ࡱ> ~!` -8bjbj\\ x>>-0nnnnnnn""""dj"TM2"""""$$$'M)M)M)M)M)M)M$NhBQ`MMn*1$"$*1*1MMnn""bM&3&3&3*1"n"n"'M&3*1'M&3&3JnnL"" P\z"L1J'MxM0MJ6Qb1Q,LQnL $_(&3* -$$$MMMM3$$$M*1*1*1*1""nnnnnn  Water Branch Water market rules Australian Competition and Consumer Commission GPO Box 520 Melbourne Vic 3001 15 August 2008 Public Submission Water Market Rules Position Paper Southern Riverina Irrigators 15 August 2008 Jennie Hehir CEO SRI RMB 3190 FINLEY NSW 2713 03 58832357 0428 832357  HYPERLINK "mailto:rayjen@mcmedia.com.au" rayjen@mcmedia.com.au 1. Background Southern Riverina Irrigators represents 1600 irrigation farm businesses within the mid Murray Valley in southern NSW. Irrigation water is supplied to these farms by Murray Irrigation Ltd (MIL) and each irrigation business is a member of MIL. Murray Irrigation diverts water from the Murray River under license from the NSW Government. The NSW Government in consultation with the Murray Darling Basin Commission determines the available allocation which is then administered by NSW State Water. Introduction As SRI represents the interests of the irrigators within MIL it will concentrate but not limit its comments to issues directly affecting the irrigators. SRI supports the need for standardisation and streamlining of water market rules to improve the working of the water market. It sees no good reason to pursue a process called transformation of water access entitlements that its members hold. The members of SRI require stability and certainty for their water access entitlements and can see no benefit in adding the transformation process. We have no evidence of excessive delay in processing water entitlement transfers at MIL. We believe that these moves undervalue what the water entitlement represents to our irrigators. Before the privatisation of MIL our irrigators had no property right to their water allocations. We understand that general security irrigation water up to that time was issued by a government regulation which could be altered or withdrawn without compensation. The conveyance loss allowance granted to MIL at privatisation is an essential part of our irrigators overall water entitlement package. ԭ should not interfere with MILs administration of this license. We believe there is some confusion between annual trades of water and permanent trades of water entitlements. The issue of timeliness is of most importance to annual trade and for the moment less important to permanent trade. For the record, annual trade is real water, the yield of water entitlements; permanent trade is the exchange of buckets either empty or full or somewhere between. We understand that this paper is limited to permanent trade, but reiterate the point that timeliness is not so critical for permanent trade, however that will change as technology improves. SRI protests the tight time frames involved in adequately responding to this paper. 2. SRI Responses: Box 1. SRI supports standardisation and streamlining but notes that accuracy is more important than timeliness when dealing with permanent trades/ transformation. SRI emphasises that water entitlements parallel land entitlements in that they are both valuable real property which may have large encumbrances attached. In the case of water entitlements this may include water debts to such institutions as Snowy Hydro. SRI wishes to note that MIL operates under the Corporations Act and ԭ cannot direct MIL to act in a way that would put MIL in conflict with that Act. SRI supports the direction of time limits but notes that the process is usually restricted by the provision of all required documentation and delays at state government departments. We have no evidence of significant delays within MIL. Point 13 under Application Process is not clear as to whom the information should be made available. SRI does not understand why these conditions only apply to irrigation infrastructure operators and not to government instrumentalities. Box 2. SRI is concerned that the water delivery rights outlined in the paper do not just give equal delivery rights to transformed water entitlement but may diminish the right of those water entitlements not transformed. SRI is concerned that the shareholders of MIL may be disadvantaged by these recommendations. We are of the view that shareholders choosing to transform their entitlements are seeking to move their entitlements outside the area of operations of MIL and thus these transformed entitlements should be subject to the same conditions as other entitlements outside the area of operations of MIL. SRI supports the right of its members possibly maintaining a preference in delivery rights ahead of water from off the MIL license. SRI supports the principle that new delivery contracts are substantially equivalent but not to the extent that shareholders of MIL could lose control over their own company. Box. 3. SRI notes there must be recognition of physical constraints to trade but that this may be addressed in the Water Trading Rules. SRI supports rules retaining minimum water holdings for stock and domestic purposes but do not believe that this should be restricted to state legislative requirements. SRI rejects the ԭs recommendation regarding conveyance losses. SRI is concerned that attempts to implement rules that encourage transfers may be just as damaging to the water market as rules which discourage trade. 