Review of the Murrumbidgee inter-valley transfer (IVT) application and assessment approach - Issues and options paper for public consultation
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Review of the Murrumbidgee inter-valley transfer (IVT) application and assessment approach Issues and options paper for public consultation July 2021
Contents Contents 1 Summary 2 Potential outcomes 2 Scope of the issues and options paper 2 Process 3 How to provide feedback 3 Timeline 3 Treatment of information 3 Background on the Murrumbidgee IVT 4 NSW Government policy 4 WaterNSW management of the IVT trade 4 Recent Murrumbidgee IVT application statistics 5 Issues with the current trade application and assessment approach 7 Ensuring equity of access to IVT capacity 7 Maintaining efficient processes for market participants and WaterNSW 8 Improving the transparency and predictability for water market participants and the public 9 Options for alternative application and assessment approaches 10 1. Timing and notice of opening 10 2. Eligible applications 11 3. Processing order 12 4. Improving transparency 13 5. Alternate mechanisms 14 Principles for assessing the different options 14 Ensuring equity of access 14 Maintaining efficient processes for market participants and WaterNSW 15 Improving the transparency and predictability for water market participants and the public 15 Attachment A – Murrumbidgee IVT statistics 15 Murrumbidgee IVT | Issues and options paper | July 2021 1
Summary
WaterNSW is responsible for the administration and management of the trade processes that
facilitate inter-valley transfers (IVT) between the Murrumbidgee and Murray systems.
Due to changing patterns of water usage, increased and more sophisticated approaches to
water allocation trading in the southern connected Basin and the changing expectations of
water market participants, WaterNSW is reviewing the current arrangements for the receipt
and processing of the trade applications for access to Murrumbidgee IVT capacity.
WaterNSW has prepared this options paper to invite feedback from water market
participants. It is structured as follows:
1. Background on the Murrumbidgee IVT application process,
2. Issues with the current trade application and assessment approach,
3. Options for alternative application and assessment approaches, and
4. Principles for assessing the different options.
Potential outcomes
This review may lead to a range of outcomes, such as:
• Improved or streamlined application process for water users to access Murrumbidgee
IVT capacity, and
• Improved transparency for market participants.
Scope of the issues and options paper
This review is focussed on issues and options relating to the current application process and
its administration. The review is not considering changes to the NSW Government’s IVT policy
or underlying market architecture. These broader market architecture questions have been
raised by the Australian Competition and Consumer Commission (ACCC) in its recent
Murray-Darling Basin water markets inquiry – final report (ACCC Report) 1, however this paper
assumes that the existing policy settings will remain in place – noting that any changes are a
matter for the NSW Government to decide in due course.
1 https://www.accc.gov.au/focus-areas/inquiries-ongoing/murray-darling-basin-water-markets-inquiry
Murrumbidgee IVT | Issues and options paper | July 2021 2Process
WaterNSW invites written submissions to this issues and options paper. You are invited to
provide your feedback on any aspect of this paper, identify your preferred (or non-
preferred) options and provide any suggestions for options that have not been identified in
this document.
How to provide feedback
You can provide your feedback to WaterNSW by completing the feedback form at
waternsw.com.au/ivtfeedback by 23 August 2021.
If you have any queries about this paper, the process or have issues submitting feedback,
please contact WaterNSW on 1300 662 077 or email Customer.Helpdesk@waternsw.com.au.
Timeline
The dates below are indicative. WaterNSW will provide updates on its website as the review
progresses.
Commencement date Indicative date
Release of Issues and Options Paper Wednesday 28 July 2021
Due date for feedback in response to the Issues and Options Monday 23 August 2021
Paper
Release of consultation findings September 2021
New application and assessment approach implemented (if December 2021
changes are deemed necessary)
Treatment of information
Submissions will not be displayed on the WaterNSW website. However, all submissions will be
considered and listed in the final report, unless the author requests that it be kept
confidential. Any request for confidentiality will need to be agreed with WaterNSW.
Murrumbidgee IVT | Issues and options paper | July 2021 3Background on the Murrumbidgee IVT
NSW Government policy
The NSW Government Department of Planning, Industry and Environment-Water (DPIE-Water)
is responsible for setting the management policies for the operation of the Murrumbidgee
IVT, as detailed in the relevant water sharing plans and trade rules. The WaterNSW website
provides an overview of the current NSW Government policy for the management of the
Murrumbidgee IVT.2
In summary, those policies are:
1. There is a Murrumbidgee IVT account that keeps track of net allocation trade to and
from the Murrumbidgee valley.
