Cost recovery for
groundwater planning and
management in Australia
Frontier Economics and Sinclair Knight Merz
Waterlines Report Series No 88, September 2012
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Waterlines
This paper is part of a series of works commissioned by the National Water Commission on key water
issues. This work has been undertaken by Frontier Economics and Sinclair Knight Merz on behalf of
the National Water Commission.
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ii
© Commonwealth of Australia 2012
This work is copyright.
Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any
process without prior written permission.
Requests and enquiries concerning reproduction and rights should be addressed to the
Communications Director, National Water Commission, 95 Northbourne Avenue, Canberra ACT 2600
or email bookshop@nwc.gov.au.
Online/print: ISBN: 978-1-922136-04-6
Cost recovery for groundwater planning and management in Australia, September, 2012
Frontier Economics and Sinclair Knight Merz
Published by the National Water Commission
95 Northbourne Avenue
Canberra ACT 2600
Tel: 02 6102 6088
Email: enquiries@nwc.gov.au
Date of publication: September 2012
Cover design by: Angelink
An appropriate citation for this report is:
Frontier Economics and SKM 2012, Cost recovery for groundwater planning and management in
Australia, Waterlines report, National Water Commission, Canberra
Disclaimer
This paper is presented by the National Water Commission for the purpose of informing discussion
and does not necessarily reflect the views or opinions of the Commission.
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Contents
Executive summary ............................................................................................................................ viii
1.Introduction ........................................................................................................................................ 1
1.1.Background .......................................................................................................................... 1
1.2.Purpose of this report and our approach ............................................................................. 1
1.3.Report structure ................................................................................................................... 3
2.Current expenditure and future cost drivers....................................................................................... 4
2.1.Types of groundwater planning and management activities ............................................... 4
2.2.Costs of water planning and management activities ........................................................... 5
2.3.Areas of spending ................................................................................................................ 8
2.4.Future cost and funding pressure ........................................................................................ 9
3.Current approaches to cost recovery ............................................................................................... 12
3.1.What is cost recovery? ...................................................................................................... 12
3.2.Rationale for cost recovery ................................................................................................ 12
3.3.Extent of cost recovery for groundwater planning and management in Australia ............. 13
3.4.Key components of cost recovery design .......................................................................... 18
3.4.1.Cost allocation ................................................................................................................ 18
3.4.2.Cost recovery mechanisms ............................................................................................ 20
3.4.3.Processes for reviewing groundwater planning and management costs and
charges .................................................................................................................................... 25
4.Assessment of current approaches to cost recovery ....................................................................... 28
4.1.Assessment criteria............................................................................................................ 28
4.2.Assessment of current arrangements ................................................................................ 32
4.2.1.Revenue adequacy ......................................................................................................... 32
4.2.2 Economic efficiency ........................................................................................................ 36
4.2.3.Transparency and administrative simplicity .................................................................... 39
4.2.4.Equity .............................................................................................................................. 41
4.2.5.Consistency with the NWI and NWI pricing principles .................................................... 45
5.Conclusions and future priorities ...................................................................................................... 48
Appendix A: NWI pricing principles—recovering the costs of water planning and
management activities ........................................................................................................................ 51
Appendix B: Framework for classifying water planning and management activities .......................... 53
Appendix C: Current cost recovery arrangements for groundwater ................................................... 57
Glossary of terms ................................................................................................................................ 74
References .......................................................................................................................................... 76
Tables
Table 1: Groundwater planning and management activities and cost drivers ...................................... 4
Table 2: Estimated costs of groundwater planning and management activities, by
state—2010–11 estimates ............................................................................................................. 7
Table 3: Coverage of groundwater planning and management charges in Australia ......................... 17
Table 4: Approaches to allocating costs between government and groundwater users .................... 19
Table 5: Ratio of revenue from fixed and variable groundwater charges ........................................... 21
Table 6: Approaches to differentiating groundwater charges by location or source ........................... 24
Table 7: Approaches to reviewing groundwater planning and management costs and
charges ........................................................................................................................................ 25
Table 8: Progress in implementing NWI pricing principles for recovering the costs of
water planning and management activities (groundwater) .......................................................... 47
Table 9: Cost recovery for groundwater planning and management—Australian Capital
Territory ........................................................................................................................................ 57
Table 10: Cost recovery for groundwater planning and management—New South Wales ............... 59
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Table 11: Cost recovery for groundwater planning and management—Northern Territory ............... 61
Table 12: Cost recovery for groundwater planning and management—Queensland......................... 62
Table 13: Cost recovery for groundwater planning and management—South Australia. .................. 64
Table 14: Cost recovery for groundwater planning and management—Tasmania ............................ 67
Table 15: Cost recovery for groundwater planning and management—Victoria ................................ 69
Table 16: Cost recovery for groundwater planning and management—Western Australia ............... 72
Figures
Figure 1: Project overview..................................................................................................................... 2
Figure 2: Distribution of expenditure across activities—nationwide...................................................... 8
Boxes
Box 1: Commonwealth funding for groundwater planning and management .................................... 11
Box 2: NWI commitments related to recovering the costs of wate rplanning and
management activities ................................................................................................................ 13
Box 3: Building blocks approach to determine revenue requirements (NSW IPART) ....................... 26
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Abbreviations and acronyms
ACCC
Australian Competition and Consumer Commission
ACT
Australian Capital Territory
BERC
Budget Expenditure Review Committee of Cabinet
BoM
Bureau of Meteorology
CMAs
Catchment Management Authorities
CSIRO
Commonwealth Scientific and Industrial Research Organisation
CSO
Community Service Obligation
DECCEW
Department of the Environment, Climate Change, Energy and Water
(Australian Capital Territory)
DfW
Department for Water (South Australia)
DNRM
Department of Natural Resources and Mines (Queensland) (previously the
Department of Environment and Resource Management—DERM)
DoW
Department of Water (Western Australia)
DPIPWE
Department of Primary Industries, Parks, Water and Environment (Tasmania)
DSE
Department of Sustainability and Environment (Victoria)
ERA
Economic Regulation Authority (Western Australia)
ESC
Essential Services Commission (Victoria)
ESCOSA
Essential Services Commission of South Australia
ESDD
Environment and Sustainable Development Directorate
(Australian Capital Territory)
FTE
Full-time equivalent
GAB
Great Artesian Basin
G-MW
Goulburn–Murray Water
GWIMS
Groundwater Information Management System
GWMWater
Grampians Wimmera Mallee Water
ICRC
Independent Competition and Regulatory Commission
IPART
Independent Pricing and Regulatory Tribunal of New South Wales
kL
Kilolitre
MDB
Murray–Darling Basin
MDBA
Murray–Darling Basin Authority
ML
Megalitre
NGIS
National Groundwater Information System
NOW
New South Wales Office of Water
NRETAS
Department of Natural Resources, Environment, The Arts and Sport
(Northern Territory)
NRM
Natural resource management
NSW
New South Wales
NT
Northern Territory
NWC
National Water Commission
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NWI
National Water Initiative
PWAs
Prescribed Wells Areas
PWRA
Prescribed Water Resources Area
Qld
Queensland
RAB
Regulatory Asset Base
RWC
Rural Water Corporation
SA
South Australia
SAFE
Secure Allocation, Future Entitlement
SKM
Sinclair Knight Merz
SRW
Southern Rural Water
SWIMP
Strategic Water Information and Monitoring Plan
Tas.
Tasmania
Vic.
Victoria
WA
Western Australia
WAC
Water Abstraction Charge
WAMC
Water Administration Ministerial Corporation
WIRO
Water Industry Regulatory Order
WPM
Water Planning and Management
WSA
Watersmart Australia
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Executive summary
Cost recovery for groundwater planning and management
Cost recovery refers to imposing user charges to fund some or all of a particular activity. It differs from
general taxation because there is a link between the revenue from charges and the costs of
undertaking specific activities. The level of cost recovery for a given program or activity is the
proportion of costs that user charges recover.
In this report, we examine cost recovery for planning and management activities undertaken by, or on
behalf of, governments, as a result of groundwater use (or potential groundwater use).
Governments may recover groundwater planning and management costs through user charges for a
number of reasons, including to provide financial resources for government agencies to undertake
required groundwater planning and management activities.
States and territories have agreed to actions related to recovering the cost of water planning and
management activities (including those related to groundwater) under the National Water Initiative
(NWI) and NWI pricing principles. These include:

identify all activities and their costs

allocate these costs on an ‘impactor-pays’ basis1

recover the costs from impactors on the basis of catchment, valley or region and by water source
where practicable.
Extent of cost recovery for groundwater in Australia
Currently, New South Wales, Victoria, and the Australian Capital Territory are the only jurisdictions
that appear to recover a substantial proportion of groundwater planning and management costs from
users. In South Australia and Queensland, there are charges that contribute to funding groundwater
planning and management activities, but they account for a relatively small proportion of total
groundwater planning and management costs in those states. In Western Australia, the Northern
Territory and Tasmania, cost recovery for groundwater planning and management is currently very
low and in some cases close to zero.
Groundwater cost recovery typically relates to activities undertaken by state government departments,
except in Victoria and South Australia where some activities are delegated to Rural Water
Corporations (RWCs) such as Goulburn–Murray Water and Southern Rural Water, and natural
resource management (NRM) Boards, respectively.
Generally, cost recovery for groundwater planning and management activities occurs within a broader
cost recovery regime for water planning and management activities. That is, agencies generally have
responsibilities for both groundwater and surface water planning and management, and develop
groundwater and surface water charges at the same time.
1
The impactor-pays approach seeks to allocate costs to different individuals, groups or organisations in proportion to the
contribution that each individual, group or organisation makes to creating costs or the need for costs to be incurred.
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Recent reviews in Western Australia, South Australia and Tasmania have considered increased cost
recovery for groundwater and proposed potential models, but state governments are yet to commit to
these recommendations.
Levels of cost recovery by jurisdiction
In New South Wales, the Office of Water (NOW) is the main agency responsible for groundwater
planning and management, and recovers nearly all of these costs from groundwater users (87% of
these costs are expected to be recovered in 2012–13).
In Victoria, RWCs appear to be at near full cost recovery. However, the Victorian Department of
Sustainability and Environment (DSE) does not directly recover the costs of its groundwater planning
and management activities. The overall level of cost recovery for groundwater planning and
management in Victoria is therefore probably in the vicinity of 40% to 50% (excluding revenue from
the Environmental Contribution, which is recovered indirectly from all urban and rural water users via
the RWCs).
The Australian Capital Territory Government recovers approximately 32% of groundwater planning
and management costs. However, it is likely the overall level of cost recovery for all water planning
and management activities (i.e. for surface water and groundwater) is close to 100%.
In Queensland, the Department of Natural Resources and Mines (DNRM) recovers a small portion of
water planning and management costs (e.g. less than 5%). We understand cost recovery for
groundwater in particular is at a similar level.
In Western Australia, the Northern Territory, South Australia and Tasmania, cost recovery for
groundwater planning and management is close to zero. However, in South Australia, revenue from
water levies in Prescribed Wells Areas (groundwater resources) is an important source of funding for
some NRM boards. There was insufficient cost information to estimate the level of cost recovery for
groundwater at the state level. The Western Australian Government notes that it does recover some
costs related to administrative costs of licensing.
Current approaches to cost recovery for groundwater
Cost recovery design has several elements, including:

cost allocation (i.e. defining the proportion of costs to be funded by resource users and
government, respectively)

cost recovery mechanisms (e.g. the type and structure of user charges)

processes for reviewing costs and cost recovery charges.
Approaches to allocating costs between users and governments range from a case-by-case approach
to funding with no explicit cost-sharing formula (e.g. Victoria), to using a formal framework to assign
cost shares for activities on an impactor-pays basis (e.g. New South Wales).
Notable features of the design of cost recovery mechanisms include:

the structure of ongoing management charges: these range from relying almost entirely on fixed
charges (e.g. Victoria) to relying almost exclusively on usage charges (e.g. the Australian Capital
Territory Water Abstraction Charge (WAC))
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
differentiation of ongoing management charges: agencies in South Australia, New South Wales,
Queensland and Victoria set groundwater charges that vary by region (e.g. by Prescribed Wells
Areas in South Australia, inland and coastal valleys in New South Wales, declared groundwater
areas in Queensland, and service areas in Victoria).
In general, state and territory governments undertake internal reviews of groundwater expenditure
and funding needs, and a Minister approves any groundwater charges. The exceptions are the New
South Wales Office of Water and Victorian RWCs, which have their costs reviewed and charges set
by an independent economic regulator.
Assessment of current arrangements
We assessed current approaches to cost recovery for groundwater planning and management
against assessment criteria that represent good practice for cost recovery. The criteria for assessing
current cost recovery arrangements were:

revenue adequacy

economic efficiency

transparency and administrative simplicity

equity

consistency with the NWI and NWI pricing principles.
Revenue adequacy
Cost recovery can help support revenue adequacy by providing an ongoing funding source.
Features of cost recovery design that can support revenue adequacy include:

establishing transparent, open, and independent review processes

aligning tariffs structures (i.e. fixed and usage charges) with underlying costs

establishing clear links between the revenue collected from user charges and the funding
activities.
With the exception of New South Wales, most jurisdictions are a long way from full cost recovery. This
means they are highly reliant on recurrent central agency funding and program funding provided by
the Commonwealth. With many states reducing their budgeted expenditure, and Commonwealth
programs coming to an end, there is likely to be reduced capacity to meet necessary elements of
groundwater planning and management, including bore maintenance and renewal.
Even where full cost recovery is fully or partially in place, in many cases, it is unclear whether that
level of expenditure represents the most efficient and sustainable set of planning and management
activities, given changes in the competing demands for groundwater resources (NWC 2012).
Economic efficiency
The cost recovery regimes in place for NOW and Victorian RWCs perform relatively well in terms of
encouraging efficient service delivery due to the relatively high level of public scrutiny (e.g.
independent review of operational and capital expenditure).
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Significant progress remains to make charges more cost-reflective (e.g. ongoing management
charges in Queensland and South Australia do not necessarily reflect underlying costs. Fees for
service are often set without reference to costs).
Adopting an impactor-pays approach can provide incentives for efficient groundwater use by
signalling to users the cost of managing the adverse impacts of their actions. However, the case for
rebalancing groundwater charges towards usage charges to promote groundwater conservation is not
compelling. Signalling the value of groundwater must be kept separate from the issues of cost
recovery and is best achieved via water entitlement trading (or possibly an explicit scarcity charge).
Transparency and administrative simplicity
Further work remains to improve transparency in water planning and management costs and charges
(including those for groundwater).
However, each state and territory faces different circumstances that will influence the costs and
benefits of adopting a specific approach to cost recovery (e.g. materiality of groundwater costs, the
extent to which there are existing independent review processes to build upon).
Equity
Equity issues and concerns about customer impacts arising from cost recovery are best dealt with
through transparent and public review processes.
Transparent review processes (including stakeholder consultation) can in themselves manage
customer impacts by establishing clear service standards and reducing the risk of inefficient
investments and gold-plating, which increase costs to society as a whole.
Consistency with NWI
New South Wales is the only state to have substantively met its NWI obligations relating to recovering
the costs of water planning and management activities (including for groundwater).
Some states have made recent progress in developing new cost recovery policies. However, the
critical test will be whether governments actually implement these policies.
Conclusions
Problems with current arrangements
Groundwater planning and management is often publicly funded with little transparency (despite NWI
commitments). The limited use of user charges is largely due to concerns about the financial impacts
of cost recovery on customers.
In recent years the drawbacks of current approaches to funding have become increasingly apparent.
For example, discussions with jurisdictional staff have made clear that across most states and
territories, budgetary constraints have placed pressure on resources, resulting in reductions in total
staff numbers or less funding to address groundwater planning and management priorities. In many
cases, planning and management activities are undertaken opportunistically when grants (e.g.
Commonwealth funding) are available.
The complementary report An assessment of groundwater management and monitoring costs in
Australia (NWC 2012) shows that the level of funding, particularly for bore maintenance and renewal,
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needs to increase in order to maintain the integrity of the bore network and quality of resultant
management information.
Current funding models are unlikely to be sustainable in the longer term and do not provide the most
effective approach to facilitating revenue adequacy, certainty and stability. For example, several key
Commonwealth groundwater funding programs have recently ended or are coming to an end in 2012.
Funding gaps are likely to lead to continued underinvestment in groundwater planning and
management, particularly in the monitoring bore network.
Improved cost recovery provides an obvious means of addressing this problem.
Communicating the need for better funding arrangements
Transparency is a necessary first step to address emerging funding challenges.
Governments and agencies need to be upfront and candid about the current level of groundwater
planning and management expenditure, and what level of service and investment this enables.
An open examination of the adequacy of current funding arrangements for groundwater planning and
management (including current cost recovery from users) will have benefits regardless of how
governments choose to fund any shortfalls. These benefits include:

