The SEQ water market concept
Features and benefits of the proposals
Implementation
Local government implications
Consumer implications
Employment impacts
Rural communities

The SEQ water market concept

Q. What are the key elements of the South East Queensland (SEQ) urban water reform model announced by the Queensland Government?

After considering detailed recommendations provided by the Commission and submissions from key stakeholders, the Government approved the core institutional reform model for water supply arrangements for urban and industrial use in SEQ proposed by the Commission, comprising the following elements:

• Bulk source and treatment – ownership of water sources such as dams, weirs and aquifers will be aggregated into a single Bulk Supply Authority owned by the State effective by 1 July 2008. The entity will conduct its affairs on a commercial basis and sell all its water services to the Water Grid Manager
• Manufactured water – the SEQ (Gold Coast) Desalination Plant and the Western Corridor Recycled Water Project will be located within a second State owned bulk entity focused on manufactured water
• Bulk transport – a state owned authority will own the major transport infrastructure, including that presently owned by local governments and that being built by the State as part of the SEQ Water Grid to enable conjunctive (regional) management and distribution of water. The Bulk Transport Authority is required to sell all its water services (transport from the bulk supply and manufactured water sources to the Distribution Entity’s network) to the Water Grid Manager
• Water grid management – a Water Grid Manager will be established by the State to manage contracts with the Bulk Supply and Transport Authorities and the retailers, and to manage the flow of water around the SEQ Water Grid allowing for the sharing of costs, effective from 1 July 2008. The Water Grid Manager will buy the services of the Bulk Supply, Manufactured Water and Bulk Transport Authorities and sell the treated water to retailers and power stations
• Distribution – a single Distribution Entity will own the water and sewerage reticulation pipes, reservoirs, pumps etc (i.e. all non bulk transport assets) and sewage treatment plants. It will be wholly owned by the SEQ local governments, effective from 1 July 2010. The Distribution Entity will deliver water to retailer customers and collect sewerage from retail customers, deliver sewerage to its treatment plants, treat and dispose of the sewerage
• Retail – Local government owned retailers will be established by 1 July 2010 (i.e. separate legal entities from local government). The corporate structure is yet to be decided. Retailers will:

• sell water supply and sewerage disposal services to SEQ households and businesses
• purchase treated water from the Water Grid Manager
• contract and pay the Distribution Entity to deliver water to their customers
• contract and pay the Distribution Entity to collect, treat and dispose of sewage from their customers

• The SEQ Councils are to advise the Government on the number of retail entities they wish to establish by the end of May 2008.

The Bulk Supply, Manufactured Water and Bulk Transport Authorities and the Water Grid Manager will be State statutory authorities, each governed by its own Board. There is provision for Ministerial direction (akin to shareholding Minister’s direction of a Government owned corporation) to perform, for example, non-commercial activities.

Q: What is the SEQ Water Grid?

The SEQ Water Grid is a series of interconnected pipelines that will deliver water security to SEQ. By connecting the region’s major water sources, water treatment plants and bulk water transport networks, the water grid will enable the co-ordination of delivery of urban and industrial water supplies across the SEQ region.

Q: Why do we need a water grid?

The water grid will ensure adequate water supplies are maintained throughout the SEQ region. The grid will connect existing water supplies with new water sources so that water can be moved to areas where it is needed.

Q: Who is in the grid?

There are 10 Councils in the SEQ Water Grid - Brisbane, Gold Coast, Logan, Redland, Sunshine Coast, Ipswich, Somerset, Moreton Bay, Scenic Rim and Lockyer Valley. The operational and pricing arrangements for the grid will commence from 1 July 2008.

CS Energy and Tarong Energy will also be customers of the grid, purchasing water to supply Swanbank, Tarong and Tarong North Power Stations.

Q: Who will operate the SEQ Water Grid?

It is proposed that a new State owned entity, the Water Grid Manager, will operate the grid and ensure Council and power station water requirements are delivered. The Water Grid Manager will operate the grid in accordance with Water Market Rules to be established by the Queensland Water Commission, after consultation with key stakeholders, and endorsement by the State Government.

Q: What is the role of the Water Grid Manager?

The role of the Water Grid Manager (WGM) is to manage the operation of the SEQ Water Grid, maintaining regional water security at minimum cost. The WGM does not own any infrastructure assets. It purchases bulk supply and transport services, sells water and water services to grid customers and oversees the physical operation of the water grid. The WGM ensures that water grid participants comply with the System Operating Plan through a combination of monitoring and contractual arrangements.

Features and benefits of the proposals

Q: What are the benefits of the restructuring of our water management?

Restructuring the industry and reducing the number of entities involved in managing South East Queensland’s water supply will result in improved regional coordination and management of water supplies, a clearer responsibility and accountability framework, consistent levels of service and improved water supply security. The reforms will deliver improved asset management regimes that will ensure water infrastructure is upgraded in a timely and efficient way.

