The ‘Strong foundations for Victoria's water: compliance, markets, water entitlements and oversight of the Water Grid’ initiative is delivering actions in Chapter 8 and Chapter 9 of Water for Victoria to ensure water is shared equitably and transparently across Victorian communities, the environment and the economy.

Chapter 8 contains actions to improve state-wide water resource planning, improve water resource information to support planning and decision-making, and enhance public reporting of water availability and use. Chapter 9 relates to the management and enhancement of Victoria’s water markets and grid.

The initiative includes development of a water grid oversight function and planning for future water grid augmentations. Priorities include:

  • Embedding the Water Grid Partnership and oversight of the grid as part of the sector’s broader planning and decision-making framework.
  • Reviewing the effectiveness of water markets across Victoria and identifying opportunities for future improvement.
  • Further developing policy positions on the merits of water markets in south-central Victoria and the further development of markets in unregulated systems.
  • Reviewing trade and operational rules for the Goulburn river in northern Victoria.
  • An integrated work plan to better understand, mitigate and manage water delivery risks in the connected water systems of northern Victoria, and to work with other states to consider how the changing operation of the River Murray will affect these risks in the future.

Further developing more accessible water market information and consulting with the community on options for greater water market transparency.

EC5 Expenditure to date

Program Title (EC5)

2020–21 Expenditure $’000

2021–22 Expenditure $'000

Strong foundations for Victoria's water: compliance, markets, water entitlements and oversight of the water grid

6,749 6,913

Compliance and interceptions: protect reliability of water entitlements and maximise water resources for regional business and communities

N/A 739
Resilient Water Markets, Regional Communities, and Infrastructure   3,586

Progress summary

Retail Entitlements and Markets

This initiative is a holistic program of work that the Retail Entitlements team will deliver across 2021 to 2024 by solving key issues in five areas of work:

  • Market Monitoring and Information
  • Governance, Licencing and Legislation
  • Declared Systems Reform
  • Murray Systems Management
  • Interstate sharing and intergovernmental commitments

Reliability of entitlements and access to water is enabled by a strong entitlement framework, the movement of water to the highest value use and the efficient and effective operation of competitive markets. This project enables water security through the equitable sharing of water between users, and the flexibility provided by markets and trade networks.

The team ensures the regulation and instruments supporting water ownership and trading are responsive and fit for purpose to make sure the system is efficient and certain to underpin economic certainty.

A critical component of this project is acquitting the final water recovery savings as part of the $2 billion Connections Projects so that 75 gigalitres (GL) of water can be provided to irrigators in the Goulburn Murray Irrigation District. This water is essential for the continued productivity of the region and irrigated agriculture jobs.

Summary of progress to date of EC5:

  • Implemented interim operating rules and trade rules for the 2021-22 water year, to prevent damage to the lower Goulburn River and ensure trade can be delivered within ecological tolerances, while final rules were under development.
  • Partnered with Traditional Owners, river operators, waterway managers, scientists and the community to undertake further analysis of the trade, operational, joint-venture, ecological, bio-cultural and recreational impact of the interim rules, which was publicly released.
  • Completed the regulatory steps to implement enduring restrictions on tagged water use to create a level playing field between different types of trade, ensuring continued regulatory coverage while long-term options were explored
  • Completed the regulatory steps to implement refined long-term Goulburn to Murray trade and operating rules to ensure trade is only allowed up to what can sustainably be delivered within the ecological tolerances of the lower Goulburn River.
  • In consultation with Victorian and Murray-Darling Basin Authority river operators, developed a joint operating plan for the lower Goulburn River for the 2022-23 water year, to give more certainty in river operations for the delivery of Goulburn inter-valley trade to meet traded demands.
  • Commenced a project to review and co-design renewed governance arrangements and increase opportunities for two-way learning for the next phase of implementation for the Goulburn to Murray trade review, with a focus on improving opportunities for Traditional Owner voices in operational decision making and knowledge sharing between Traditional Owners, scientists and government agencies.
  • Conducted targeted engagement with stakeholders, alongside the Murray-Darling Basin Authority, water corporations and Agriculture Victoria on managing delivery risks and published supporting material including fact sheets and reports with the latest information about risks.
  • Developed a River Murray Shortfall Response Plan with other River Murray states and the Murray-Darling Basin Authority which sets out the procedures to follow in the event of a shortfall to ensure a coordinated response across states.
  • Tested Victorian shortfall preparedness plans with a shortfall “drill” involving the Murray-Darling Basin Authority and other river Murray states.
  • Passed amendments to the Victorian Water Act 1989 to strengthen and clarify water delivery rights with the introduction of a Place of Take approvals framework.
  • Developed a plan with water corporation partners to the Place of Take approvals framework by July 2024, including the necessary policy, legislative and system changes.
  • Provided input into and influenced the development of a roadmap for water market reform in response to the Australian Competition and Consumer Commission Murray-Darling Basin Water Markets inquiry.