identifying emerging risks to the quality of services

identifying the magnitude of required expenditures and how this affects different parties under
current arrangements.
Mechanisms to help improve transparency of funding needs
Simply improving the quality of public information on groundwater planning and management costs
and funding arrangements is a worthwhile first step.
A further step would be to introduce independent and public monitoring/review of groundwater
planning and management costs and charges (drawing on stakeholder input).
Setting groundwater charges
There are no specific aspects of groundwater planning and management that would warrant a
fundamentally different approach to cost recovery than that adopted for surface water.
In general, the approaches to setting groundwater charging that perform best are those that reflect the
underlying costs structures of groundwater planning and management services. In many cases, these
costs are fixed, so fixed annual charges based on the entitlement held are likely to perform well,
combined with variable charges that recover any variable costs.
In contrast, charging structures that seek to incorporate objectives such as groundwater conservation
or affordability can compromise efficiency, revenue adequacy and transparency.
There will inevitably be practical considerations that will affect the approach to setting groundwater
charges in each jurisdiction (e.g. coverage, differentiation of prices by region, charging structures).
Further, there will be implementation and transitional issues that may require short-term trade-offs
between efficiency and customer impacts (e.g. phasing in prices).
Effective review processes can help deal with these issues by transparently examining the merits of
different charging options against regulatory principles (e.g. efficiency, revenue adequacy, equity,
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etc.) and drawing on public input. Experiences of moving urban and rural water supply services to
higher levels of cost recovery provides one important precedent that can be drawn upon.
Such review processes are most effective when they highlight the trade-offs between levels of service
and costs incurred, and present users with information on the balance between cost and investment
in effective and efficient water planning and management.
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1. Introduction
1.1. Background
Groundwater is a vital source of water supply in Australia, accounting for 17% of accessible water
resources and over 30% of current water consumption. In recent years, increased demands on
groundwater resources have focused attention on groundwater planning and management.
The Commission’s 2009 Groundwater Forum identified a number of groundwater planning and
management priorities for the Commission to take forward. Among these was addressing knowledge
gaps associated with current and required expenditure on groundwater planning and management
activities, and the adequacy of existing funding arrangements. A particular area of concern was the
aging of the monitoring bore network in Australia, which provides key information to support effective
groundwater planning and management.
In light of these information gaps, the Commission initiated a project to:

report on the current status of groundwater monitoring infrastructure, and broader groundwater
planning and management practices

improve transparency in the costs of groundwater planning and management activities (including
groundwater monitoring)

assess the adequacy of existing approaches to recovering the cost of groundwater planning and
management activities.
1.2. Purpose of this report and our approach
The key outputs from this project are two Waterlines reports:

An assessment of groundwater management and monitoring costs in Australia (NWC 2012)

Cost recovery for groundwater planning and management in Australia (this report).
Figure 1 provides a summary of the main components incorporated into the two Waterlines reports.
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Figure 1: Project overview
Report 1 (NWC 2012) assesses existing groundwater monitoring infrastructure in terms of age,
technology, suitability of coverage and baseline cost. This report also assesses broader groundwater
planning and management activities performed by each jurisdiction, and reports on the expenditure
currently required to perform these activities. Assessment of planning and management activities is
largely based on information provided by the jurisdictions in terms of monitoring assets, activities
performed, and the resources and costs required to perform these activities.
This report benchmarks current approaches to cost recovery for groundwater planning and
management activities in Australia. Our approach to this assessment involves:

describing current expenditure on groundwater planning and management activities in Australia
and key cost drivers—drawing on findings from NWC (2012)

describing current approaches to funding these activities, focusing on charges to groundwater
users (i.e. cost recovery)

assessing current approaches to cost recovery against criteria that represent good practice,
drawing on existing government guidelines and recent reviews of water planning and
management charges

identifying potential risks and opportunities associated with current approaches to cost recovery
(and broader funding arrangements).
The findings from the two reports draw on consultation with the states and territories, which included
introductory workshops and follow up meetings with representatives from each jurisdiction and a
combined stakeholder workshop held in Melbourne in August 2011. Report 1 (NWC 2012) contains
further details on information collection.
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1.3. Report structure
The rest of the report is set out as follows:

Section 2 describes current and future costs associated with groundwater planning and
management in Australia

Section 3 defines cost recovery, describes its rationale, and provides an overview of current
approaches to cost recovery for groundwater planning and management in Australia

Section 4 describes our assessment criteria and assesses current approaches to cost recovery
against these criteria

Section 5 provides our conclusions and identifies future priorities.
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2. Current expenditure and future cost
drivers
In this section, we briefly summarise information on groundwater planning and management costs
outlined in the complementary report An assessment of groundwater management and monitoring
costs in Australia (NWC 2012). It provides important context to the cost recovery assessment in
Sections 3 and 4 by highlighting that, at the national level, current expenditure (and funding) is
insufficient to enable efficient and sustainable groundwater management, particularly in relation to
groundwater monitoring.
2.1. Types of groundwater planning and
management activities
As noted in the first report (and Appendix B in this report), groundwater planning and management
comprises a range of activities including:
A. Water reform strategy and policy
B. Water planning
C. Water management
D. Water monitoring and evaluation
E. Information management and reporting
F. Water administration and regulation
G. Water industry regulation.
For the purposes of estimating groundwater planning and management costs, the complementary
report excluded costs associated with ‘Water reform strategy and policy’ and ‘Water industry
regulation’ on the basis that the costs of those activities are not attributable to groundwater users (we
discuss this issue further in Section 3). Table 1 describes each of the remaining activities and relevant
cost drivers.
Table 1: Groundwater planning and management activities and cost drivers
Activity
B. Water planning
C. Water
management
Description
Cost driver

Development and review of water
resource plans

Approval of water plans

Administration of demand
management and conservation
programs

Construction and refurbishment of
monitoring bores

Number and complexity of groundwater plans or
water resource plans which include groundwater
aspects

Monitoring bores constructed, refurbished and
maintained
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Activity
D. Water monitoring
and evaluation
E. Information
management and
reporting
F. Water
administration and
regulation
Description

Cost driver
Water resource monitoring (not
streamflow gauging, but should
include groundwater bore monitoring
of levels and quality)

Number of bores being monitored

Extent, frequency and type of monitoring

Collection of metering information

Water use monitoring (e.g. collection
of water use information from
metering or surveys)

Number and extent of water resource assessments
(e.g. studies, reports, plans)

Water resource assessment
(hydrological and water quality
assessments)

Addressing national accounts
reporting requirements

Frequency and type of information reported

Addressing Bureau of Meteorology
reporting requirements

Provision of annual reports

Assessment of licence applications


Administration of licences
Number of water resource/groundwater licences
issued and assessed

Compliance inspections and
enforcement

Financial management, reporting and
other management activities
Source: Adapted from NWC (2012).
2.2. Costs of water planning and management
activities
Indicative estimates of groundwater planning and management costs are shown in Table 2. They
show that Western Australia and Queensland account for the highest levels for groundwater planning
and management expenditure (approximately $40 million and $25 million respectively). South
Australia, New South Wales and Victoria each incur in excess of $10 million per year in groundwater
planning and management costs.
These costs estimates generally relate to the main government department responsible for
groundwater planning and management in each jurisdiction:

New South Wales Office of Water (NOW)

Queensland Department of Natural Resources and Mines (DNRM)

Western Australian Department of Water (DoW)

South Australian Department for Water (DfW)

Tasmanian Department of Primary Industries, Parks, Water and Environment (DPIPWE)

Australian Capital Territory (ACT) Government

Northern Territory (NT) Department of Natural Resources, Environment, The Arts and Sport
(NRETAS)

Victorian Department of Sustainability and Environment (DSE) and three Victorian water
corporations, which undertake some groundwater planning and management functions.
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As discussed in NWC (2012), these costs reflect a range of factors, including the extent of
groundwater resources and reliance on them in different jurisdictions. For example, Western Australia
has increasingly relied on groundwater for domestic and other water supplies as the replenishment of
surface water supplies has diminished over the past three decades.
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Table 2: Estimated costs of groundwater planning and management activities, by state—2010–11 estimates
Activity
ACT
NSW
Total
expend.
FTE
FTE
NT
Total
expend.
FTE
Qld
Total
expend.
FTE
Total
expend.
SA
FTE
Tas.
Total
expend.
FTE
Vic.
Total
expend.
FTE
WA
Total
expend.
Total
expend.
FTE
B. Water
planning
0.5
$79 000
19.0
$3 584 000
6.8
$1 183 000
26.0
$5 939 000
3.0
$463 000
0.5
$79 000
26.5
$3 746 000
27.5
$18 829 000
C. Water
management
0.0
$0
3.8
$717 000
1.5
$283 000
15.0
$3 360 000
0.0
$0
0.0
$0
5.3
$79 000
6.0
$4 487 000
D. Water
monitoring and
evaluation
0.8
$245 000
22.8
$4 301 000
4.2
$723 000
39.0
$9 063 000
44.2
$6 897 000
0.7
$243 000
11.1
$3 202 000
29.3
$4 521 000
E. Information
management
and reporting
0.4
$150 000
7.6
$1 433 000
0.9
$146 000
11.0
$2 539 000
10.6
$1 661 000
0.4
$150 000
19.1
$1 065 000
8.2
$357 000
F. Water
administration
and regulation
1.5
$210 000
22.8
$4 301 000
14.0
$2 453 000
20.0
$4 670 000
27.1
$4 222 000
1.5
$210 000
27.8
$3 729 000
83.0
$10 752 000
Total
3.2
$684 000
76.0
$14 336 000
27.4
$4 788 000
111.0
$25 571 000
84.9
$13 243 000
3.1
$682 000
89.8
$11 821 000
154.0
$38 946 000
National totals
B. Water
planning
FTE
Total expend.
C. Water
management
D. Water monitoring
and evaluation
E. Information management
and reporting
F. Water administration and
regulation
Total
110
30
150
60
200
550
$ 33 902 000
$ 8 926 000
$ 29 195 000
$ 7 501 000
$ 30 547 000
$ 110 071 000
FTE estimates include externally funded activities in most cases (excluding Queensland)
Data has been compiled through jurisdictional liaison and review of available information. Where jurisdictional data was not available, additional external data has been used to construct this table.
Base expenditure data has been compiled from a range of sources and is presented above for the 2010–11 financial year. Information received from the Australian Capital Territory and Tasmania
has been escalated from 2009–10. Information from Western Australia has been escalated from 2008–09 using an annual inflation rate of 2.5%.
Further jurisdictional detail is available in the jurisdictional summary chapters.
Source: NWC (2012).
NATIONAL WATER COMMISSION — WATERLINES
7
2.3. Areas of spending
The nationwide distribution of expenditure across groundwater planning and management activities
shows the current higher levels of expenditure on water planning, monitoring and administration
(categories B, D and F) and the lower proportion of funds allocated to Water Management (category
C) and Information Management and Reporting (category E). Category C includes much of the
infrastructure emplacement (bore construction, bore refurbishment, bore monitoring and metering).
Discussions with jurisdictions indicate that many category C activities have historically been funded
through Commonwealth initiatives, and in some cases these activities have not been recorded in the
jurisdictional budgets.
Importantly, there are significant differences in the allocation of resources between individual
jurisdictions. The complementary report highlights that jurisdictions with larger, more developed
groundwater systems (New South Wales, Victoria and Western Australia) appear to receive funding to
be able to undertake most categories of activities. However, jurisdictions with less developed
groundwater resources appear to lack sufficient funding to address each activity category and appear
to prioritise mandatory reporting, licensing and compliance activities over proactive planning and
management activities.
Figure 2: Distribution of expenditure across activities—nationwide
B. Water planning
28%
31%
C. Water management
D. Water monitoring and
evaluation
7%
8%
26%
E. Information management
and reporting
F. Water administration and
regulation
Source: NWC (2012)
More broadly, the review of the available information and discussions with jurisdictional staff have
made clear that across most states and territories, budgetary constraints have placed pressure on
financial resources, resulting in reductions in total staff numbers or less funding to address critical
issues. This is an ongoing trend that challenges the ability to conduct proactive planning and
management activities. As a result of these constraints, it is expected that the resources allocated to
activities B, C, D and E would reduce, while the proportion of resources allocated to mandatory
activities such as those performed under category F would increase. Each category plays an
important role in the holistic management of groundwater resources. Neglecting any one aspect
would compromise the success of other complementary functions, further compromising the ability to
address elements of the NWI.
NATIONAL WATER COMMISSION — WATERLINES
8
These findings are aligned with the outcomes of the 2011 Strategic Water Information and Monitoring
Plan (SWIMP) reports2, which identified the following gaps in terms of groundwater monitoring and
information management:

bore network has insufficient design or coverage

maintenance of monitoring network is not of sufficient standard

metadata (information on data source, provenance, quality) information on bore location,
hydrogeology, datum not collected consistently

gaps in data capture and access (data not digitised, project-based data not being entered into
databases)

inadequate or inconsistent measurement frequency and/or timeliness

lack of interoperability between databases

lack of sufficient groundwater quality monitoring.
Additional knowledge gaps were also identified from the SWIMP reports:

