Irrigation sector largely stable in 2016-17, but challenges ahead

The ACCC’s eighth Water Monitoring Report, published today, found 2016-17 was a largely stable period for most on-river and off-river infrastructure operators (IOs) within the Murray-Darling Basin.

Good water availability and favourable seasonal conditions across much of the Murray-Darling Basin resulted in increased water deliveries: up 27 per cent for on-river IOs and 12 per cent for off-river IOs.

The report found transformation of irrigation rights, and termination of water delivery rights in the Murray-Darling Basin dropped to record lows in 2016-17. (Around 5.1GL of water delivery rights were terminated or surrendered across the basin and 28GL of irrigation rights were transformed in 2016-17).

The ACCC uses IO charges to estimate annual customer bills. This year, these hypothetical bills showed charges rose broadly in line with inflation for most off-river IO customers and some on-river IO customers, with some exceptions that reflected moves by IOs to achieve more cost-reflective pricing or greater cost recovery.

“The estimated bill impacts are in line with expected movements, given price determinations and charging structures. Stability and predictability of charges are positive for users,” ACCC Commissioner Cristina Cifuentes said.

“We should also note that this relative stability has occurred against a backdrop of significant ongoing policy reviews and development in the industry.”

“Change creates challenges for the irrigated agricultural sector and our work helps to inform policy makers of the importance of having a framework that progresses reforms in a critical part of the economy,” Ms Cifuentes said.

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IOs can expect seasonal and annual water demand to vary more in the future, because of changes in network infrastructure, crop choice and land use and the impacts of increasing volumes of trade inside and outside irrigation networks.

“The full impacts and effectiveness of policies are still being assessed by policy makers. However, ongoing effective monitoring, evaluation and enforcement is critical for the Murray-Darling Basin,” Ms Cifuentes said.

The ACCC report also found most off-river IOs in the Southern Murray-Darling Basin were net exporters of water allocation, though Lower Murray Water was a notable exception.

The majority of off-river IOs reported more than half of the water delivered in their individual networks came from allocation trade in, out and within those networks.

“Results reported in the ACCC Water Monitoring Report demonstrate that off-river the customers of IOs are using markets to trade water and network capacity,” Ms Cifuentes said.

“These results highlight the increasing use of water trading within the irrigation sector and the important role that efficient and effective markets play in allocating scarce water resources,” Ms Cifuentes said.

The report also found that complaints to the ACCC about compliance with water market and water charge rules continued to decline.

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For more information: Water monitoring and reporting

Notes to editors

The ACCC is required to monitor regulated water charges, transformation arrangements, and compliance with the water charge and market rules under the Water Act 2007.

The ACCC collects data from Basin States and Infrastructure Operators on regulated water charges (including termination fees), transformation arrangements and compliance with the Water Charge Rules and Water Market Rules made under the Water Act 2007.

The ACCC uses ‘hypothetical bills’ to estimate annual charges for water end users such as irrigators for specified volumes of irrigation right and water delivery scenarios.

‘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 the process when a customer partially or fully reduces 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.