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Providing innovative procurement solutions for local government projects April 20, 2018

We advised City of Casey on the procurement process of the Bunjil Place Project. Bunjil Place is a $125 million civic and cultural precinct for the City of Casey, encompassing an 800-seat theatre and 200-seat … Continued

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Strategic use of regulatory action policies: an example in the context of Freedom of Information May 23, 2018

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Water conservation initiatives undertaken by water authorities – striking the right balance

In the face of climate change and the associated demands on our precious water sources, the pressure on society to engage in water conservation is ever mounting. Businesses and individuals can take unilateral action to conserve water by, for example, installing water efficiency devices and replacing potable water with non-potable water, where appropriate. However, water conservation can also be undertaken by water authorities. This article considers how water conservation has been embedded in the regulatory framework applicable to Sydney Water Corporation (Sydney Water) in New South Wales and the challenge Sydney Water is likely to face in implementing water conservation measures within the confines of the regulatory framework.

Sydney Water is one of the four government water utilities whose operating licence is administered by the Independent Pricing and Regulatory Tribunal of New South Wales (IPART). In July this year, IPART granted Sydney Water Corporation its operating licence for the period of 2015 to 2020 (current Licence), introducing a number of major changes which are not included in or differ from its previous licence, including on water conservation. The term ‘water conservation’ is not expressly defined under the current Licence. However, the water conservation requirements contained within the Licence indicate that the concept of water conservation encompasses the policies, strategies and programs developed and implemented to reduce water leakage and to promote water recycling and water efficiency (including demand management).

Previous licence obligations regarding water conservation

The 2010-2015 licence (previous Licence) set out specific targets for water conservation. Under the previous Licence, Sydney Water was required to meet targets for:

  • Water use: Specifically, the previous Licence required Sydney Water to reduce the quantity of drinking water drawn from all sources to a level of water use equal to, or less than, 329 litres per person per day. If it failed to meet the water use level in a particular year, Sydney Water was required to demonstrate, to the satisfaction of IPART, that it would not have been reasonable to meet the water use level in that year
  • Water leakage: Sydney Water was required to ensure that the level of water leakage from its drinking water supply system did not exceed 105 megalitres per day.[1]

In addition to the above targets, Sydney Water was also required to:

  • undertake and promote water efficiency programs
  • give due consideration to water efficiency and other water conservation measures as part of planning for future services, including addressing water leaks
  • promote, foster and encourage the production and use of recycled water in its area of operations.[2]

Further, Sydney Water was required to prepare a five year water conservation strategy document that included:

  • strategies relating to water leakage, recycled water, and water efficiency
  • how these strategies contribute to the objectives and targets outlined in the Metropolitan Water Plan
  • analysis of current and future programs and projects
  • an outline of water conservation objectives, targets and timetable for the entire term of the licence.[3]
Water conservation obligations under the current Licence

Instead of prescribing binding and static water conservation targets, IPART adopted a new approach to water conservation under the current Licence. The new approach is designed to ensure that Sydney Water can be responsive to a changing environment and to promote public transparency and accountability regarding Sydney Water’s water usage levels and conservation program.[4]

The approach relies upon Sydney Water developing a methodology (Methodology) to determine its economic level of water conservation (ELWC) and using that Methodology to develop a 5 year rolling water conservation program.[5] The following table outlines the process and associated timeframe for the establishment and implementation of Sydney Water’s ELWC.

Timeframe Obligations
1 November 2015 Sydney Water must submit to IPART a report outlining Sydney Water’s approach to, and principles for, developing a methodology for determining its economic level of water conservation, including at a minimum the following elements: water leakage, water recycling and water efficiency (including demand management).
Upon approval of the approach and principles Sydney Water must develop a methodology in accordance with the approach and principles.
31 December 2016 Sydney Water must obtain IPART’s approval for the Methodology.
1 September 2017 Sydney Water must develop a water conservation program consistent with its ELWC and in accordance with the Methodology.