understanding of surface water – groundwater interactions such as recharge events, connectivity
and base flows

a lack of sufficient data to develop adequate understanding and models for groundwater
management

a lack of information on groundwater-dependent ecosystems.
2.4. Future cost and funding pressure
Based on information provided by the states, NWC (2012) estimates the additional resources required
to perform a minimum, sustainable standard of groundwater planning and management. The
information presented is indicative in its nature, but suggests that an approximately 30% increase in
planning and management labour costs (not including monitoring asset maintenance and
replacement) is required to sustainably manage groundwater resources. These estimates vary
considerably across jurisdictions, with New South Wales and Victoria reporting the need for a
moderate 15% increase, compared with Tasmania reporting the need for an increase in current staff
levels in excess of 400%.
The jurisdictions report that funding constraints impinge most on activity categories C and E, which
require the largest increases in current staff levels (estimated at 65% and 61% respectively) and
which are currently the least well funded activities.
Category C activities include asset construction and maintenance, which are currently reliant on
external funding sources and hence not currently included in budget estimates. Additional resources
will be required following the expiry of external funding sources at the end of the 2011–12 financial
year. Category E covers water accounting and national reporting obligations. Development of the
systems and capabilities to perform these activities has largely been funded through the BoM
2
New South Wales Office of Water (2011b); Northern Territory. Department of Natural Resources,
Environment, the Arts and Sport (2011); Queensland. DERM (2011b); South Australia. Strategic Water
Information Coordinator (2011); Tasmania. Department of Primary Industries, Parks, Water and Environment
(2011); Victoria. Department of Sustainability and Environment (2011a); Western Australia. Department of
Water (2011).
NATIONAL WATER COMMISSION — WATERLINES
9
Modernisation and Extension fund, which is expected to expire at the end of the 2011–12 financial
year. Ongoing water accounting and reporting activities are expected to be underfunded beyond this
point.
In addition to staffing requirements, the first report (NWC 2012) estimates the requisite funding of a
monitoring asset replacement and maintenance program to sustain the existing bore network. When
aggregated to the national level, the funding required to clear the backlog of assets already expected
to be beyond their expected lives has been estimated at approximately $27.6 million per annum over
10 years. Adding the cost of monitoring (about $12.2 million per annum) and decommissioning (of
about $6.1 million), the total national funding requirement to ensure that the existing groundwater
monitoring asset network is capable of producing reliable and continuous data is expected to amount
to $45.9 million per annum. Beyond this 10-year program, the requisite perpetual maintenance and
replacement program has been estimated at $48.3 million per annum including the cost of monitoring.
Current asset management practices are not conducive to maintaining the groundwater monitoring
network, with a considerable funding commitment required to preserve the condition of these assets
and the quality of data produced.
Planning and management of water resources relies on accurate data to understand water quantity
and quality so that forecasts can be made for different components of the resource (such as allocation
for ecosystem support and for agriculture). Inaccurate data may potentially lead to poor planning
decisions, inefficient resource utilisation, and damage to ecosystems and economies. Deterioration of
a bore may occur under many different physical, chemical and biological mechanisms and reduce the
effectiveness of the bore to provide quality data. In some circumstances, data collection is no longer
possible, or data may continue to be collected from a bore that is no longer ‘effective’ (i.e. is supplying
data of poor quality). This can lead to erroneous assessments of hydrogeologic conditions.
Identification of bore deterioration requires rigorous data assessment and quality control to identify
statistical anomalies, and confirmation with down-hole investigations where required. These activities
are currently underfunded and, as reported, the condition of monitoring bores nation-wide is not well
understood, although it is expected that many bores are already in poor condition.
In recent years, state government and Commonwealth grants have played an increasingly significant
role in funding groundwater planning and management in Australia (Box 1).
NATIONAL WATER COMMISSION — WATERLINES
10
Box 1: Commonwealth funding for groundwater planning and management
Over the past seven years, important sources of Commonwealth funding for groundwater planning and
management have included:
 The Raising National Water Standards program, including the $82 million National Groundwater
Action Plan announced in 2007 (National Water Commission): This provided funding for projects
that help implement the NWI and improve Australia's national capacity to measure, monitor and
manage water resources. For example, the Northern Territory received $825 000 from April 2009 to
December 2011 for a groundwater stocktake to update and improve current data and groundwater
resource understanding in the Northern Territory. The Raising National Water Standards program
had largely ended by 2011
 The Water Smart Australia program (Department of Sustainability, Environment, Water, Population
and Communities): This program aimed to accelerate the development and uptake of smart
technologies and practices in water use across Australia, and advance the implementation of the
NWI. For example, the Western Australian DoW received additional funding (approximately $5.7
million) for groundwater resource assessments in 2007–08 and 2008–09. The Water Smart
Australia program operated over seven years to 2011

Bureau of Meteorology funding, including the Modernisation of Groundwater Monitoring program, to
improve water data availability, quality and coverage. For example, in 2011–12, Tasmania will
receive $400 000 in funding for the DPIPWE Groundwater Information Management System
(GWIMS) to enable the supply of Tasmanian groundwater data to the National Groundwater
Information System (NGIS). This program ends in 2012.
Sources: DSEWPC (2011), NWC (2011).
This funding has been to facilitate national water reforms (including under the NWI and Water Act
2007), and to address perceived gaps and priority issues in groundwater planning and management.
However, these external funding sources (e.g. the Raising National Water Standards program) have
or are coming to an end (see further discussion in Section 4.2.1). In addition, most jurisdictions have
reported ongoing budgetary pressure at a state level with evidence of recent and recurrent staff
reductions. The expiry of external groundwater activity funding sources at the end of 2011–12 is
expected to further increase the pressure felt by jurisdictions to fund activities that meet statutory
obligations as well as best practice management of groundwater resources.
NATIONAL WATER COMMISSION — WATERLINES
11
3. Current approaches to cost recovery
In this section, we define cost recovery and describe its rationale. We then describe current
approaches to cost recovery for groundwater planning and management in Australia.
3.1. What is cost recovery?
Cost recovery refers to imposing user charges to fund some or all of a particular activity. User
charges can include fees for goods or services (e.g. application fees) and levies applied across
particular groups.
Cost recovery differs from general taxation because there is a link between the revenue from charges
and the costs of undertaking specific activities. The level of cost recovery for a given program or
activity is the proportion of costs that user charges recover. Where user charges provide sufficient
revenue to fund the entire cost of an activity (i.e. both capital and operating costs), for example, the
level of cost recovery is 100%.
Governments seek to recover the costs of providing some services to users from those users.
Guidelines for cost recovery have been established by both the Australian Government
(Commonwealth of Australia 2005) and by state governments.
In this report, we examine cost recovery for planning and management activities undertaken by, or on
behalf of governments, as a result of use, or potential use, of groundwater. These activities exclude
activities undertaken to manage land-based impacts, such as those associated with land clearing.
3.2. Rationale for cost recovery
Governments may recover groundwater planning and management costs through user charges for a
number of reasons. These include to:

provide incentives for efficient service provision by making the demand for, and cost of, activities
more transparent

provide financial resources for government agencies additional to those resources available from
general taxation revenue (departmental budgets) to enable them to undertake groundwater
planning and management activities

provide incentives for efficient resource use by signalling the cost of managing the adverse
impacts of groundwater use to users

influence demand for government services (e.g. requests from private parties for groundwater
information)

more equitably distribute the costs of government activities (Productivity Commission 2001).
Policy commitments for recovering the costs of groundwater planning and
management activities
The National Water Initiative (NWI), signed by each Australian state and territory, is the blueprint for
national water reform in Australia. Among other things, the NWI includes agreed actions relating to
recovering the costs of water planning and management activities (including those related to
groundwater) (Box 2).
NATIONAL WATER COMMISSION — WATERLINES
12
Under the NWI, all of the states and territories agreed to identify and report on the proportion of the
total cost of water planning and management attributed to water access entitlement 3 holders and the
basis upon which this proportion is determined. They also agreed to link user charges as closely as
possible to the costs of activities or products.
Box 2: NWI commitments related to recovering the costs of water planning and management activities
Under the NWI, states and territories have agreed to implement pricing and institutional arrangements that,
among other things:

promote efficient use of government resources devoted to water management (Paragraph 64(i)(c))

ensure sufficient revenue streams to allow efficient delivery of the required services (Paragraph 64(ii))

promote pricing transparency for cost recovery for planning and management (Paragraph 64(iv)).
Under Paragraph 67 of the NWI, the states and territories have agreed to:
bring into effect consistent approaches to pricing and attributing costs of water planning and management
by 2006, involving:
i)
the identification of all costs associated with water planning and management, including the costs of
underpinning water markets such as the provision of registers, accounting and measurement
frameworks and performance monitoring and benchmarking;
ii) the identification of the proportion of costs that can be attributed to water access entitlement holders
consistent with the principles below:
a) charges exclude activities undertaken for the Government (such as policy development, and
Ministerial or Parliamentary services); and
b) charges are linked as closely as possible to the costs of activities or products.
Paragraph 68 of the NWI notes that:
The States and Territories agree to report publicly on cost recovery for water planning and management as
part of annual reporting requirements, including:
i)
the total cost of water planning and management; and
ii) 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.
Due to slow progress in meeting NWI commitments, the Council of Australian Governments (COAG)
released NWI pricing principles in 2010 to provide further guidance to jurisdictions. The NWI pricing
principles include principles for recovering the costs of water planning and management activities
from water users4, and a framework for classifying those activities on a consistent basis. Each
jurisdiction has agreed to implement the NWI pricing principles (Appendix A).
Broadly, the NWI pricing principles require that jurisdictions:
3
The NWI defines a water access entitlement as ‘a perpetual or ongoing entitlement to exclusive access to a
share of water from a specified consumptive pool as defined in the relevant water plan’.
4
The 2004 NWI refers to the costs attributable to ‘water access entitlement holders’, while the 2010 NWI
pricing principles often use the more general term ‘water users’. Unless otherwise stated, we use the more
general term to define user costs.
NATIONAL WATER COMMISSION — WATERLINES
13

identify all activities and their costs

allocate these costs on an ‘impactor-pays’ basis

recover the costs from impactors on the basis of catchment, valley or region and by water
source where practicable.
The ‘impactor-pays’ approach seeks to allocate costs to different individuals, groups or organisations
in proportion to the contribution that each individual, group or organisation makes to creating costs or
the need for costs to be incurred. An alternative approach to cost allocation is the ‘beneficiary pays’
approach, which allocates costs to individuals or groups in proportion to the benefits they derive from
the activities for which costs are being incurred. The Regulation Impact Statement for the NWI pricing
principles (DEWHA 2010, p. 31) supported an impactor-pays approach because it:
… provides the opportunity for price signals to be provided to those who cause the need for a
water planning and management activity, and therefore may have the potential to modify their
actions or behaviour as a consequence. The alternative approach being a beneficiary pays
approach. The outcomes of applying the impactor and beneficiary pays approaches will diverge
significantly when there are differences between the impactor and beneficiary. This would be the
case for activities designed to improve environmental outcomes such as environmental works or
environmental management plans. These activities are attributable to water users as impactors
but costs would be shared with the government under a beneficiary pays approach to the extent
that there were public benefits which cannot be captured by users.
An impactor pays approach is widely considered to be more suitable than a beneficiary’s pays
approach to cost sharing for water planning and management activities, primarily because of the
weighting given to environmental activities in water planning and management required to
redress the impacts of water extraction.
The beneficiary pays approach can be subject to considerable arbitrariness in determination of
relative benefits accruing to various beneficiaries. The impactor pays approach involves costs
that are observable, although in practice application does entail some subjective judgements to
be made.
Agencies that impose water planning and management charges in the Murray–Darling Basin (MDB),
which covers parts of New South Wales, Victoria, Queensland, South Australia and the Australian
Capital Territory, have additional reporting obligations under the Water Act 2007 (Cwlth). These
include publishing information relating to water planning and management charges in accordance with
the Water Charge (Planning and Management Information) Rules overseen by the Australian
Competition and Consumer Commission. In line with the requirements of s. 92 of the Water Act 2007,
the Rules aim to improve the availability of information about water planning and water management
activities funded by government through charges, and to ensure that information is provided in a way
that promotes the MDB water charging objective of pricing transparency in respect of cost recovery
for water planning and management. The information requirements broadly relate to identifying water
planning and management charges, and describing the processes for determining those charges.
3.3. Extent of cost recovery for groundwater
planning and management in Australia
Currently, New South Wales, Victoria and the Australian Capital Territory are the only jurisdictions
that appear to recover a substantial proportion of groundwater planning and management costs from
users. In South Australia and Queensland, there are charges that contribute to funding groundwater
planning and management activities but they account for a relatively small proportion of total
groundwater planning and management costs in those states. In Western Australia, Tasmania and
the Northern Territory, cost recovery for groundwater planning and management is currently close to
NATIONAL WATER COMMISSION — WATERLINES
14
zero. The Western Australian Government notes that it does recover some costs related to
administrative costs of licensing.
South Australia, Western Australia and Tasmania are in the process of examining options for
introducing greater cost recovery for water planning and management activities (including those
related to groundwater). In particular:

the Economic Regulation Authority (ERA) of Western Australia has published an inquiry report
outlining a proposed cost recovery regime for water planning and management activities
undertaken by the Department of Water (DoW) (ERA 2011). The WA Government is currently
considering the ERA’s recommendations

the Tasmanian Department of Primary Industries, Parks, Water and Environment (DPIPWE)
recently undertook an internal review of the costs of water planning and management activities
under the Water Management Act 1999 (Tas). Among other things, the review considered the
potential for greater cost recovery to coincide with the introduction of groundwater licensing in that
state (DPIPWE pers. comm.). DPIPWE provided information from its review for this study. Further
work is underway to examine the issues in more detail