Water Grid Oversight

The Water Grid Partnership was formed in November 2018 to deliver actions in Chapter 9 Water for Victoria and it is playing a pivotal role in helping to inform and provide advice on future augmentation decisions.

This project is needed to:

  • Inform policy directions that impact decisions around major augmentations and how the water grid is used.
  • Identify augmentation options across the water grid that enable better water security through improved selection and delivery processes.
  • Ensure that barriers do not continue to emerge that impede the way water is transferred physically and legally. This will prevent water users managing their own risks and result in uneconomical infrastructure investments.

Summary of progress to date of EC5:

  • Work continued developing the Water Grid Plan (previously known as the Water Supply Readiness Roadmap), which is due for release in early 2023. The Water Grid Plan will outline the options, triggers/timing, and how water corporations and government will collaborate on future major supply augmentations (such as desalination plants) for the Central and Gippsland region.
  • This work was progressed through the (Central and Gippsland Region Sustainable Water Strategy) Urban Water Security Working Group, which concluded in the first half of 2022. New concepts and proposals from the development of the Water Grid Plan have been embedded in the Central and Gippsland Region Sustainable Water Strategy document (chapter 9), due for release in late 2022 – and are already having an impact on the sector.
  • This work has laid the foundations for new governance structures to help government make key urban water supply augmentation decisions. on regionally significant augmentations.

Water Market Reform

Water markets provide an important mechanism for flexible water sharing across Victoria and management of the increased water scarcity that is emerging. An effective market allows for the sharing of water security benefits in ways that are equitable, responsive and transparent. Water for Victoria (2016) commits the Department of Environment, Land, Water and Planning to undertake policy work to improve the effectiveness of water markets across Victoria.

Building on work already completed to deliver Action 9.5 and 9.7 of Water for Victoria this work is needed to:

  • Develop and implement water sharing arrangements in south central Victoria to improve water security outcomes for the region.
  • Implement changes to policy and rules around trading in groundwater and unregulated systems to enable water to flow to its highest value, while protecting the environment and third parties in the face of changing water resource conditions.
  • Monitor opportunities to improve water market effectiveness in western Victoria.

Summary of progress to date of EC5:

  • Work is continuing on the South Central Reforms program, which aims to optimise how  water and associated costs are shared between water corporations in the Melbourne grid and physically connected systems. This has involved working collaboratively with water corporations and other stakeholders to identify objectives, problems, options and how they will be assessed. The program is expected to deliver a recommended solution in 2023, for implementation in 2024-2025.
  • An action was developed for the Central and Gippsland Region Sustainable Water Strategy document around the creation of a South Central Pooled Resource – which is an element of the broader South Central Reforms program. This action is aimed at facilitating a more sustainable pricing arrangement which integrates desalinated water and surface water sources.
  • While a lasting reform is finalised, the program has supported short term priorities such as increasing security of water supplies for Gippsland Water’s Warragul Drouin system (an action arising through the Central and Gippsland Region Sustainable Water Strategy process).

