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Water Industry Competition Act Regulations |
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Water Industry Competition
Department of Water and Energy
GPO Box 3889
SYDNEY NSW 2001
19th July 2007
Re: Submission on the Regulations Consultation Paper of the Water
Industry Competition Act
To whom it may concern,
The Nature Conservation Council of NSW (NCC) would like to comment on
the Regulations Consultation Paper (RCP) of the Water Industry Competition
Act 2006 (WICA). While we understand that this legislation has the potential
consequence to develop significant alternative water supplies and cause
reductions in sewage emissions, we have reservations about the proposed
regulations, especially in regard to situations where there will be a monopoly
water provider. We are presently not assured that the regulations that cover
monopoly licensees will be sufficient to continue ecologically sustainable
progression or provide adequate protection to customers.
We acknowledge that this legislation is unique and innovative, and believe
that this underlies the need for the regulations to be strong enough to avoid
problems with the essential service of supplying water.
We would note that these regulations are being drawn up for a potentially
large range of uses. As there are few similar existing regulations, there is little
opportunity for comparison on alternative schemes. We wish to emphasise
the importance of a system of review of the regulations so that they provide
sufficient ongoing protection of the environment and customers and enable
the efficient and sustainable supply of water and wastewater management.
This submission will outline the response to the specific questions of the RCP.
We will also outline some additional points that we believe are relevant to the
regulations.
Key Issue 1 – Licence Conditions
We wish to emphasise the importance of not compromising on licence
conditions so as to make potential involvement in the sector more attractive.
The ‘relaxing’ of license conditions could have the outcome of increased
environmental impacts, excessive water use and unchanged or greater
sewage emissions. For greater transparency, standard licence conditions
should be used for specific types of potential licensees. These licence
conditions should be exhibited before being enacted and drawn up for the
main predicted types of user.
During the consultation session feedback was sought on whether concessions
given to one licensee should be automatically transferred across to all
licensees in a similar situation. We do not believe that this should be an
automatic process.
One of the principles outlined in the Act (Section 7(1c)) on whether to grant a
licence is ensuring the sustainability of water resources. This could be
interpreted as either being ecologically sustainable or sustainable in terms of
long term reliability. We would consider it important that license be granted
only where the water infrastructure meets the principles of ecologically
sustainable development (ESD). This would preclude water systems that are
overly energy intensive or that would propagate a linear water system that
expanded delivery infrastructure and increased centralised sewage
emissions.
Key Issue 2 – Water Quality and Public Health
The Australian Drinking Water Guidelines should be used and referenced
within the regulations to set the minimum standard provision for license
holders providing drinking water. It is important that these Australian
guidelines be used as they provide a tested, reviewed and agreed standard
on which it is necessary for a water provider to meet. These guidelines clearly
articulate the requirements of a service provider in regard to drinking water.
In terms of water provision for purposes other than drinking we would be
supportive of the standards as outlined in the Australian Guidelines for Water
Recycling being utilised. These guidelines use a risk management based
approach to guidelines and would be applicable to the regulations in this
situation. The guidelines have been peer reviewed and would be a good basis
to work from.
Phase 2 of these guidelines are still to be finalised and will include some
important aspects of water recycling that we believe may have significant
benefits if they occur in NSW. This includes stormwater reuse and recycling
for drinking purposes - both areas that NCC believes should be significantly
expanded. These guidelines are not expected until late 2007 so there may be
a time lag before they could be properly integrated into the regulations. This
may require an interim measure of standard regulations to be used and
determined on a case basis until the phase 2 guidelines are available.
Key Issue 3 – Safe and reliable infrastructure
We believe this is a critical issue and that the regulations need to recognise
the importance of a safe/reliable water supply. High design standards need to
be achieved and maintained with this being particularly important for potential
monopoly operators.
Due to the broad range of possible water users it will be difficult to have a
broad based regulation determining asset management obligations of the
licensee. Despite this there is still scope for a clear set of overarching
regulations that will ensure that water assets will be constructed to a high
standard and properly maintained. To achieve this, licensees will need to
provide a clear asset management plan, or equivalent framework to
demonstrate how they will maintain their infrastructure. This should be done
as a licence condition although there may be a number of small-scale
situations where this is not necessary.
We also wish to emphasise the importance of strong regulations for potential
licensees who will be providing a monopoly water service, be that for
household or industrial purposes. This situation could result in significant
problems for Department of Water and Energy (DWE), through either
supply/equipment failure and also through lack of maintenance towards the
end of a contract period.
We are uncertain how compliance with asset management requirements will
occur, and if this will be carried out by the DWE as the licence provider. We
believe it is necessary for compliance to be a high priority so that the
infrastructure that is built or managed is shown to be of the highest design
standards. This could be through regular DWE managed performance and
risk audits.
