(b) the provisions of clause 139 of the Agreement and of Schedule F continue to apply while this Part applies, except to the extent that any of those provisions is inconsistent with a provision of this Part.
13. Obligations of the Committee
(1) While this Part applies, the Committee must meet at least once in every 2 months:
(a) to consider possible actions which might be taken by the Ministerial Council, the Authority, a Constructing Authority or any Contracting Government; and
(b) to recommend any such actions to the Ministerial Council as it considers appropriate; and
(c) to monitor and to prepare a report to the Ministerial Council on the implementation of any actions approved by the Ministerial Council; and
(d) to recommend to the Ministerial Council such amendments to, or additional, actions as it considers appropriate.
(2) The Authority may make suggestions to the Committee about any matter mentioned in subclause (1).
(3) The Committee must take into account any suggestions made by the Authority under subclause (2) when discharging its functions under subclause (1).
(4) Without limiting subclause (1) or (2), in discharging their functions under those subclauses, the Committee and the Authority must have regard to any relevant policies adopted by the Committee in relation to remedial action.
14. Obligations of the Ministerial Council
While this Part applies, the Ministerial Council must meet at least once in every 4 months:
(a) to consider any recommendations or reports made by the Committee; and
(b) to take such consequential action as it considers appropriate in the circumstances.
PART 4 – ACCOUNTING FOR WATER UNDER THIS SCHEDULE
15. Establishing and maintaining accounts
(1) Whenever Part 2 or Part 3 applies, the Authority must establish and maintain separate accounts for each State relating to:
(a) the storage and use of water for the purpose of meeting current critical human water needs; and
(b) water set aside for current conveyance water; and
(c) the storage and use of water for the purpose of meeting private carry‑over; and
(d) water set aside for the conveyance reserve.
(2) The Authority must apply any relevant rules adopted under subclause 135 (14) of the Agreement when maintaining accounts under subclause (1).
(3) The Authority must give to each Committee member a copy of each account mentioned in subclause (1) at the same time as the water accounts kept under Subdivisions D and E of Division 1 of Part XII of the Agreement.
(1) Whenever Part 2 or Part 3 applies, within 14 days after the end of each month each State must give the Authority a written report setting out any alterations to each of the accounts mentioned in subclause 15 (1) for the State, required as a result of action taken in the preceding month.
(2) If the Authority considers it necessary or appropriate to verify the contents of any report given under subclause (1), the Authority may appoint an independent auditor to investigate and advise it on the accuracy of the report.
(3) If an independent auditor advises the Authority that a report was inaccurate in any way, the Authority must seek to resolve the matter in consultation with the relevant State.
(4) If the Authority is unable to resolve the matter under subclause (3) within 14 days after raising it with the relevant State, the Authority may refer the matter to the Committee.
(5) After considering any matter referred to it under subclause (4), the Committee may determine what, if any, adjustment is required to the accounts mentioned in subclause 15 (1), and the Authority must adjust the accounts accordingly.
PART 5 – REVIEW OF SCHEDULE
17. Review of Schedule
The Committee may, from time to time, recommend to the Ministerial Council that the Ministerial Council review this Schedule in accordance with subclause 135 (11) of the Agreement.
Schedule 1A—The Murray‑Darling Basin
Note: See section 18A.
The map set out in this Schedule delineates the boundaries of the Murray‑Darling Basin but does not show all of the water resources within the Murray‑Darling Basin that are covered by this Act.
Map showing the Murray-Darling Basin
Schedule 2—Basin water charging objectives and principles
Note: See section 4.
Part 1—Preliminary
1 Objectives and principles
This Schedule sets out:
(a) the Basin water charging objectives; and
(b) the Basin water charging principles.
Note 1: These objectives and principles are relevant to the formulation of water charge rules under section 92 of this Act.
Note 2: These objectives and principles are based on those set out in clauses 64 to 77 of the National Water Initiative when Part 2 of this Act commences.
Part 2—Water charging objectives
2 Water charging objectives
The water charging objectives are:
(a) to promote the economically efficient and sustainable use of:
(i) water resources; and
(ii) water infrastructure assets; and
(iii) government resources devoted to the management of water resources; and
(b) to ensure sufficient revenue streams to allow efficient delivery of the required services; and
(c) to facilitate the efficient functioning of water markets (including inter‑jurisdictional water markets, and in both rural and urban settings); and
(d) to give effect to the principles of user‑pays and achieve pricing transparency in respect of water storage and delivery in irrigation systems and cost recovery for water planning and management; and
(e) to avoid perverse or unintended pricing outcomes.
Part 3—Water charging principles
3 Water storage and delivery
(1) Pricing policies for water storage and delivery in rural systems are to be developed to facilitate efficient water use and trade in water entitlements.
