Australia's water story


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This presentation was given to me by a senior officer of the Victoria state government--who has dealt with water reforms.

Australia's federal government has a senior officer (equivalent to our Additional Secretary) whose job title is First Assistant Secretary, WATER REFORMS.

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  • Australia: Background Irrigation began in Australia in small, local developments in the late 19 th century. Further large-scale development occurred when a major drought in Victoria from 1877 to 1884 prompted Alfred Deakin, then a minister in the State Government and chairman of a Royal Commission on water supply, to visit the irrigation areas of California. There he met the Canadian brothers George and William Chaffey who had worked on irrigation schemes in California. In 1886 the Chaffey brothers came to Australia and selected a derelict sheep station covering 250 000 acres at the Murray River settlement of Mildura as the site for their first irrigation settlement. They signed an agreement with the Victorian government to spend at least £300,000 on permanent improvements at Mildura in the next twenty years. These irrigation developments served to set a template for the subsequent evolution of the water industry in Australia, in the mix of crops and produce, the development of water rights, and the view of such infrastructure developments as nation building exercises. It also set a pattern whereby irrigation operated separately from urban uses and systems, using large volumes of water at a time when the impacts of population pressures had yet to be felt.
  • Australia: Background Australia is slightly larger in area than the United States (minus Alaska), yet our population of almost 21 million is barely a tenth of this country ’ s. And despite our large land mass (almost 3m square miles/7.7 million square km), most Australians live in just 20 urban areas in the coastal strip, with more than half based in our four largest capitals: Sydney, Melbourne, Brisbane and Perth. Approximately 85% of Australians occupy only 1% of the continent in the capital cities and along the coast. Like the US, Australia is a Federation of states with a history of uninterrupted, stable democracy. It is a constitutional monarchy, operating under a Westminster, bicameral political system. It is also notable for having evaded recession in the recent financial collapse, due to a strong and effective, but not burdensome, regulatory system.
  • The majority of Australia ’ s land mass is arid to semi-arid land, with the majority of land receiving an average of less than 300 mm (< 8 inches) a year. Higher average rainfalls are mainly concentrated along the coastal strip of the Eastern coast. Despite the large area of low average rainfall, there is also an element of inter-seasonal volatility to rainfall in Australia, with drought and flooding both common. This was made clear in early 2009 with Victoria ’ s disastrous ‘ Black Saturday ’ bushfires (where 209 lives were lost) occurring simultaneously with emergency flood conditions cutting off communities and towns across Queensland and Northern NSW.
  • The bulk of Australian irrigation is located in the Murray Darling Basin, in the south-east corner of the mainland. It is this area which poses some of the key challenges for water management in Australia. Current political and administrative challenges facing the MDB will be covered in further detail later, but many of these challenges come from over-allocation of water resources (see next slide).
  • Recent water scarcity in Australia has highlighted historical barriers to sustainable and efficient water use. This map illustrates the results of a 2000 study into allocation of water entitlement against resource limits extrapolated from long-term flow data. It shows that the limits of resources were basically reached across the Murray Darling Basin in the mid-1970s, even before the more recent effects of drought and climate change. Recent analysis from CSIRO confirms that the current scarcity in South Eastern Australia had its beginnings at least 15 years ago, when the rate of capture and use exceeded the rate of supply. The CSIRO research also suggests that the 60s and 70s were wetter than usual decades. It was during this time, when high water availability was taken for granted, that patterns of increased capture of river flows for urban consumption and irrigation were established.
  • This map shows rainfall deciles for the last 12 years. Rainfall in Victoria for this period is mostly in the first decile – that is, in the lowest 10% of all historical totals. From a water planning point of view, we tend to think of the dry conditions starting from around 1997. October/November 1996 was last time Melbourne storages were full, and its been downhill from there with three particularly bad years since (El Nino years) in 1997/98, 2002/2003, and 2006/07. What does this mean? The question is whether this is just a bad drought or the beginnings of a more permanent shift in climate that might be the result of climate change. Whilst it might not be possible to definitively answer this question now, it is clear that we have to take the possibility of permanent changes like this into account when planning for future water needs.
  • While recognising the impact on storages and water for human consumption, it is important to acknowledge the disproportionate impacts on the environment – particularly because our environmental share of water in regulated systems relies on ‘spills’ from dams. These will reduce or disappear in the climate change scenario. A 2004 assessment of 26,000kms of streams found that only 21% of streams were in good to excellent condition. This reflects the impacts of over-allocation and human intervention over and above the drought conditions.
  • Current streamflow conditions across the state are broadly consistent with what ’ s expected under climate change scenarios. Drier catchments (catchments with lower runoff/rainfall ratios) are known to be more sensitive to changes in rainfall. Changes in evaporation are also important, but runoff response is more sensitive to changes in rainfall. A good example of the impact on streamflows is Avoca at Coonooer with a 19% decrease in rainfall translating to a 86% decrease in streamflow (i.e. 4.6 times) – which may also reflect impacts of changing seasonality of the rain.