Q: Is the State Government taking over all water assets?

No. It is proposed that the State Government will own the major water sources, trunk pipelines and water treatment plants, with Councils retaining ownership of the local distribution pipeline network and wastewater treatment plants. Where major sources and pipelines are being taken over from the Councils, fair compensation arrangements have been developed and are being implemented.
Water Security

Q: How will these arrangements ensure water security for SEQ?

The State Government is building major new water assets to provide more water for South East Queensland. These assets include new dams, a desalination plant, extra groundwater sources and the Western Corridor Recycled Water Project. Regional inter-connector pipelines, which are a key element of the South East Queensland Water Grid, are being constructed to allow water from new and existing water sources to be moved around the region. Through the active management of the grid by the Water Grid Manager, a 14% increase in water supply will be available.

The proposed institutional arrangements will ensure that these water supplies are coordinated and managed from a regional perspective. It will also clearly align ownership and control of water assets with public accountabilities, so that the State Government is clearly accountable for water supply security and controls the water and the assets to deliver that security.

Q: Will these reforms affect the delivery of the drought projects currently underway in SEQ?

The Commission has recommended that the model be implemented in stages over a minimum two year period. This staged approach will enable the drought infrastructure projects to be delivered without disruption.

The Commission and the State Government are closely monitoring all the drought related infrastructure projects to ensure that they reach completion as soon as possible.

Implementation

Q: What will happen from here? How long will it take?

The SEQ reforms will be phased in over three years, with two key stages:

Stage 1: The Water Grid Manager and the other State owned entities will begin operation in July 2008 under SEQ Water Market Rules. The Queensland Government announced the Market Rules and outlook for bulk water prices for South East Queensland, following analysis and recommendations by the Queensland Water Commission, on 12 May 2008. 

Stage 2: New Local Government owned retail and distribution businesses will be created from the SEQ Council water service providers. Contracts will be developed which will balance the need for water security in the region with cost recovery. By no later than July 2010, all the proposed entities will have been created.

Local government implications

Q: How do these arrangements relate to the Local Government amalgamations review?

Following the Council elections in March 2008, the new arrangements for SEQ water supply and sewerage are based on the 10 new Council boundaries in SEQ. They are: Brisbane, Gold Coast, Logan, Redland, Sunshine Coast, Ipswich, Somerset, Moreton Bay, Scenic Rim and Lockyer Valley.

Q: What do these arrangements mean for Local Government employees? (e.g. affects on existing employees, entitlements?)

The changes will not happen immediately – these will be implemented over a number of years. The object of the changes is to improve the institutional arrangements for supplying water and sewerage. The changes have not been developed with staffing reductions as an aim.

The State Government is committed to principles of security of employment and workers’ entitlements. The Government will work closely with unions, councils and the new water businesses to ensure the changes are as least disruptive as possible.

Q: What do these arrangements mean for Local Government rates?

Impacts on rates will be determined individually by Councils, given that water prices are not presently the same across shires and prices for bulk water are yet to be determined by the State Government.

Q: When will water prices go up in different Local Government areas?

After taking into account inflation, all households in SEQ - except for those in the Sunshine Coast and Redland Council areas - that use the same amount of water should have the same increase in their annual water bill from July 1 2008 due to increases in bulk water charges. 

Under the water price path, councils will reach the final price point at different times, reflecting the fact that councils have different bulk water costs at present.   Once the final price point is reached, bulk water increases should only be based on inflation.  

The years in which the relevant councils reach the final destination price point are:

• Lockyer: 2011-12
• Somerset: 2014-15
• Scenic Rim: 2015-16
• Logan: 2015-16
• Gold Coast: 2016-17
• Brisbane, Ipswich, Moreton Bay, Sunshine Coast and Redlands: 2017-18.

Consumer implications

Q: As a water user who will supply and bill me for my water?

From no later than 1 July 2010, households and businesses in SEQ will buy water from a number of Council owned retailers – no more than 10 in all, with the number and boundaries to be determined by the Councils in consultation with the Commission by the end of May 2008. Customers will be billed directly by a new retail business, rather than by their local council, as currently occurs.

Q: What does it mean for water prices?

The institutional reforms lead to a range of improvements and efficiencies relating to costs and prices. This includes increased economies of scale (greater purchasing power and lower overheads) by reducing the number of businesses involved in water and sewage. There will also be strict economic regulation to ensure prices are efficient.

Q: What will water prices be?

There is recognition that the immediate beneficiaries of the water grid should not have to bear the full cost of infrastructure now being put in place because of the present drought. This infrastructure will secure the region’s water supply well into the future. The State Government will forgo significant profits to ensure that the inevitable price increases for water will occur slowly over the next 10 years.