(2) Water charges are to include a consumption‑based component.
(3) Water charges are to be based on full cost recovery for water services to ensure business viability and avoid monopoly rents, including recovery of environmental externalities where feasible and practical.
(4) Water charges in the rural water sector are to continue to move towards upper bound pricing where practicable.
(5) In subclause (4):
upper bound pricing means the level at which, to avoid monopoly rents, a water business should not recover more than:
(a) the operational, maintenance and administrative costs, externalities, taxes or tax equivalent regimes; and
(b) provision for the cost of asset consumption; and
(c) provision for the cost of capital (calculated using a weighted average cost of capital).
(6) If full cost recovery is unlikely to be achieved and a Community Service Obligation is deemed necessary:
(a) the size of the subsidy is to be reported publicly; and
(b) where practicable, subsidies or Community Service Obligations are to be reduced or eliminated.
(7) Pricing policies should ensure consistency across sectors and jurisdictions where entitlements are able to be traded.
4 Cost recovery for planning and management
(1) All costs associated with water planning and management must be identified, including the costs of underpinning water markets (such as the provision of registers, accounting and measurement frameworks and performance monitoring and benchmarking).
(2) The proportion of costs that can be attributed to water access entitlement holders is to be identified consistently with the principles set out in subclauses (3) and (4).
(3) Water planning and management charges are to be linked as closely as possible to the costs of activities or products.
(4) Water planning and management charges are to exclude activities undertaken for the Government (such as policy development and Ministerial or Parliamentary services).
(5) States and Territories are to report publicly on cost recovery for water planning and management annually. The reports are to include:
(a) the total cost of water planning and management; and
(b) the proportion of the total cost of water planning and management attributed to water access entitlement holders, and the basis upon which this proportion is determined.
5 Environmental externalities
(1) Market‑based mechanisms (such as pricing to account for positive and negative environmental externalities associated with water use) are to be pursued where feasible.
(2) The cost of environmental externalities is to be included in water charges where found to be feasible.
6 Benchmarking and efficiency reviews
(1) Independent and public benchmarking or efficiency reviews of pricing and service quality relevant to regulated water charges is or are to be undertaken based on a nationally consistent framework.
(2) The costs of operating these benchmarking and efficiency review systems are to be met through recovery of regulated water charges.
Schedule 3—Basin water market and trading objectives and principles
Note: See section 4.
1 Definitions
In this Schedule:
exchange rate means the rate of conversion to be applied to water to be traded from one trading zone and/or jurisdiction to another.
trading zones means zones established to simplify administration of a trade by setting out the known supply source or management arrangements and the physical realities of relevant supply systems within the zone so that trade can occur within and between zones without first having to investigate and establish the details and rules of the system in each zone.
water access entitlement tagging means an accounting approach that allows a water access entitlement that is traded from one jurisdiction or trading zone to another jurisdiction or trading zone to retain its original characteristics when traded to the new jurisdiction or trading zone (rather than being converted into a form issued in the new jurisdiction or trading zone).
2 Objectives and principles
This Schedule sets out:
(a) the Basin water market and trading objectives; and
(b) the Basin water market and trading principles.
Note 1: These objectives and principles are relevant to the formulation of:
(a) the provisions of the Basin Plan (see item 12 of the table in subsection 22(1)); and
(b) the provisions of water management plans for particular water resource plan areas (see subsection 22(3)); and
(c) the provisions of the water market rules (see paragraph 97(1)(b)).
Note 2: These objectives and principles are based on those set out in clauses 58 to 63 and Schedule G of the National Water Initiative when Part 2 of this Act commences.
3 Basin water market and trading objectives
The objectives of the water market and trading arrangements for the Murray‑Darling Basin are:
(a) to facilitate the operation of efficient water markets and the opportunities for trading, within and between Basin States, where water resources are physically shared or hydrologic connections and water supply considerations will permit water trading; and
(b) to minimise transaction cost on water trades, including through good information flows in the market and compatible entitlement, registry, regulatory and other arrangements across jurisdictions; and
(c) to enable the appropriate mix of water products to develop based on water access entitlements which can be traded either in whole or in part, and either temporarily or permanently, or through lease arrangements or other trading options that may evolve over time; and
(d) to recognise and protect the needs of the environment; and
(e) to provide appropriate protection of third‑party interests.
4 Basin water market and trading principles
(1) This clause sets out the Basin water market and trading principles.
(2) Water access entitlements may be traded either permanently, through lease arrangements, or through other trading options that may evolve over time, if water resources are physically shared or hydrologic connections and water supply considerations would permit water trading.