  • CSIRO conducted modelling using historical inflow data, with 1990 as the base year, and predicting the effects under three different climate change scenarios of varying intensity. This graph shows the predicted reductions in inflows to Victoria ’ s share of the Murray according to these scenarios, against the actual average inflows of the last ten years. As the graph shows, reality has exceeded dire expectations, with recent inflows essentially travelling at the levels predicted under a high climate change scenario in 2055.
  • Victoria is located in the south-eastern corner of Australia. Melbourne is its population and economic centre, with the main irrigation districts in the northern region of the state. It is projected that Victoria ’ s population will grow by around 20% over the next two decades, to more than six million people by 2025 – over 5 million of whom will reside in Melbourne. This increased population growth will ensure that, even with significant measures to conserve water, demand for water supplies will continue to grow into the near future.
  • As it is a relatively more developed and wetter part of the continent, Victoria ‘ punches above its weight ’ in terms of population and economic productivity, despite its smaller land area – with 25% of the population and around the same contribution to Australia ’ s GDP.
  • Prior to the 1980s, water management was largely conducted by local authorities, with separate local trusts being responsible for water delivery and sewerage services. Although geographically small and with a relatively low population, Victoria had around 370 regional water authorities - yet no overarching integrated policy and planning body. Melbourne ’ s water supply was managed by the Melbourne Metropolitan Board of Works and the rural supply managed by the State Rivers Commission. There were two main authorities who serviced the majority of the population but this meant that there were 368 authorities that were servicing only 5% of the state ’ s population.
  • For most of its history, the Australian economy operated as a protectionist bastion of the British empire. The economy was highly dependent on agricultural trade, chiefly with the United Kingdom. The mid 1970s and the 1980s saw some major Government initiatives to enhance national productivity through liberalisation of the economy, such as the across the board tariff cuts of 1973, the floating of the dollar (1983) and the elimination of foreign exchange controls. At industry level, initiatives such as the corporatisation of government business enterprises and progressive deregulation in the transport and telecommunications sectors became keystones of the so-called 'microeconomic reform programs' of both Commonwealth and State and Territory Governments. The pursuit of competition policy highlighted the need for reform in the water sector – particularly in relation to water allocation policies, regulation and institutional arrangements.
  • The Government realised that there was no single focus within Victoria on water policy. It had developed in an ad hoc way over more than a century and, because water was generally in plentiful supply, it had not yet become the subject of widespread public debate. The reform program began in earnest in 1982/83 with the creation of a new government department devoted solely to water resource management. It commenced a radical and far-reaching review and reform program, which started with the compilation of an inventory of Victoria ’ s water resources and a review of the legal, regulatory and institutional framework. Many programs were introduced to implement reform including reduction in subsidies, the introduction of compulsory business planning, annual reporting, performance measurement, accounting regulators, environmental water entitlements, clear tradable entitlements for agricultural uses and ultimately a complete re-write of the water legislative framework.
  • The catalyst for change was the creation of a Public Bodies Review Committee in 1980 , which included progressive young members who later became senior figures in government. They highlighted the inefficiencies of having 370 authorities in a state the size of Victoria. In 1983, the Water & Sewerage Authorities (Restructuring) Act was introduced and as a result 370 authorities were restructured to 150 water boards, 7 sewerage authorities and 43 municipalities with water supply functions. There was a basic recognition that there is a fixed amount of water available for allocation and that with growing demand, water would need to be moved about the community. A decision was made that it was best to keep governments out of the allocation process and instead develop a water market for trade. In 1984, the Public Bodies Review Committee tabled its final report on Future Structures for Water Management, which publicised the inadequacies and inefficiencies of the current structure of the water industry, and captured public interest in reform for the first time. By the mid-1980s there was a further reduction to 120 non-metropolitan water authorities. In 1989, the Water Act 1989 was introduced, which included provisions to make water rights tradeable and to allow for the development of water markets. This was the first time that water rights could be separated from the land. With extensive community consultation, moves were made to convert ill-defined rights into as clear a system as possible. This process took 12-13 years as water users and communities were consulted across the state.
  • Implementation of the Water Act progressed through the early 90s, with the first bulk water entitlement for the Goulburn irrigation system, and the start of water trade and the growth of water markets. With this early trade came the first indication of the value of water, but also identification of a range of problems with existing legislation. In October 1993 the government launched the water reform policy statement Reforming Victoria ’ s Water Industry – A Competitive Future that resulted in a two step further reduction in the number of water businesses in Victoria: The metropolitan water industry was restructured to create Melbourne Water to supply bulk water and wastewater management services, and three metropolitan water retailers. 139 water authorities were amalgamated into 15 regional authorities. The Water (Resource Management) Act was introduced in 2005 to address the Environmental Water Reserve, Water Register, unbundling and reconfiguration. In 2006 the Water (Governance) Act was introduced to ‘ fix ’ some of the problems that water trading had identified. It also clarified high value and low value uses for water and, in some areas, assets were closed down.