3. SRI supports the present termination fee policy of MIL. SRI notes that the time may be opportune for the involvement of the Foreign Investment Review Board in the water market. SRI notes that the Victorian restriction on trade (4% rule) is apparently not covered by this paper. SRI recognises that cut off dates in relation to trading seasons are important in regard to the amount of water that may be in the bucket. To ignore this would be to ignore the reality that trade in water access entitlements includes the yield attached to that entitlement at the time of the trade/transformation. Box 4. SRI recognises the fundamental need for MIL to operate with the utmost security for all fees and charges. MIL was privatized on the basis of this security. The size of its operation and the number of shareholders determines the need to retain the utmost security at all times. SRI does not believe its members have been disadvantaged by its current security arrangements. It believes that diminution of these arrangements would disadvantage the vast majority of its shareholders. Box 5. SRI supports the concept that the water market rules should apply equally to all operators within the MDB. It notes that this level playing field is not presently apparent. In regards to implementation, SRI notes that if changes to the MIL constitution are forced by the ԭ the changes will require a 75% majority of shareholders to agree under corporations law. It is difficult to imagine shareholders voting for a change that would disadvantage them. SRI notes that the costs of implementation and monitoring/reporting should be funded by government and not MIL shareholders. Further comments Page 7. SRI notes that facilitation does not mean encouragement. Its supports improved mechanisms but does not support any requirement for MIL to encourage trade/transformation from its license. Page11. SRI rejects Mr Shippens assertion that MIL has eroded his property right. The fact is that MIL enhanced the property rights of all its shareholders at privatization and continues to retain that strength. Page 12. SRI supports consultation and notification to its irrigators by MIL. The question remains, what happens if shareholders reject the ԭs recommendations? 4. Page 17. SRI believes that the ԭ has failed to give sufficient weight to the issue of encumbrances attached to water entitlements. It notes there appears to be no reference to water borrowings such as the Snowy Hydro arrangements. 4.2.1 Para 1. Seems to relate entirely to annual trades, which are not covered by this paper. Page 21. SRI notes again that time limits are often impeded by failure to provide all documentation as well as external impediments, particularly state governments. Page 24. SRI supports MIL recovering its costs for any trade/transformation. Page 27. SRI cannot see any benefits to either its members or the water market from the introduction of transformation. Any benefits can be achieved by standardisation and streamlining only. This would alleviate the disadvantages and complications associated with the introduction of transformation. Page 28. SRI is not opposed to this prohibition but supports the right of MIL to have rules which benefit its shareholders. Page 31. SRI believes that the ԭ has failed to recognise the rights of irrigators not wishing to transform their water entitlements. It rejects the concept that transformed water entitlements should retain all the benefits of those not transformed. Page 36. SRI believes the ԭ does not understand the reasons for cut off dates and trading seasons. Page 40. SRI supports this recommendation. Page 43. SRI supports retentions for stock and domestic purposes on landholdings. SRI is unsure how transformation may affect funding of environmental activities related to Land and Water Management Plans (LWMP). Page 44. SRI supports water use being decoupled from where a water entitlement may sit. We recognise that environmental and usage rules should not be connected to the water access entitlement, but should relate to where and how water is used. 5. Page 45. As SRI understands transformation of a water entitlement moves that entitlement outside the district to a water access license. SRI rejects the assertion that transformed water entitlements can be sold within the district. SRI supports MILs ability to restrict trade within its own network. SRI further notes that yield from transformed water entitlements may be subject to restrictions on delivery within the MIL network in the same way as other water from outside the license is. Page 47. SRI notes that the conveyance loss allowance portion of MILs license at privatisation was attached to the landholdings as part of their overall water entitlements. This portion is now held in a separate license, but the water entitlements attached to this license are held by the shareholders. This portion of the entitlements must remain attached to MIL and cannot be transformed or traded. Page 48. SRI supports the recommendation. Page 49. SRI is not opposed to the 4% limit on permanent trade out of an irrigation district. It notes that the application of this cap is unequal across jurisdictions. These cap rules are skewed towards restricting trade in Victoria but have no apparent affect in NSW. SRI believes that further definition is required. Page 51. SRI believes that the recommendations on cut off dates and trading season limits should be delayed. The elimination of these restrictions may be possible when effective modern trading platforms are in place. It is not presently practical to eliminate this restriction. Page 56. SRI supports MILs need for security. Page 59. Part 1. SRI is unsure of a definition of an original water access entitlement. Permanent water trade has been occurring since approx 1993 and any reference to original water entitlements is now meaningless. Part 2. Current arrangements for security at MIL do not restrict trades. For water entitlements transformed, SRI assumes that it would be the yield from these entitlements that would be transferred for use within MIL. It is unclear whether the ԭ believes that fixed charges from MIL would be charged to transformed water entitlements that would be then attached to another WAL. 6. Page 61. SRI accepts a charge over 20% of an irrigators access entitlement may be sufficient, however this paper does not set out what charges MIL may exert on another irrigators WAL. Page 64. SRI is concerned that diminution of security may jeopardize its members if a large proportion of irrigators remain unfinancial. Page 66. SRI finds it is hard to imagine MIL continuing to deliver water to unfinancial irrigators. Page 69. SRI supports this view. Page 72/74. SRI is of the view that transition to water market rules and implementation along with reporting requirements should be funded by government. 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