(3) All trades should be recorded on a water register. Registers will be compatible, publicly accessible and reliable, recording information on a whole of catchment basis, consistent with the National Water Initiative.
(4) Restrictions on extraction, diversion or use of water resulting from trade can only be used to manage:
(a) environmental impacts, including impacts on ecosystems that depend on underground water; or
(b) hydrological, water quality and hydro‑geological impacts; or
(c) delivery constraints; or
(d) impacts on geographical features (such as river and aquifer integrity); or
(e) features of major indigenous, cultural heritage or spiritual significance.
(5) A trade may be refused on the basis that it is inconsistent with the relevant water resource plan.
(6) Trades must not result in the long‑term annual diversion limit being exceeded. That is, trades must not:
(a) cause an increase in commitments to take water from water resources or parts of water resources; or
(b) increase seasonal reversals in flow regimes;
above sustainable levels identified in relevant water resource plans such that environmental water or water dependent ecosystems are adversely affected.
(7) Trades within overallocated water resources (including ground water resources) may be permitted in some cases subject to conditions to manage long‑term impacts on the environment and other users.
(8) Where necessary, water authorities will facilitate trade by specifying trading zones and providing related information such as the exchange rates to be applied to trades in water allocations to:
(a) adjust for the effects of the transfer on hydrology or supply security (transmission losses) or reliability; and
(b) reflect transfers between different classes of water resources, unregulated streams, regulated streams, supplemented streams, ground water systems and licensed runoff harvesting dams.
(9) Water trading zones, including ground water trading zones, should be defined in terms of:
(a) the ability to change the point of extraction of the water from one place to another; and
(b) the protection of the environment.
The volume of delivery losses in supplemented systems that provide opportunistic environmental flows will be estimated and taken into account when determining the maximum volume of water that may be traded out of a trading zone.
(10) Exchange rates must not be used to achieve other outcomes such as to alter the balance between economic use and environmental protection or to reduce overall water use.
(11) Trade in water allocations may occur within common aquifers or surface water flow systems consistent with water resource plans.
(12) Trade from a licensed runoff harvesting dam (that is, not a small farm dam) to a river may occur subject to:
(a) a reduction in dam capacity consistent with the transferred water access entitlement; or
(b) retention of sufficient capacity to accommodate evaporative and infiltration losses; or
(c) conditions specified in water resource plans to protect the environment.
(13) Compatible institutional and regulatory arrangements will be pursued to improve intrastate and interstate trade, and to manage differences in entitlement reliability, supply losses, supply source constraints, trading between systems and cap requirements.
(14) The transfer of water allocations and entitlements will be facilitated (where appropriate) by water access entitlement tagging, water access entitlement exchange rates or other trading mechanisms that may evolve over time.
(15) Institutional, legislative and administrative arrangements will be introduced to improve the efficiency and scope of water trade and to remove barriers that may affect potential trade.
(16) Barriers to permanent trade out of water irrigation areas up to an annual threshold limit of 4% of the total water entitlement of that area will be immediately removed, subject to a review by 2009 by the National Water Commission under paragraph 7(2)(h) of the National Water Commission Act 2004, with a move to full and open trade by 2014 at the latest.
(17) Subject to this clause, no new barriers to trade will be imposed, including in the form of arrangements for addressing stranded assets.
Schedule 3A—Risk assignment framework
Note: See section 74A.
Part 1—Clauses 48 to 50 of the National Water Initiative
48. Water access entitlement holders are to bear the risks of any reduction or less reliable water allocation, under their water access entitlements, arising from reductions to the consumptive pool as a result of:
(i) seasonal or long‑term changes in climate; and
(ii) periodic natural events such as bushfires and drought.
49. The risks of any reduction or less reliable water allocation under a water access entitlement, arising as a result of bona fide improvements in the knowledge of water systems’ capacity to sustain particular extraction levels are to be borne by users up to 2014. Risks arising under comprehensive water plans commencing or renewed after 2014 are to be shared over each ten year period in the following way:
i) water access entitlement holders to bear the first 3% reduction in water allocation under a water access entitlement;
ii) State/Territory governments and the Commonwealth Government to share one‑third and two‑thirds respectively reductions in water allocation under water access entitlements of between 3% and 6%; and
iii) State/Territory and Commonwealth governments to equally share reductions in water allocation under water access entitlements greater than 6%.
50. Governments are to bear the risks of any reduction or less reliable water allocation that is not previously provided for, arising from changes in government policy (for example, new environmental objectives). In such cases, governments may recover this water in accordance with the principles for assessing the most efficient and cost effective measures for water recovery.
Part 2—Clause 10.1.3 of the Agreement on Murray‑Darling Basin Reform of 3 July 2008