Regulator ready: Countdown is on for the commencement of the NSW water industry competition reforms

Nick Thomas, Alison Packham and Phoebe Hinton
17 May 2023
Time to read: 3 minutes

The long-expected shake-up of NSW's water industry competition regime is drawing closer, as the Water Industry Competition Act 2006 regulator releases administrative guides for comment.

Over a decade in the making, the major reforms to NSW's water industry competition legislation are nearing commencement. A key regulator of the Water Industry Competition Act 2006 (WIC Act), the NSW Independent Pricing and Regulatory Tribunal (IPART), is finalising guides and application processes to prepare for the commencement of the Water Industry Competition Amendment Act 2021 (WIC Amendment Act).

The WIC Amendment Act will make significant changes to the structure and operation of the NSW water industry competition regime. Among other things, it will introduce a new suite of approvals for private water utilities, and will provide a 12-month transitional period for existing participants to obtain the new approvals.

IPART has now released its proposed application forms and guides for the licences and approvals that will be required under the WIC Amendment Act: the Retailer and Operator Licences, Scheme Approvals and Operational Approvals.

IPART is seeking submissions on the proposed application forms and guides until 5 June 2023.

Starting date for the Water Industry Competition reforms

Despite being passed on 1 November 2021, the WIC Amendment Act has not yet commenced.

Preparation for the commencement of the Amendment Act is ongoing. Recent developments include:

  • October 2022: the draft Water Industry Competition Regulation 2022 was released for comment;
  • February 2023: IPART's draft report outlining its review of fees under WIC Act was released – IPART sought feedback on the proposed fee structure under the new regulatory framework, in anticipation of the implementation of the new fees from July 2023; and
  • May 2023: IPART is now seeking input on the new draft application forms and guides that will be used when the Amendment Act commences.

The WIC Amendment Act will commence when the new regulation is made. A start date has not been announced, but IPART's latest indication is that the WIC Amendment Act will commence "later in 2023". It's currently anticipated that commencement is likely to be in or after September 2023.

New licences and approvals

The current WIC Act licensing regime requires a licence for the construction and operation of each water and wastewater network which it governs, and a separate licence for retail services relating to that network. Each licence authorises both the activity and the person carrying it out.

The WIC Amendment Act restructures the current licensing regime to require:

  • operator and retailer licences, to authorise persons to carry out water industry infrastructure construction / operation or retailing across multiple infrastructure assets or networks; and
  • scheme and retail approvals, to authorise the design / construction / operation of specific water industry infrastructure assets or networks, or retailing for those assets or networks.

The WIC Amendment Act and the new regulations contain transitional arrangements for existing licence holders, where existing licences will remain in force for 12 months after the commencement of the WIC Amendment Act. Key issues in the process of transitioning to the new licence regime will be whether each licensed water industry infrastructure asset or network should be declared "essential infrastructure" and, if so, who should be appointed as "last resort provider" and how.

IPART guides the transition to the new licensing regime

To assist with the transition, IPART has developed new Licence, Scheme and Operational Application Forms guides for each of the forms.

The forms are extensive, as would be expected given the examination which is involved in deciding whether to grant a licence or approval.

The guides give applicants general instructions for completing the application forms and set out practical matters such as application fees and provide commentary on the questions that applicants will be required to answer.

Applications made are submitted to IPART for consideration; those to vary an existing licence follow the same procedure as applications for new licences.

The detail required in the applications reflects the focus of the WIC Amendment Act on strengthening the last resort regime and contingency planning. For example:

  • The licence application requires applicants to establish their financial capacity to undertake the activities and comply with the licence. This involves providing details of their expertise, related corporations and its directors, proving financial and technical capacity, and whether they are a suitable corporation.
  • The scheme approval application requires applicants to demonstrate the scheme's financial viability over its lifetime.

Both applications require significant detail of an organisation's environmental impact, including the extent to which climate change has been considered by scheme participant and the capacity of the organisation to respond to climate change.

What's next for the Water Industry Competition Act

It is expected that IPART will release the final version of its application forms and guides and its final fees report by August 2023. Stakeholders should make its submissions to IPART on the draft application forms and guides by 5 June 2023.

Given this timetable, and as indicated earlier in this article, it's currently expected that commencement is likely to be in or after September 2023.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.