ࡱ> ;=:!` *bjbj\\ ;8>>!u` ` ` 8  ]\  $h!l   ^   :, ܀` H^< -0]FR^D   ] ` `   PUBLIC SUBMISSION TO WATER MARKET RULES ISSUES PAPER APRIL 2008 BY THE TRANGIE NEVERTIRE IRRIGATION SCHEME CO-OPERATIVE LTD 9 MAY 2008 BACKGROUND This submission is made by the Board of the Trangie Nevertire Irrigation Scheme Cooperative Ltd (TNIS) on behalf of its 67 irrigating members and 22 stock and domestic members. The TNIS is a Joint Water Supply Scheme that was privately funded in the early 1970s by the Co-operative members to enable a pump site and some 230 km of channels and associated structures to be constructed. These works supply water from the regulated section of the Macquarie River to members farms in the Trangie and Nevertire districts of central western NSW. The TNIS relies on the combined strengths of its members to allow it to operate, with costs and transmission losses shared equally between them regardless of their geographical location within the system. It is a co-operative by its nature as well as by name, and this principle has allowed members to irrigate where costs and transmission losses would have made it impossible for any individual to irrigate alone. THE ISSUES FOR TNIS IN RELATION TO WATER MARKET RULES The difficulty for the TNIS under these proposed Water Market Rules is to work out a procedure that is fair and equitable to members who wish to transform their Water Access Licence (WAL) and remove it from the system, without disadvantaging those members remaining .The removal of WALs from the Scheme will affect the remaining members in three ways: Increased Costs. As the cost structure of the TNIS is largely fixed cost based, any reduction in water entitlement will mean these costs will need to be levied at a higher rate over the remaining members. There will be only small cost savings to the Scheme when some members remove their WALs, depending on their location within the system, or potentially increased costs if redundant structures and earthworks need to be removed. A reduction in the volume of water pumped annually will also reduce the economies of scale currently enjoyed by members, increasing costs for the remaining members. A system of termination fees need to be implemented to charge a capital amount against each WAL exiting the Scheme so when invested will cover the ongoing liability for water access charges that were agreed to when each member signed up to our constitution. Alternatively, if a member removes his WAL from the Scheme but wishes to retain his delivery right and pay the associated monthly access charges the TNIS would require a bank guarantee or similar to replace the security of control of that WAL which the Scheme previously had. Reduction in the loss pool. Currently all irrigator members contribute a proportion (around 20%) of their available water allocation to cover the transmission losses during the irrigation season. This is because WALs are owned at the river but delivered and charged for at the farm gate, the difference being the transmission losses. Unlike many of the formally Government-owned water operators, the TNIS has no loss account to allow for these transmission losses. Within the transformation process there needs to be a conversion factor applied to the exiting WAL so that the water previously applied against transmission losses remains within the Scheme to cover the departing members share of pooled losses. Risk of stranded assets. Given the geographic spread of our members it is quite likely that we will see some members marooned at the ends of the channel system when the WALs upstream have been transformed and moved off the Scheme, making it impossible to efficiently and cost- effectively supply water to the remaining member. That member would find himself in the unfair position of owning a WAL but being unable to utilize it within his farm, making the investment in his irrigation infrastructure redundant through no fault of his own. These third-party issues need to be resolved, potentially by a levy on departing WALs to allow structural adjustment to occur within the TNIS system. OTHER ISSUES Increased administration and legal costs to comply with regulatory authorities. The Trangie Nevertire Irrigation Scheme is very small in terms of members (89) and water entitlement (67000 Ml) when compared with most of the other irrigation infrastructure operators within the Murray Darling Basin. We operate with an unpaid Board, one office clerk and two field operators. The changes contained within the Water Act 2007 mean that we will be forced to radically change the Constitution and rules under which we have successfully and harmoniously operated under for the last 37 years. This will take substantial time and cost, as we will need to outsource this procedure and ask that time be allowed for smaller operators such as ourselves and the other similar schemes in the Macquarie Valley to adapt to these legislative changes and ԭ rules. The Pace of Change As explained above, the transformation of members entitlements and their subsequent removal from the Scheme will have a profound impact on the core structure of TNIS. These issues will take time and money to adjust to. To allow this to happen in an orderly manner a cap needs to be set on the volume of water able to be transformed and externally traded in any water year from within the TNIS. Socio-economic effects on the local communities. Small towns such as Trangie, Nevertire and Warren have been hard hit during this ongoing drought, with much reduced economic activity and associated employment. Removal of WALs from the off-river Schemes within these irrigation communities will hinder their recovery, particularly where the transformed WALs are sold to Governments who then remove them from economic production. The long term effects on these communities will be devastating, with severe third-party effects on agricultural contractors and suppliers extending right across these communities. WATER MARKET RULES The following are core needs of the TNIS that need to be embodied within the Water Market Rules: The right for off-river schemes such as TNIS to charge a termination fee of 15 times our annual Operating, Maintenance and Capital contributions charge (water access charge) against members who transform their water entitlement, as well as other costs incurred by the TNIS in decommissioning redundant assets. The right to apply a conversion factor against WALs being transformed so as to leave behind the water previously deducted to cover that members share of combined transmission losses. A levy on transformed WALs to deal with stranded assets and structural adjustment within the TNIS. A cap of 4% of total water entitlement of each infrastructure operator that can be transformed" in any one water year, for at least the next 7 years. Time and assistance for small infrastructure operators such as TNIS to adapt to the Water Act 2007 and the Water Market Rules, possibly staging their introduction over time. CONCLUSION The members of the Trangie Nevertire Irrigation Scheme Co-operative thank the ԭ for the opportunity to comment on this Water Market issues paper and look forward to further input as this process proceeds. Anthony P Quigley Mobile 0419 297047 On behalf of Trangie Nevertire Irrigation Scheme Co-operative Ltd.      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