The Water Industry Competition Act 2006 ("Act") commenced on 8 August 2008 to a fanfare which failed to rate against the opening ceremony of the Beijing Olympics!
Nevertheless, the commencement of the Act and consequential amendments to Acts including the Local Government Act 1993 and Sydney Water Act 1994 were long awaited. The intervening development of supporting regulations suspended the commencement of the Act which was initially assented to on 27 November 2006.
The Act is part of a shift in community attitude towards waste water and sewerage. According to ANU academics1, "Water which was once seen as a nuisance is now being recast as a valuable resource ... The recycling of human waste water is being reinvented as both an environmental and commercial opportunity that can be facilitated by giving 'third-party' access to established public-sector sewerage infrastructure and – importantly – to the sewerage! The realisation of the resource value of waste water has spored a new industry – sewer mining!"
In presenting the legislation to Parliament, the then Minister for Water Utilities labelled the Act as "promoting new recycling businesses by enabling prospective sewer miners to have the terms on which they can mine sewers determined by the Independent Pricing and Regulatory Tribunal (IPART).
Who is affected by the Act?
The Act introduces the following key players: Infrastructure S ervice Providers who provide
- the storage, conveyance or reticulation of water or sewerage by infrastructure, including public water utilities such as State Water Corporation, Sydney Water Corporation or Councils exercising water or sewerage functions;
- Network Operators who are licensed to construct, maintain and operate water industry infrastructure
- Retail Suppliers who are licensed to supply water or provide sewerage services, by means of water industry infrastructure;
- Monopoly Suppliers are Network Operators or Retail Suppliers declared to be so by the Minister for Energy Utilities and Sustainability under section 51 of the Act, because they offer a service for which there are no other suppliers or potential other suppliers competing in the part of the market concerned; and
- Retailer of Last Resort who are declared to be so by the Minister for Energy Utilities and Sustainability under section 44 of the Act to intervene in the event of a supply failure by another water or sewerage supplier.
Significantly, an entity may play a number of roles under the Act. For example, an Infrastructure S ervice Provider may also be a Retailer of Last Resort. A Network Operator may also be a Monopoly Supplier.
Each entity will be subject to a variety of obligations under the Act and Regulations including:
- Infrastructure Service Provider: must submit a cost allocation manual to IPART.
- Network Operators: must comply with all environmental protection legislation and ensure drinking water is fit for human consumption.
- Retail Suppliers: must comply with any Codes of Conduct relevant to marketing in the water industry.
Key aspects of the Act
The Act establishes:
- a system for licensing water and sewerage service providers;
- a limited process for providing third parties with access to existing infrastructure services; and
- a dispute resolution mechanism under which applications may be made to IPART for determination by an Arbitrator.
In addition it gives Network Operators rights to erect and maintain water infrastructure similar to public water utilities.
Licences are not required by public water utilities.
For others providing water or sewerage services, it is an offence to operate without a licence: section 5 of the Act. Directors and, significantly "each person .... concerned in the management of the Corporation" are liable for corporate offences under the A ct: section 97 of the Act.
However, there is an exemption from licensing requirements until 8 August 2009 for water or sewerage infrastructure:
- whose construction commenced before 8 August 2008; or
- that was being operated immediately before 8 August 2008.
Third parties have limited rights to obtain access to existing infrastructure services by making an application to IPART. Applications may currently only be made with respect to land within the area of operations of Sydney Water Corporation and Hunter Water Corporation: section 22 of the Act.
IPART may only declare that a service is covered by the access regime if:
- the infrastructure is of State significance;
- it would not be economically feasible to duplicate the infrastructure;
- access is needed to promote a material competition in an upstream or downstream market;
- the safe use of the infrastructure can be assured at an economically feasible cost;
- access would not be contrary to the public interest.
These considerations are similar to those specified in section 44H (9) of the Trade Practices Act 1974 which formerly gave the parties access to "declared services" including water and sewerage infrastructure.
Third parties are already entitled to access Sydney Water's sewerage networks at Bondi, Malabar and North Head by virtue of the transitional provisions in Schedule 4 and Part 3 Division 2 of the Act.
In addition to adjudicating disputes over access to infrastructure services, IPART has authority to determine disputes over sewerage mined from that service. IPART may determine a dispute between an infrastructure service provider and sewer miner by arbitration only if the infrastructure service provider has lodged a policy permitting sewer miners to draw from the service and agreed to allow disputes to be referred to IPART for arbitration: section 45 and 46 (1) of the Act.
In determining a dispute, the arbitrator must give effect to the infrastructure service provider's policy: section 46 (5) of the Act. If the dispute relates to the pricing of access to an infrastructure service, the arbitrator must have regard to the pricing principles specified in section 41 (2) of the Act.
Rights of Network Operators
The Act gives Network Operators significant rights including:
- rights to erect and maintain water infrastructure under a public road or reserve: section 58 of the Act
- rights to remove trees or obstructions to water or sewer mains: section 60 and section 61 of the Act
- ownership of the infrastructure even when it is on another persons land: section 64 of the Act.
1 Title: Troubled waters [electronic resource] :confronting the water crisis in Australia's cities / editor, Patrick Troy. Published: Acton, A .C.T. : ANU E Press,2008. Online Resource: http://epress.anu.edu.au
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