Australian Water Markets reform – ACCC Final Report – “comprehensive change” recommended
The Australian Competition and Consumer Commission (ACCC) Inquiry into the Murray-Darling Basin Water Markets commenced on 7 August 2019. The ACCC’s Interim Report was publically released on 30 July 2020. The ACCC provided its 700-page Final Report to the Treasurer on 26 February 2021 and it was released publically on Friday 26 March 2021 (the Final Report). A full copy of the Final Report is available on the ACCC website: https://www.accc.gov.au/publications/murray-darling-basin-water-markets-inquiry-final-report
The Final Report contains 29 recommendations to reform Australia’s Basin water markets. The ACCC’s recommendations reflect its earlier views and the findings of its Interim Report that there was a need for increased, and more adequate, market regulation, together with improvements in trade processes and market transparency, market architecture and market governance.
The ACCC found that the “complexity of water markets is increased by ineffective and opaque governance arrangements, and the roles of numerous Australian and state government agencies which sometimes overlap or conflict.” The ACCC specifically excluded from its analysis the social and economic impact of water trading on communities in the Basin which was the subject of a separate independent panel process and report in April 2020.
In its Final Report, the ACCC has recommended:
1. the establishment of a new independent Basin-wide Water Markets Agency which will be focussed on facilitating efficient water markets;
2. assistance to users to navigate markets, ensuring markets operate fairly and with integrity, and providing a market-focused perspective for water management decisions through advice to governments; and
3. the realignment of processes to achieve consistent, clear, transparent and well understood processes for amendments to trading rules and other decisions with significant impacts on water markets and where advice from the Water Markets Agency is considered, while existing decision-makers retain current water management responsibilities.
The ACCC has recommended that the proposed Water Markets Agency would be best established through a co-operative legislative scheme between the Australian and Basin State governments.
In more detail, the ACCC summarised its 29 Recommendations (Rec) into three inter-related stages:
Stage 1: Improving current trade arrangements and existing commitments regarding:
· trade forms identifiers (Rec #4)
· inter-zone trades (Rec #5)
· information portal initiatives (Rec #6)
· transparency of allocations decisions and the drivers of water availability (Rec #15)
· accounting for the costs of carryover (Rec #16)
· metering and monitoring (Rec #17)
· modelling of delivery and trade (Rec #18)
· delivery shortfalls (Rec #19)
· river-operations guidance to more effectively and transparently balance trade-offs (Rec #20)
· transparency regarding conveyance losses and other delivery impacts (Rec #21)
· inter-valley trade mechanisms (Rec #22)
· configuration of geographical units (Rec #24)
· roles and functions of intergovernmental committees (Rec #29)
Stage 2: Creating new market focused governance, oversight and information arrangements through:
· a new Water Markets Agency (Rec #26)
· centralised, Basin-wide water market conduct and integrity legislation including an enforceable code of conduct for water market intermediaries; provisions that prohibit price manipulation, broaden price reporting requirements and broaden and strengthen insider trading provisions (Recs #1-3)
· new Water Market Data Standards to provide a clear and fit-for-purpose framework for water market data and water trade services (Rec #7)
· mandatory trade approval service standards (Rec #8)
· rules and processes for water announcements (Rec #9)
· better rule-making process (Rec #27)
Stage 3: Strengthening governance, decision making and market design by:
· Water Markets Agency leadership of:
o a comprehensive Digital Messaging Protocol for the capture, storage and transfer of water market data and trade applications (Rec #10)
o a digital platform (‘Backbone Platform’) to act as a single repository for water market data and a single hub for trade approvals (Rec #11)
o a public-facing Water Market Information Platform which harnesses improved data collection and quality (Rec #12)
o a Basin-wide Water Market Education Program (Rec #13)
o a reform roadmap for designing and operating efficient markets now and into the future (Rec #25)
· Australian/Basin State governments leadership of:
o lifetime traceability for water allocations (Rec #14)
o clear and integrated mechanisms for delivery of environmental water (Rec #23)
o due consideration of advice from the Water Markets Agency (Rec #28).
Central to the Final Report’s Recommendations is the establishment of the Water Markets Agency. The Final Report and its Recommendations are also highly reliant on technology and will involve extensive collaborative, interdisciplinary engagement between the Commonwealth, Basin State governments and market participants.
Dr Nigel Wilson can be contacted at: wilson@australischambers.com or 0413 807 585
Dr Nigel Wilson, Australis Chambers, has over 28 years’ commercial expertise in regulation, government relations, contract law, competition and consumer law, mergers, expert evidence (including economics, finance and agribusiness), water rights, renewables, agribusiness, critical infrastructure, insurance, corporate law, environmental protection, indigenous law and native title, cybersecurity and technology law.
Nigel has advised Australian and international corporations, regulators (including the ACCC and ASIC) and Australian Governments. He has been General Counsel of South Australia's largest private corporation (Peregrine Corporation), General Counsel and Head of Governance of the Indigenous Land Corporation, including regarding the expansion of its charter to include water and sea countries for the benefit of indigenous Australians. He has also been an Executive Director, Market Regulation, Government and Conveyance, at Water Find Pty Ltd where his responsibilities included market regulation, water valuations, indices and annual reports, the Australian Water Markets Training Programme and its role as a Delivery Partner in the Commonwealth of Australia’s $1.5 billion Water Efficiency Programme.
Nigel has also been a law reform adviser to the South Australian and Commonwealth Governments regarding the implications of technological change in the Digital Age. He is a longstanding member of the Law Council of Australia’s Competition and Consumer Law Committee.