ࡱ> EGF7 1bjbjUU *@7|7|-lxxxxxxx , $2\ \ \ \ \ \ \ \ vxxxxxx$) Ix\ \ \ \ \  xx\ \    \ x\ x\ v \ v  :,xxv\ P ̫ð z  v0$R v xxxxPUBLIC SUBMISSION TO WATER MARKET RULES ISSUES PAPER BY CENTRAL IRRIGATION TRUST ON 7 MAY 2008 PREFACE The following response to the ԭ issues paper on Water Market Rules presents the position of the CIT group of irrigation infrastructure operators. Our group has taken every step possible to be fully compliant with the major objectives of the National Water Plan because the future of our State and irrigation industry at the bottom end of the river system is so dependent on the achievement of a successful Basin Wide Water Plan. As a fully compliant business by choice, we contend that the solution is very simple. Adopt open trade and permit the irrigation infrastructure operators to recover in full the future reductions in revenue from fixed charges through permanent introduction of exit/termination fees. All of the other proposed arrangements for delivery shares and transformation will un-necessarily burden our businesses with additional administration costs and complicate processes just to achieve compliance across the whole industry with the core principle of open trade. INTRODUCTION Central Irrigation Trust is a company that manages and operates water delivery systems for the Berri, Cadell, Chaffey, Cobdogla, Kingston, Loxton, Lyrup, Moorook, Mypolonga and Waikerie Irrigation Trusts in South Australia. Our submission also includes the Pyap Irrigation Trust which we provide management services to under contract. The eleven Irrigation Trusts we represent pump water from the River Murray in South Australia and deliver it through modern irrigation systems to 1,500 mostly family owned farms producing high value horticultural crops in the highland irrigation districts adjacent to the river. The water delivery systems include fully automated pumping stations, closed pipeline delivery networks and fully metered water supplies to every farm, household and factory. The Trusts are 90% of the way through an $8million program to replace 2,300 in-line mechanical water meters with solar powered electronic meters, and 25% of the way through a $2million program to install radios on the meters to download flow and consumption data back to irrigators via the web every 15 minutes. Of the 14,000 hectares of mostly vineyards and orchards irrigated by our 1500 family farms, over 95% is watered through sprinkler, micro or drip irrigation systems. BACKGROUND Our eleven Trusts have a history of being compliant and working with Government initiatives and policy reforms for delivery of water. Irrigators already had volumetric water allocations when the Government privatised the districts in 1997. Consumption based pricing was introduced in 1997 to be compliant with the 1994 COAG water reforms. The Trust is not aware of any other Water Authority that adopted the reform, even though it has encouraged greater water use efficiency. Open water trade was permitted from 1997 to 2007 subject to maximum limitations of 25% from each farm and 2% net trade out from each district. Removal of all of our barriers to trade was introduced in 2005 to comply with the National Water Initiative Intergovernmental Agreement, accompanied by a requirement for sellers to pay exit fees of $380 per megalitre for water permanently leaving the Trusts group of districts. The Trusts have publicly committed to the process of achieving a register of individual water access entitlements for irrigators to comply with the National Water Initiative. We are currently working towards the best outcome between the register proposed by the SA Government or the National Irrigation Corporations Water Entitlement Register. Completion is being delayed by our need to resolve bulk water licence shortfalls inherited from the SA Government and obtaining assurances about capacity of the Government register to provide Water Authorities with knowledge of water transactions and opportunity for providing consent or stipulating conditions on transactions. In 2008 exit fees were replaced with termination fees of $303 per megalitre to comply with ԭ recommendations for water permanently leaving the Trusts group of districts. The introduction of exit fees, now replaced with termination fees, has not prevented permanent water trade from our group of districts since 2005. Records show 6 trades to the SA Government, made of 3 farms selling their full water entitlement and 3 farms that retained only a remnant entitlement. We understand that half of these trades were destined to the Living Murray Project. Records also show 31 permanent trades out of our group of districts to private purchasers in the same period. Decisions to permanently trade water into our districts are based on the capacity of pipeline systems to deliver the additional water without unduly reducing pressures or availability to existing irrigators. The support of surrounding irrigators is obtained before final decisions are made on larger trades, normally involving a new development. SUBMISSION DETAILS The Irrigation Trusts managed by CIT have used their best endeavours to remove barriers to water trade and pursue introduction of a register of individual water entitlements to comply fully and work within the spirit of the National Water Plan. This is particularly illustrated by our adoption of termination fees recommended by the ԭ even though we are totally resolute in our belief that the slightly higher exit fees we introduced were costed correctly and a legitimate discharge of a departing irrigators financial obligation towards future maintenance of the community owned assets. If you extend the right of a Water Authority to charge exit or termination fees to a permanent arrangement, our recent removal of all barriers to trade and our intent to introduce a register of individual water access entitlements will provide