2. A positive IVT account balance means that there is net trade out of the valley – i.e.,
water currently sits in Murrumbidgee storages for delivery out of the valley.
a. The maximum balance for the Murrumbidgee IVT account is + 100 GL.
b. This is the volume of water that can be physically transferred out of the valley
via Balranald in one year without incurring excessive transmission losses.
3. A negative IVT account balance means that there is net trade into the valley from
downstream.
a. A negative balance is not generally allowed as water cannot be physically
delivered upstream from the Murray to the Murrumbidgee.
b. Therefore, the minimum balance for the Murrumbidgee IVT account is 0 GL.
WaterNSW management of the IVT trade
WaterNSW is responsible for implementing the NSW Government’s Murrumbidgee IVT policy
settings by managing the trade processes and river operations that result in increases and
decreases in the IVT account balance – within the set policy limits of 0 – 100 GL.
The WaterNSW website provides an overview of the current ‘first come, first served’ trade
processing arrangements.3 In summary, those arrangements are:
1. Trade opens and closes when the following IVT account balance triggers are
reached:
2 Refer the ‘Background’ section of https://www.waternsw.com.au/customer-service/ordering-trading-and-
pricing/trading/murrumbidgee
3 Refer the ‘Murrumbidgee IVT trade processing arrangements’ section of https://www.waternsw.com.au/customer-
service/ordering-trading-and-pricing/trading/murrumbidgee#stay
Murrumbidgee IVT | Issues and options paper | July 2021 4a. Trade out: opens at 85 GL and closes at 100 GL
b. Trade in: opens at 15 GL and closes at 0 GL
2. The WaterNSW website is updated at 9am (NSW time) each business day morning
giving the latest IVT account balance.
3. When the WaterNSW website indicates that trade is open, trade applications can be
lodged electronically (by email or fax) from 10am (NSW time) on that day.
4. WaterNSW processes trade applications based on the order in which WaterNSW’s
systems identify those applications as having been received.
5. WaterNSW continues to process trade applications until the IVT account limit is
reached (100 GL or 0 GL).
6. The trade that causes the limit to be reached and those queued behind cannot be
approved until capacity becomes available in the account.
7. The WaterNSW website is updated to indicate when the limit is reached and trade is
closed (however applications will be accepted into a pending queue until midnight
that day).
8. Information about the ‘queued applications’ is displayed on the WaterNSW website
and these applications are returned if they cannot be processed within 7 days of
trade closing.
9. After 7 days the queue is cleared on the basis of order of receipt, size of the
application and any new availability in the IVT account (e.g. due to water delivery to
the Murray or back-trade), which means that some smaller applications may be
processed before the process is completed.
The ‘first come, first served’ arrangements have been in place since the 2016-17 water year,
when DPIE-Water (then DPI-Water) reviewed and amended the previous ‘ballot-based’
trade application and assessment process.
Recent Murrumbidgee IVT application statistics
WaterNSW has provided a summary of the application statistics for the past 6 months in
Attachment A to this Issues and Option Paper. In summary, Attachment A highlights:
1. The level of demand for IVT trade opportunities – noting the large ‘over-subscription’
on:
a. 5 January 2021 when 10 applications were registered out of the 333
applications that were received, resulting in 40.7 GL being processed (refer
slide 3). Of the ten successful applications, 5 trades totalling 27.2 GL were
processed when the IVT opened, a further 42 applications were placed on
Murrumbidgee IVT | Issues and options paper | July 2021 5the IVT trade queue and an additional 5 trades totalling 13.5 GL were
processed over the following 7 days before the IVT queue was cleared.
b. 15 March 2021 when 12 applications were registered out of the 307
applications that were received, resulting in 30.6 GL being processed (refer
slide 6). Of the 12 successful applications, 3 trades totalling 5.7 GL were
processed when the IVT initially opened. The next trade in the queue which
totalled 14.864.7 ML, if processed, would have taken the balance over the
100GL limit. At this point the IVT was closed and all registered trades were
placed on the IVT trade queue. Over the following 7 days, as capacity
became available in the IVT, 9 more trades were processed. This large trade
was processed 2 days after the IVT closed which is the reason why on this
occasion more water was traded from the queue than in the original IVT
window.