in South Australia, the Department for Water (DfW) is involved in a project to: identify the costs of
providing water planning and management in the state; introduce a new water planning and
management cost-recovery framework; and set charges in accordance with the framework from
2011–12 (South Australian Government 2010). The DfW commissioned a review of cost recovery
arrangements in South Australia in late 2010 (Deloitte 2010). DfW provided the review report for
this study. However, the report is not yet public and does not necessarily reflect the views of the
SA Government.
In Queensland, the state government undertook a review of water planning and management charges
(including for groundwater) and developed a policy to increase the level of cost recovery between
2003 and 2005. In 2006 however, the Queensland Government suspended the implementation of the
new water charges indefinitely (NWC 2007).
In several jurisdictions, current and proposed cost recovery arrangements for groundwater planning
and management focus on a single government department that undertakes most, if not all,
groundwater planning and management activities. For example, cost recovery arrangements for
groundwater planning and management activities in NSW relate primarily to activities undertaken by
the NOW, while the proposed cost recovery arrangements for Western Australia focus on the
activities of the Western Australian DoW.
The exceptions are Victoria and South Australia where the state governments have delegated several
groundwater planning and management functions to third parties, which have their own cost recovery
arrangements. In Victoria, rural and regional water corporations (e.g. Goulburn–Murray Water,
Grampians Wimmera Mallee Water, and Southern Rural Water) undertake activities such as
groundwater planning and licensing, and recover associated costs through water charges and fees. In
South Australia, the DfW collects water levies from groundwater entitlement holders in prescribed
water sources to help fund the activities of various regional natural resource management (NRM)
boards, which include developing water plans and mitigating the effects of water extractions. Notably,
the main government departments responsible for groundwater planning and management in Victoria
and South Australia, the DSE and DfW respectively, have very limited cost recovery for their own
groundwater-related activities.
In addition to more direct approaches to cost recovery for groundwater planning and management
activities, Victoria and South Australia also apply levies to help fund broader water or NRM-related
activities. The Victorian Treasury collects an Environment Contribution from water corporations
(based on a percentage of water corporation revenue) to offset the cost of state funding for initiatives
that seek to promote the sustainable management of water, or address adverse water-related
NATIONAL WATER COMMISSION — WATERLINES
15
environmental impacts in the state. Previously funded initiatives include groundwater planning and
management activities undertaken by DSE, rural water corporations and other parties. In addition to
the funds from water levies, South Australian NRM boards receive funds from regional NRM levies
(which local councils collect from ratepayers). However, it is unclear whether revenue from regional
levies helps fund groundwater planning and management activities.
Generally, cost recovery for groundwater planning and management activities occurs within a broader
cost recovery regime for water planning and management activities. That is, agencies generally have
responsibilities for both surface water and groundwater planning and management, and develop
groundwater and surface water charges at the same time. Because surface water and groundwater
planning and management activities have common inputs (e.g. staff and infrastructure), groundwater
planning and management charges may recover both direct costs attributable to specific groundwater
planning and management activities as well as a portion of indirect (shared) costs.
NOW and the Victorian water corporations are the only agencies undertaking groundwater planning
management activities that are subject to economic price regulation, which means an economic
regulator—the New South Wales Independent and Regulatory Pricing Tribunal (IPART) and the
Victorian Essential Services Commission (ESC), respectively—must approve their proposed
expenditures and charges. Other agencies generally have charges set by government.
Table 3 summarises the coverage of current and proposed cost recovery arrangements for
groundwater planning and management activities in Australia. We include estimated costs and
revenues associated with groundwater planning and management activities and charges (where
available). The table excludes some less significant charges (such as administrative fees charged by
the South Australian DfW and Victorian DSE). Greater details of these arrangements are provided in
Appendix C.
NATIONAL WATER COMMISSION — WATERLINES
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Table 3: Coverage of groundwater planning and management charges in Australia
State
Collected by
Cost of activities
($)
Groundwater activities covered
Revenues from
user charges ($)
Cost recovery
(%)
Current
SW
NSW Office of
Water (NOW)
Various groundwater planning and
management activities undertaken by
NOW
$14 030 051
(2012–13)
n/a
87% of user
costs
(2013)a
Vic.
Water
corporations
Functions delegated by DSE
(Minister), including groundwater
licensing and planning
Approx. $3mb
(2006–07)
$3.0mb
(2006–07)
Approaching
100%
Vic.
Treasury and
Finance
(Environmental
Contribution)
Funding water-related initiatives
undertaken by DSE, water
corporations and other parties
n/a
$2.8mc
(2010–11)
-
ACT
ACT
Government
Various groundwater planning and
management activities undertaken by
the ACT Government (such as
planning and licensing)
$455 000
(2010–11)
$145 000
(est. annual)
32%
SA
Department for
Water
(water levy)
Funding activities of regional NRM
boards (which can include
groundwater planning and
management)
n/a
Less than $3.3md
(2009–10)
-
Qld.
Department of
Natural
Resources and
Mines (DNRM)
Include groundwater planning,
allocation and management by
DNRM
n/a
n/a
Less than 5% of
total costs e
(2004)
Proposed/under development
WA
Department of
Water (DoW)
Various groundwater planning
and management activities
undertaken by DoW
$40 919 000
(2009–10)
n/a
n/a
Tas.
Department of
Primary
Industries,
Parks, Water
and
Environment
(DPIPWE)
Includes groundwater licensing,
water management planning, and
water resource monitoring and
assessment by DPIPWE
$700 000
(2009–10)
n/a
n/a
SA
Department for
Water (DfW)
Potentially covers groundwater
planning and management
activities of both NRM boards and
DfW
$13 243 000
n/a
n/a
a IPART
forecast of NOW’s cost recovery of efficient costs attributable to groundwater users by 2013.
Based on G-MW and SRW only. Estimated expenditure based on operating costs reported in ESC expenditure reviews.
Revenues based on revenue from groundwater charges in ESC revenue models.
c Based on Victorian Environmental Contribution expenditures for groundwater-specific projects (including the state observation
network) reported in DSE annual reports.
d Upper-bound estimate based on total revenues from NRM water levies, being $6.757 million (2009–10) and revenue from
River Murray water levies (i.e. surface water) in the SA MDB region typically accounting for at least 50% of total annual revenue
from NRM water levies.
e Indicative estimate based on past study (ACIL Tasman 2004) that found total revenue from all charges (surface water and
groundwater) was less than 5% of total water planning and management cost in 2004.
n/a Not available.
b
NATIONAL WATER COMMISSION — WATERLINES
17
3.4. Key components of cost recovery design
Cost recovery design has several elements, including:

cost allocation (i.e. defining the proportion of costs to be funded by resource users and
government, respectively)

cost recovery mechanisms (e.g. the type and structure of user charges)

processes for reviewing costs and cost recovery charges.
Below we describe these concepts and compare and contrast industry approaches in each
jurisdiction.
3.4.1. Cost allocation
Cost allocation involves determining the share of groundwater planning and management costs
attributable to different parties, which broadly comprise groundwater users and government. The
rationale for allocating some costs to government is that some groundwater planning and
management activities benefit the broader community and future users (for example, the costs
associated with environmental protection).
As noted above, under the NWI pricing principles, jurisdictions have agreed to allocate costs between
water users and governments using an impactor-pays approach (Appendix A).
Approaches to allocating costs between groundwater users and government
Current approaches to allocating the cost of groundwater planning and management activities
between government and resource users range from a case-by-case approach to funding with no
explicit cost-sharing formula (e.g. Victoria), to using a formal framework to assign cost shares for
activities assessed on an impactor-pays basis (e.g. NSW).
In New South Wales, IPART uses an impactor-pays approach to define unique cost shares for
surface water and groundwater planning and management activities undertaken by NOW. For
example, the user cost share of groundwater quantity monitoring is 100%. IPART assigns cost shares
for each activity based on the extent to which an activity is driven by private water extraction and use
(i.e. the user share) or by maintaining standards demanded by the community (i.e. the government
share) (ERA 2011). IPART has previously sought independent advice to review these cost shares and
also considers input from stakeholders during NOW’s price determination process.
In Victoria and the Australian Capital Territory, governments generally do not specify explicit cost
shares by surface water and groundwater planning and management activity. In Victoria, decisions
concerning how many activities are funded often appear to be made on a case-by-case basis (ACCC
2009). For example, funding of groundwater management plans prepared by Goulburn–Murray Water
is approximately two-thirds from government and one-third from G-MW charges to groundwater users
(ACCC 2009). In the Australian Capital Territory, the government has a general policy of attributing all
water planning and management costs incurred by the Australian Capital Territory Government to
water users (NWC 2007). However, there is no formal framework that systematically identifies each
activity and the basis for recovering the full cost from water users.
In South Australia, Western Australia, Queensland, Tasmania and the Northern Territory,
governments currently fund a large portion (if not all) of groundwater planning and management
costs, and there is limited reliance on user charges. To the extent user charges exist, there is
generally no formal cost allocation framework. For example, the ACCC (2009) has previously noted
water charges in Queensland relate to water planning and management costs generally, and are not
NATIONAL WATER COMMISSION — WATERLINES
18
specific to any type of activity. Past efforts to introduce cost allocation policies based on an impactorpays approach in some of these jurisdictions (e.g. Queensland and Western Australia) have been
subject to considerable opposition (NWC 2007).
The recent reviews of water planning and management charges in South Australia, Western Australia
and Tasmania all propose formal cost allocation policies based on the impactor-pays approach. For
example, the ERA cost allocation framework allocates costs to users and government based on the
private/public good nature of each activity undertaken by the DoW. Based on this framework, the ERA
attributes 70% of groundwater ‘assessment, investigation and review’ costs associated with ‘providing
water allocation and managing water ongoing use’ to private parties, as the majority of these services
are for private parties. It attributes the remaining costs to government given these activities also
exhibit public good characteristics (ERA 2011).
The proposed cost allocation polices for South Australia, Western Australia and Tasmania all draw on
the NWI pricing principles framework for classifying water planning and management activities.
However, there are some differences in the activity categories used to define cost shares due to
differences in the institutional settings in each state, such as the structure of departments and the
nature of their activities.
Table 4 provides examples of current and proposed approaches to allocating the cost of groundwater
planning and management activities between government and users. As noted, state governments in
Western Australia, South Australia and Tasmania are yet to formally endorse the proposed policies
for those states.
Table 4: Approaches to allocating costs between government and groundwater users
State
Cost allocation
Examples of cost shares
Current cost recovery arrangements
NSW
Unique cost shares defined by source
(groundwater,
surface
water
regulated,
unregulated) and activity.
Groundwater quantity and quality
management, and asset renewal.
Vic.
There is no specific formula for allocating costs
between the Victorian Government and water
users. Funding often appears to be made on a
case-by-case basis.
Funding for groundwater management plans prepared by GMW. Approximately 33% user share, 67% government
share.
ACT
Allocates all water planning and management
costs incurred by government to users. There is
no formal framework that systematically
identifies each activity and the basis for
recovering the full cost from water users.
Government expenditure on activities such as catchment
management, environment protection, and water policy and
administration.
There is no specific formula for allocating costs
between the Queensland Government and water
users.
No allocation.
Qld.
monitoring,
asset
100% allocated to users.
100% allocated to users.
Proposed cost recovery arrangements
WA
Proposed cost shares defined by service and
contributing activity.
Groundwater assessment, investigation and review (i.e.
contributing activity) for providing water allocations and
managing ongoing use (i.e. service).
70% allocated to users, 30% allocated to government.
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State
SA
Tas.
Cost allocation
Examples of cost shares
Proposed cost shares based on NWI pricing
principles activity categories and applied to
water
extractors,
non-extractors
and
government.
Monitoring and evaluation of water resources.
Proposed cost shares based on NWI pricing
principles activity categories.
Water licensing and permitting.
100% allocated to users.
75% water extractors, 25% non-extractors.
Water resource monitoring and assessment.
50% allocated to users, 50% allocated to government.
Sources: See Appendix C.
Governments are responsible for funding the difference between the revenue from user charges and
the total cost of groundwater planning and management. Government funding for groundwater
planning and management activities can take a number of forms including departmental budgets and
funding for specific initiatives (e.g. from the Commonwealth or state governments) (see Appendix C).
For example, the National Groundwater Action Plan has provided $21 million for state-specific
groundwater projects, $35.6 million for multi-state projects—including Great Artesian Basin (GAB)
projects—and $60.2 million for national projects. From 2007–08 to 2011–12, the BoM provided $17.6
million to states and territories for groundwater-related projects (data collected by SKM).
One of the arguments for user charges is that they can provide an ongoing and secure source of
revenue to fund planning and management activities by government agencies. In contrast, initiative
funding from Commonwealth or state governments can be limited in duration and/or only available
intermittently. We return to this issue in the assessment of current arrangements in Section 4.
3.4.2. Cost recovery mechanisms
There is a variety of different approaches to recovering the costs of water planning and management
activities from users. Possible charging bases include:

entitlement volume (per ML of entitlement held)

fixed fees per entitlement

usage (per ML of groundwater extracted)

per service/transaction (e.g. application/transfer fees).
These charges can be differentiated by:

customer type (e.g. irrigation, town, stock and domestic)

source (i.e. surface water, groundwater resources)

geographic location (by valley, water plan area, aquifer).
Differentiating charges by customer type, source or location allows prices to reflect underlying cost
drivers, such the density of infrastructure development (e.g. number of monitoring bores in the
region).
Basis for setting groundwater charges
There are two broad types of charges for recovering the cost of groundwater planning and
management activities:
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
ongoing planning and management charges: these relate to ongoing planning and management
activities, such as allocation planning and water quality and quantity monitoring