a package capable of delivering all of the outcomes sought by the National Water Plan for fully transparent and tradable water access entitlements. The notion of separating delivery rights from water access entitlements will add another layer of administration. This in turn will add to the cost of water delivery through fully metered modern pipeline systems without providing any benefits to a minority of irrigators who permanently trade out water access entitlements or the majority of irrigators who engage in annual trade to suit the requirements of each season. Modern pump and pipeline schemes differ from gravity open channel systems because they have been designed to deliver water at predetermined pressures as well as flows to each of the farm outlets in the district. The systems have limited capacity to cope with permanent trade of water access entitlements that disturb the hydraulic balance of the pipeline scheme. Permanent trade out of districts does not adversely affect hydraulic capacity of pipelines but obviously loss of the associated water sales impacts on business viability. The notion of separating delivery rights from water access entitlements will complicate the free movement of water into or out of pipelined horticultural districts to meet variations in crop water demand. Horticulture is cyclic by nature. As the crops and varieties in our districts constantly change to meet new market requirements, water requirements vary, particularly following changes between vines and trees. Remember, whereas farmers irrigating broad acre annual crops can increase or decrease the area cropped each season to match the seasonal water allocation available, no such flexibility exists for horticultural farmers irrigating permanent plantings. The current CIT arrangements using consumption based pricing and fully open trade maximise the flexibility for matching water availability to crop demand. We are unable to see any benefit to either our farmers or our water business from separating delivery rights. If water delivery businesses operating large open channel schemes upstream desire to introduce delivery rights to meet their purposes, we support them being permitted to exercise that option. Equally, requirements that suit them should not be imposed on the much smaller operators of modern pipeline systems. The Trusts in the CIT group seek to permanently retain fully costed exit or termination fees without the additional complication and cost of administering delivery rights that produce no apparent benefit. We need to impose these fees to cover the reduction in future revenue from fixed charges so we can comply with the principle in the National Water Plan that no third party impacts arise from open trade. The notion of introducing provisions for irrigators to transform irrigation rights into water access entitlements also appears to us to be part of your intention to force the introduction of fixed and variable charges and preclude the future use of exit or termination fees. The CIT group already has one very large corporate irrigator with a contract arrangement for delivery of their water access entitlement through the district water delivery system. Under their supply agreement they pay the same price as all other irrigators but do not hold voting rights as members of the Trust. Whilst this option was necessary and has worked well for this corporate irrigator, it has shown us how much additional administrative work is needed to specially service an account with different reporting, monitoring and membership characteristics. The experience has demonstrated to us that more widespread transformation will create another administration burden we dont need when open trade is already available. 4.5 Your issues paper makes no mention of corporate or managed investment schemes being subject to the trading and reporting rules you are proposing for water delivery businesses like the CIT group. Many of these enterprises are larger than our Trusts and we know some who operate under irrigation legislation and would appear to meet your definition of an irrigation infrastructure operator. We wish to know if you intend for them to be bound by the same trading and reporting obligation as our Trusts. SUMMARY The CIT group has a Board of Directors elected by the members of our ten Trusts. It also has 25 staff with over 500 years experience in delivering water services to 1500 farmers. We have the most technically advanced irrigation water delivery systems in Australia and have contained our water price increases below CPI over the eleven years since privatization. Our farmers are consulted on works programs, budgets, technology improvements and vote on changes to water prices and policies. That puts us in the best position to know what our irrigation community expect from the operator of their water delivery system. We have made every endeavour to adopt the objectives of the National Water Plan by choice and now that we can demonstrate that we are fully compliant with the objectives of the plan, we consider you should leave us to use our longstanding experience and record of success in water delivery to get on with the management of our business. If you are having difficulty with some irrigation infrastructure operators meeting the objectives of the plan, show some courage and sort them out. Do not add unnecessary administrative burdens to businesses such as ours that are prepared to be compliant. Jeff Parish Chief Executive Officer 9 May 2008 Copies to: Senator Penny Wong Malcolm Turnbull MP Senator Elect Nick Xenophon Patrick Secker MP Hon Karlene Maywald MP Mitch Williams MP 8`aiIUM X o "&''++15\ CJmH sH 5CJ\mH sH 5\mH sH 5CJ\mH sH 8_`ai45HIV m n L M X H4 & F^ & F$a$14z(nowx[\  h^`h & F p8^8^ & F & F^ & F !""##%%&&''))P*Q*+++,,- ^` & F`z`z ^` & F8^8 h^`h--J/K/L0M0Y0q0|0}000000011 ^`(1. 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