Water Market Rules
On the 22 June 2009, Minister for Climate Change and Water, Senator Penny Wong registered the water market rules and termination fee rules. These rules came into effect on 23 June 2009.
In accordance with the Water Act 2007, new functions were given to the Australian Competition and Consumer Commission ('ACCC'), which included monitoring Termination Fee Rules, 2009.
What are Water Market Rules?
Many irrigators do not own a statutory water access entitlement, which is called a water access licence (in NSW) a water licence (in SA), a water share (in Vic) and a water allocation (in Qld).
Instead, an entity or operator operates the irrigation infrastructure and holds the statutory water access entitlement on behalf of the members.
Members (irrigators) hold an irrigation right which entitles them to receive water from their operator.
The water market rules prohibit operators from preventing or delaying transformation from occurring, except where allowed under the rules.
Transformation is the process of converting an irrigation right into a statutory water access entitlement, thereby reducing the water access entitlement held by the operator.
The water market rules place certain obligations on operators of irrigation infrastructure in relation to the process of transformation and the ongoing delivery of water to a transformed irrigator.
Water market rules have been developed to provide irrigators with greater control and flexibility over managing their water.
Termination Fee Rules
Rules governing termination fees have been developed to ensure there is a balance between the interests of irrigators who are exiting an irrigation district and irrigators that wish to remain.
Termination fees are imposed on the termination or surrender of an irrigator's delivery right and cannot exceed 10 times the total network access charge (essentially represents the fixed access fee).
When do the water market rules and termination fee rules come into effect?
The water market rules and termination fee rules are now in effect.
The water market rules provide operators with a transition period to prepare all the necessary documentation to enable an irrigator to transform their irrigation right into a water access entitlement. This transitional period expires on 31 December 2009. The water market rules also allow existing contracts, agreements and understandings to remain in force until 31 December 2009.
Listed below are a number of actions operators are required to or otherwise should undertake during the transition period to ensure compliance with the water market rules.
Must notify irrigators of the existence of the water market rules (WMR 5).
Should review and update the constitution, supply contracts and other governance or contractual arrangements to comply with the water market rules (WMR 20).
Must notify irrigators of any changes to arrangements affecting transformation (WMR 21).
Must develop clear and comprehensive policies, processes and procedures for transformation by 31 December 2009 (WMR 6).
Small operators must notify irrigators of the existence of the water market rules (WMR 5) and of any changes to arrangements affecting transformation (WMR 21). Small operators (as defined by WMR 6(3)) are not required by the water market rules to develop clear procedures for transformation by 31 December 2009. Small operators must update their processes when they first receive an irrigator's written notice that they intend to apply for transformation or a request for transformation (WMR 6(2)).
There are a number of other water market rules that may apply should an operator proceed to give effect to transformation arrangements during the transitional period.
For instance, if an operator imposes new terms or conditions in a supply contract prior to 31 December 2009 those conditions should be consistent with the water market rules because the transitional provisions will not apply. In other words, the water market rules will be enforceable against any provisions in breach of the rules prior to 31 December 2009.
The termination fee rules provide operators with a transitional period to implement the new termination fee cap and associated charging arrangements. This transition period expires on 31 August 2009. The termination fee rules allow the ACCC to approve an additional termination fee (in excess of the termination fee cap) under certain circumstances. There is no transition period in respect of ACCC approval of an additional termination fee.
Further information
The ACCC has published guides to assist irrigators, operators and interested stakeholders in understanding the application of the water market rules and termination fee rules.
The Minister's water market rules, termination fee-rules, the ACCC's advice to the Minister and the guides on the rules can be viewed on the ACCC website at www.accc.gov.au/guides.
The guides contain information of a general nature. Whilst the ACCC will assist stakeholders where possible, the ACCC is unable to provide definitive advice regarding the application of the rules to your organisation or approve proposed arrangements as being compliant with the rules (unless expressly provided for in the rules).