Water Industry Competition Act - further progress

By Nick Thomas and Thomas Klempfner.

Key Points:
The NSW Government has been progressing work on the regulations to be made under the Water Industry Competition Act 2006; while WA is looking at competition in the water and wastewater services sector.

On 28 June 2007 the NSW Minister for Emergency Services and for Water Utilities released the Water Industry Competition Act Regulations Consultation Paper.

The purpose of the Consultation Paper is to seek public input into the development of regulations to support the operation of the Water Industry Competition Act 2006. The Regulations are intended to supplement the Act, which seeks to encourage competition in the water industry and to promote the development of infrastructure for the production and reticulation of recycled water.

The Act seeks to achieve these purposes by imposing:

• A licensing regime for private participants (Pt 2)
• A detailed access regime, which encourages negotiation of arrangements for the storage and transportation of water and sewage using existing networks (Pt 3); and
• A dispute resolution process for sewer mining disputes (Part 4).

The Act also permits the Minister to make Regulations where appropriate with respect to:

• Water quality and public health
• Construction and maintenance of water industry infrastructure
• Consumer protection; and
• Licensing administration and conditions.

These Regulations are intended to incorporate more detail in relation to obligations and enforcement of the broad regime set out in the Act. The Consultation Paper raises a number of questions the responses to which will inform the design of the Regulations. Key questions include the following:

• a licensing scheme for private providers – "What common obligations span across the water industry, and what obligations remain specific to licence holders?"
• a regulatory framework for supply of water and sewerage services in New South Wales – "Other than the obligations in the Act, should any additional obligations be placed on licence holders to ensure the sustainability of water resources used by them?"
• public health issues such as water quality – "Should national and state-based standards be incorporated into the Regulations or should water quality obligations be based on a case-by-case analysis of the risks associated with each licence holder?"
• development, operation and maintenance of water infrastructure – "What initial asset management obligations should be imposed on licensed network operators in the Regulations? What services can we ensure will be continued in the case of a physical disruption to water and sewerage services, and how should this be achieved?"
• sustainability and environmental protection issues - "Should any additional environmental protection measures be applied to licence holders across the board or on a case by case basis?"
• consumer protection – "How should protections be implemented? Should the minimum protections be applied depending on nature and size of the customer? Should the protections be prescribed through Regulations, or Codes of Conduct? What safeguards are necessary, if any, to protect the customer information given to licence holders?"; and
• licensing and exemptions – "Should certain categories of water industry infrastructure be exempt from licence requirements (eg, on the basis of size, location or operation), and if so, which ones?"

Submissions were due on 20 July 2007. The next stage will be consideration of the submissions received in response to the Consultation Paper and preparation of the regulations, which we await with interest.

WA Inquiry on competition in the water and wastewater services sector

On 20 July 2007, the Economic Regulatory Authority released an Issues Paper settling out background information and outlining the issues to be investigated by it in its inquiry on competition in the water and wastewater services sector in WA (see Tim Macknay's article in this edition for more information about wastewater recycling in WA).

In that paper, the Authority identifies third party access as a mechanism that facilitates decentralised procurement, trading and retail competition and raises the prospect of the introduction of a state-based third party access regime.

The paper recognises the complexities of such a regime (as evident from the range of issues to be considered in the development of the NSW regulations) and seeks comments on the comprehensiveness of the regime, appropriate licence conditions, access price and a range of structural issues, in order to assess whether the benefits of a state-based regime would outweigh the costs.

It also seeks comment on the fundamental issue: would a state-based access regime result in commercial operators entering the market?

The Authority has called for submissions by 31 August 2007. The Authority's Draft Report is expected to be released in November 2007. The Final Report is expected to be delivered to Government by 31 March 2008.

For further information, please contact Nick Thomas.