30 October 2006
Sydney is closer to retail water competition with the introduction of the Water Industry Competition Bill into the New South Wales Parliament.
The Bill aims to enable more recycling and improved water security by encouraging private sector innovation and investment in the water and wastewater industries. The Bill sets up a framework for private sector players to access water and wastewater infrastructure while, as far as possible, giving them powers, protection - and restrictions - similar to those enjoyed by public authorities.
Generally, the new regime will give Independent Pricing and Regulatory Tribunal (IPART) a significant role in regulating access, and is similar to the policy announced last year. Although the access scheme is limited to the greater Sydney and Newcastle areas at the moment, it could later be extended across more of the State.
Licensing new entrants
Private sector players will be able to obtain a licence to supply water or sewerage services (a retail supplier's licence), or to construct, maintain or operate water industry infrastructure (a network operator's licence). An important restriction is the requirement that licence applicants seeking to supply water must show that sufficient quantities of water will be obtained from sources other than a public water utility. At the same time, they must comply with the Water Management Act 2000 and the Protection of the Environment Operations Act 1997.
The unanswered question at this stage is how flexible this licensing regime will be. The Bill allows conditions to be attached to a licence, which can include requiring the licensee:
Licences are granted for indefinite periods, but can be cancelled if the Minister considers it to be in the public interest. Disappointed licensees can apply for compensation.
Getting access to others' infrastructure service
Private sector players will also be able to seek access to water and waste water infrastructure services under a new access regime. The sorts of infrastructure services that could be subject to the access regime in the bill might include water or sewage transportation or storage services, and services for third parties to connect to existing infrastructure.
The access regime in the bill is similar to that under the Trade Practices Act - it is based on the declaration/negotiate/arbitrate model and provides scope for access undertakings to be given by water industry infrastructure owners.
Owners of water industry infrastructure services may make access undertakings which set out how they will provide access to their infrastructure services.
If there is no access undertaking, access-seekers must first approach the owner; if they is unsuccessful, and the water industry infrastructure service in question meets certain criteria, access-seekers can ask the Minister to declare the infrastructure to be covered by the access regime.
The exceptions to this are connection and sewage conveyance services provided by means of Sydney Water's Bondi, Malabar and North Head sewerage networks, which will be declared from the outset. Services provided by those networks were declared under the National Access Regime provisions of the Trade Practices Act last year.
Once a service is declared, an access seeker will have a right to negotiate with the provider of that service, and if there is a dispute to apply to IPART for the dispute to be determined by arbitration.
Where there's muck there's brass - sewer mining under the new regime
IPART will have powers to deal with disputes over sewer mining under the Bill. Sewer mining involves the extraction of raw effluent from the wastewater system (by a party other than the operator of that network), usually for the purpose of treating the effluent and subsequently selling or using it as recycled water. It differs from access to the wastewater network in that sewer miners extract effluent for the purpose of using recycled water on-site or for re-selling recycled water to other users but do not receive wastewater charges from customers. Sewer mining is an existing practice, but the Bill aims to further encourage sewer mining and water recycling by the private sector.
Service providers of sewerage infrastructure may opt into the dispute resolution provisions of the new regime by lodging a notice with IPART. The notice must set out whether the service provider permits sewer mining and its policy and terms. It must also state that it agrees to have any disputes referred to IPART.
A level playing field - powers and protection
Licensed network operators will have powers similar to those of public authorities, such as access to land. This protection is important if a private sector player builds its own infrastructure which is not exclusively on its own land, such as a pipeline to its recycling plant. New rights include access to land:
Likewise, new offences are created to protect private sector infrastructure from tampering (including unauthorised connections, use of water, and discharges into the drains and mains).
Customer protections
Licensed retail suppliers will be required to belong to an approved external ombudsman scheme to deal with complaints by small retail customers.
The Bill does not change the pricing regulation arrangements for existing public water utilities. New private suppliers will not be subject to price regulation, except where they are declared to be a monopoly service provider. This might be the case in greenfields sites, such as where the Government has conducted a tender for private recycled water supply to the new development area.
The Bill also contains arrangements to protect customers in the event of the failure of a new market entrant. Public water utilities may be required to step in to provide essential water and sewerage services if a new retailer's business fails.
What next?
The Bill is only meant to set up the framework of the new regime, and much of the detail will be in the regulations, particularly licence conditions.