administrative/transaction fees: these relate to service requests such as processing and
approving applications.
Structure of ongoing groundwater planning and management charges
Agencies typically apply ongoing groundwater planning and management charges to groundwater
entitlement holders. However, as shown in Table 5, the structure of these charges ranges from relying
almost entirely on fixed charges (e.g. fees per ML of entitlement held, fixed annual fees per licence) to
relying almost exclusively on usage charges (e.g. per ML of groundwater extracted).
Table 5: Ratio of revenue from fixed and variable groundwater charges
NOWa
Usage
Fixed
30%
70%
Examples
Border Valley groundwater (metered customers) (2011–12)
$3.32/ML of entitlement (access charge)
$1.43/ML of use (usage charge)
The minimum annual charge payable by a licence holder is $101.13.
Goulburn–
Murray Water
0%
100%
Shepparton Irrigation Region (groundwater)
(2011–12)
$3.55/ML of entitlement (base charge)
$1.58/ML of entitlement (intensive management fee)
$89.87 per bore (additional service point).
Southern
Rural Water
5%
95%
Koo Wee Rup (2011)
$ 295.00/licence
$ 3.30/ ML of licensed volume (base charge)
$1.90/ML of licensed volume (intensive management fee)
(Salinity mitigation charges per ML of use apply in some SRW service areas).
SA
(Water levy)
-
ACT
Government
(WAC)
>75%
Up to
100%
Tintinara–Coonalpyn and Padthaway PWA (2011)
<25%
WAC for groundwater licences (non-urban network) (2011)
$2.38 /ML allocated to irrigation licensees.
$0.25/kilolitre (kL) of water taken.
There are also annual licence fees to cover the cost of administering the
licensing system (e.g. $360/licence).
Qld.
n/a
n/a
Border Rivers Groundwater Management Area
$1.32/ML entitlement volume
$0.88/ML of water taken
Minimum charge $121.60 per year.
Estimates exclude transaction fees. Due to data limitations, examples and ratios do not necessarily relate to the same years..
a Target level based on forecast use.
n/a Not available.
Sources: G-MW (2010), SE NRM Board (2010a), ACT Government (2011a), DERM (2011a), SRW (2011).
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The Australian Capital Territory Government largely recovers ongoing planning and management
costs from surface water and groundwater licence holders through a WAC, which is based on the
volume of water taken. Hence, revenue varies with changes in annual groundwater use.
In contrast, Victorian water corporations and South Australian NRM boards tend to rely on charges
that are invariant to groundwater use. In Victoria, for example, G-MW and Southern Rural Water
(SRW) largely recover ongoing groundwater management costs through fixed annual fees, either per
licence or per ML of entitlement held. South Australian NRM boards tend to set NRM water levies
based on the volume of water allocated to a licence (rather than the volume of water used or taken).
In New South Wales and Queensland, charges often include both fixed and variable components.5 In
New South Wales, NOW currently applies a fixed access charge per ML of entitlement and a
volumetric usage charge to metered groundwater users. IPART sets NOW’s charges such that usage
charges will recover approximately 30% of required revenue (based on use forecasts), with the fixed
charge recovering the remaining 70%.
In Queensland, the structure of groundwater charges set by DNRM vary by declared groundwater
area, but often include a fixed component based on entitlement volume and a variable component
based on water taken. Information on the balance of revenue from each tariff component is not
available.
In New South Wales and Queensland, agencies apply meter fees to recover the costs of reading and,
in some cases, installing, maintaining and renewing groundwater meters.6 In Victoria, G-MW has
additional service point fees (per bore). These types of fees can vary with the number or type of
meters/bores that groundwater users have installed, but are essentially fixed charges unless
groundwater users choose to rationalise the number of service points.
As noted above, some user charges are based on factors only weakly related to water use or
services, if at all. For example, the Victorian Environmental Contribution is based on the revenue of
urban and rural water businesses.
Setting administrative fees
Most states and territories impose fees for service to cover the costs of administrative activities
associated with groundwater planning and management. However, the number and coverage of fees
relating to groundwater activities varies substantially across jurisdictions. In Victoria, for example,
SRW has fees relating to applications for new licences and amendments to existing licences,
transfers of existing groundwater licences, advertising applications, groundwater information reports,
and technical information analysis (SRW 2011). In contrast, NRETAS in the Northern Territory has a
small fee that covers the costs of advertising applications. It does not cover the cost of assessing and
processing the applications (NRETAS, pers. comm.)
5
However, a minimum annual charge may apply.
6
The ERA has proposed similar fees for groundwater in Western Australia (ERA 2011).
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Differentiation of charges
Differentiating ongoing planning and management charges
Agencies in New South Wales, Victoria, South Australia and Queensland set groundwater charges
that vary by region. However, only NOW and Victorian water corporations have explicit processes for
linking differences in regional groundwater charges to regional differences in costs.
In New South Wales, IPART currently differentiates NOW’s groundwater management costs and
charges by river valleys. This involves first allocating the user share of costs for specific groundwater
activities to each valley based on defined cost drivers. For example, IPART uses the proportion of
active monitoring bores in each region to allocate groundwater quantity monitoring costs. The levels
of fixed and variable groundwater charges in each valley reflect these cost allocation decisions. For
example, metered groundwater users in the Border Valley currently face a fixed charge of $3.32/ML of
entitlement and a usage charge of $1.43/ML, while users in the Far West face a fixed charge of
$4.20/ML of entitlement and a usage charge of $1.80/ML (NOW 2011a).
IPART’s (2011) most recent determination for NOW includes a transition from setting groundwater
charges based on individual river valleys towards charges based on two broad regions (‘inland
valleys’ and ‘coastal valleys’). IPART made this shift to more accurately reflect both the physical
boundaries of the groundwater sources and the efficient costs of managing those resources.
In Victoria, groundwater planning and management costs and charges vary by region partly because
different water corporations are responsible for groundwater planning and management in different
parts of the state. For example, G-MW is largely responsible for activities in rural northern Victoria,
while SRW is responsible for activities in rural southern Victoria. This separation results in differences
in both the level and structure of charges in different parts of the state (although in practice, the
structures and level of charges are broadly similar—see Table 6).
Victorian water corporations also differentiate some groundwater charges within their service areas. In
particular, G-MW and SRW differentiate intensive management fees, which apply to groundwater
users in areas that require more intensive management. For example, SRW’s intensive management
fees range from $1.90/ML in Koo Wee Rup to $23/ML in Deutgam, while G-MW’s fees range from
$1.58/ML to $4.44/ML (G-MW 2010; SRW 2011).
As water corporations in Victoria are subject to economic regulation by the ESC, they need to be able
to demonstrate their groundwater charges broadly reflect their underlying costs. For example, G-MW
notes its charges for water planning and management reflect any direct costs incurred in providing
each service and a share of indirect costs depending on corporate requirements.
Like Victoria, groundwater charges in South Australia vary by source and location partly because
different agencies are responsible for groundwater planning and management in different parts of the
state. In particular, NRM water levies vary across PWAs in different NRM regions. In 2010–11, for
example, the South East NRM water levy was $2.38/ML for volumetric irrigation licensees in the
Tintinara–Coonalpyn and Padthaway prescribed wells area. In contrast, the South Australian MDB
NRM water levy for the Angas Bremer PWA was $4.65/ML (SA MDB Board 2011). In theory, the level
of the water levy in each NRM region reflects funding priorities identified by each NRM board.
In Queensland, the level and structure of DNRM groundwater charges vary across declared
groundwater management areas. However, it is unclear whether these differences reflect differences
in DNRM’s underlying groundwater planning and management costs. In any event, the level of cost
recovery for DNRM water planning and management activities in Queensland is generally very low
(ACCC 2009).
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In the Australian Capital Territory, the government differentiates the WAC according to whether a
licence is held for the urban supply network. All groundwater licences fall into the non-urban supply
category and attract a lower charge.
Table 6: Approaches to differentiating groundwater charges by location or source
State
Charge
Differentiation
NSW
Annual groundwater entitlement
charges (NOW)
Differentiated by ‘inland valleys’ and ‘coastal valleys’
Vic.
Annual groundwater entitlement
charges (Water corporations)
Differentiated by water corporation
Vic.
Intensive groundwater
management fees
(Water corporations)
Differentiated by water corporation and service area
SA
NRM water levies (NRM boards)
Differentiated by prescribed water source
ACT
Water abstraction charge
Differentiated by supply type (via urban network or not via non-urban
network)
Qld.
Groundwater charges in water
management areas (DNRM)
Differentiated by declared groundwater management area
Sources: See Appendix C.
Some agencies differentiate the level or structure of groundwater charges by user type (such as
irrigation or non-irrigation licensees in the South East NRM region). However, this sometimes reflects
practical constraints such as limited metering or volumetric entitlements. For example, unmetered
groundwater licence holders in New South Wales pay fixed fees and no usage fee (NOW 2010). In
South Australia, licensees with area-based allocations (entitlements) in the Tatiara and Lower
Limestone Coast PWA pay a rate per hectare irrigation equivalent rather than on volume allocated
(SE NRM Board 2010a).
Several states, including Victoria, New South Wales, South Australia and Queensland, exempt some
stock and domestic users from groundwater management charges (Appendix C).
It is noted that in many cases, management and monitoring charges do not differ based on volume
extracted. This is because many of the underlying costs such as monitoring, metering and many
management activities need to be carried out regardless of the levels of extraction.
Administrative fees
Administrative fees (such as groundwater licence applications) often apply on a postage stamp basis
across the state (e.g. South Australian DfW fees). However, agencies sometimes differentiate
administrative fees by the level of effort involved. For example, fees for applications to transfer
groundwater entitlements in northern Victoria vary depending on whether the application is low,
medium or high risk (G-MW 2011). Similarly, the ERA (2011) has proposed differentiated application
fees for DoW licence approvals.
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3.4.3. Processes for reviewing groundwater
management costs and charges
planning
and
In general, state and territory governments undertake internal reviews of groundwater expenditure
and funding needs and a Minister approves any groundwater charges. The exceptions are NOW and
Victorian water corporations, which have their costs reviewed and charges set by an independent
economic regulator.
The frequency of reviews of groundwater planning and management costs and charges range from
ad hoc reviews (e.g. Queensland, Australian Capital Territory, South Australia) to ongoing reviews as
part of a price determination process (e.g. NOW).
Reviews by economic regulators include public reporting and consultation, and regulators will
generally publish independent advice on matters such as efficient operating and capital expenditures.
The extent of public reporting and consultation associated with internal government reviews is
variable.
Under ACCC Water Charge Rules, agencies in the Murray–Darling Basin provide information on
charges and charging policies. In doing so, some agencies provide high-level information on the costs
to which these charges relate. The ACCC does not set charges. Table 7 provides an overview of
existing review processes for water planning and management charges. Further information is
available in Appendix C.
Table 7: Approaches to reviewing groundwater planning and management costs and charges
Independent and
public review of
cost and/or
charges
Independent
price setting
Frequency
Jurisdiction
Review body
NSW
(NOW costs/charges)
Economic regulator
(IPART)
Yes
Yes
Ongoing
Vic.
(Water corporation
costs/charges)
Economic regulator
(ESC)
Yes
Yes
Ongoing
Vic.
(Environmental
Contribution)
Internal (DSE)
Partiala
No
Ongoingb
SA
(DfW costs/charges)
Internal (DfW)
No
No
Ad hoc
SA
(NRM water levies
proposed by NRM
boards)
Internal (DfW)
Partialc
No
Ongoing
ACT
(WAC)
Economic regulator
(ICRC)
Partiald
No
Ad hoc
WA
(DoW costs/ proposed
charges)
Economic regulator
(ERA)
Yese
No
Ad hoc
Tas.
(DPIPWE costs/
proposed charges)
Internal (DPIPWE)
No
No
Ad hoc
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Jurisdiction
Qld.
(DNRM costs/
proposed charges)
NT
(NRETAS
costs/charges)
Review body
Independent and
public review of
cost and/or
charges
Independent
price setting
Frequency
Internal (DNRM)
No
No
Ad hoc
Internal
(NT Treasury)
No
No
Ad hoc
a Consultation
with stakeholders occurred during the development of the regional Sustainable Water Strategies and the
Government’s 2004 White Paper.
b The Water Industry Act 1994 requires the Secretary of DSE to undertake periodic reviews of the environmental contribution.
c NRM water levies are subject to some public scrutiny through the process for developing NRM plans, which involves
community consultation.
d The ICRC has undertaken reviews of the WAC but these have largely focussed on surface water.
e The ERA Inquiry provided detailed information on costs and proposed charges. However, the WA Government is yet to
approve the ERA’s recommendations.
Link between user charges and the funding of planning and management
activities
The link between the revenue from user charges and the funding of specific groundwater water
planning and management activities tends to be strongest for agencies that are subject to economic
price regulation. In the case of the NOW and Victorian water corporations, for example, economic
regulators use a ‘building blocks approach’ to define a revenue requirement for each agency to meet
their water planning and management obligations (Box 3). Revenue from approved user charges
directly funds each agency’s efficient operating costs as wells as an allowance for a return of their
asset base (depreciation). Since 2011, IPART has also permitted NOW to receive a return on its
regulatory asset base (Box 3).
The review process can include identifying opportunities to schedule activities to smooth budgets and
expenditures over time.
Box 3: Building blocks approach to determining revenue requirements (NSW IPART)
In applying the building block method to set NOW notional revenue requirement for the 2011
Determination period, IPART considered:

NOW’s forecast efficient operating expenditure over the determination period

an appropriate allowance for a return on its Regulatory Asset Base (RAB)

an appropriate allowance for a return of this asset base (regulatory depreciation) .
Following independent advice, IPART decided that:

an opening value of zero was appropriate for NOW’s RAB, due to concerns about NOW’s asset
management and capital planning frameworks

the annual value of the RAB from 2011–12 onwards should be established by incorporating the
forecast capital expenditure deemed to be efficient in each year of the 2011 determination period

an appropriate rate of return for NOW over the 2011 determination period is 7.1% per annum

for calculating the regulatory depreciation allowance, the straight-line depreciation method and
average asset lives of 20 years are appropriate.
In the previous 2006 determination, IPART did not establish a RAB or allow a return on assets. Rather,
it set prices to provide NOW with a depreciation allowance, and this allowance related primarily to post-
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1997 groundwater bores.
The consequence of having a low RAB is that that allowances for depreciation and a return on assets
currently account for a small proportion of NOW’s notional revenue requirement.
An alternative approach to RAB is the annuity approach, which forecasts asset replacement and growth
costs over a fixed period and converts these to a future annualised charge.
The NWI pricing principles include detailed pricing principles for the recovery of capital expenditure (in
the context of providing water services).
Source: IPART (2011).
For other agencies, revenue from user charges provides an additional stream of funding to defray the
cost of planning and management activities but there is often a limited link between the level of these
charges (and associated revenue) and funding requirements for specific services. For example, the
Victorian Government hypothecates (i.e. earmarks) revenue from the Victorian Environmental
Contribution to fund a range of water-related activities and some of this funding has previously gone
towards maintaining the state bore network managed by DSE. Unlike the ESC’s approach of setting
Victorian water corporations’ groundwater charges to explicitly allow for maintenance and
depreciation of assets, DSE periodically bids for Environmental Contribution funding to maintain its
monitoring assets. This is because the Victorian Government, rather than the water corporations,
owns the bore network.
In some cases, user charges to recover the cost of groundwater planning and management activities
may also recover other costs. In particular, the Australian Capital Territory WAC includes components
to reflect water scarcity and environmental impacts.
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4. Assessment of current approaches to
cost recovery
In this section, we assess current approaches to cost recovery for groundwater planning and
management against assessment criteria that represent good practice for cost recovery.
4.1. Assessment criteria
Our proposed criteria for assessing current cost recovery arrangements are:

revenue adequacy

economic efficiency

transparency and administrative simplicity

equity

consistency with the NWI and NWI pricing principles.
These criteria reflect the objectives and outcomes sought by the NWI, including to:

promote efficient use
(Paragraph 64(i)(c))

ensure sufficient revenue streams to allow efficient delivery of the required services
(Paragraph 64(ii))

promote pricing transparency for cost recovery for planning and management (Paragraph 64(iv)).
of
government
resources
devoted
to
water
management
They also reflect agreed NWI pricing principles on cost recovery for water planning and management
(Appendix A) and existing Australian (Commonwealth of Australia 2005) and state guidelines on cost
recovery.
We briefly outline each criterion, including proposed questions for assessing performance against
each criterion, below.
Revenue adequacy
Revenue adequacy considers whether existing arrangements can adequately fund necessary and
efficiently provided groundwater planning and management activities now and in the future. It is
aligned with the NWI best practice pricing outcome of ensuring ‘sufficient revenue streams to allow
efficient delivery of the required services’.
In general, existing guidelines on cost recovery for government agencies recommend that the default
position should be for the full cost of activities to be recovered from users. The Australian Government
cost recovery guidelines, which relate to services provided by Commonwealth Government agencies
(including information services and regulation), recommend that:
Agencies should set charges to recover all the costs of products or services where it is efficient to do
so, with partial cost recovery to apply only where new arrangements are phased in, where there are
government endorsed community service obligations, or for explicit government policy purposes
(Commonwealth of Australia 2005, p. 1).
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In some cases, governments may deem that full cost recovery for groundwater planning and
management is not appropriate because activities generate broader community benefits and/or
address other policy objectives (e.g. equitably sharing the costs of addressing the adverse effects of
past water use or meeting increased environmental standards). In these cases, the target level of cost
recovery for groundwater planning and management activities will be less than 100%.
Where the government has made a policy decision to recover less than the full cost of water planning
and management activities from users, government agencies will need to access sufficient alternative
funding to meet their planning and management obligations. Where government agencies have
insufficient funding to meet their obligations, it may reduce the quality of service and/or cause
agencies to cease some activities.
In addition to the level of funding for water planning and management activities, certainty of funding is
also important to allow agencies to plan future activities and expenditure. In Victoria, cost recovery
guidelines for government agencies recommend that agencies should avoid volatility with a
framework of cost recovery charges that smooths year-on-year fluctuations to facilitate the forward
planning processes of government, enterprises and industries (Victorian Department of Treasury and
Finance 2010).
In assessing current arrangement against this criterion, relevant questions include:

do current funding arrangements for groundwater planning and management (from government
and users) facilitate revenue adequacy, certainty and stability for agencies?

