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Third Party Access for Water - IPART, James Cox
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Transcript of Third Party Access for Water - IPART, James Cox
third party access for water
… another Water Industry Alliance Market Solution Forum
James Cox
CEO Independent Pricing and
Regulatory Tribunal
Independent Pricing and Regulatory Tribunal
Third Party Access- Water Industry
Water Industry Alliance & Stormwater Association
James Cox CEO & Full Time Member
17 August 2010
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Water Industry Competition Act 2006 (WICA)
There is increasing interest in competition in the water industry
The NSW Government introduced the WICA to harness the innovation & investment potential of the private sector
The Act came into operation in August 2008 on finalisation of regulations
Background: Severe drought ACT declared parts of Sydney Water’s sewage
transportation services following application by Services Sydney (private corporation)
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WICA continued
The Act establishes regimes for: Licensing of industry participants Gaining access to infrastructure services Arbitration of sewer mining disputes
The Act allows for price regulation of monopoly services to small retail customers
Licensing regime ensures the continued protection of public health, the environment & consumers
Ways to gain access Voluntary access agreement approved by IPART Granting a coverage declaration to applicant, establishing a
right to negotiate terms with service provider, arbitration by IPART if dispute
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Access- declaration criteria (s.23 of WICA)
The infrastructure is of State significance having regard to its nature and extent and its importance to the State economy
It would not be economically feasible to duplicate the infrastructure
Access (or an increase in access) to the service by third parties is necessary to promote a material increase in competition in an upstream or downstream market
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Access- declaration criteria (s.23) continued
The safe use of the infrastructure by access seekers can be ensured at an economically feasible cost and, if there is a safety requirement, that appropriate regulatory arrangements exist
Access (or an increase in access) to the service would not be contrary to the public interest
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Who can be licensed?
Licenses can only be granted to corporations who: Are fit and proper persons (Corporations Law) Have capacity (including financial, technical &
organisational) to carry out licensed activities Have appropriate insurance arrangements Will supply sufficient quantities of water sourced
otherwise than from a public water utility Satisfy other matters prescribed by regulations or
Minister (on grounds of public interest)
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Types of licences
A Network Operator’s Licence is required if you are a private corporation that proposes to construct, operate and/or maintain water industry infrastructure
A Retail Supplier’s Licence is required if you are a private corporation that proposes to supply water or provide sewerage services to others through water industry infrastructure
Licences are issued in perpetuity (may be cancelled) with 5 yearly reviews
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What activity has there been to date?
No voluntary access agreements lodged & no applications for declaration of infrastructure services
5 network licences granted
4 retail licences granted
Licence applications include: Major industrial recycled water scheme with seed funding
from NSW Government Industrial recycled water scheme- source is polluted
underground water, company required to rectify Recycled water schemes in CBD office buildings mining
Sydney Water’s sewers Wastewater & recycled water schemes for out of sequence
residential developments
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Competition in potable water supply
Easing of drought conditions
Several dams all operated by the Sydney Catchment Authority;
Fewer opportunities for transfer from irrigation to urban uses than in some other cities;
Limited opportunity for competitive sourcing of drinking water in short term with Government directing: Sydney Water to build desalination plant Hunter Water to build Tillegra Dam and Prohibiting use of recycled water for drinking purposes
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Competition in potable water supply cont.,
However, application for WICA licence for desalination plant- possible forerunner to establishment of wholesale market (recently granted by Minister)
If market established then access regime may be invoked
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What is IPART’s role?
Licence applications are made to IPART
IPART is required to: Call for public submissions Place applications on public register Submit applications to Ministers for Health; Water; Planning; &
Environment for comment Review applications & submissions & recommend to Minister
for Water – Whether or not a licence should be granted – The conditions to which a licence should be subject
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What is IPART’s role? Cont.,
Once licence is granted IPART has a licence monitoring/ compliance/enforcement role
Further assessment prior to infrastructure commencing operation
Significant penalties for breach of licence (including cancellation of licence by Minister)
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Issues to date
Financial viability of small schemes Vs
Continuation of postage stamp pricing
Act provides for retailer of last resort but not supplier of last resort (currently being reviewed)
Overlap with local government approval processes
Exemption provisions (currently being reviewed): Community title schemes, ski resorts Golf courses (on site sewer mining) Schemes on Commonwealth owned land – e.g. airports
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Issues to date cont.,
Property rights- Crown Vs private ownership No charges for untreated wastewater ‘product’
Access pricing: ACCC decision in Services Sydney Vs Sydney Water
case- retail minus avoidable costs UK view that this approach may inhibit competition However, other approaches (e.g. system wide average
cost) may encourage ‘cherry picking’ that may leave incumbent with large sunk network costs
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Issues to date cont.,
Mixing of products from different sources Cross contamination risk Chemical composition (e.g. groundwater Vs dam
water) Industrial Vs household wastewater discharge
Infrastructure coordination (eg construction standards)
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In conclusion ….
Access provisions of Act not invoked to date
Licence applicants have been small scale, stand alone recycled water & sewerage schemes- importance of establishing supplier of last resort arrangements
Compared with electricity, water & wastewater: Are costly to transport & historically catchment based Have a greater proportion of investment in the network and low
retail margin Exhibit less uniform characteristics Are less clear on property rights (e.g. stormwater) Have greater importance for public health
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In conclusion continued
Manufactured water (desalination & recycling) will increasingly fill demand/supply gap leading to: Localised solutions (recycled water) & Making transporting over longer distances more
financially viable (potable water) & encouraging access arrangements
Independent Pricing and Regulatory Tribunal
www.ipart.nsw.gov.au
Get connected with the Water Industry Alliance
visit www.waterindustry.com.au