  • The end result of three decades of reform is: A water sector that is accountable, capable, and largely self-funded Authorities that have clear roles and responsibilities
  • Currently there are 19 state-owned water businesses in Victoria, responsible for water supply and sewerage services: 15 regional water authorities (3 rural water corporations and 12 urban) Three metropolitan water retailers and one metropolitan bulk supplier
  • The 19 water authorities operate within a transparent regulatory framework. Government plans and allocates resources, sets obligations, monitors performance and makes policy. Authorities manage waterways, supply users, manage sewerage. Regulators - Essential Services Commission (ESC) regulates prices, service quality and financial performance Department of Human Services (DHS) regulates drinking water quality Environmental Protection Authority (EPA) sets environmental standards and regulates environmental performance
  • Victoria ’ s water allocation framework is administered at three levels: Tier 1 - The Crown (ie State Government) retains overall rights to the use, flow and control of all surface water and groundwater, on behalf of all Victorians Tier 2 - The Minister for Water is responsible for granting bulk entitlements to water authorities and the environment, and for setting limits and caps. Tier 3 - Authorities then allocate individual rights to water for consumptive use to water users, including consumers and irrigators.
  • In 1989 water rights were separated from land. In 2005 the next step of commercialising water rights began with ‘ unbundling ’ . Unbundling separates the traditional entitlements of water rights in districts and take and use licences on waterways into a: Water share : high-reliability and low-reliability where people have had access to sales water Delivery share , or extraction share on waterways Water-use licence , or water-use registration for non-irrigators Compared to the old bundled entitlements, water shares are easier to trade and can be mortgaged separately, leased and held without land. Access to sales water has been converted into legally recognised low-reliability water shares. As part of meeting Victoria ’ s commitment to the Living Murray Initiative, the landmark sales water agreement resulted in 20% of these being dedicated for environment use. Fairer tariffs come with delivery shares, as well as greater farmer flexibility to manage how water is delivered.
  • Further clarification and identification of rights is intended in the near future with ‘ carryover ’ rights, delivery capacity, and ‘ airspace ’ rights in dams to be closely examined.
  • Markets and water trading in Victoria - where we ’ re at We have a proper functioning market in the north of the state that signals what value users place on water – chiefly for irrigation. In the Southern urban sector work has been done around the value of water and a customer ’ s willingness to pay, but to date the focus is still on signalling the costs of providing water (supply) rather than the value a consumer places on this resource.
  • This map details storage capacities and long-term average diversions from major storages across the state. It shows that the bulk of Victoria ’ s water capture and consumption (around 70-80%) takes place in the irrigation districts of Northern Victoria (Goulburn, Murray, and Murrumbidgee systems).
  • Of all the water that falls and flows into Victoria, around 70% stays on the surface in rivers and catchments. The remaining 30% is diverted for use under consumptive entitlements, with use broken down as follows: Agriculture – 76.8% (Irrigation and rural domestic & stock) Households – 12.4% (Melbourne and regional residential use) Industry – 9.4% (Melbourne and regional non-residential use, and power generation) Environment – 1.3% (Specific environmental uses, through environmental entitlements) (Ref: 2006/2007 Victorian Water Accounts)
  • Victoria has endeavoured to create water entitlements that are secure and highly reliable, by avoiding over-allocation. This has resulted in irrigation allocations remaining relatively high in the Murray and Goulburn systems, despite recent years of low rainfall.
  • Secure and reliable water entitlements gives users more certainty when making investment decisions and encourage a shift toward high-value water use. While progress has been made toward making this shift, there is still a large amount of water devoted to low-value uses in Victorian agriculture. The table on the left shows irrigation water use by agricultural sector – currently dominated by pasture crops. The graph on the right shows the value added per ML of water in various agricultural sectors – with horticulture clearly the highest value use of water. Refs: Australian Government Treasury, Economic Roundup Summer 2006; Water and Australia ’ s future Economic Growth (Data source ABS 2004); Irrigation use data from Australian Bureau of Statistics
  • This graph shows the disparity between volumes of water being used and financial return generated per ML. Despite far lower returns relative to water input, dairy, crops and grazing still use the bulk of Victorian irrigation water.
  • Victoria already has an active water market - it is now the gateway to significant investment in value-adding agriculture. 2007/08 saw 158 GL of permanent trade worth about $300 million and 478 GL of temporary trade worth about $250 million. 2008/09 saw this continued pattern of increase in trade.
  • In the decade prior to 2007, Victoria experienced record low rainfalls and inflows, continuing declines in storages and environmental impacts consistent with future climate change scenarios. The previous 20+ years of Victorian water reforms had enabled considerable adaptation to these years of low rainfall. However, the extreme failure of winter and spring rains in 2006 (traditionally providing the bulk of inflows) on top of the already dry catchments meant 2006 inflows into Melbourne ’ s reservoirs were 30% lower than the previous driest year. This unprecedented event required a change in planning assumptions for Melbourne ’ s water supplies and demonstrated the need for large-scale augmentations for the Melbourne water supply system.