Water Market Transparency

As the market price of allocation has increased, particularly in the northern Victorian regulated systems, communities have raised concerns about the transparency of water markets and how markets are operating for irrigators. The Government sought feedback on ways to improve market transparency during 2019/2020 and has committed to a range of actions based on community input including:

  • Publish the names of companies who own two per cent or more of water in a system on the Victorian Water Register. The government will also pursue legal changes to report the same information for individuals with greater than two per cent
  • Report on non-water users in the market by tracking how they use their accounts and pursue legal changes to allow publication of information about allocation accounts with more than 20 trades per year
  • Introduce new requirements to provide more clarity on different types of trade, so it’s clear what kind of purchase or transfer has occurred and at what price
  • List the names of water brokers who meet Government standards and auditing requirements associated with the use of Victoria’s water broker portal on the Victorian Water Register website.
  • Further actions were published on the water register website:
  • Explore options and pilot a central trading platform to improve transparency for irrigators about the price and availability of water in real time.
  • Provide clearer and easier to find information, including agricultural demand
  • Improving information sharing via the Victorian Water Register Website and enhancing the Water Market Watch app

Summary of progress to date of EC5:

  • Undertook the annual water broker audits for the 2019-20 and 2020-21 water years, and listed the names of the water brokers who meet Government standards and auditing requirements on the Victorian Water Register website;
  • Published the annual water trade report for the 2020-21 water year.
  • Improved water market transparency by:
  • Updating the price ‘widgets’ on the VWR website to split the River Murray price reporting into Zone 6 and Zone 7.
  • Publishing the names of companies who own two per cent or more of water in the largest water systems on the Victorian Water Register website;
  • Introducing new requirements to provide more clarity on different types of allocation trade, and made this information available to the public;
  • Supporting the process to amend the Water Act 1989  to make more information available to the public;
  • Supported Southern Rural Water’s assessment of current barriers to trade in the Macalister Irrigation District to see if the barriers could be reduced to promote more water utilisation and trade in the district.
  • Advocated for increased transparency of foreign owners of water entitlements; and
  • Supported Murray-Darling Basin governments to produce a practical, cost-effective water market reform roadmap for future water market reform and supporting its alignment with Victoria’s work program and advocating for reforms in the public’s interest.

Managing Victoria’s Water Sharing Framework

Water entitlements provide the transparent rule-based mechanism to apportion water between economic, community and environment uses and minimise adverse impacts on the environment. For economic users, such as irrigators, the entitlement is an asset that can be traded or mortgaged (in some cases) in the same way as land. Water corporations also trade water for urban supply purposes. Water resource planning and management establishes the rules that govern how entitlements are held, used and transferred between water users. This means the integrity of the entitlements framework is paramount.

This work program is focussed on maintaining the integrity of Victoria’s bulk entitlement framework and regulated water systems and is commencing work on emerging entitlement issues including water access for Traditional Owners, and water interception by plantations.

Summary of progress to date of EC5:

  • Granting of new bulk entitlements for Greater Western Water, South East Water and Yarra Valley Water to issue a combined 75 GL long-term average annual yield (LTAAY) share of water recovered through the Goulburn-Murray Water (GMW) Connections Project.
  • Set aside 1.36 GL (LTAAY) of additional water recovered through the GMW Connections Project for Traditional Owners and issued a further 681.6 ML (LTAAY) of entitlement to be distributed as part of the irrigators’ share.
  • Completed review of the past performance and management arrangements for the Latrobe Drought Reserve in collaboration with Southern Rural Water, and commencement of implementation of the recommendations to improve management outcomes for entitlement holders.
  • A number of Storage and Resource Manager re-appointments were made by the Minister in late 2021, including associated bulk entitlement amendments, progressing key commitments in Water for Victoria to ensure a strong and responsive water entitlement system.
  • Reviewed the Guidelines for Bulk Entitlement Metering Programs, with a revised guideline approved by the Minster for Water. The guideline was updated to reflect contemporary water management policy, practices and standards and to address specific issues identified by bulk and environmental holders during the review process.
  • Supported processes to improve Traditional Owner access to water in regulated surface water systems by seeking to address identified barriers in the entitlement framework.
  • Developed guidance on how licensing authorities should consider Traditional Owners when making decision on unallocated water as part of the Central and Gippsland Region SWS (in development).
  • Supported the Broken Review Project Steering Group to develop and undertake public consultation on draft proposals for the future management of water in the Broken River system.
  • Administered the development of the urban and rural water corporations’ water outlooks for 2022 and prepared the state-wide outlook – ensuring that the state’s water position and forward outlook is clearly accessible to the community.
  • Oversaw water corporation’s compliance with their bulk entitlements including review of annual reports and annual operating plans.