The Queensland Government has decided that, as a transitional measure for the first two years of the SEQ grid’s operation (commencing on 1 July 2008), bulk water prices will be set by the State on advice from QWC. The approved price model was released by the Queensland Government on 12 May 2008.

The Queensland Competition Authority will continue to monitor retail water prices.

Q: Will water prices increase?

Bulk water prices will need to rise to cover the cost of the new water infrastructure which will improve the region's water security. Increases in bulk water prices will commence on 1 July 2008. The price model released by the Queensland Government on 12 May 2008 also included expected retail bill increases due to bulk charges.

For all price increases, the Government has announced a ‘phasing in’ approach over a period of 10 years for SEQ, which will allow prices to increase gradually over time. This will help consumers adjust to increased water charges.

Employment impacts

Q: Has the Government considered the employment implications of the reforms?

The Government has decided that the following principles will be observed in regard to the SEQ urban water reform exercise:

• public ownership of water assets will be maintained
• reforms have not, and will not, be driven with labour savings as an aim
• staff and unions will be engaged throughout the implementation process
• there will be no forced redundancies of staff employed under awards or Enterprise Bargaining Agreements
• workers’ entitlements and conditions will be protected
• the terms and conditions of employment contracts will be honoured
• the State is aware of the need to protect staff from the Commonwealth’s Australian Workplace Agreements (‘Work Choices’) regime, and if necessary will enact legislation to ensure that employees transferring from Councils to the new State owned and Local Government owned entities are protected from Work Choices exposure.

The restructuring of the SEQ urban water arrangements will run simultaneously with the Local Government amalgamation process and the State Government will ensure that the two processes will be co-ordinated to be as least disruptive as possible. The Government has put in place a formal consultation framework to deal with industrial relations in further detail during the bulk water reform implementation phase. This consultation process involves the relevant unions, councils, QWC, Treasury and the Department of Employment and Industrial Relations.

Q: Will the Government give a commitment that there will be no forced redundancies as a result of the reforms?

Yes, this is one of the non-negotiable principles already endorsed by the Government. The reforms aim to improve water and sewerage services in SEQ. The changes have not been developed with staffing reductions as an aim.

The State Government is committed to principles of security of employment and workers’ entitlements. The Government will work closely with unions, councils and the new water businesses to ensure the changes are as least disruptive as possible.

Q: How have the unions been consulted with regard to the impact of the bulk water reforms?

Consultation with the unions is one of the non-negotiable principles already endorsed by the Government. To that end, a SEQ Staff Support Group was established in mid-2007 with representation from the Queensland Council of Unions, the Australian Workers’ Union, the Australian Services Union, along with relevant government agencies, including the Department of Employment and Industrial Relations, and representatives of SEQ Councils.

This group developed a ‘staff support framework’ document directed at ensuring:

the proper transition of employees transferred from one water entity to another under the Act
the appropriate and fair treatment of other employees of water entities affected by the process.

Following extensive consultation with key stakeholders, the Treasurer approved the SEQ Urban Water Reform: Workforce Framework 2007 on 23 January 2008, based on the recommendations of the Staff Support Group. The Framework is effective from the date of gazettal (25 January 2008).

Among other things, the Framework articulates a set of principles and processes to which all existing water businesses affected by the reform process should adhere in the treatment of employees, and sets forth a consistent set of parameters to be used by water businesses to ensure the reform process is as seamless and efficient as possible for all employees. A copy of the Framework is publicly available on the Queensland Treasury website at: http://www.treasury.qld.gov.au/office/knowledge/docs/seq-water-reform-framework/seq-water-reform-2007.pdf

Q: What process of union engagement are local governments undertaking for the distribution and retail components of the SEQ water reforms?

Unions are being consulted on a proposed approach for development of a human resources framework. It is intended that a consultative group will be established with unions, State Government and councils, similar to the consultative group established by the State for the bulk level reforms.

Rural communities

Q: How will these arrangements impact on farmers?

The SEQ Water Grid is designed to ensure the security of supply for urban and industrial users. Farmers will continue to access water for irrigation under existing arrangements. Where there are pricing and product reviews underway, those reviews will be carried forward by the new entities.

The preferred approach for rural irrigation water in SEQ has been included in the draft South East Queensland Water Strategy which was released for public comment in March 2008.

Q: Will farmers in the Lockyer be able to get water from the Western Corridor Recycled Water Project via the grid?

The combined effect of high costs of new water sources, and high demand from future urban expansion is putting pressure on additional water entitlements being available for rural purposes. However, the Government has given an undertaking that water will be made available when not required to meet urban need (e.g. temporary or seasonal supply, subject to further negotiation in respect to pricing which will need to be consistent with National Water Initiative requirements). This could include, for example, some water from the Western Corridor Recycled Water Project.