2. The large number of ‘invalid’ trades, being those applications that either arrived
before 10am, or were the subsequent copies of an application (i.e. multiple copies
are sent in an attempt to be as close to the 10:00 am opening as possible).
3. The variability in demand for IVT trade opportunities throughout the water year –
noting the contrast between the significant oversubscription and rapid close on
5 January 2021 and the IVT remaining open for 25 days after opening on 10 May.
4. The range of successful trade volumes:
a. For example, ranging from 10 GL to 41 ML on 5 January - which is a product of
only smaller applications being able to fill the final small balances without
going over the limit.
b. Typically being between 1 – 10 GL during the four openings in January,
February and March, but generally lower later in the season – which may
indicate bunding of applications.
c. Some large applications being successful, such as 10 GL on 5 January,
approx. 15 GL on 15 March and approx. 13 GL on 13 April – which again may
indicate bunding of applications.
Murrumbidgee IVT | Issues and options paper | July 2021 6Issues with the current trade application and
assessment approach
In the five years that WaterNSW has been responsible for implementing the current trade
processing arrangements, it has become aware of several issues that have prompted the
development of this review.
Notably, water markets have evolved over this time and market participants expectations
have changed. These changes have highlighted several issues that indicate the existing
process may no longer be fit-for-purpose.
Many of these issues have been reinforced by the ACCC in its recent inquiry into markets for
tradeable water rights in the Murray–Darling Basin.
The issues with the existing application and assessment approach affect water market
participants attempting to access water, and WaterNSW as the approval authority. These
potential issues can be categorised as three broad challenges:
1. Ensuring equity of access to IVT capacity,
2. Maintaining efficient processes for market participants and Water NSW
3. Improving transparency and predictability for water market participants and the
public.
Each of these issues is explored below.
Ensuring equity of access to IVT capacity
WaterNSW is concerned that the current ‘first come, first served’ arrangements do not
provide equitable access to trade opportunities – as reflected in customer feedback from
prospective applicants. WaterNSW’s concerns about the equity of the current approach
were highlighted in the ACCC Report, which noted that:
“[A]ccess to intervalley trading opportunities is inequitable:
The processing of intervalley trades operates on a first-come, first-served basis, and the
technological and procedural differences between Basin State trade approval
authorities provide advantages to some traders over others. This has prompted a
Murrumbidgee IVT | Issues and options paper | July 2021 7technological ‘arms race’ between a limited number of market participants who have
the expertise and resources to use digital technologies to help ensure they are at the
front of the queue and able to capture the majority of benefits from intervalley trading
opportunities.” 4
As a result, the ACCC recommended improvements to IVT mechanisms (recommendation
22), noting that it applies more broadly than to just the Murrumbidgee IVT and NSW transfers.
A number of the ACCC’s recommendations go beyond the scope of this options paper, as
they consider the broader policy settings for IVTs (e.g., more ‘dynamic’ rather than the
current ‘rolling’ limits), however relevantly for this review, the ACCC recommended:
“improving the efficiency of, and equity of access to the opportunity to trade, which are
currently largely ‘first in, first served’”.5
Maintaining efficient processes for market participants
and WaterNSW
WaterNSW is concerned that current arrangements are not efficient for:
• Market participants – as it currently results in wasted effort for repeatedly unsuccessful
applicants and arguably does not deliver the greatest productivity gains to the
market, and
• WaterNSW – as the process results in an inefficient and unnecessarily resource-
intensive approval process that does not always provide the best outcomes to
customers.
WaterNSW has received customer feedback that the current application process
(including but not limited to the email application process) could be more efficient for
market participants. Therefore, WaterNSW welcomes feedback on improving the
efficiency of all of the elements of the process – as outlined in the ‘Options’ section
below:
• The timing and notice of opening,
• Eligible applications, and
• Process order.
4 ACCC Report (above) at pages 17-19
5 ACCC Report (above) at page 37
Murrumbidgee IVT | Issues and options paper | July 2021 8Improving the transparency and predictability for water
market participants and the public
The ability of market participants to make informed trading decisions is essential to
functioning and competitive water markets. Furthermore, transparency supports public
confidence in the market and broader resource management.