Licensing framework groundwater and unregulated systems

The Licensing Groundwater, and Unregulated systems team is responsible for:

  • Management of licensing policies that facilitate access, protect the security of licences and the environmental water reserve.
  • Review of trends in water use outside the entitlement framework and developing options to manage the risk to existing users and the environment, such as domestic and stock and small catchment dams.
  • Refreshing Victoria’s strategy for groundwater management and licensing reform to set clear direction and priorities for improvements to management of the resource.
  • Supporting the preparation and amendment of statutory management plans for unregulated and groundwater systems, inclusive of economic, environmental, recreational, social and cultural values of water.
  • Improving our knowledge of Traditional Owner interests in entitlements and addressing any identified barriers through increased participation of Traditional Owners in water resource planning and management. This work will be completed in partnership with other relevant teams in particular the Bulk Entitlements and Systems team.
  • In collaboration with rural water corporations, DELWP has identified priority areas of work under three outcomes to enable better management and licencing of Victoria’s groundwater resources to support a healthy environment, cultural and community values and the economy. Broader stakeholder engagement will occur from 2023 on the various programs of work and will continue over the next 8 years.
  • DELWP continues to support licensing Authorities and Traditional Owners as water is returned to Traditional Owners by way of take and use licences such as in the Fitzroy River.
  • Work has commenced on understanding of water use outside the licensing and entitlement framework with the objective of managing the risk for existing users and the environment.
  • A review of existing policies and guidance relating to take and use licensing has been undertaken to improve transparency of roles and responsibilities and improve communication of best practice approaches to making delegated decisions. The Meeting flow requirements for licensable farm dams Technical Guidelines were released
  • Review has commenced on the licensing framework to understand whether the framework remains fit for purpose and can continue to meet the needs of future users in a changing climate. Consultation on the licensing framework is expected to commence in 2023.

This work will continue to deliver on Water for Victoria (2016) actions 8.2 and 8.4.

Water compliance reform (Retail)

The water entitlement framework is the foundation for ensuring scarce water resources are shared equitably and transparently and enables lessons from the past to be applied as we prepare for the future. Government must maintain the rules and oversee the markets that determine how water is traded, ensuring they are fair, provide oversight of how water is transferred across the water grid, and drive compliance and enforcement to ensure confidence that water is fairly used across Victoria.

The objective of this project is to improve compliance and enforcement practices and governance across the State. This will ensure confidence in the water entitlement system and drive compliance and enforcement reform across the State and through Basin Plan commitments. This will be achieved through:

  • Water compliance reform, coordination and oversight activities to deliver a modern compliance and enforcement system.
  • Provision of a robust contemporary compliance and enforcement framework
  • Monitoring of water corporation implementation and capability.
  • Regular performance reporting to the Minister and the public.

Summary of progress to date of EC5:

