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Focus: Will the Queensland Water Commission solve the state's liquidity problem?

19 July 2006

In brief: Like many Australian states, Queensland is in the grip of a drought. Partner Alan Millhouse(view CV) and Special Counsel Philip Murray examine the role of the newly established Queensland Water Commission in addressing the state's water shortage crisis.

Background

South East Queensland has a liquidity problem. The region has 19 water storages owned by 12 different bodies, a growing population, 17 local governments, the worst drought in a very long time and not enough water.

Due to the number of stakeholders and the wide range of different and often parochial interests involved, managing the existing regional water resources through a consultative process has proven inflexible, ineffectual and far too time consuming given the seriousness of the current water shortage.

The Queensland Government has intervened – but not directly. In June, the Government formed the Queensland Water Commission (the Commission)– an overarching planning authority with technical expertise. The Commission creates a new regulatory level between the Government and current water industry stakeholders and consumers.

Some of the key themes the Government has sought to highlight with the establishment of the Commission are:

  • long-term regional water security;
  • sharing and linkages of water and costs; and
  • a regional planning model for solutions to water supply issues that transcend local government boundaries.

The scope of the Commission's powers

The Commission will have a role in four key areas.

  • Planning for water security.
  • Implementing and ensuring compliance with a regional water security program.
  • Infrastructure development.
  • Applying water restrictions.

The Commission will investigate and assess issues referred to it, report on those issues and advise Government of options. The Commission will then primarily be involved in implementing and enforcing the Government's decision.

According to Premier Peter Beattie, the Commission will not acquire or take over existing South East Queensland water infrastructure, such as local government assets, however the Government has flagged that it wants to further consider and review the current institutional arrangements. The Commission will not be the actual proponent for the development of new water infrastructure in the region.

What will happen in South East Queensland?

The Commission's first task will be to assess how to achieve sustainable water supply in South East Queensland. Issues for consideration include:

  • the levels of service;
  • infrastructure and sources of supply, eg desalination;
  • water sharing, ie the establishment of a regional water grid and how this might be achieved;
  • demand management measures; and
  • cost sharing and pricing.

A regional water security program will be prepared based on the advice and options presented by the Commission. The Commission will then prepare and enforce a system operating plan to ensure the success of the program.

The region's system operating plan will:

  • set out how water is to be shared and moved around the region;
  • identify the demand management measures required to deliver on the set levels of service; and
  • require water providers to report on, and submit to audits of, their performance in complying with the plan.

Impact of regional water security measures on water service providers

While the regional water security program and system operating plan are aimed at regional outcomes, they will be very much focused on, and implemented through, individual water service providers involved in the storage, distribution and treatment of water.

The amendments to the Water Act 2000 ensure regional water security measures will be binding on local service providers.

The regional water security program will:

  • be a code under the Integrated Planning Act 1997;
  • prevail over local planning schemes, local laws and any other plan, policy or code other than the South East Queensland Regional Plan; and
  • be a condition of both the licence to operate water supply infrastructure under the Water Act and the development approval for the water supply works under the Integrated Planning Act.

Water service providers should get involved

Water service providers will want to carefully monitor and participate in the development of the regional water security program and the system operating plan because:

  • failure to comply with the system operating plan will attract the same penalties as the serious offence of unlawfully taking water; and
  • the Commission can require providers to publicise the extent of their compliance with the system operating plan. Failure to do so would attract the same serious penalties.

The wording of the regional water security program and the system operating plan will be of vital importance. The amendments do not guarantee water service providers a role at all stages of developing the regional water security measures.

The Commission may, but is not obliged to, engage in consultation it considers appropriate to develop the options for a regional water security program. The minister is not required to consult on his response to the Commission's options, or the regional water security program.

The Commission must make reasonable endeavours to consult with each water service provider in the region about the system operating plan.

However, any failure to consult will not invalidate either the regional water security program or the system operating plan.

New water infrastructure

While the Commission will not develop any new water infrastructure (identified in the regional water security program), it may coordinate pre-feasibility studies. Its role will be to 'conduct a market-based process to identify a suitable body willing to act as a proponent'.

The powers under the State Development and Public Works Organisation Act 1971 to enter land to investigate its suitability for water infrastructure and to take land, will now apply to any water infrastructure subject to a regional water security program.

Water restrictions

The Commission is empowered to impose restrictions on water supply and usage where there is an urgent need to deal with a significant threat to sustainable and secure water due to circumstances such as climatic conditions. The Commission can override existing water restrictions imposed by water service providers.

Cost implications

While the Commission has a mandate to apply a least-cost planning approach, it must also deal with the difficult issue of cost sharing. There can be no doubt that regional water security will have a cost and the principles the Commission must apply for cost sharing and pricing are:

  • the cost of water sources should be shared among users who benefit from them; and
  • pricing should be consistent with the Government's commitments under intergovernmental agreements, such as the National Water Initiative.

Conclusion

It will be interesting to observe how the Commission addresses the water shortage issue, and whether ultimately it will have any effect on the price of water in South East Queensland.

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