WaterNSW has received customer feedback that the process can be unpredictable. The IVT
balance is necessarily a product of market activity and river operations requirements – both
of which are dynamic and therefore difficult to plan for. However, this review provides the
opportunity to consider whether more predictable or regular opening ‘windows’ could be
considered.
Separately, while WaterNSW has taken steps to provide information about the order in which
applications are processed, the queue is ultimately the product of WaterNSW IT systems.
Again, this review provides the opportunity to consider whether different processes could
provide greater transparency.
Additionally, WaterNSW would welcome feedback from market participants and other
respondents, as to what information they would like to see made available and how that
would better inform their decision-making.
WaterNSW is interested in understanding:
• Do you agree with these problems?
• How significant do you consider these problems?
• Are there other problems that need to be considered?
Murrumbidgee IVT | Issues and options paper | July 2021 9Options for alternative application and
assessment approaches
The application and assessment approach can be broken down into three key elements:
1. The timing and notice of opening,
2. Eligible applications, and
3. Process order.
These three elements can be implemented in different ways. WaterNSW has identified
several options for how these elements can be implemented and welcomes market
participants’ views about these options. WaterNSW also welcomes any suggestions for:
4. Improving transparency, and
5. Other approaches to the elements or options, which may arise from water or other
markets and industries.
1. Timing and notice of opening
• Current approach: The IVT opens – and trade applications can therefore be lodged –
on the day that the IVT account reaches its trigger points (either 15 or 85 GL). Noting
that the IVT must close again when it reaches 0 or 100 GL, there may be options as to
how the opening triggers operate.
• Approaches for comment:
o On the day that the trigger is reached (i.e. maintain current arrangements): As
is currently the case, WaterNSW could continue to receive and process trade
applications on the day that the trigger is reached.
o On a set day after the trigger: Once the trigger is reached, WaterNSW could
announce that applications will be received at a set date after opening
(e.g., 5 business days).
o At regular intervals: WaterNSW could announce at regular intervals (e.g., the
middle of each month as for available water determinations (AWDs)) whether
the IVT is open or closed, and when applications will be received (potentially
that day, as per option 1.1 or at a later date, as per option 1.2). In this case,
even if the 15 or 85 GL trigger was reached before the announcement date, it
would not be ‘actioned’ until that date (again, as is the case for AWDs).
Murrumbidgee IVT | Issues and options paper | July 2021 10o Broadening the application window: Pending the adoption of a processing
order that is not ‘first come, first served’, WaterNSW could provide a longer
application window, such as a number of hours (or even longer).
o Reducing openings and increasing availability when open: Triggers could be
amended to have less frequent openings, but greater volumes of water
available when they do open – which may potentially see more successful
applications. For example, if the triggers were 30 and 70 GL, the IVT would
open less regularly, but there would be more water available for participants
when it did.
WaterNSW is interested in understanding:
• Which of the above options for timing and notice of opening do you
favour?
• What are the pros and cons of the above options?
• Are there any other ways the timing and notice of opening could be
approached?
2. Eligible applications
• Current approach: Currently there is no limit to the number of applications that can
be lodged:
o by a water account
o by water account holder
o with respect to a volume of water in a water account
o with respect to portions of a volume of water in a water account
o Currently the only disincentive to multiple or duplicate trade applications is
the fact that WaterNSW does not refund the $49.37 application fee if the
application is unsuccessful (or withdrawn or incomplete). There may therefore
be options to ensure that water account holders only lodge one application.
• Approaches for comment:
o Current approach: No limit to the number of applications.
Murrumbidgee IVT | Issues and options paper | July 2021 11o No duplicate applications: WaterNSW could restrict the process to prevent
duplicate / copied applications, potentially rendering the original application
ineligible (not just the duplicates).
o One application per water account: Noting that the establishment of multiple
accounts is an option for market participants, WaterNSW could restrict the
process to one application per water account. Arrangements would of
course need to be made with respect to shared bulk licences (such as for
Irrigation Corporations).
o One application per water account / works approval holder: Noting that
multiple account holders may be associated with an account or works
approval, WaterNSW could restrict the process to one application per water
account or works approval – again noting that arrangements may need to be
made for shared bulk licences.
o One application per volume or portion of a volume of water: WaterNSW could
restrict the process to require an account holder to seek to trade one volume
(for example 1 GL) rather than multiple volumes (for example 2 x 500 ML).
