. COMPETITION &MER COMMISSION

ce To Be CAN BERRA

2 5 AUG 2008

The PVic tCria

Department ofSustainability and Environment

8 Nicholson Street

PO Box 500 East Melbourne

Victoria 8002 Australia

Telephone: (03) 9637 8000

Facsimile: (03) 9637 8100

ABN 90 719 052 204

DX 210098

Ref: DSE054711

File:

Mr Graeme SamuelChairman FILE No:Australian Competition & Consumer Commission

DOC:GPO Box 3131CANBERRA ACT 2601 I MARS/PRISM:

Dear Mr Samuel

WATER MARKET RULES POSITION PAPER

I refer to the recent Australian Competition and Consumer Commission (ACCC) position paper titled"Water Market Rules". While most of the issues covered in the Paper are not directly relevant toVictoria, I would like to express my general support for the positions expressed. However, I wouldalso like to offer the following detailed drafting comments that I believe need to be addressed to ensuremaximum clarity.

Transformation and/or tradeAlthough the definition of this term is fairly clear in the context of the Paper, it could be made clearer ifit was defined up front. This would also help to distinguish the Water Market Rules from the upcomingWater Trading Rules.

Section 5.1.2 supports the right of irrigators to transform separately from trade, but this conclusion isnot referenced in a box — I suggest that it should be.

Section 6.2.1 contains a couple of instances where 'transform' and 'trade' are used separately — Iwonder if this is intentional and if so, why?

Exit feesWhile imposing a ban on exit fees and compulsory termination fees is implied within the first dot pointin Box 3 Rule 2, there is little mentioned of this proposal in the text, except in connection with thesecurity issue. This is such an important position that I believe should be made abundantly clear.

The 4% limit:Box 3 Rule 6 and section 6.8 permit the imposition of the 4% limit on trade out of irrigation areas 'asreflected in state legislation'. In Victoria this limit is implemented by a trading rule, in NSW thelegislation forbids an operator from applying a limit that is less than 4%. In neither case is the 4% limitin legislation. We recommend a slight modification to the current words as follows: '..as reflected instate legislation or other state instruments.'

Privacy StatementAny personal information about you or a third party in your correspondence will be protected under the provisionsof the Information Privacy Act 2000. It will only be used or disclosed to appropriate Ministerial, StatutoryAuthority, or departmental staff in regard to the purpose for which it was provided, unless required or authorised bylaw. Enquiries about access to information about you held by the Department should be directed to the ManagerPrivacy, Department of Sustainability & Environment, PO Box 500, East Melbourne, 3002.

Setting terms and conditions for transformation and/or tradeBox 1 Rule 5 sets a process for making changes to terms and conditions; however, there is no processto guide the initial setting of terms and conditions. The process for setting terms and conditions shouldbe at least as rigorous as the requirements for any changes.

Public copy of recordBox 1 Rule 13 sets a requirement that information about irrigation rights should be made available onrequest. We believe this should go further and be a requirement to be on public record.

Time limitsThe third time limit in Box 1 - 'updating the register' - needs to be clarified. In cases where permanenttrade is involved, there will commonly be a settlement process between approval and updating theregister. This can take weeks or months. Perhaps the rule should be modified to mean 'after settlementand recording of the ownership change'?

Water delivery rightsBox 2 Rule 2 should be clarified as follows: Upon transformation, terms and conditions of a deliverycontract may reflect those terms and conditions concerning delivery contained in the arrangements asthey previously related to the irrigation right. This is to ensure that no terms and conditions about theprevious entitlement are added to the delivery rights.

SecurityFor clarity, we believe that further detail on Rule 2 Box 4 about the meaning of 'original' is required.What should happen if people seek to transform their irrigation right in smaller parcels over time? Asimilar question arises for Rule 10 - 50% of the value of the termination fee is mentioned, but it is notclear as to which delivery entitlements would be allowed to be included in the termination feecalculation.

Deduction for lossesSection 6.6 seems reasonable, but the conclusion in the Box is unclear. Presumably, the deduction ofsome of the entitlement to allow for losses can be permitted. This needs to be clarified.

Finally, as you are aware, on 3 July 2008, COAG agreed to extend the application of the water marketrules and water charge rules to all entities and transactions within the Basin. I assume any discussionrequired on this issue will be addressed in the next step of the Water Market Rule development process.

I hope the above comments will assist the ACCC to further progress the development of the WaterMarket Rules.

Yours sincerely

ay. i Dov_y_at

1Manager, Office of Water

DSE054711

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