  • Finalised and implementing a zero-tolerance escalation policy consistent with the recommendations from the independent Compliance and Enforcement Review (2020).
  • Delivered all Victoria’s actions required under the Murray-Darling Basin Compliance Compact, including annual reporting requirements for 2020/21, which are publicly available.
  • Implemented annual performance reporting on unauthorised take compliance for the six rural water corporations. The rural water corporations now report in their annual reports their performance against the targets for unauthorised take that have been set by the Minister.
  • Continued quarterly performance reporting on unauthorised take to the Minister.
  • Weekly and quarterly unauthorised take reports are now distributed to the rural water corporations and are now considered business-as-usual.
  • Co-ordinated three working groups and one Community of Practice with membership across six water corporations to share best practice and deliver key priorities in a collaborative way.
  • Facilitated the implementation of Penalty Infringement Notices (PINS) for Goulburn-Murray Water and Lower Murray Water as a tool for managing low volumes of unauthorised take. Also facilitated significant progress being made by the other four rural water corporations in be set-up to implement PINS.
  • Updated Victoria’s Compliance Communications Plan including establishing the PINs Communications Action Plan and related messaging and resources regarding the introduction of PINs to customers.
  • Produced and collated visual materials (e.g. Photos, drone footage and interview content) to compliment existing compliance communications.
  • Commenced the development of a compliance and enforcement training framework, to ensure consistent training and authorisation of authorised water officers in order to meet best practice standards expected from a modern regulator.
  • Finalised an online training module on issuing PINS and provided to Authorised Water Officers (AWOs). Introductory compliance and regulation training material was prepared to be included in an online training module to be developed in 2022-23.
  • Oversaw implementation of Victoria’s Non-Urban Water Metering Policy including establishing a non-urban metering working group with the rural water corporations.
  • Developed a tool to support the water corporations undertake a cost benefit analysis of telemetering meters in a consistent way.

Accounting for Water Recovery

DELWP must ensure that water recovery estimates are independently audited across Victoria according to expectations set out by the Minister for Water in the Water Savings Protocol (the Protocol). Verification of water recovery ensures the Minister can meet the obligations under the Water Act 1989 and ensures Victoria’s integrity in Victoria’s entitlement framework when issuing water entitlements from resulting water recovery.

The Water Recovery and Compliance team facilitates the independent audits of water recovery projects to confirm water recovery claimed by infrastructure investment, enabling fair and transparent issuing of entitlements. The team also tracks water recovery against the Murray-Darling Basin Plan, provides support for Basin Plan policy and develops policy related to water recovery across Victoria.

Summary of progress to date of EC5:

  • Confirmed the long-term water recovery achieved by the Connections Project:
  • Undertook final independent audit and verification of long-term water recovery. Confirmed that the Connections Project achieved its target of 429 GL long-term water recovery plus 4 GL of ‘over’ water recovery.
  • Reconciled the water recovered and translated into water entitlement products for issue.
  • Developed loss allowances to ensure that entitlements issued are commensurate with water recovered and the reduction in loss achieved by the project.
  • Developed loss allowances to facilitate the irrigator share distribution.
  • Supported resultant amendments for Goulburn-Murray Water’s Goulburn and Murray bulk entitlements.
  • Developed data cleansing programs, rules and governance for the issuing of the water shares irrigators.
  • Identified volumes recovered by respective traditional owner country.
  • Determined the water entitlements to be issued for the respective water recovery.
  • Worked with the Victorian Environmental Water Holder to finalise their water entitlements arising from the Connections Project to ensure equitable distribution of water recovery.
  • Facilitated the successful distribution of 77 GL of water shares and financial benefit to irrigators for the ‘irrigator share distribution’ including:
  • Supported 2 GL of the ‘over’ water recovery to be returned to traditional owners:
  • Audited ‘actual’ water recovery achieved by the Connections Project in 2020-21 and supported the distribution of water allocation to the Melbourne Retailers and to the Victorian Environmental Water Holder for mitigation water.
  • Supported the management and formal closure of Goulburn-Murray Water’s Goulburn and Murray offset accounts, to enable distribution of the financial benefit to customers.
  • Supported the formal review and implementation of Goulburn-Murray Water’s Goulburn revised bulk entitlement loss allowances.
  • Finalised a water recovery audit plan for the $177 million Goulburn-Murray Water water efficiency project and reached agreement with Goulburn-Murray Water.
  • Provided technical review and advice on water recovery estimates for the Lower Murray Water’s business case for a water efficiency project.
  • Confirmed water recovery for the Macalister Irrigation District 1A project and the Willang Yarn Balancing Storage.
  • Began the process to review and develop conversion factors for determining long-term water recovery in Southern Victoria.
  • Delivered various technical projects in support of water recovery projects and policies.
  • Confirmed Victoria’s water recovery for the Murray-Darling Basin Authority’s water recovery register for the Basin Plan.
  • Managed the Panel of Independent Water Recovery Auditors and Reviewers.

Page last updated: 09/10/22