ࡱ> BDA!` .bjbj\\ 4B>>&llll$$ D$Ohsss.sssV 02lln~ 0 v,M `MMsi   ll TRANGIE NEVERTIRE IRRIGATION SCHEME PO BOX 20, TRANGIE, NSW, 2823 PHONE: 0268887335 E-MAIL:  HYPERLINK "mailto:tnis@bigpond.com" tnis@bigpond.com PUBLIC SUBMISSION TO WATER MARKET RULES POSITION PAPER AUGUST 2008 BY THE TRANGIE NEVERTIRE IRRIGATION SCHEME CO-OPERATIVE LTD 15 AUGUST 2008 Background This submission is made by the Board of the Trangie Nevertire Irrigation Scheme Co-Operative (TNIS) on behalf of our 67 irrigating and 22 Stock & Domestic members. As stated in our previous submission, we are a privately owned and operated joint Water Authority operating in the lower Macquarie region of central NSW. Focus The focus of this submission is to help achieve a set of water trading rules that will allow those members wishing to transform and exit the TNIS to do so without adversely affecting those members and the co-operative who wish to remain as irrigators. The foundation stones of the TNIS are that pooling of costs and conveyance losses have allowed members to irrigate together where it would have been impossible as individuals. The Issues The issues from the Water Trading Position Paper that concern the TNIS and its members are: Conveyance losses It is noted on page 47 of the position paper that the ԭ acknowledges the differences between the former NSW Government schemes (principally Murray Irrigation Ltd, Coleambally, Murrumbidgee and Jemalong) who were granted a Conveyance Loss Account (in addition to their irrigation entitlements )by the NSW Government upon incorporation, and the remaining privately owned and operated schemes who have never had loss accounts .These privately built schemes funded their conveyance losses out of their irrigation entitlements. The effect of the proposed rule Operators must not restrict the transformation and/or trade of a portion of an irrigators entitlement for the purposes of covering conveyance losses therefore has completely different implications, depending on whether schemes have been granted conveyance loss accounts. As stated above, one of the basic principles of the TNIS and similar private schemes is that members share equally in conveyance losses regardless of the distance from the pump site. The TNIS believes that to achieve a level playing field with the ex-Government schemes it will need to apply to the NSW Government to create a Conveyance Loss Account to be owned by the Co-Operative. TNIS would envisage a system where continuing members of the Scheme would contribute water annually to this account to cover their share of the actual losses, as historically has been our practice. Those members wishing to transform their entitlement would contribute a proportion of the amount being transformed at a rolling average of the historical annual conveyance losses over the past 10 irrigation seasons, ignoring very low or zero allocation years. This allows for a potential reduction in contributions over time as our proposed Modernisation Plan is implemented. This is really the water parallel to termination fees for transforming members, where a capital sum of water is left to cover forward conveyance obligations of transforming members, while remaining members continue to contribute on an annual basis. Termination Fees The TNIS continues to support the MDBC Schedule E Protocol on Exit and Termination Fees, which allows schemes to charge a termination fee of fifteen times the current annual access fee upon surrender of a delivery entitlement. This capital sum, once invested, will substantially cover the ongoing share of the schemes operating costs that would have been paid annually by the terminating member. Without such a termination fee, the remaining members would be saddled with paying higher access fees every year to cover the departing members share. For example, if one third of members transformed and exited the scheme the ongoing access fees for the remaining members would need to increase by 50% to cover the shortfall. As our ongoing capital replacement and upgrade program has largely been put on hold due to the ongoing drought and subsequent zero water allocations, we believe a component of this and the capital cost of decommissioning and removing redundant channel sections and structures should also be included in the termination fee. It should not be left to the remaining members to shoulder these extra costs due to other members departure. The Need for Security over Access Fees Small irrigation schemes such as TNIS are extremely vulnerable to cash flow effects of the non payment of access fees by members. At present this risk is secured by internal rules restricting any water use or transfer of any type once a member reaches 90 days in arrears. Once irrigation entitlements are transformed off the TNIS WAL, this security would no longer be available particularly where 100% of the entitlement is transferred. This represents an unacceptable credit risk to TNIS, and could lead eventually to insolvency of the Scheme if a group of members transformed their water and refused to pay their ongoing access charges. The rules proposed in the position paper do not adequately protect the TNIS against this risk. The reasonable grounds test for schemes to require