Introduction

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

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

6,749

Summary of progress in Year 1 of EC5:

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 in Year 1 of EC5:
  • Developed and consulted on options for Goulburn to Murray trade and operating rules through a regulatory impact statement process, assessing economic, social, environmental and cultural impacts of potential changes
  • Introduced new interim operating rules and trade rules to prevent damage to the lower Goulburn River and ensure trade can be delivered within ecological tolerances
  • In consultation with other jurisdictions, developed a joint operating plan to give more certainty in river operations for the delivery of Goulburn inter-valley trade to meet traded demands
  • Secured Commonwealth funding to undertake a feasibility study investigating moving privately owned irrigation pumps from within the channel of the lower Goulburn River to the top of the bank, to give more flexibility in river operations
  • Implemented interim 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
  • Released a joint government report on Managing Delivery Risks in the River Murray that presents key findings from recent studies about these risks and the actions needed to support governments and water users to manage them.
  • Conducted targeted engagement with stakeholders, alongside the Murray-Darling Basin Authority and other states as appropriate, 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
  • Provided input into and influenced the Australian Competition and Consumer Commission Water Markets inquiry and the review of basin plan trading rule 12.02.

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 in Year 1 of EC5:
  • The Water Grid Partnership has transitioned to the Central and Gippsland Region Sustainable Water Strategy Urban Water Security Group, with a focus on grid and augmentation planning across this area.  Proposed reforms from this work include the development of the Water Supply Readiness Roadmap approved by the Sustainable Water Strategy (SWS) Consultative Committee for inclusion in the draft SWS.  The Roadmap aims to improve the decision making around readiness and delivery of water supply augmentations.
  • Supporting water corporations across the state on readiness and augmentation planning work, particularly through Urban Water Strategies and updating Drought Preparedness Plans.
  • Release of second Biennial Statement for the Victorian Water Grid, a snapshot of Victoria’s current and emerging water security position.  The second Statement was published as a series of online interactive dashboards that visualise Victoria's water resources and encourage audiences to engage and interact with the information most relevant to them. The release of the Statement meets Water for Victoria (2016) Action 9.1. This year’s Biennial Statement has a strong focus on challenges to Victoria’s water security and the role the grid can play in addressing these.

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 in Year 1 of EC5
  • Assessed the feasibility of further developing the urban water market in south-central Victoria and established that the fundamental conditions for an effective urban water market do not exist in south-central Victoria. This completes Action 9.5 from Water for Victoria.
  • Developed a set of proposed reforms to the entitlement and market arrangements for urban water in south-central Victoria. The proposed reforms are designed to improve water sharing and security outcomes for the region.
  • Reviewed the Minister for Water policies for take and use licences and proposed changes to improve trade in unregulated and groundwater systems.
  • Developed a proposal for improving communication of rules in unregulated surface water and groundwater systems (part of Action 9.7 from Water for Victoria).

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 in Year 1 of EC5:
  • Listed the names of the water brokers who meet Government standards and auditing requirements on the Victorian Water Register website;
  • Published the names of companies who own two per cent or more of water in the largest water systems on the Victorian Water Register website;
  • Introduced new requirements to provide more clarity on different types of allocation trade, and made this information available to the public;
  • Supported the process for legislative change to make more information available to the public;
  • Advocated for increased transparency of foreign owners of water entitlements; and
  • Responded to the ACCC Murray Darling Basin water markets inquiry, demonstrating 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 in Year 1 of EC5:
  • Significant progress on the reappointment of storage manager including development of the proposed approach and consultation with storage managers and other entitlement holders on the form of the appointed.
  • Commenced the review of the Latrobe Drought Reserve
  • Amended Goulburn Murray Water’s Goulburn Bulk Entitlement to enable customers to be supplied with water from the Mitiamo pipeline from July 2021
  • Amended Goulburn Murray Water’s Goulburn and Murray Bulk Entitlements to implement the accounting and entitlement arrangements to support the future decision to distribute water to irrigators as part of the Connections program.
  • Developed a proposed policy position on the impacts of water availability by plantations for the draft Central and Gippsland SWS (in development), which is supported by key stakeholders.
  • Administered the development of the rural water corporations water outlooks for 2021 and contributed to the development of the state-wide outlook – to ensure the state’s water position and forward outlook is clearly accessible to the community.
  • Developed draft updated Guidelines for bulk entitlement metering programs.
  • 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.
Summary of progress in Year 1 of EC5:
  • A Community of Practice (CoP) has been established with rural water corporation representation to co-design a reform program that delivers a contemporary groundwater management strategy. Work on identification and articulation of issues to address as part of strategy development is well advanced through two meetings of the CoP with support from within WCG through an internal working group. Broader stakeholder engagement on this work will take place in 2021-22.
  • Planning for work to develop an understanding of water use outside the licensing and entitlement framework is underway with the objective of managing the risk for existing users and the environment.
  • Planning work has commenced to develop and improve licensing policies that facilitate access, protect the security of licences and the environmental water reserve and support increased access to water for Traditional Owners via the entitlement framework.

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 in Year 1 of EC5:
  • 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.
  • Reviewed current compliance performance reporting arrangement across six water corporations with rural customers to identify areas for improvement and efficiencies.
  • Delivered all Victoria’s actions required under the Murray-Darling Basin Compliance Compact, including annual reporting requirements for 2019/20, which are publicly available.
  • Implemented recommendations from the independent Compliance and Enforcement Review (2020), including development of a zero-tolerance and escalation policy on unauthorised take.
  • Continued quarterly performance reporting to the Minister.
  • Oversaw implementation of Victoria’s Non-Urban Water Metering Policy.
  • Co-ordinated three working groups with membership across six water corporations to share best practice and deliver key priorities in a collaborative 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 her 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 in Year 1 of EC5:
  • Delivered the 2019-20 audit of water recovery for the Connections Project.
  • Delivered the Water Recovery Project Plan for the Connections Project Irrigators’ Share Distribution Project including:
    • successfully reconciling the volume of water recovery to be issued
    • developing the loss allowances to facilitate the Irrigators’ Share Distribution
    • supporting resultant amendments for Goulburn-Murray Water’s Goulburn and Murray bulk entitlements
    • scenario modelling for the Goulburn and Murray offset accounts.
  • Delivered the review of Murray loss allowances in partnership with Goulburn-Murray Water.
  • Delivered various technical projects in support of water recovery projects and policies.
  • Managed the Goulburn and Murray offset accounts, in partnership with Goulburn-Murray Water
  • Provided advice and support to Southern Rural Water, Lower Murray Water, Goulburn-Murray Water and across Water and Catchments Group in development of business case estimates and funding agreements for water recovery projects across Victoria.
  • Liaised with the Murray-Darling Basin Authority confirming water recovery volumes against Victoria’s Basin Plan water recovery targets.

Page last updated: 16/09/21