WaterNSW is interested in understanding:
• Which of the above options for eligibility do you favour?
• What are the pros and cons of the above options?
• Are there any other ways the eligibility of applications could be
approached?
3. Processing order
Noting the potential for improvements in timing and eligibility, the fundamental issue for
market participants and WaterNSW is how to establish the queue for WaterNSW to assess
allocation trade applications. As noted above, before 2016 when the ‘first come, first served’
process was introduced, WaterNSW used a ballot system. A selection of possible prioritisation
methods is noted below, however WaterNSW welcomes feedback on other alternatives.
• Approaches for comment:
o First come, first served (i.e. maintain current arrangements): The current
process is summarised in the ‘Background’ section above and is described in
further detail on the WaterNSW website.
Murrumbidgee IVT | Issues and options paper | July 2021 12o Market-based mechanism: WaterNSW could introduce a market-based
mechanism for allocating capacity for trade through the Murrumbidgee IVT.
Section 16.2.8 of the ACCC Report explores this option and notes that the
market would be expected to value this right at the price difference between
the source and destination trading zones. 6 Market-based mechanisms could
include processes such as reverse / auctions.
o Proportional allocation: Assuming that applications can be managed to
avoid duplication, WaterNSW could introduce a mechanism whereby the
available water is allocated proportionally between all eligible applications.
o Ballot: WaterNSW could return to a ballot or lottery to allocate the trade
opportunity on a random basis.
WaterNSW is interested in understanding:
• Which of the above options for processing order do you favour?
• What are the pros and cons of the above options?
• Are there any other ways the processing order could be approached?
4. Improving transparency
WaterNSW currently makes the following information available: 7
• The IVT balance on a daily basis, and
• The queue once the application process has commenced.
WaterNSW is interested in understanding:
• What information would you like to see made available and how would it
better inform your decision-making?
6 ACCC Report (above) at page 524
7 https://www.waternsw.com.au/customer-service/ordering-trading-and-pricing/trading/murrumbidgee
Murrumbidgee IVT | Issues and options paper | July 2021 135. Alternate mechanisms
WaterNSW welcomes suggestions for other mechanisms (processes, technologies or
otherwise) that could be considered, within the boundaries of the current policy settings:
• Closing when the IVT account balance reaches 0 GL or 100 GL
• Opening when the IVT account balance reaches 15 GL or 85 GL
• WaterNSW is the approval authority for the allocation trade (either s 71T or 71V
dealings)
For example, respondents may be able to suggest tools such as application portals (avoiding
emails and allowing for on-line payment).
If you propose alternative mechanisms, please provide details about the following:
• How the proposed solution could improve
o Equity of access
o Efficiency of process for market participants and WaterNSW
o Transparency and predictability
Principles for assessing the different options
Reflecting WaterNSW’s categorisation of the issues, WaterNSW proposes to consider
feedback received to this paper against the principles of equity, efficiency and
transparency.
Ensuring equity of access
An important objective of water markets in the Murray-Darling Basin is that water users have
fair access to trade opportunities. The ACCC distinguished between:
• ‘equity of access’ (where all market participants have equal ability to bid for trade
opportunities), and
• ‘equity of outcome’ (where all market participants would receive an equal share of
trade opportunities).
Murrumbidgee IVT | Issues and options paper | July 2021 14In making that distinction, the ACCC noted that it is a matter for governments to determine
how these considerations should be addressed in design of the allocation mechanism8.
Maintaining efficient processes for market participants
and WaterNSW
WaterNSW is seeking to identify processes that deliver both:
• ‘market efficiency’ – such that participants do not waste (or devote) time and
resources to the process unnecessarily, and
• ‘administrative efficiency’ – such that the approval authority can deliver an
appropriate standard of service within available resources.
Furthermore, WaterNSW will consider the efficiency benefits of potential consistency with
other IVT and trade mechanisms within the Basin.
Improving the transparency and predictability for water
market participants and the public
WaterNSW is seeking to identify a process that is clear, predictable, understandable and
maintains public confidence in resource allocation, the water market and WaterNSW as the
approval authority.
Attachment A – Murrumbidgee IVT statistics
8 As above
Murrumbidgee IVT | Issues and options paper | July 2021 15You can also read
