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11447 Focus Water June 08.Indd

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11447 Focus Water June 08.Indd FOCUS WATER June 2008 NEW ACT INTRODUCES NEW WATER MARKET FOR SOUTH EAST QUEENSLAND A new urban water market for South East Queensland will have signifi cant implications for suppliers and users of water. Senior Associate Jenny Lyons and Lawyer Scott Watson report. HOW DOES IT BACKGROUND Current local AFFECT YOU? The Water Supply (Safety and Reliability) Act government water 2008 (Qld)(the Water Supply Act) amends the suppliers will be taken • The existence of a water grid and a water Water Act 2000 (Qld)2 to: market will affect urban and industrial over by water retailing suppliers and users of water, and, in • establish the regulatory framework for an particular, operators of bulk water supply urban water market (the market) within South entities owned by infrastructure (water storages and water East Queensland, and local governments by treatment plants) and users of bulk water, in • facilitate the operation of a water grid within or near South East Queensland. South East Queensland. • These reforms will also have wider 2010 under a new Act The market is expected to commence on implications for retail water customers in 1 July 2008.3 South East Queensland, as the current local government water suppliers will be taken over by water retailing entities owned by local governments by 2010. • Increases in bulk water charges are also expected to commence on 1 July 2008, resulting in increased retail water bills for all people and businesses in South East 2. Refer to AAR Focus: Water – June 2008 for further information on the Water Supply (Safety and Queensland, with further price increases to be Reliability) Act 2008 (Qld). ‘phased in’ over the next 10 years.1 3. Queensland, Hansard, Legislative Assembly, 30 April 2008, 1329 (Craig Wallace, Minister for 1. Queensland Water Commission, Water Reform Natural Resources and Water and Minister Assisting the – Frequently Asked Questions (2008) at 19 June 2008. Premier in North Queensland). The reforms of the urban water supply arrangements in South East Queensland arose WHAT IS THE out of a Queensland Water Commission report released in May 2007, which proposed a range MARKET? of structural and regulatory reforms to the water The market is created for the sale and industry by 2010.4 purchase of declared water services. As the The Water Supply Act represents the second name suggests, a declared water service is a stage of this restructure and follows the initial water service (such as a water storage, water requirement to transfer ownership of bulk water reticulation or water treatment plant) that is assets to the Queensland Bulk Water Supply declared by the relevant Minister to supply water Authority. The Bulk Water Supply Authority to the water grid. The infrastructure and assets is a statutory authority established under the of the declared water service themselves do not South East Queensland Water (Restructuring) need to be physically located within the South Act 2007 (Qld) (the Restructuring Act) to own East Queensland region, but must be able to 6 all major water storages and water treatment supply to this area. facilities in South East Queensland. Declared water services are supplied to the The Restructuring Act also established: water grid manager by a grid service provider. This will, in effect, be the Bulk Water Supply • the SEQ Water Grid Manager, who will operate Authority as the owner of bulk water sources, as the single purchaser of bulk water services the Manufactured Water Authority as the owner and the single seller of bulk water in South of bulk manufactured water supplies and the East Queensland; Bulk Water Transport Authority as the owner of • the Queensland Bulk Water Transport the water transport services. Authority, which is a statutory authority created to own the major transport Water is sold by the water grid manager to a infrastructure used to transport the water grid customer. A grid customer will initially bought and sold by the water grid manager; consist of each local government in the South and East Queensland region (Brisbane, Gold Coast, • the Queensland Manufactured Water Logan, Redland, Sunshine Coast, Ipswich, Authority, which is a statutory authority Somerset, Moreton Bay, Scenic Rim and Lockyer established to hold bulk manufactured Valley), and CS Energy Limited and Tarong water supplies (currently the Gold Coast Energy Limited (operators of Swanbank, Tarong Desalination Plant and the Western Corridor and Tarong North power stations). Recycled Water Project). Local-government-owned retailers will then be The water grid is a series of interconnected responsible for the retail sale of water supply pipelines that connect the South East and sewerage disposal services to South East Queensland region’s major water sources, water Queensland households and businesses through treatment plants and bulk water transport their water distribution networks. networks. The key principle