Key Issue 4 – Network Planning
These regulations could cover a range of different service provisions. While all
these services are vital, some situations will mean that temporary disruption to
service is possible without causing major disruption, such as for municipal
irrigation. It is important that licences clearly state the varying degrees in
which disruption to service is possible, and we would recommend that a
hierarchy be drawn up to reflect this. This hierarchy would mean that essential
services be listed at the top and this would include uninterrupted drinking
water and wastewater provisions to all households and business. Other
essential services may include recycled water provision for households for
greywater services, and recycled water for industrial users which needs to be
assured for safety reasons.
Contingency planning should be mandatory for all cases, especially in the
early stages of a licence so that service disruption can be avoided.
Key Issue 5 – Sustainable/Reliable Water supplies
The licence conditions of Sydney and Hunter Water presently mean that they
be required to implement demand reduction strategies, and also water
restrictions when necessary. It is very important that new entrants into the
water market continue to do this and this is explicitly stated in the licence
requirements.
We are concerned that this will not occur as new entrants seek to maximise
their revenue, and thereby undermine efforts at water conservation. There is a
conflict of outcomes for a provider selling water and seeking to minimise water
use. Regulations must integrate strong water conservation measures into the
licences, placing the onus on the licensee to manage water in an ecologically
sustainable manner.
We identify present NSW operating licences as being weak on water
conservation and inadequately enforced. It is necessary that the new
regulations strongly integrate water conservation and wastewater
minimisation into all of the new licences.
Key Issue 6 – Environmental Protection
Present legislation covering water service provision does not sufficiently
enforce the ecologically sustainable use of water. It is vital that the regulations
as outlined in the RCP go further than the existing legislation so that new
water services and infrastructure are supportive of the principles of ESD.
We would be seeking that at a minimum the license requirements that are
outlined for HWC and SWC are maintained in the regulations and also that
the commitments made by SWC to the principles of ESD are maintained in
new entrants to the water market.
We would support the licensee preparing and implementing an environmental
management plan that is binding within the licence. This plan should be
completed before the licence is granted, and compliance to this plan be
closely monitored. It would be necessary that the plan covers the areas of
energy and waste minimisation, water conservation and wastewater
management.
Key Issue 8 – Retailer of last resort
Under ‘Key Issue 4’ we outlined the need for contingency planning for service
disruption. This could be extended also to include contingency for total service
breakdown for when a licensee exits the market – be this voluntary or
otherwise. We have major concerns of a system breakdown for licensees who
are providing a monopoly service. There needs to be a contingency plan in
place and we would propose that a Government Water Authority be in place
as a possible back up.
To support this contingency plan and to ensure minimal disruption of service,
the licensee may need to deposit a secure bond to cover costs that occur
during the transition of service.
There may be situations where a licensee seeks to discontinue their
involvement in the water area which will create a service gap. We request that
the regulations include a framework to provide notice to DWE when they are
seeking to discontinue a licence.
Key Issue 10 – Licensing Exemptions
We believe that it is important to ensure that household scale greywater
recycling systems are excluded from this licensing requirement. Our present
understanding of WICA is that this is exempt from licensing. It is important
that this is carried through to the regulations, and for other systems that
promote on-site recycling of water.
We have reservations about giving automatic exemptions to stand alone
developments that may result in sewage emissions into the environment,
especially in areas that are adjacent to fragile water catchments or
ecosystems. Due to the high cost of evolving sewerage and water systems in
new areas there is considerable potential for this to be a large area in
licences. We request that exemptions not be granted in these cases and
strong environmental protection regulations (as outlined in key issue 5) be
included in the licence conditions for these situations.
Other Issues
Price
We are concerned by the method in which pricing of water services either for
the provision of infrastructure or water supplies will occur. IPART, as outlined
in the Act will have regard to the pricing structure and responsibility to monitor
the cost charged by water providers. We believe there is a need for greater
clarity on the issue of price and how price will be integrated into the
regulations and subsequently the licence conditions.
There is the potential for monopoly water providers to become licensed and
charge for service at a rate lower than, for example, Sydney Water, and
afterwards increase the price markedly. This increase may occur with the
support of IPART and we are seeking some outline as to how price changes
will occur as part of the licences.
Finally, the price of water is a major incentive for water users and wastewater
emitters to minimise their usage. It is important that the pricing structure used
in the licences is based largely on usage rates and not standard charges. This
will increase the ability of economic factors to reduce overall usage and
achieve greater environmental benefits. It is important that mechanisms such
as subsidies for water efficient appliances and the mandatory installation of
water-saving devices are put in place, particularly to assist low-income
earners, if the price of water rises.
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