does the design of current user charges support revenue adequacy, certainty and stability for
agencies?
Economic efficiency
This objective relates to obtaining the greatest net benefits to the community as a whole from the use
and allocation of resources, including the resources devoted to groundwater planning and
management activities. It is consistent with NWI best pricing outcomes of promoting efficient use of
‘water resources’, ‘water infrastructure’ and ‘government resources devoted to water management’
(Paragraph 64).
Efficient service provision
A key efficiency benefit of cost recovery is providing incentives to government agencies (or other
parties acting on their behalf) to improve the efficiency of service provision by making the demand for,
and cost of, activities more transparent.
An important principle for cost recovery is that arrangements should reflect efficient costs (i.e. the
minimum cost necessary to deliver the service, while maintaining quality of service over time)
(Commonwealth of Australia 2005). This prevents perverse incentives such as cost-padding or goldplating.
Efficient service delivery also implies that the level of service is appropriate (i.e. the level of services
maximises the overall net benefits to society).
In general, independent and transparent processes for reviewing water planning and management
costs and charges can reinforce incentives for efficiency of service provision.
Relevant assessment questions include:

what is the type and level of groundwater planning and management services?
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
are there incentives for required groundwater planning and management services to be provided
at an efficient cost?
Efficient use of water and government resources
Another function of cost recovery for groundwater planning and management is to influence the
behaviour of resource users by signalling the cost of planning and management activities. For
example, charges to recover the costs of activities to manage the adverse environmental impacts of
groundwater use can promote more efficient water-use decisions by causing resource users to
consider the consequences of their actions. Similarly, cost-reflective charges for administrative
services (e.g. licence approvals) provide resource users with an incentive to consider the effects of
their demands on government resources.
The Australian Government cost recovery guidelines (Commonwealth of Australia 2005) note the
importance of charges being linked as closely as possible to the cost of activities. Consistent with this
view, Paragraph 67 of the NWI requires ‘charges are linked as closely as possible to the costs of
activities or products’.
The price signal that groundwater users receive from user charges will depend on both the share of
costs allocated to users and the structure of charges.
In assessing current arrangements against this criterion, relevant questions include:

do charging mechanisms send an appropriate signal to users about the groundwater
management and planning costs that vary with the level of groundwater use?

are there incentives for efficient use of government resources (e.g. by signalling the cost of
administrative activities to users through charges)?
Transparency and administrative simplicity
This criterion ensures that the approach balances accuracy against both cost effectiveness (in terms
of administration, compliance, enforcement and information costs) and the transparency of the
approach.
In general, guidelines on pricing and cost recovery recognise the need to balance the trade-offs
between accuracy and administrative costs. For example, the Australian Government cost recovery
guidelines note that ‘cost recovery should not be applied where it is not cost-effective’
(Commonwealth of Australia 2005, p.1). Similarly, the Victorian Cost recovery guidelines note ‘the
cost of administering cost recovery arrangements should be less than the value of the costs
recovered’ (Victorian Department of Treasury and Finance 2010, p. 8).
Beyond a certain level, increasing the rigour of the cost recovery approach may reduce transparency.
For example, the Victorian Cost recovery guidelines caution that complex arrangements that are
theoretically pure may introduce unjustified costs and unnecessary confusion (Victorian Department
of Treasury and Finance 2010). There are also practical issues to consider, such as the cost of
reliably measuring and monitoring differences in service costs across resource users.
Relevant assessment questions include:

are there clear processes/policies for allocating user costs and setting water planning and
management charges for groundwater?

how effective are the agencies at allocating and tracking the costs associated with groundwater
activities so that users know what is being done and how much it costs?
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
have any studies been undertaken to assess the cost-effectiveness of user charges for water
planning and management and, if so, what did these studies find?
Equity
Equity relates to the distributional consequences of different approaches to cost recovery. While what
constitutes an equitable allocation can be difficult to define precisely, governments are often
concerned about the potential financial impacts of cost recovery on customers. States and territories
currently use a range of approaches to manage customer impacts through cost recovery design
(including phasing in prices and exempting some activities from cost recovery). Several states have
no cost recovery at all due to concerns about customer impacts.
Addressing customer impacts through groundwater charges can have unintended consequences. For
example, policies that keep groundwater charges low to reduce customer impacts, may undermine
revenue adequacy for agencies and reduce service standards. Hence, it is important to identify
approaches to addressing equity objectives that limit the risk of undermining other objectives.
Importantly, there is a range of more direct options for protecting vulnerable customers other than
through groundwater charges (e.g. direct welfare assistance).
Equity can also relate to the processes for determining charges, such as the extent of stakeholder
consultation or whether resource users in similar situations are treated equally (i.e. horizontal equity).
In some cases, approaches to cost recovery will need to consider and address potential
inconsistencies with other government policies (such as past policies encouraging groundwater use to
reduce the burden on potable urban supplies). Stakeholder input can often be important in identifying
these issues.
Relevant assessment questions include:

how are social objectives accommodated in the charging regime and how does this affect other
objectives such as efficiency?

does the existing regime exhibit horizontal equity across resource users (i.e. resource users in
similar situations are treated equally)?

was the cost recovery regime based on public consultation?
Consistency with the NWI and NWI pricing principles
Best practice pricing objectives outlined in Paragraph 64 of the NWI encompass the efficiency,
revenue adequacy and transparency criteria above, as well as objectives relating to efficient
functioning of water markets and the avoidance of perverse pricing outcomes.
NWI pricing principles provide further guidance on specific aspects of cost recovery for water planning
and management (see Appendix A). These include principles relating to cost allocation, differentiating
costs and charges and testing for cost-effectiveness.
Rather than being a stand-alone criterion like those outlined above, this criterion synthesises our
analysis and relates it back to NWI commitments and the NWI pricing principles concerning water
planning and management. That is, it considers the extent to which approaches to recovering the cost
of groundwater planning and management activities in Australia generally align with the NWI and NWI
pricing principles. Specific assessment questions include:

to what extent have jurisdictions implemented NWI actions related to recovering the costs of
groundwater planning and management activities?
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
to what extent have jurisdictions implemented NWI pricing principles related to recovering the
costs of groundwater planning and management activities?
4.2. Assessment of current arrangements
Presented below is an assessment of current approaches to cost recovery for groundwater planning
and management, based on the criteria outlined in Section 4.1.
4.2.1. Revenue adequacy
Findings
In several parts of Australia, agencies’ ability to source adequate funding for groundwater planning
and management is coming under pressure from rising costs, internal budget pressures and the end
of several Commonwealth funding programs.
These challenges have raised questions about whether current funding models are sustainable in the
longer term or provide the most effective approach to facilitating revenue adequacy, certainty and
stability.
This has led some states to consider increased cost recovery from users to augment existing funding
sources.
Our review suggests that, in addition to the general benefits of cost recovery in providing an ongoing
source of funding, several features of cost recovery design can support revenue adequacy. These
include:

establishing transparent, open and independent processes (at arm’s length from government) to
define service obligations, assess the required revenue to deliver those services and identify
funding sources (including agreed user and government contributions). Reviews should occur on
a regular basis

aligning tariffs structures (i.e. fixed and usage charges) to reflect the fixed-cost nature of ongoing
groundwater planning and management activities.
Establishing clear links between the revenue collected from user charges and the funding of
groundwater planning and management activities by using an explicit, bottom-up approach to
identifying and costing groundwater planning and management activities, and setting direct charges to
recover those costs.
As noted in Section 2 and NWC (2012), several factors are currently placing pressure on funding for
groundwater planning and management activities in Australia. These include the need to upgrade or
replace aging monitoring bore networks.
Drawbacks of current funding arrangements
There are three main sources of funding for groundwater planning and management:

the recurrent budgets of groundwater planning and management agencies (typically government
departments)

ad hoc state or Commonwealth grants

cost recovery from users.
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Often, government departments responsible for groundwater planning and management are largely
reliant on their recurrent budgets (typically approved by state treasury departments) to fund their
activities. While this theoretically provides the relevant department with an ongoing source of funds to
facilitate forward planning, financial resources dedicated to groundwater planning and management
can vary over time, reflecting changing priorities in each state and territory and broader fiscal
conditions. For example, public awareness of water planning and management issues tends to
increase during droughts or following significant events (such as the River Murray mouth closing in
the early 1980s due to low flows) but may lessen when water is less scarce.
There is also a common perception that groundwater planning and management has been the poor
cousin of surface water in terms of public profile and funding. This may be due to the fact the adverse
impacts of groundwater use are often less tangible that those for surface water or take longer to
emerge.
Department budgets may also fail to keep pace with changing circumstances (such as increased
water demand and changing service obligations) that increase the cost of groundwater planning and
management. In 2003, for example, the Western Australian Auditor General found that increasing
water demand, a 33% decline in funding in real terms since 1998 and increased workload (due to
legislative amendments) seriously affected the Water and Rivers Commission’s capacity to manage
the state’s water resources (Auditor General for Western Australia 2003). This may be more likely to
arise where processes for reviewing required funding of groundwater planning and management
activities are undertaken on an ad hoc basis.
Evidence from states and territories indicates that external government grants often fund a sizable
portion of groundwater planning and management activities. For example, the Tasmanian DPIPWE
has estimated that there is currently internal funding for approximately two full-time staff to work on
groundwater, with the remaining five staff reliant on initiative funding (i.e. grants). In Western
Australia, a report undertaken for the ERA found that external funding accounted for approximately
12% of required expenditure on water planning and management in 2008–09, with the majority of
external funds directed at groundwater planning and management (PWC 2010). Several stakeholders
suggested that, due to budgetary constraints, many groundwater planning and management activities
only occur opportunistically when external funds are available.
Although external funding is playing an important role in supporting groundwater planning and
management, it is debatable whether this current funding model will be sustainable in the longer term
or provide the most effective approach to facilitating revenue adequacy, certainty and stability.
First, a large amount of state and Commonwealth funding through grants is coming to an end and
future levels and areas of funding are currently uncertain. For example, the Water Smart and Raising
National Water Standards programs, which are two of the main vehicles for providing Commonwealth
funds for groundwater planning and management, have both largely ended. BoM Modernisation and
Extension Funding is ending in 2012.
Second, a heavy reliance on external grants for basic activities can raise issues for long-term
planning and funding. For example, in some cases the Commonwealth has offered to fund capital
assets to aid the management of groundwater (e.g. monitoring bores, meters) (see for example,
IPART 2011). However, the costs of maintaining, managing and decommissioning such assets can
create a future liability, which requires identifying further funding sources.
Third, as noted in a recent review in Western Australia, there is a risk that external funding can drive
the type of planning and management activities that agencies undertake, rather than the other way
around (PWC 2010).
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Perhaps reflecting some of these potential problems with current approaches to funding, as well as
NWI policy commitments, several governments are now considering increased cost recovery from
users to augment existing funding sources.
Features of cost recovery that support revenue adequacy for agencies
Our review suggests that several features of cost recovery design can support revenue adequacy for
government agencies undertaking groundwater planning and management activities. These include:

transparent and independent processes for identifying service and funding needs

providing revenue stability through cost-reflective tariff structures

linking revenue from user charges with required activities.
Transparent and independent processes for identifying service and funding needs
In past reviews, the NWC and the ACCC have both highlighted the lack of progress that has been
made in transparently identifying the costs of water planning and management activities, and
approaches to cost recovery (ACCC 2009; NWC 2011). This lack of information can undermine
revenue adequacy for agencies responsible for delivering groundwater planning and management
activities because funding (from government and/or users) can fail to keep up with changing service
obligations and costs. Lack of information and independent advice on efficient and prudent
expenditure on groundwater planning and management activities can also make it more difficult for
state treasuries to justify large increases in government expenditure in that area or to convince
resource users of the need to increase charges.
A benefit of the independent and public review processes for NOW and Victorian water corporations
is that service obligations and required expenditures are regularly subjected to considerable scrutiny.
Among other things, this increased scrutiny can help identify potential funding shortfalls before they
occur. Because the findings of reviews are independent and public, it can also add greater credibility
to any recommendations regarding the need to increase public or user funding.
In contrast, internal reviews of groundwater planning and management funding needs by government
agencies can have several drawbacks. For example, if there is no obligation to publish review findings
there will be less public accountability for state governments to address any identified funding issues.
Further, any real or perceived conflict of interests for the agency undertaking the review may affect
the relevant state government’s (i.e. Treasury’s) views about the reliability of findings and hence their
propensity to release additional funds. It may also affect customer reactions to any proposals to
increase charges.
In some cases, reviews of groundwater planning and management expenditure and funding needs
are public and independent, but are only undertaken on an ad hoc basis (e.g. Western Australian
ERA Inquiry, Auditors General reports). The drawback of such reviews is that they may only occur
when significant funding shortfalls have already emerged, and thus fail to ensure ongoing revenue
adequacy for agencies.
For these reasons, we believe independent and regular review processes for water planning and
management activities (including groundwater) can be an important part of ensuring revenue
adequacy. In this regard, the ERA’s proposal to introduce a new independent review process for
water planning and management activities undertaken by the Western Australian DoW is
encouraging.
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Providing revenue stability through cost-reflective tariff structures
As noted in Section 3, the relative proportion of ongoing planning and management costs that
agencies recover through fixed and variable charges (i.e. usage charges) varies substantially across
agencies.
In general, a large component of groundwater planning and management costs are fixed in nature
and hence recovering costs mainly through fixed charges (such as annual licence fees) would likely
be cost-reflective. For example, NOW has argued that its costs are independent of the level of water
extracted, and that its costs are more closely related to entitlement volumes—as it is the entitlement
system that it is administering and protecting (IPART 2011).
A benefit of fixed fees is that they provide a relatively stable stream of revenue from year to year.
This, in turn, facilitates planning. In contrast, revenue from usage-based charges can vary from year
to year depending on water availability and can be hard to forecast (particularly for unregulated rivers
and groundwater sources) (IPART 2011).
The reason that some agencies do not recover more revenue through fixed charges is often because
governments or regulators setting charges have sought to achieve other objectives through tariff
structures, such as equity or signalling the scarcity value of the resource itself. For example, the
Australian Capital Territory Government uses the WAC to signal the value of scarce water in other
uses and the environmental impacts of water abstraction. In New South Wales, IPART suggests
usage charges enable NOW and entitlement holders to share water availability risk, by allowing
entitlement holders to face lower bills during times of lower water availability or usage, and provide a
conservation or scarcity signal to water users.
We return to this issue in the sections below on efficiency and equity. In general, however, the case
for increasing usage charges related to groundwater planning and management to meet other
objectives is not compelling.
Linking revenue from user charges with required activities
The strength of a link between revenue from user charges and the funding of specific groundwater
activities ranges from building block approaches that directly link revenue from user charges to the
cost of regulated services (e.g. NOW, Victorian water corporations) to general purpose levies that
raise revenue to fund a range of water-related activities (e.g. Victorian Environmental Contribution).
Using general levies to fund a variety of water-related activities (including groundwater planning and
management) can have some advantages over direct user charges that earmark revenue for
groundwater activities. For example, it can provide flexibility to allocate funding to areas where it will
generate the greatest benefit to society.
When the link between revenue from user charges and the funding of groundwater activities is very
weak, however, such charges may be less effective in promoting revenue certainty and stability for
groundwater planning and management. For example, because revenue from the Victorian
Environmental Contribution funds a range of water-related activities, groundwater managers have to
compete with other water projects to secure funding (despite the fact that funding is sometimes for
core activities such as maintaining monitoring bores). In this regard, funding from the Victorian
Environmental Contribution may suffer from the same issues associated with relying on ad hoc state
and Commonwealth government grants (i.e. unpredictability of funding over time). One difference may
be that that funding from the Victorian Environmental Contribution does not have a limited duration
and hence may provide greater certainty compared to Commonwealth funding, for example.
Another issue to consider is whether the availability of funding from general levies is well aligned with
funding requirements for water planning and management. For example, revenue from the Victorian
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Environmental Contribution is linked to water corporation revenue. During prolonged drought periods,
water corporation revenue will tend to decline due to lower water sales and thus reduce levy revenue.
However, water management costs may be increasing during drought, and a variety of water projects
(including for groundwater) may be competing for a smaller amount of funds. Conversely, water
corporation revenue may increase substantially over time, reflecting increased water bills to fund
major urban supply investments. If the Victorian Environmental Contribution remains at the same
percentage of water corporation revenue, this may increase overall funding to levels higher than
necessary.
In the Australian Capital Territory and several countries in Europe (including Denmark and the
Netherlands) governments impose user charges to signal the scarcity value of groundwater
(University College Dublin 2011). While this approach can generate additional revenue that can assist
in funding groundwater planning and management activities, this revenue can exceed that required
for efficient groundwater planning and management (i.e. the charges relate to the value of
groundwater not the cost of groundwater management activities). If all revenue is hypothecated for
groundwater planning and management projects, it could result in overinvestment or gold-plating.
However, returning the revenue to consolidated revenue may meet public opposition if it is perceived
as unwarranted taxation.
Given the above issues, we would suggest there is substantial benefit in establishing clear links
between the revenue collected from user charges and the funding of groundwater planning and
management activities. This would involve using an explicit, bottom-up approach to identifying and
costing groundwater planning and management activities, and setting direct charges to recover those
costs.
4.2.2. Economic efficiency
Findings
Efficient service delivery—Independent processes for regularly reviewing groundwater planning and
management costs and charges help make service obligations and expenditures more transparent
and improve the accountability of service providers. On this basis, the cost recovery regimes in
place for NOW and water corporations in Victoria perform relatively well in terms of encouraging
efficient service delivery.
Cost-reflective pricing for government services—To date, one of the main obstacles to assessing if
groundwater charges are cost-reflective has been the lack of information regarding the planning
and management activities and costs attributable to resource users and the extent to which those
costs vary across different users. While there has been some improvement in the transparency and
rigour of cost allocation policies for water planning and management in recent years, significant
further progress is required.
Incentives for efficient groundwater use—Adopting an impactor-pays approach can provide
incentives for efficient groundwater use by signalling to users the cost of managing the adverse
impacts of their actions. However, the case for rebalancing groundwater charges towards usage
charges to promote groundwater conservation is not compelling.
Incentives for efficient service delivery
The NWI pricing principles note that the costs of water planning and management activities that have
been identified for cost recovery from water users should be ‘tested’ for cost-effectiveness by an
independent party, and the findings of such cost-effectiveness reviews are to be made public.
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As discussed above, independent processes for regularly reviewing planning and management costs
and charges help make service obligations and expenditures more transparent and improve the
accountability of service providers. Public consultation also promotes close scrutiny of the costs
incurred and a clear understanding of the nature and purpose of the activities carried out and the
resultant charges (ERA 2011). For these reasons, the cost recovery regimes in place for NOW and
water corporations in Victoria perform relatively well in terms of encouraging efficient service delivery.
Other jurisdictions (particularly Western Australia) have made recent progress in this area. For
example, the ERA Inquiry published several consultant reports examining the costs and costeffectiveness of activities undertaken by the DoW.
Cost-reflective pricing for government services
To date, one of the main obstacles to assessing if groundwater charges are cost-reflective has been
the lack of information regarding the planning and management activities and costs attributable to
resource users and the extent to which those costs vary across different users.
Identifying efficient costs attributable to groundwater users
While there has been some improvement in the transparency and rigour of cost allocation policies for
water planning and management in recent years, significant further progress is required.
Even where states or territories elect to allocate most or all groundwater planning and management
costs to government, it is still valuable to transparently identify the costs of groundwater planning and
management activities, and the rationale for seeking a low level of user cost recovery. This is
because a good understanding of required expenditure is a precondition of ensuring revenue
adequacy regardless of the funding source (see above). Further, clearly articulating the policy
rationale for allocating costs to government (e.g. to meet social objectives) may help identify more
efficient options for addressing these objectives (e.g. using more targeted assistance measures rather
than subsidising water charges). Ideally, this would occur through a public and independent process.
Differentiating management charges across resource users
The appropriate basis for differentiating charges is an empirical issue, as the costs of groundwater
planning and management are likely to vary across jurisdictions and agencies. Under the NWI pricing
principles, jurisdictions have agreed, where practicable, to:

identify and differentiate water planning and management cost by catchment or valley or region,
and by water source where practicable

recover the costs of the activities concerned using charges differentiated by catchment or valley
or region, and by water source (e.g. regulated, unregulated or groundwater sources).
As noted in Section 3, agencies in New South Wales, Victoria, Queensland and South Australia
currently differentiate ongoing groundwater charges by region.
An advantage of the economic review processes that apply to NOW and Victorian water corporations
is that they create an obligation for agencies to publicly report on their service obligations and costs,
and show that their approach to setting charges is efficient and broadly cost-reflective. Moreover,
regular review of costs and charges through successive price determinations ensures charges remain
appropriate over time. For example, IPART’s recent price review for NOW considered a range of
potential approaches to differentiating groundwater charges by area (including by valley, water
sharing plan area, aquifer and ‘inland’/‘coastal’ division). It eventually decided to transition NOW’s
licence charges from a valley-based division to an ‘inland’/‘coastal’ division on the basis that
groundwater aquifers do not align with surface water valleys and that it is not practicable to price by
valley, aquifer or, at this stage, water sharing plan area.
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In contrast, there is much less public evidence to suggest that regional differences in groundwater
charges in Queensland and South Australia reflect underlying costs. For example, there is little public
reporting of costs and no formal processes for reviewing the appropriateness of charges.
Cost-reflective fees for service
The other broad category of charges is administrative charges or fees for service. Our review found
that in many cases, the extent to which fees promote a more efficient level of demand for government
resources is often questionable. For example, some fees cover only the administrative costs
associated with processing an application or request, or are set without formal reference to costs
incurred (e.g. administrative fees imposed by the South Australian DfW, Northern Territory NRETAS
and Tasmanian DPIPWE). This is despite the fact these services primarily provide private benefits
and hence would be largely attributed to users under an impactor-pays approach.
In contrast, the Western Australian ERA’s proposed charging arrangements for DoW considered
several approaches to setting licence application fees, incorporating cost data from the DoW and
input from other stakeholders.
Incentives for efficient groundwater use
While intended to recover the costs of planning and management activities in a cost-reflective
manner, the design of groundwater charges can influence incentives for efficient groundwater use. At
a general level, cost recovery can provide incentives for efficient groundwater access and use by
signalling to users the cost of managing the adverse impacts of their actions. That is, individuals will
limit groundwater-use activities that impose costs if they internalise some of the costs through
charges. However, it is also important to consider how the structure of groundwater charges (i.e. fixed
and usage components) influences water-use decisions, noting that the primary purpose of planning
and management charges is to recover the costs of these activities, not to charge for use of the
resource itself. Moreover, the costs of planning and management activities may in fact reflect costs
associated with remediating past activities or be driven by the overall level of entitlements on issue,
rather than current or future levels of usage. The efficiency argument for a higher usage component
would require that usage is a key driver of future planning and management costs.
In practice, the extent to which the balance of fixed and variable charges affects incentives for
efficient groundwater use will depend on several factors including whether groundwater users are
able to trade water. In the presence of water markets for groundwater, for example, the market prices
will signal the scarcity of the resource (rather than water planning and management charges) (IPART
2011). Currently, groundwater trading takes place in parts of New South Wales, Victoria, South
Australia and Western Australia (NWC 2009a). Groundwater entitlements also limit total use.
If trading is not possible and groundwater extraction is at the sustainable extraction limit, it may be
more efficient and transparent to set a separate scarcity price to promote conservation rather than
changing the structure of groundwater planning and management charges.7 This would mean each
price instrument would target a different objective and avoid sending confusing signals to resource
users. Recent legal challenges to the validity of the WAC in the Australian Capital Territory, which
tries to simultaneously recover planning and management costs and signal the scarcity value of water
through a single charge, provides evidence of the problems that can arise when the rationale for
charging is not clear.
In theory, inconsistencies in approaches to cost recovery for groundwater could potentially distort
groundwater trading between regions by altering the relative cost of groundwater use and thus giving
users in some regions a competitive advantage when bidding in the market. While this may be worth
7
Before implementing a scarcity price, the potential for a water market should be thoroughly tested.
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further investigation in specific cases, it does not appear to be a major issue given groundwater
trading in Australia is nearly all internal trade (NWC 2009a).
In general, the case for rebalancing groundwater planning and management charges towards usage
charges to promote groundwater conservation is not compelling.
4.2.3. Transparency and administrative simplicity
Findings
Transparency—There is still considerable room for improvement in terms of making water planning
and management costs and charges (including those for groundwater) more transparent. However,
there has been some progress assisted by reporting obligations under the ACCC water charge
rules and the NWI pricing principles.
Administrative costs of cost recovery—Each state and territory faces different circumstances that
will influence the costs and benefits of adopting a specific approach to cost recovery. Practical
considerations include:
●
the significance of groundwater resources, and related planning and management activities
●
the complexity of differentiating water planning and management costs and charges by source
or region
●
the relative merits of making fundamental changes to the current cost recovery regime versus
making improvements within the existing regime
●
the practicality of incorporating all relevant activities and users (i.e. impactors) in the cost
recovery regime
●
the extent to which the regime can build on existing institutions (e.g. extending the functions of
an existing independent economic regulator) as opposed to creating new institutions
●
the extent to which the cost recovery regime would cover other water planning and
management activities.
Transparency
Recent reports published by the NWC (2009b, 2011) have noted that progress in improving the
transparency of cost recovery for water planning and management has generally been poor. The
ACCC supported this view in 2009 when it observed that no jurisdiction in the MDB, other than New
South Wales, consistently made information publicly available (ACCC 2009).
Since then, some agencies have published information on water planning and management costs
and/or charging polices as part of state-initiated reviews (i.e. Western Australian ERA Inquiry) and
reporting obligations under the ACCC Water Charge Rules for water planning and management
activities (e.g. DSE, Victorian water corporations in the MDB, Australian Capital Territory Government,
and South Australian DfW).
In the case of New South Wales, reporting requirements are becoming increasingly detailed. For
example, IPART has proposed that NOW establish an annual and end-of-determination reporting
framework, which includes reporting revenue collected from water charges, operating expenses
separately identified by activity codes, current year allowed expenditure and actual expenditure, an
explanation of the variation between allowed expenditures and actual expenditures, and reports on
the resources allocated to each activity code (IPART 2011).
Apart from New South Wales, there is still considerable room for improvement in terms of making
water planning and management costs and charges (including those for groundwater) more
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transparent. Although South Australia and Tasmania have developed, or are developing, proposed
cost recovery regimes (drawing on the NWI pricing principles), state governments are yet to endorse
these proposals and/or some key details are not yet public.
Administrative costs
While other states often use New South Wales as a benchmark in terms of transparency and the
detail of cost recovery arrangements (ERA 2011), each state and territory faces different
circumstances that will influence the costs and benefits of adopting a specific approach to cost
recovery. Our review found that a variety of practical issues will influence the approach to
implementing cost recovery for groundwater planning and management in each state, including:

the significance of groundwater resources and related planning and management activities
 groundwater planning and management costs are more significant in states such as Western
Australia and New South Wales, which have large and fully developed groundwater resources
that require management. In contrast, groundwater is a less significant resource in the
Australian Capital Territory.

the complexity of differentiating water planning and management costs and charges by source or
region
 the NWI pricing principles suggest that a broader charge (such as a statewide charge) may
be applied where differentiating water planning and management charges by water source or
region is excessively costly to determine.

the relative merits of making fundamental changes to the cost recovery regime to address existing
deficiencies versus making improvements within the existing regime and avoiding some
implementation costs
 for example, the review of cost recovery arrangements in South Australia noted that although
building on existing charges may not overcome instances where identification of impactors is
sub-optimal, it could be low cost, as it could utilise existing billing and collection arrangements
(Deloitte 2010).

the practicality of incorporating all activities and users in the cost recovery regime
 the Western Australia ERA excluded small, unlicensed garden bore owners in Perth from the
cost recovery regime on the basis it would not be cost-effective at this stage (ERA 2011)
 lack of metering can limit the application of usage charges (e.g. NSW).

establishing legal authority for setting charges
 in the Australian Capital Territory, the validity of the WAC has been subject to legal challenge
(Frontier Economics 2011, p. 35)
 some states have legislation or regulations that exempt stock and domestic use for charges
(e.g. South Australian NRM Act). Hence, extending charges to those users may require
legislative amendments.

the extent to which the regime can build on existing institutions (e.g. extending the functions of an
existing independent economic regulator) as opposed to creating new institutions.