Until Sydney Water has developed and obtained IPART’s approval for the Methodology, it must:

  • maintain the quantity of drinking water drawn from all sources to a level of water usage equal to, or less than, 329 litres per person per day
  • ensure that the level of water leakage from its drinking water supply does not exceed 121 megalitres per day
  • promote, foster and encourage the efficient use of water and the production and use of recycled water, where financially viable.

In addition to developing the Methodology and a water conservation program consist with the EWLC, the current Licence also requires Sydney Water to report to IPART on any significant changes it proposes to make to the Methodology and water conservation.

Striking the balance between conservation and economic efficiency

The development of the Methodology and the determination of the ELWC by Sydney Water will no doubt be guided by various elements of the regulatory framework applicable to Sydney Water, including:

  • Economic efficiency: economic efficiency is a critical requirement of the economic regulatory framework administered by IPART under the Independent Pricing and Regulatory Tribunal Act 1992 (NSW). Accordingly, Sydney Water will need to demonstrate that water conservation measures proposed under the Methodology are economically efficient.
  • Integrated water management: the objects of the Water Management Act 2000 (NSW) include ‘to provide for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations and, in particular, to encourage best practice in the management and use of water’. This object tends to support best-practice water conservation measures.
  • Sustainability: under the Sydney Water Act 1999 (NSW) Sydney Water is exhorted to ‘protect the environment by conducting its operations in compliance with the principles of ecologically sustainable development’. The requirement to protect the environment and to ensure ecological sustainability will help to frame the water conservation measures adopted by Sydney Water.

A key challenge that Sydney Water will face in developing the Methodology and the ELWC is to strike an appropriate balance between, on the one hand, the need to ensure integrated water management and ecological sustainability and, on the other hand, the imperative to ensure economic efficiency.

Author
xinyu z Xinyu Zhang | Graduate Lawyer
Tel +61 3 9258 3383
E xinyu.zhang@maddocks.com.au

 

[1] Sydney Water: Water Conservation Strategy 2010-2015.

[2] Ibid.

[3] Ibid.

[4] Sydney Water Corporation Operating Licence End of Term Review Water Licensing – Report to the Minister May 2015” Chapter 3: Changes to the licence.

[5] Sydney Water Corporation Operating Licence End of Term Review Water Licensing – Report to the Minister May 2015

In the face of climate change and the associated demands on our precious water sources, the pressure on society to engage in water conservation is ever mounting. Businesses and individuals can take unilateral action to conserve water by, for example, installing water efficiency devices and replacing potable water with non-potable water, where appropriate. However, water conservation can also be undertaken by water authorities. This article considers how water conservation has been embedded in the regulatory framework applicable to Sydney Water Corporation (Sydney Water) in New South Wales and the challenge Sydney Water is likely to face in implementing water conservation measures within the confines of the regulatory framework.

Sydney Water is one of the four government water utilities whose operating licence is administered by the Independent Pricing and Regulatory Tribunal of New South Wales (IPART). In July this year, IPART granted Sydney Water Corporation its operating licence for the period of 2015 to 2020 (current Licence), introducing a number of major changes which are not included in or differ from its previous licence, including on water conservation. The term ‘water conservation’ is not expressly defined under the current Licence. However, the water conservation requirements contained within the Licence indicate that the concept of water conservation encompasses the policies, strategies and programs developed and implemented to reduce water leakage and to promote water recycling and water efficiency (including demand management).

Previous licence obligations regarding water conservation

The 2010-2015 licence (previous Licence) set out specific targets for water conservation. Under the previous Licence, Sydney Water was required to meet targets for:

  • Water use: Specifically, the previous Licence required Sydney Water to reduce the quantity of drinking water drawn from all sources to a level of water use equal to, or less than, 329 litres per person per day. If it failed to meet the water use level in a particular year, Sydney Water was required to demonstrate, to the satisfaction of IPART, that it would not have been reasonable to meet the water use level in that year
  • Water leakage: Sydney Water was required to ensure that the level of water leakage from its drinking water supply system did not exceed 105 megalitres per day.[1]

In addition to the above targets, Sydney Water was also required to:

  • undertake and promote water efficiency programs
  • give due consideration to water efficiency and other water conservation measures as part of planning for future services, including addressing water leaks
  • promote, foster and encourage the production and use of recycled water in its area of operations.[2]

Further, Sydney Water was required to prepare a five year water conservation strategy document that included:

  • strategies relating to water leakage, recycled water, and water efficiency
  • how these strategies contribute to the objectives and targets outlined in the Metropolitan Water Plan
  • analysis of current and future programs and projects
  • an outline of water conservation objectives, targets and timetable for the entire term of the licence.[3]
Water conservation obligations under the current Licence

Instead of prescribing binding and static water conservation targets, IPART adopted a new approach to water conservation under the current Licence. The new approach is designed to ensure that Sydney Water can be responsive to a changing environment and to promote public transparency and accountability regarding Sydney Water’s water usage levels and conservation program.[4]

The approach relies upon Sydney Water developing a methodology (Methodology) to determine its economic level of water conservation (ELWC) and using that Methodology to develop a 5 year rolling water conservation program.[5] The following table outlines the process and associated timeframe for the establishment and implementation of Sydney Water’s ELWC.

Timeframe Obligations
1 November 2015 Sydney Water must submit to IPART a report outlining Sydney Water’s approach to, and principles for, developing a methodology for determining its economic level of water conservation, including at a minimum the following elements: water leakage, water recycling and water efficiency (including demand management).
Upon approval of the approach and principles Sydney Water must develop a methodology in accordance with the approach and principles.
31 December 2016 Sydney Water must obtain IPART’s approval for the Methodology.
1 September 2017 Sydney Water must develop a water conservation program consistent with its ELWC and in accordance with the Methodology.

Until Sydney Water has developed and obtained IPART’s approval for the Methodology, it must:

  • maintain the quantity of drinking water drawn from all sources to a level of water usage equal to, or less than, 329 litres per person per day
  • ensure that the level of water leakage from its drinking water supply does not exceed 121 megalitres per day
  • promote, foster and encourage the efficient use of water and the production and use of recycled water, where financially viable.

In addition to developing the Methodology and a water conservation program consist with the EWLC, the current Licence also requires Sydney Water to report to IPART on any significant changes it proposes to make to the Methodology and water conservation.

Striking the balance between conservation and economic efficiency

The development of the Methodology and the determination of the ELWC by Sydney Water will no doubt be guided by various elements of the regulatory framework applicable to Sydney Water, including:

  • Economic efficiency: economic efficiency is a critical requirement of the economic regulatory framework administered by IPART under the Independent Pricing and Regulatory Tribunal Act 1992 (NSW). Accordingly, Sydney Water will need to demonstrate that water conservation measures proposed under the Methodology are economically efficient.
  • Integrated water management: the objects of the Water Management Act 2000 (NSW) include ‘to provide for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations and, in particular, to encourage best practice in the management and use of water’. This object tends to support best-practice water conservation measures.
  • Sustainability: under the Sydney Water Act 1999 (NSW) Sydney Water is exhorted to ‘protect the environment by conducting its operations in compliance with the principles of ecologically sustainable development’. The requirement to protect the environment and to ensure ecological sustainability will help to frame the water conservation measures adopted by Sydney Water.

A key challenge that Sydney Water will face in developing the Methodology and the ELWC is to strike an appropriate balance between, on the one hand, the need to ensure integrated water management and ecological sustainability and, on the other hand, the imperative to ensure economic efficiency.

Author
xinyu z Xinyu Zhang | Graduate Lawyer
Tel +61 3 9258 3383
E xinyu.zhang@maddocks.com.au

 

[1] Sydney Water: Water Conservation Strategy 2010-2015.

[2] Ibid.

[3] Ibid.

[4] Sydney Water Corporation Operating Licence End of Term Review Water Licensing – Report to the Minister May 2015” Chapter 3: Changes to the licence.

[5] Sydney Water Corporation Operating Licence End of Term Review Water Licensing – Report to the Minister May 2015