security leaves a departing member a loophole to avoid paying a termination fee where an irrigator has been a member for more than 3 years and has not been in arrears on his access charge for more that 60 days or more than one occasion in the last 3 years, then the Scheme is unable to withhold consent for transformation and trade. Once this transformation has occurred and the member fails to pay their access fee then it is very difficult for the scheme to enforce payment particularly if the member subsequently sells his transformed entitlement and doesnt irrigate any further. TNIS believes that if a member transforms 100% of his entitlement, then they should automatically be required to pay termination fees. This removes the huge unsecured risk to TNIS of a transformed member failing to meet his obligations to the rest of the members, and removes any doubt about him remaining a bona fide irrigator on the scheme. The scheme would still be prepared to pump and deliver temporary transfer water to him at our contract pumping rate providing that it was physically possible to do so. Where a member transforms up to 80% of their entitlement, TNIS believes the remaining water is sufficient security, but above this level (80-99% transformed) security as either a cash deposit or bank guarantee of 100% of the applicable termination fee is required. The position paper rule of 50% security is inadequate on small schemes where resources are limited to withstand the cash flow shortfall and initiate debt recovery. Time Allowed for Transfers The changes brought about by the NSW Government by the issue of Water Access Licences (WAL) has made transfers much more difficult and time consuming for TNIS. Formerly, the Joint Water Authority was held by the TNIS Co-Operative with each members interest noted. This allowed the Board to deal with transfers on behalf of members. Under our (yet to be issued) WAL ,all members are listed as owners of the WAL and Dept of Water and Energy requires more than half of these owners and their financiers to sign every transfer form. This amounts to some 60 signatures to be collected, assuming that members are prepared to sign the transfer, and is beyond the power of the Board to be responsible for. Some banks may be reluctant to sign transfers where they may be unsure of the legal and security consequences of doing so. The time limits on transfers in the position paper are therefore almost impossible for TNIS to meet, given the NSW Dept of Water and Energy requirements. Third Party Implications As stated in our introduction, TNIS is committed to a process where members who wish to transform and exit the Scheme can do so without adversely affecting the remaining members and the Co-operative. TNIS is disappointed that the position paper has not been written on a fair and equitable basis, as it advances the cause of those members transforming over those members remaining. This could lead to windfall gains to transforming members if they are allowed to transform all of their at river rather than their farm gate entitlement. Issues such as stranded assets caused by members being marooned on channel sections where the other members have transformed and exited, ongoing problems of maintaining underutilized assets and the costs of decommissioning of such redundant channel sections have not been dealt with. TNIS believes we need a fair and equitable set of water market rules to allow transformations without unduly adverse effects on remaining irrigators. If the ԭ and the Minister for Climate Change and Water do not provide them, then it will be undoubtedly up to the Supreme Court to decide them. Conflict of Interest TNIS suggests that the Minister for Climate Change and Water has a substantial conflict of interest in this issue. On one hand, the Minister is responsible for making the Water Market Rules The Act gives the Minister for Climate Change and Water the role of making water market rule (page x). On the other hand, her Department is the one tasked by the Commonwealth Government to purchase water entitlements under the Commonwealth Water Buy-Back, and are currently the major purchaser of any water for sale within the Murray-Darling Basin. This represents a clear conflict of interest as the freeing up of Water Market Rules are in the Departments financial interests in terms of its water purchases. The TNIS thanks the ԭ for the opportunity to comment on this position paper and looks forward to further interaction as we move towards a workable set of Water Market Rules. 78_`& ' ( 3 u { l , 7 8 > O Z \ h 6+6kqs|ƼhoWh*6hoWhY6h^yhYhVh*hEkhYhfhX5h*4h:DhXhEkhX5>* hu5>*huhR5 hR5huhu5 hu5h]9hu0JjhuUhRhu2$C ' ( 3 4 t u { | + , 7 8 gdX & FgdX $da$gdRdgdu d^gdu.mn45JKtu gd0$gdzh & FgdzhgdX|'nr%):NXao: ;DU\IMt@N]tǿϻǿǷ׷Ƿhfh0$6hh0$hRhfhzh5hzhhh~hoWh*hYh:Dh*4hfh*45hfh5 hR5hYC7# !%!W![!s!!!!!!" "E"["\"a""""""" ##{############$$i%j%%%%%¾ƺʮʮ־➪šh:chVhkmFhoWhoW6hhEkhfh*5hzhhVh:Dh*4h*hWKhohoWhkC hRh 1h0$hfh*46hfh0$6 h 16; """""G#H####%%&&&&e'f'(()))gdqgdRC & FgdRCgd* & FgdzhgdXgdzhgd0$%%%%&&&&()>)E)f)s)))(*++++>+X++++++++++9,:,D,E,,,,,- ------.ܼh@~hqh!6hPhPh8hfh!5h!hkmFhqhfhRC5hRChzhhEkh:ch/)+++++E,;-<---.gd! & Fgd!gdRC 21h:pWw . 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