  • The Government ’ s Water Plan In response to this alarmingly dry outlook, the Victorian Government realised that simply ‘ saving more water ’ was no longer a viable solution – especially given our high population growth, and record low inflows into our depleted storages. Instead, we had to find new ways to increase our overall water supplies, with a move away from relying on traditional, rainfall-dependant sources, such as dams. To achieve these goals, the Victorian Government is investing $4.9 billion over four years to fund several key water initiatives, including: the construction of Australia ’ s largest desalination plant, able to produce up to 150 billion litres of drinking water a year (expandable to 200 billion litres) an expansion of the Victorian Water Grid, to provide better access to water for important regional centres an increase in water recycling, to conserve Melbourne ’ s drinking water an ongoing push for household and industry water harvesting and conservation and a long overdue upgrade of Northern Victoria ’ s antiquated irrigation system.
  • The Victorian Water Grid aims to provide better access to water across the state and integrate the augmentations into the state ’ s storage and supply network. Some of the state ’ s water systems have already been connected through a grid of rivers, channels, pipes and storages. But the focus has generally been on each river valley and its regional storages looking after the local region. In the face of climate change, this approach is inadequate. The expanded water grid will allow more water to be transferred between water systems to where it is needed the most. It not only maximises flexibility for water sharing across regions and between users, it also provides a valuable insurance option to secure water supplies for households and industries across the state. Connections between rural, regional and metropolitan water supplies provide for greater security of supply in the face of rainfall uncertainty. Manufactured water, such as desalinated water, will be delivered into the system via new interconnecting pipelines.
  • One of the key projects under the Water Plan is the Northern Victoria Irrigation Renewal Project. The first stage of this project has secured funding of $1 billion and will generate 225 GL in savings. These savings will be split equally between Melbourne, irrigators and the environment. At the CoAG (Council of Australian Governments) meeting in March this year, the Federal Government committed to fund stage two of this project (up to $1b), which will see a further 200 GL saved and shared equally between irrigators and the environment. In exchange for an investment of $300m, the Melbourne community will be provided with a 75 GL entitlement that is capped under stage one. Because the water savings arise from system losses, the 75 GL will be available in any year the irrigation system runs. Irrigators will have their share added to their existing entitlements and the environment will have its own entitlement.
  • Modelling has shown that Melbourne ’ s storages would have been empty by mid-2009, if conservation measures had not been put in place.
  • Water restrictions are managed by Victoria ’ s urban water corporations and are applied across Victoria based on the Uniform Drought Water Restriction Guidelines. Stage 3a restrictions have been in place in Melbourne since April 2007. Three years later, these are being eased to Stage 3, due to success of efficiency programs and supply augmentation from the Sugarloaf Pipeline, which came online in February this year. Launched in November 2008, Target 155 aims to encourage Melburnians to limit their personal water consumption to under 155 litres per person per day and is in place along with water restrictions. In its first year of implementation, Target 155 has been successfully met.
  • Non-residential customers account for approximately 30% of total demand for water in Melbourne.  Victoria ’ s non-residential sector - which includes industrial, commercial and institutional customers - is becoming increasingly water efficient. Melbourne ’ s non-residential customers have made significant water savings, reducing daily water consumption by about 41% per capita compared to 1990s averages. This is in line with Melbourne ’ s overall reduction of about 38% compared to the 1990s. Victoria ’ s non-residential water users are also subject to drought response measures similar to residential water users, including Stage 1-4 restrictions. In some instances, non-residential users can have their water use restricted entirely (for example, in the case of some car washing and turf growing businesses).
  • Recycled water provides a secure rainfall independent supply of water that is fit for a wide range of uses. It is part of the Government ’ s strategy to diversify water supplies, and to improve environmental health. The Government ’ s target of recycling 20 percent of Melbourne ’ s wastewater has been achieved two years ahead of schedule through agricultural, residential parks and gardens and industrial recycling schemes. About 40 per cent of Melbourne ’ s wastewater is treated at the Eastern Treatment Plant (ETP). A major upgrade of the Eastern Treatment Plant is expected to be completed during 2012, which will treat 100 billion litres of wastewater to Class A recycled water standard each year. In addition to improving water quality at ocean outfalls, this new Class A recycled water resource will be available for use in Melbourne ’ s south-east for localised, cost effective recycled water projects.
  • The Commonwealth of Australia was formed in 1901 when six independent British colonies agreed to join together and become states of a new nation. The rules of government for this new nation are enshrined in the Australian Constitution, which defines how the Commonwealth Government operates and what issues it can pass laws on. Land use planning and natural resources management is a State responsibility.