underpinning the The Minister has the power to impose grid establishment of the water grid is that water is a contracts between a grid service provider shared resource.5 and the water grid manager for the supply of The State Government is constructing of declared water services, and between the water a number of new water storages and water grid manager and a grid customer for the supply pipelines. As these water storages and water of water to the grid customer. The effect of the pipelines are completed and connected to grid contracts is that: existing water supplies, the water grid will • only grid service providers can sell water to enable water to be moved to areas where it is the water grid; needed within South East Queensland. • only grid customers can buy water from the water grid; and • both grid customers and grid service providers must only deal with the water grid manager (though the market rules (refer below) may subsequently allow other entities to be 4. Queensland Water Commission, Our Water – Urban supplied with water from the water grid). Water Supply Arrangements in South East Queensland, Final Report, (2007). 5. Explanatory Notes, Water Supply (Safety and Reliability) Bill 2008 (Qld) 20. 6. Explanatory Notes, above n 5, 205. These provisions are aimed at sharing the cost The State Government’s position is that liability of water services across South East Queensland, should be limited to direct losses, consistent as opposed to the previous system of costs being with the general position adopted by entities incurred by individual local governments.7 operating in a utilities market, such as the Victorian gas industry market.10 Consequently, a grid participant will not be civilly liable to HOW DOES another grid participant for any consequential loss for an act or omission (including THE MARKET negligence) of the fi rst grid participant in the performance of its function under the Water Act OPERATE? (or a failure to perform). The details of how the market will operate will be In this case, consequential loss will include contained in the market rules, which the Minister any lost profi ts or revenue, use of equipment, is empowered to create under the Act. These business interruption, loss of data, downtime, market rules will cover a range of topics including: loss of goodwill, damages or any other special or indirect loss or damage. This exclusion of • the process for entry into, and participation liability, however, does not apply to the extent in, the market; that the consequential loss was caused or • the rights and obligations of grid participants; contributed to by the wilful default of the • fees or charges payable by grid participants; responsible grid participant. • the regulation of the operational aspects of the market; • a process for putting in place operating EXISTING protocols between grid participants where their operations interact (but there is no grid AUTHORITIES TO contract); • the prices payable for water sold and TAKE WATER AND purchased on the market; • dispute resolution processes; and WATER SUPPLY • monitoring and reporting obligations. Grid participants must comply with the market AGREEMENTS 8 rules, which may be highly technical in nature. Existing allocations, licences and permits to Until the market rules are publicly available, take water for town water supplies or urban however, there are few details available about purposes held by local governments, existing the operation of the market and the grid licensees and other permit holders will also be participants’ responsibilities. transferred to the water grid manager. As more water sources and pipelines are completed and LIABILITY OF GRID connected to the water grid, water will be able to be moved around South East Queensland. PARTICIPANTS This transfer of existing allocations is necessary to ensure that the water grid manager is the sole Under the new structural arrangements, the purchaser and seller of declared water services, contractual relationship between the parties and can respond to drought situations or will not follow the physical fl ow of the water.9 implement water supply models as necessary.11 Each grid participant (which includes both grid The Water Act will now provide that any water service providers and grid customers) will only supply agreements in force for the supply of have a contract with the water grid manager water or a water service that are to be supplied and therefore no contracts will exist between by a declared water service will end at 30 June grid participants themselves. This means that, 2008. However, each of those affected by although the various grid participants will have this provision, that is, each local government operational contact with each other, there is no whose local government area forms part of the opportunity for them to deal with the liability South East Queensland region (together with issues that may arise between them in a party- certain power stations), is deemed to be a grid to-party contract. customer. 7.
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