retail levels Separation of service delivery from policy and regulation Corporate planning processes, Waterway management functions, Environment considerations

Reform Water Authorities

Replaced local government and large Metro Authorities with expert Boards (with regional ties) Built capability (large regional authorities) with appropriate

people financial muscle, and knowledge and skills

Self funding through water prices allowed authorities to Cover operation and maintenance Look after assets, and Source money to grow business

Focus on customer and commercial service delivery Clarified roles, responsibilities and incentives

Water Industry Reform Key Events

1990s Water Act implementation progresses (first bulk water entitlement for Goulburn irrigation system, water markets grow)

1993 Reforming Victorias Water Industry - a Competitive Future

RWC split into 5 regional RWAs

139 bodies amalgamated to 15 regional authorities

MBW split up into headworks business and 3 retail businesses

1994 Water Industry Act 1994 introduced to regulate the operation of the new metropolitan retailers

2005 Water (Resource Management) Act

Environmental Water Reserve, Water Register, unbundling, reconfigure

2006 Water (Governance) Act

Addressed identified problems, clarified high and low value uses for water

Victorian Institutional Arrangements

Allocation and Management Entitlement Framework

Based on Secure Property Rights Water Act 1989 (Pt 4)

Sets out stakeholder engagement processes which must be followed if issuing/amending entitlements

Largely based on notifications, seeking submissions, considering submissions, panel if necessary & making decision with ability for disallowance (BEs) or review at VCAT (individual entitlements)

Licensing functions delegated to rural water corps & guided by policies: see: http://waterregister.vic.gov.au/Public/Documents/Policies-for-Managing-Take-and-Use-Licences.pdf

For Trading, Need Meters, Penalties

Maximum Penalties for Stealing Water:

1st Offence: $7,000 fine or 6 months jail

2nd Offence: $14,000 fine or 12 months jail

Accurate meters, remote-controlled gates

Old meters, manual gates - need to order four days in advance

Unbundling Water Rights

Mortgageable asset easier to trade able to be leased dont need land choice b/w high, low Obligation to pay can opt for more (e.g. if have drip irrigation) Standards can go up restrictions on water use

Victorian Water Register

The Water Register is a public register of all water-related entitlements in Victoria:

- bulk entitlements

- environmental entitlements

- water shares

- water licences

The Water Register:

- provides individual records

- key statistics of trades (water shares and allocations)

- trade forms and helps track trades

- is being used as the basis for the Australia-wide water register, under development to help facilitate interstate trade.

Planning Framework

Comprehensive stakeholder consultation at each level

Processes prescribed in Act for long-term assessment, sustainable water strategies, drought response plans

Obligations on water corps and CMAs to engage on their strategies.

15-YEARLong-term water resource assessment

Identify a permanent reduction in availability and appropriate response.

Could include permanent changes to entitlements.

10-YEAR

Regional sustainable water strategiesIdentify risks to water quantity/quality over next 50 years and

appropriate response. Includes urban use, rural use and environment.

Long term /

Strategic /

Consultative

Short term /

Responsive /

Unilateral

5-YEAR

Water supply-demand strategiesAssess urban supply/demand over 50 years.

Address shortfalls.

Regional river health strategiesEstablish objectives for rivers.

Set priorities to achieve these objectives.

1-YEAR

Drought response plans

Seasonal allocation / reserve policy

Environmental watering plans

Local management rules

Annual restrictions/bans and allocations.

Priorities for supply.

Sustainable Water Strategies Key Focus

Central Supply shortfalls in Melbourne & adjacent regional cities; improvements to river health

Northern Managing through drought

Gippsland Sustainable use;

protection of waterways

WSWS - Interception

Water Authorities

Water Authorities State Owned Water Corporations

Owned and regulated by Victorian Government Boards appointed by Government

Operate under commercial principles

Drought response -

infrastructure

In response to 2006 conditions, the previous government invested in

major infrastructure including:

Desalination plant (150+ GL p.a. [121,650 acre feet])

Expanding network of pipes and connections

Upgrading Northern Victorias irrigation system

Northern Victoria Irrigation Renewal Project (Modernising the GMID)

Bass Strait

425 GL in total savings - Improved Service Delivery/Renovation/Rationalisation

Stage 1: 225 GL for $1b ($100m irrigators)

Food Bowl farmers 75 GL p.a.

Environment 75 GL p.a.

Melbourne* 75 GL p.a.

Stage 2: 200 GL for $1b

State and Federal Investment

up to 100 GL for irrigators

up to 100 GL for environment

Victorian Water Grid

Lessons Learned in Australian Water Reform

Political Will

The will to reform must be accepted at a politically effective level. The economic importance of water and water related services at high standards and lowest possible cost must be recognised as a key national objective.

Government Role Policy / Legislative

Government must maintain ultimate control but retain only a policy/legislative role.

Reform Team

Government must establish a committed team of multi-disciplinary professionals AND key community stakeholders from outside the industry to set the framework to drive the reform (not existing water decision makers -but utilising their knowledge.) . Key champions of reform must be identified early and engaged in the effort.

Long Journey Over Many Electorial Cycles

Reform is a long journey or the battle will be lost in the early stages

Lessons Learned in Australian Water Reform (2)

Reform Ingredients Framework

The framework must cover:

Measurement and accounting for the resource (sometimes takes many years and can run alongside reform)

Statutory volumetric rights (capacity share) which are tradeable

Reserve powers should remain in the hands of most powerful politicians not bureaucrats

Extensive community consultation in all phases of development of the framework and finalisation of water rights

A statutory based register of all entitlement and allocation decisions

Water trading at bulk and retail levels as the means of allocating water not Government/Ministerial/bureaucratic orgs (including environmental water)

Institutional separation of policy ,service delivery and regulation (and customer complaints) for water supply ,sewerage ,waterway and catchment management functions (PERHAPS THE MOST IMPORTANT ELEMENT OF ALL)

Creation of financially viable regional authorities to undertake service delivery with skill based Boards , performance reporting and community obligations to perform. These authorities are independently regulated to determine prices of monopoly and must be empowered to charge customers. Social programs should be run separately or the whole reform program will be lost.(viz. Apple does not provide subsidies)

Recognition of environmental standards , establishment of env. managers and the need for sustainability

Long run water supply planning involving the community is critical as climate variability and demand happens faster than you think.

Lessons Learned in Australian Water Reform (3)

Restrictions are for Emergencies Only

Restrictions are almost invariably economically expensive and do not benefit the environment. There is plenty of water and price is the only variablelet the market and the community determine if they want to pay more or conserve.

Mult-Tier Framework

There must be a nationally agreed framework agenda involving the commitment of national /regional and local governments to the broad agenda and direction.