  • The Murray-Darling Basin covers a major area of Australia ’ s eastern sea-board. The States sharing the Murray-Darling Basin are Victoria, New South Wales, South Australia, Queensland and Australian Capital Territory – which is also where the Commonwealth Government sits. The river is the boundary between New South Wales and Victoria for much of their shared border. The Basin consists of many river systems, but the major ones are the Murray River and the Darling. The Darling (2740km), Murray (2530km) and Murrumbidgee (1690km) are Australia's three longest rivers. The Basin covers more than 1 million square hectares and drains 1/7th of the Australian land mass. It has an annual run-off of 24,000 gigalitres The Murray-Darling Basin includes a huge proportion of Australia ’ s agricultural and viticultural production and is a critical contributor to the Australian economy. It is a complex river and groundwater system that has underpinned much of the agricultural development in southern Australia.
  • NWI agreed in 2004 between Commonwealth and states. Represents a shared commitment to increase the efficiency of Australia ’ s water use, leading to greater water productivity and greater certainty for investment for rural and urban communities and the environment. Under the NWI, governments have made commitments to: prepare water plans with provision for the environment deal with over-allocated or stressed water systems introduce registers of water rights and standards for water accounting expand the trade in water improve pricing for water storage and delivery meet and manage urban water demands.
  • River Murray Waters Agreement The first formal agreement about the river was signed in 1915 between the governments of New South Wales, Victoria and South Australia. The purpose of the agreement was to ensure that Victoria and NSW shared inflows 50:50; provided they each met half of a defined supply for South Australia. In addition the agreement also brought about the construction of numerous storages, locks and weirs. It took a further two years to establish the River Murray Commission which had the task of putting the River Murray Waters Agreement into effect. The prime task of the River Murray Commission was the regulation of the main stream of the Murray to ensure that each of the three states, and especially South Australia, received their agreed shares of the Murray's water for consumptive use.
  • Murray-Darling Basin Agreement Basin governments (South Australia, New South Wales, Victoria and Commonwealth Government) worked together to develop a new Agreement. Through cross border collaboration, what we achieved to address the problems and take the basin forward, was a framework which applied to five out of seven of Australia ’ s mainland states.
  • Australia's water story

    1. 1. Water industry in Victoria:an overview of history, policy and capabilities David Downie State Government of Victoria, Australia
    2. 2. Mildura District irrigators, 1897
    3. 3. Population Distribution - AustraliaPopulation: ~23million Brisbane Perth Sydney MelbourneSource: Australian Bureau of Statistics
    4. 4. Australia - annual rainfall 1961 - 1990
    5. 5. Irrigated agriculture in Australia• 70-80% of water use• 0.4% land irrigated, 99.6% non irrigated• 25% gross value of agriculture• Agriculture 3% GDP - 22% total exports ($33.6b)• Irrigation mainly in MDB• Typical crops are rice (NSW), cotton, dairy (Vic) – less than 20% on horticulture, viticulture, permanent plantings
    6. 6. Australia’s challenge – over-allocation
    7. 7. Australia - 12 years of dry conditionsRainfall Deciles:1 October 1996 – 31 May 2009 A Source: Australian Bureau of Meteorology, 2009
    8. 8. Changes in climate – Perth example
    9. 9. Changes to Inflows- Victoria’s share of the River Murray system River Murray Inflows - 1891 July to 2010 June (excluding Darling inflows and Snowy releases) 35000 Average 1891-1997 9,351 GL/yr Average 1997-2010 30000 4,430 GL (53% less) Average 1896-1905 Average 1936-1945 5,115 GL/yr (45% less) 6,140 GL (34% less) 25000 Annual Inflow (GL/year) 20000 15000 10000 5000 1918/19 2008/09 1891/92 1894/95 1897/98 1900/01 1903/04 1906/07 1909/10 1912/13 1915/16 1921/22 1924/25 1927/28 1930/31 1933/34 1936/37 1939/40 1942/43 1945/46 1948/49 1951/52 1954/55 1957/58 1960/61 1963/64 1966/67 1969/70 1972/73 1975/76 1978/79 1981/82 1984/85 1987/88 1990/91 1993/94 1996/97 99/2000 2002/03 2005/06
    10. 10. Index of stream conditions 2004 - summary 26,000 km of streams
    11. 11. Annual streamflows 1997-2007 c.f. long-term average
    12. 12. Supply, drought and climate variability – Victorian Murray River inflows 1990-2055 Climate Change Scenarios - Murray System - Victorian share Mean Annual Reduction in Inflow 1990 2000 2010 2020 2030 2040 2050 Year 2060 0 0 - -1 -2 -3 -4 -5 -5 -6% -6 -10 -10 -11 -15Change % Scenario A - Low climate change -19 -20 Scenario B- Medium climate change -23% -23 Scenario C- High climate change -25 Scenario D- Continuation of past 10 years low inflows -30 -35 -38% -38 -38 -38 -38 -40 -41 -41% -45
    13. 13. Victoria – population distribution Mildura Albury-Wodonga Bendigo Shepparton Ballarat Geelong Source: Australian Bureau of Statistics
    14. 14. Snapshot of Victoria • Area - 227,590 km2 • Population density - 21.1 persons per km2 (~ 4m) • Melbourne currently 4 million inhabitants - projected to increase to 5 million by 2025 • Regional Victoria = + 350,000Agricultural advantages: • 25% of Australia’s agri-food production from just 3% of nation’s agricultural land • >$15 billion per annum of food products, exports nearly half this total • High quality road, rail and port infrastructure and export processes. • 37,000 farmers - skilled, efficient
    15. 15. Water Reform in VictoriaWater Reform in Victoria
    16. 16. Water management - history•Prior to the 1980s, water management was largelyconducted by local authorities, with separate local trustsbeing responsible for water delivery and sewerageservices•Strong connections to municipal councils•Victoria, geographically small with a relatively lowpopulation, had around 370 regional water authorities, yetno overarching integrated policy and planning body•Melbourne’s water supply was managed by the MMBW,with rural supply managed by the State RiversCommission
    17. 17. Background - Australian economic reform•Prior to the 1970s, Australia operated as a highly protectedeconomy, dependant on agriculture•In the mid 1970s there was a growing realisation of theneed to enhance productivity and adapt to changing globaleconomic conditions•The mid 1970s and the 1980s saw some majorGovernment initiatives to enhance national productivitythrough deregulation, lower trade barriers and competition•Victoria’s water reforms from the 1980s were inspired byand consistent with this national direction
    18. 18. Reform – policy developmentThe Victorian water reform program began in the early 1980s,with the creation of a new government department to developpolicy for water resource management, including: – Clear roles and responsibilities in water sector – Governance and appointment processes – Annual reporting, performance monitoring and financial management – Measurement, allocation and planning of resource – Community consultation and planning
    19. 19. Water industry reform – key events1980 Public Bodies Review Committee (Victorian Parliament)1983 Water & Sewerage Authorities (Restructuring) Act • 370 authorities restructured to 105 water boards, 7 sewerage authorities and 43 municipalities with water supply functions1989 Water Act • Statutory rights to water (continued) • Decision making in hands of Minister not bureaucracy • Consultation processes for Ministerial decisions • Bulk water entitlements • Water trading at bulk and retail levels • Separation of service delivery from policy and regulation • Corporate planning processes, waterway management functions, • Environment considerations
    20. 20. Water industry reform – key events1990s Water Act implementation progresses (first bulk water entitlement for Goulburn irrigation system, water markets grow)1993 Reforming Victoria’s Water Industry - a Competitive Future • RWC split into 5 regional RWAs • 139 bodies amalgamated to 15 regional authorities • MBW split up into headworks business and 3 retail businesses1994 Water Industry Act 1994 introduced to regulate the operation of the new metropolitan retailers2005 Water (Resource Management) Act • Environmental Water Reserve, Water Register, unbundling, reconfiguration2006 Water (Governance) Act • Addressed identified problems, clarified high and low value uses for water.
    21. 21. Reform - water authorities• Replaced local government with expert Boards (with regional ties)• Built capability (large regional authorities) with appropriate: • people • financial muscle; and • knowledge and skills• Self funding through through water prices allowed authorities to • cover operation and maintenance; • look after assets; and • source money to grow business• Focus on customer and commercial service delivery• Clarified roles, responsibilities and incentives
    22. 22. Industry capability in developing awater market• Capability in developing and maintaining a water trading market• Expertise in developing water PPP’s• Actual examples of commercial water infrastructure projects currently operating• Broad ranging water capability developed in irrigation, water efficiency management, research and development, training and development in water technology products and services
    23. 23. Urban and rural water corporations
    24. 24. Overview of the Regulatory Framework
    25. 25. Water allocation system
    26. 26. Unbundling water rights• Water right High-reliability 100 ML water share 100 ML Low-reliability Storage water share 48 ML Channel Delivery share 1 ML a day Farm Water-use licence 160 ML a year
    27. 27. Reform and MarketsVictoria’s water reforms have created an allocationframework which provides for secure, commerciallycertain and tradable water rights. – Creates flexibility to plan use, trade shares, tailor delivery services and manage risk. – Opens up markets - Separation of transferable components of entitlements has made buying and selling water a lot easier – Promotes more efficient on-farm management of water and movement of water towards higher-value use. – Aligns with obligations under The National Water Initiative to enhance the water market.
    28. 28. Further development of markets and water tradingWhy markets?• Efficiency – ability to identify willingness to pay and sell can inform investment decisions by water corporations and customers• Greater flexibility and customer choice• Individuals can manage their own risks during scarce timesWhere are we with markets?• Northern Victoria – working well but could be improved• Southern Victoria – cost of supply is known however value of water (willingness to pay) is not• Functioning water market in the north reflects value of water
    29. 29. Storage capacities and long-term annual diversions Murrumbidgee 2,657 GL NSW: 1,886 GL/yr 2,358 GL/yr VIC: 1,697 GL/yr Snowy Upper Murray Loddon 6,944 GL 3,583 GL/yr 222 GL Goulburn 6,410 GL 102 GL/yr 2,400 GL/yr Campaspe/Coliban 3,800 GL 380 GL 1,638 GL/yr 110 GL/yr Melbourne GippslandLegend 1,773 GL 423 GL 450 GL/yr 410 GL/yr1,000 GL Total storage capacity1,000 GL/yr Long-term average annual diversions
    30. 30. Water supply and use Victoria total surface water Victoria % of use 12% households 9% industry 1% environment 70% 30% 77%water for rivers water for use agriculture
    31. 31. February Allocation (%)19 0 100 150 200 50 9619 /97 9719 /98 9819 /99 9920 /00 0020 /01 0120 /02 02 Entitlements and allocations20 /03 0320 /04 0420 /05 0520 /06 0620 /07 07 /0 8 Murray Goulburn
    32. 32. Irrigated agriculture in Victoria Water use by sector: Gross value added ($) per ML water used:2005/06Irrigation Use % Pasture 76.4% Cereal crops 3.6% Rice 0.5% Other broadacre crops 0.6% Fruit trees 7.1% Vegetables 4.2% Nurseries 0.5% Grapevines 7.6%
    33. 33. Irrigated agriculture - financial return on water input 2500 Water (GL) 2,046 Water (GL) Output ($m) 2000 Output ($m) 1,503 1500 1000 770 722 498 500 291 0 Horticulture Dairy Crops / grazing $1,500/ML $350/ML $200/ML
    34. 34. Expansion of water trade• Northern Victoria now has an active water marketVictorian water tradesummary: Permanent trade - acre feet Temporary trade - acre feetYear (ML) (ML)2004/05 47,135 (58,120) 307,408 (379,048)2005/06 42,928 (52,932) 308,766 (380,772)2006/07 62,365 (76,899) 337,936 (416,690)2007/08 128,047 (157,888) 387,944 (478,353)2008/09 131,815 (162,534) 487,066 (600,575)
    35. 35. Planning and responding to climatechange, drought and future demand
    36. 36. Water security under threat – 2006/07 crisis year 1997 – 2007 Average 312,235 acre feet 385,000 ML
    37. 37. Drought response - infrastructureIn response to 2006 conditions, the previous government invested in major infrastructure including:• Desalination plant (150+ GL p.a. [121,650 acre feet])• Expanding network of pipes and connections• Upgrading Northern Victoria’s irrigation system
    38. 38. Northern Victoria Irrigation Renewal Project425 GL (344,675 acre feet) in total savings Bass StraitStage 1: $1b for 225 GL savings shared between irrigators, the environment and urban users as requiredStage 2: $1.2b for 200 GL savings shared between irrigators and environment• Combined State and Federal investmentImproved service delivery / renovation / rationalisation will ensure future prosperity of the GMIDNow includes water purchase and on-farm investment packages from Commonwealth
    39. 39. Melbourne storages without conservation
    40. 40. Conservation and efficiency - householdsMelbourne’s residents have reduced consumption by over 35% per person compared to the1990s. Changes include: • Tiered pricing structure for urban consumers - rewards water savers • Water restrictions and voluntary water reduction programs • 5 Star Rating building regulations – water efficiency requirements for new homes, renovations • Water Efficiency Labelling and Standards Scheme – minimum standards and product advice for consumers • Water Smart Gardens and Homes Rebate Scheme - has provided over 264,000 rebates since 2003, saving 2.6 billion litres (permanent greywater systems, dual flush toilets, rainwater tanks, water efficient showerheads, conservation audits, garden products etc). • Showerhead exchange program - 400,000 free water efficient showerheads provided in exchange for old, inefficient models. • Audits - voluntary home consumption audits by 110,000 households have reduced home water use by participating in voluntary behaviour change program.
    41. 41. Conservation and efficiency - industryMelbourne’s industry has reduced its water use by about 41% per capita when compared tothe 1990s (keeping pace with households).•Annual Water Reporting – water corporations to report annually on largest water users•Water Management Action Plans - Targeted at organisations using more than 5 million litres a year - 1,750 Water MAPs completed statewide (100% compliance) - Water MAP customers have saved 15 billion litres (12,000 ac-ft) since inception in 2007•Smart metering – Installation of smart meters to monitor water use in real time for Melbourne’slargest water users•Targeted industry programs – Cooling towers water efficiency program, fire sprinklers waterefficiency, laundry program, hospitals program•Financial incentives programs – Stormwater and Urban Recycling grants, Drought AssistanceProgram•Support Water Use Reduction – over 4,000 Melbourne businesses have joined voluntaryprogram to help reduce water consumption
    42. 42. Recycling• Original industry target to recycle 20% of Melbourne’s wastewater exceeded with over 65 billion litres currently being recycled (WSAA figures).• Recycled water is predominantly used for agricultural and irrigation purposes on the outskirts of Melbourne, with a growing component of higher value residential and industrial use.• Over 3,500 residences have been provided access to recycled water through dual pipe schemes – this figure is rapidly increasing.• Proposed major upgrade of the Eastern Treatment Plant, which currently treats 40% of Melbourne’s wastewater. On completion in 2012, plant will treat 100 billion litres of wastewater to Class A (non-drinking) recycled water each year - potential uses include industrial, agricultural, and environmental.
    43. 43. Living Melbourne, Living VictoriaLiving Melbourne, Living Victoria outlines the new Government’s vision for Victoria’s water future and includes the following objectives: – establish Victoria as a world leader in liveable cities and integrated water cycle management (IWM); – drive generational change in how Melbourne uses rainwater, stormwater and recycled water to provide better water services and reduce Victoria’s footprint with regard to energy and water use; and – drive integrated projects and developments in Melbourne and regional cities to use stormwater, rainwater and recycled water to provide Victoria’s next major water augmentation.As part of this plan, the Government committed to the establishment of a Ministerial Advisory Council(made up of leading water experts) to deliver a roadmap for a more sustainable Melbourne andVictoria, and the Office of Living Victoria.• The Ministerial Advisory Council produced a Living Victoria Roadmap which is available on the DSE website• The Ministerial Advisory Council has also produced a Roadmap Implementation Plan which is currently being considered by Government and is expected to be released shortly.
    44. 44. Inter-jurisdictional issues >National Water Reform >The Murray Darling Basin
    45. 45. National water reform – Murray Darling Basin case study – Australia is a federation (a national government & eight state/territory governments) – Water management is a state function – National Water Initiative – a framework for improving water planning, management & WESTERN NORTHERN TERRITORY QUEENSLAND markets AUSTRALIA SOUTH AUSTRALIA NEW SOUTH WALES – Shared river systems VICTORIA A.C.T AUSTRALIAN CAPITAL TERRITORY – Co-operative management TASMANIA MURRAY-DARLING BASIN – MDB Agreement
    46. 46. The Murray-Darling Basin
    47. 47. Broad national policy directions – National Water InitiativeThe National Water Initiative (2004) has key directions to helpachieve water security. Victoria is supportive of direction and welladvanced in implementing: • Water access entitlements and planning framework • Water markets and trading • Best practice water pricing • Integrated management of environmental water • Water resource accounting • Urban water reform • Living Murray InitiativeNational Water Initiatives + Victoria’s Water Plan = WaterSecurity
    48. 48. River Murray Waters Agreement– First formal agreement in 1915 between three NORTHERN governments TERRITORY QUEENSLAND WESTERN– Water sharing AUSTRALIA SOUTH AUSTRALIA NEW SOUTH– Ensuring supply to South WALES Australia VICTORIA A.C.T AUSTRALIAN CAPITAL TERRITORY TASMANIA– River Murray Commission MURRAY-DARLING BASIN
    49. 49. Murray-Darling Basin Agreement 1982 • 5 States and Commonwealth Government • Cross-border collaboration • Murray-Darling Basin Ministerial Council established in 1986 • Murray Darling Basin Commission established in 1988• "to promote and co-ordinate effective planning and management for the equitable efficient and sustainable use of the water, land and other environmental resources of the Murray-Darling Basin."
    50. 50. Current national water landscape• Commonwealth Water Act passed in 2007• Establishment of MDBA - responsible for setting Sustainable Diversion Limits and delivering Basin Plan by 2011• Agreement with other states and commonwealth that diversions will have to be reduced in the future• Commonwealth will hold a large volume of entitlement within the Basin• Victoria will need to engage constructively with other states and commonwealthKey question for states and commonwealth:• How to better allocate water without diminishing the integrity of water entitlements?
    51. 51. Federal role•What is the appropriate Federal role?•Add value to existing devolved model = maintainingaccountabilities & disciplines which bind sustainable outcomes.•National Government: – Holds casting vote & enforcement role on diversion limits, including through incentives – ensures compliance with market rules set in consultation with States/industry – regulates market behaviour across state systems – maintains national water accounts with comparable data across states. – avoids arrangements that duplicate, confuse and limit the accountabilities and interdependent functions of a devolved water management model.
    52. 52. Roles / structure National Accountabilities – efficient funding, Policy, audit, funding, climate, progressing agreed national water competition & planning reform priorities•State entitlement framework State Accountabilities – resource, funding,•State & regional water planning (adjusting entitlements) public (users, environment). Resource•Water corporation performance oversight (reporting & management within capacity &compliance) balancing values, ensuring maximum•State water accounting, Water market rules value from allocation. Instituting•River health strategy independent control – price & quality Service Delivery - Manage within entitlement & max valueWater CorporationsSupply customers within entitlement CMAs Accountabilities - manageDrought management, restrictions Caretakers of river health within available resource &Capital & operational planning EWR management max. value, local customersRural – seasonal allocations within entitlement Regional CMS and public.Licence compliance Implementation programsFacilitate trading within/between districts &region
    53. 53. Lessons learned1. Wide community involvement2. Lowest cost water is existing water supply3. Environmental sustainability4. Climate variability happens faster than you expect5. Federal / State / local co-operation6. Pricing7. Institutional structures are critical8. Development of industry capability