the extent to which the cost recovery regime would cover other water planning and management
activities
 the upfront costs of setting up an independent review process may be largely fixed in nature,
while the benefits could increase if this process applies to other water planning and
management activities (not just those relating to groundwater).
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4.2.4. Equity
Findings
Managing customer impacts—Jurisdictions use a range of approaches to manage customer impacts
through cost recovery design. We find:
●
transparent review processes (including stakeholder consultation) can in themselves manage
customer impacts by establishing clear service standards and reducing the risk of inefficient
investments and gold-plating, which increase costs to society as a whole
●
the case for transitional arrangements (phasing in price increases) will depend on the relative
magnitude of expected customer impacts from price increases and the impact of less costreflective prices on efficiency and other policy objectives (e.g. revenue adequacy)
●
altering the structure of groundwater charges (i.e. the balance of fixed and usage charges) to
give users greater control over their water bills can have disadvantages such as undermining
efficiency, revenue adequacy and transparency
●
consistent with the NWI pricing principles, jurisdictions should aim to reduce or eliminate
subsidies or Community Service Obligations unless they can demonstrate that doing so is not
cost-effective.
Other distributional and equity issues—Concerns about the distributional consequences associated
with cost recovery are inevitable. However, failing to deal with these issues in a transparent manner
will only exacerbate perceptions of inequity. It is therefore important to subject inputs and
assumptions to public scrutiny and consultation.
The recent reviews by IPART and the ERA provide examples of relatively rigorous and transparent
approaches to identifying and assessing equity issues and explaining a recommended response.
Despite the potential benefits of cost recovery for groundwater planning and management activities,
there is often strong resistance to it (for both surface water and groundwater, and for the management
of other resources such as fisheries) because of the potential financial impacts on users and other
distributional and equity issues. This explains why only a few states have put cost recovery in place to
date.
Currently, jurisdictions use a range of approaches to manage customer impacts though cost recovery
design, including:

reviewing costs and charges to ensure they reflect required and efficient service delivery

phasing in new or increased charges gradually over a period of time

altering the structure of charges (i.e. the balance of fixed and variable charges) to give users
greater control over their water bills

exempting certain users from the cost recovery regime or seeking to recover less than the full
user cost of an activity.
Jurisdictions may also use the design of cost recovery arrangements to address concerns about
‘fairness’ or equity.
Review processes
Transparent review processes (including stakeholder consultation) can in themselves manage
customer impacts by establishing clear service standards and reducing the risk of inefficient
investments and gold-plating. For example, IPART (2011) identified that NOW’s proposed metering
program, which had an internal goal of metering 95% of licensed entitlements, would likely result in
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the metering of a large number of unregulated and groundwater users with small entitlements and
have significant costs implications for users. Consequently, IPART urged NOW to undertake costbenefit analysis of its goal to meter 95% of licensed entitlements and to make changes to the design
of its metering program as warranted before the next determination.
Clear and meaningful service standards developed in consultation with stakeholders could also
provide an important input for ensuring customers receive value for money. In Western Australia, for
example, the ERA has given its support to establishing a water industry committee to represent
licence holders and to work with the DoW to develop performance indicators and service standards
for the relevant water resource management activities (ERA 2011).
As noted above, transparent and independent processes for reviewing groundwater planning and
management costs are likely to have significant value, regardless of the approach to funding those
activities (i.e. customers or government).
Phasing in price increases
A common approach when introducing new charges is to phase them in over time to allow customers
to adjust. IPART’s most recent price determination for NOW, for example, included a significant oneoff change for groundwater users in some valleys (IPART 2011). To assist customers with the
transition to the new prices, IPART staged the price increase over the regulatory period and capped
the forecast annual bill increases at 20% per annum. Similarly, the Western Australian ERA (2011)
has suggested that proposed fees and charges for DoW be phased in over a three-year period.
Phasing in prices over time reduces the amount of costs recovered in the intervening period. Hence,
the case for transitional arrangements will depend on the relative magnitude of expected customer
impacts from price increases and the impacts of less cost-reflective prices on efficiency and other
policy objectives (e.g. revenue adequacy).
Altering the structure of charges to give groundwater users greater control
over their water bills
When groundwater charges have a large fixed component (often reflecting the fixed nature of
underlying planning and management costs), groundwater users’ bills remain at a similar level each
year regardless of the level of groundwater use. Some may consider this as unfair or inequitable
during periods of low groundwater use.
There are different views among regulators about whether it is appropriate to alter the structure of
charges to address equity or distributional concerns. For example, one of the reasons IPART (2011)
sought to recover a portion of NOW’s costs through usage charges (rather than entirely through a
fixed charge) was that it would allow entitlement holders to face lower bills during times of lower water
availability or usage. In contrast, the Western Australian ERA (2011) noted that concerns about users’
ability to pay should not influence the design of water resource management and planning charges.
Moving away from cost-reflective pricing, by altering the structure of groundwater charges, can have
disadvantages such as undermining efficient use of government services and revenue adequacy (see
above). It can also undermine transparency to the extent it involves subjective judgments, such as
those about the ability of the different parties to manage the risk of uncertain water availability. Given
these drawbacks, consideration should be given to more targeted measures for achieving any
underlying affordability objectives (e.g. targeted welfare payments based on need).
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Cost recovery exemptions
Governments sometimes exempt certain users from cost recovery despite the fact these users
contribute to the cost of groundwater planning and management activities. 8 For example, NOW has
had a long-standing administrative arrangement where it has not billed water management charges
applicable to unregulated river and groundwater domestic and stock licensees (IPART 2011). In
Victoria, the government will continue to cover the cost of monitoring groundwater on behalf of
domestic and stock users.
Governments may meet the funding shortfall themselves (from consolidated revenue) or require
agencies to increase prices to other users to cross-subsidise these activities. Alternatively, some
activities may go unfunded (thus stretching available agency resources).
In some cases, exemptions from cost recovery may reflect practical constraints (as outlined in Section
4.2.3) and the efficiency benefits from more cost-reflective pricing will not justify the costs. In such
cases, the main focus will be to ensure there are arrangements in place to fund activities and avoid
systematic under-recovery, e.g. Community Service Obligations (CSOs).
In other cases, however, governments may use exemptions from cost recovery to achieve equity or
social objectives at the expense of efficiency and (potentially) revenue adequacy. There is ongoing
debate, for example, whether some exemptions to stock and domestic users fall within this category;
see for example, IPART (2011).
Consistent with the NWI pricing principles, we suggest that jurisdictions should aim to reduce or
eliminate subsidies or CSOs, or demonstrate that doing so is not cost-effective. For example, the
Western Australian ERA examined evidence and stakeholder views prior to recommending to not
extend cost recovery to unlicensed garden bores in Perth at this time.
The NWI pricing principles also require that jurisdictions transparently report shortfalls between the
revenue required to achieve cost recovery from water users and the total costs recovered through
water charges. Currently, it appears only New South Wales has substantially met this requirement for
groundwater.
Perceptions of fairness and equity
In addition to general price impacts on customers, the design of cost recovery arrangements for
groundwater planning and management can have distributional implications across resource users
and other parties. This can in turn give rise to debates about equity and fairness.
A concept underlying many debates about the fairness of cost recovery for groundwater planning and
management is horizontal equity. This concept is about applying similar charges to resources users
with similar characteristics.
Horizontal equity concerns have arisen where governments or regulators have proposed applying
charges to licensed groundwater users but not to unlicensed groundwater users, despite the fact
unlicensed users create similar planning and management costs. For example, the ERA’s proposed
cost recovery regime for the Western Australian DoW includes small rural licence holders but not
owners of unlicensed garden bores in Perth. Similarly, different cost recovery polices apply to
groundwater use under stock and domestic licences issued by NOW and to unlicensed groundwater
use under stock and domestic ‘basic rights’ (IPART 2011).
8
This should not be confused with allocating the cost of certain activities to government based on their public
good characteristics.
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Horizontal equity concerns can also arise where some users receive the benefits of specific planning
and management activities prior to the introduction of cost recovery. At the time cost recovery comes
into effect, for example, some regions may have government-funded resource plans in place while
other regions may be still developing plans. Hence, charging for the development of new resource
plans could create winners and losers; see ERA (2011).
A further issue is whether policies to increase cost recovery are inconsistent with previous
government policies. For example, the uptake of garden bores in some urban areas (e.g. Perth,
Canberra) often reflect previous water management policies aimed at reducing demand on
centralised urban supplies. Hence, customers may see substantial increases in groundwater charges
as unfair.
To some extent, concerns about the distributional consequences of cost recovery are inevitable.
However, failing to deal with these issues in a transparent manner will only exacerbate perceptions of
inequity. It is therefore important to subject inputs and assumptions to public scrutiny and
consultation. The recent review processes of IPART and the ERA provide examples of relatively
rigorous and transparent approaches to identifying and assessing equity issues and explaining
recommended responses.
4.2.5. Consistency with the NWI and NWI pricing principles
Findings
NSW is the only state to have substantively met its NWI obligations relating to recovering the costs of
water planning and management activities (including for groundwater). Some states have made
recent progress in developing new cost recovery policies. However, the critical test will be whether
governments actually implement these policies.
NWI agreed actions
Other than New South Wales, states and territories are yet to fully meet NWI commitments to formally
identify the costs associated with water planning and management activities (including those for
groundwater), develop policies for cost sharing between government and resource users, and link
user charges as closely as possible to cost of activities.
In Victoria, as part of an ESC price review process, water corporations identify and report on the costs
of activities delegated to them by government. They also set groundwater charges aimed at sending
cost-reflective signals to resource users. However, the overall cost of groundwater planning and
management activities in Victoria is difficult to establish, given that DSE’s water planning and
management activities (and required funding needs) fall outside the ESC’s public review processes.
There are no formal policies for sharing the costs of activities between government and resource
users, and the link between the Victorian Environmental Contribution and the cost of groundwater
planning and management is limited. However, through the Sustainable Water Strategies, the
Victorian Government has committed to a future cost-sharing arrangement that is based on a
‘beneficiary pays’ basis, where the environment is included as a beneficiary (DSE 2011b, Section 4).
In the Australian Capital Territory, the government allocates 100% of water planning and
management costs to users. However, the basis for allocating the cost of specific activities to
resource users is not always clear. For example, the Australian Capital Territory Government (2011a)
noted that revenue from the WAC covers, among other things, the cost of water policy and
administration. However, this appears at odds with the NWI and NWI pricing principles requirements
to exclude water policy costs from the user share of costs.
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In the other states and territories, where governments currently fund most groundwater planning and
management activities, there has generally been little published material on the nature and magnitude
of groundwater and planning management costs incurred by government. Where there are user
charges for groundwater planning and management, the link between charges and the cost of specific
activities is often very limited and unclear.
In recent years, several states have sought to better understand water planning and management
costs and clarify cost allocation policies. In particular, Western Australia, South Australia and
Tasmania have all undertaken recent reviews that outline proposed cost allocation policies based on
an impactor-pays approach. Western Australia has also identified and costed specific activities for the
purposes of setting cost recovery charges. However, regulations to give effect to the introduction of
licence administration fees (a precursor to broader cost recovery of water planning and management
charges) were disallowed twice in Parliament, leading to the ERA inquiry (ERA 2011).
The critical test will be whether governments implement proposed cost recovery policies.
NWI pricing principles
The NWI pricing principles provide further guidance on specific aspects of cost recovery for water
planning and management.
A notable feature of the NWI pricing principles is that they are fairly broad and some are qualified by
the phrase ‘where practicable’, which make it difficult to assess the extent of compliance. In general,
however, progress in implementing the NWI pricing principles for recovering the costs of water
planning and management activities has been highly variable across jurisdictions and agencies. We
discuss key differences in cost recovery approaches in Section 3 and Appendix C.
Table 8 recaps these findings and relates them to the NWI pricing principles.
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Table 8: Progress in implementing NWI pricing principles for recovering the costs of water planning
and management activities (groundwater)
NWI pricing principle
Summary
Principle 1: Water planning and management activities
Water planning and management activities include the
activities outlined in the water planning and
management activities framework provided (see
Appendix B).
Several states have either developed or are
developing formal frameworks for allocating
the cost of water planning and management
activities
between
government
and
resources users on a consistent basis (e.g.
NSW, SA, Tasmania). Other than NSW,
however, state governments have not yet
endorsed these polices.
Other jurisdictions do not have formal
frameworks or formulae for allocating cost
between government and resources users
on a consistent basis.
Principle 2: Government activities
Water planning and management charges should
exclude the cost of activities undertaken for
government such as policy development.
Principle 3: Cost-effectiveness test
Having identified water planning and management
costs to be recovered from water users, in whole or in
part, activities should be ‘tested’ for cost-effectiveness
by an independent party and the findings of the costeffectiveness review are to be made public.
Principle 4: Cost allocation
Costs are to be allocated between water users and
governments using an impactor-pays approach.
Principle 5: Differentiation of costs
Water planning and management costs are to be
identified and differentiated by catchment or valley or
region and by water source where practicable. Water
planning and management charges should, in turn,
recover the costs of the activities concerned and be
differentiated by catchment or valley or region and by
water source (e.g. regulated, unregulated or
groundwater sources) where practicable.
Principle 6: Community Service Obligations
Where practicable, jurisdictions should aim to reduce
or eliminate subsidies or Community Service
Obligations. Any shortfall between the revenue
required to achieve cost recovery from water users
and the total costs recovered through water charges,
should be transparently reported.
Most states do not recover the cost of water
policy development from users. A possible
exception is the ACT WAC, which appears to
cover, among other things, ‘water policy and
administration’ costs.
Currently, NOW and the Victorian water
corporations are the only agencies that have
their groundwater planning and management
costs and charges reviewed by an
independent economic regulator on an
ongoing basis. However, the WA ERA has
proposed independent review and reporting
of charges for DoW should the WA
Government implement its proposed cost
recovery regime.
The
extent
to
which
jurisdictions
transparently allocate groundwater planning
and management cost between government
and resource users based on an impactorpays approach varies significantly. For
example, NOW has unique user cost shares
for groundwater activities based on
independent consultant advice, while other
agencies do not have a formal cost-sharing
policy.
Agencies in NSW, Victoria, SA and
Queensland set groundwater charges that
vary by region or source. However, only the
NOW and Victorian water corporations have
explicit processes for linking differences in
regional groundwater charges to regional
differences in costs.
Currently, it appears only NSW (IPART,
NOW) has substantially met this requirement
for groundwater.
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5. Conclusions and future priorities
Cost recovery for groundwater planning and management has been a contentious issue in Australia
for many years. Despite agreeing to put in place pricing and institutional arrangements that promote
efficiency, transparency and funding adequacy, many jurisdictions still fund most groundwater
planning and management activities through consolidated revenues (departmental budgets and
government grants). This is largely due to concerns about the financial impacts on customers and
other distributional effects. No jurisdiction except NSW has met its NWI obligations to publicly report
on the costs of its water planning and management activities (including those for groundwater) and
approach to cost recovery.
In recent years, the drawbacks of current approaches to funding groundwater planning and
management have become increasingly apparent. In several parts of Australia, agencies’ ability to
source adequate funding for groundwater planning and management is coming under pressure from
rising costs, internal budget pressures, and the end of several important Commonwealth funding
programs (which have helped address funding gaps but only provide a short-term solution).
Current funding models are unlikely to be sustainable in the longer term and do not provide the most
effective approach to facilitating revenue adequacy, certainty and stability.
Communicating the need for better funding arrangements for groundwater
planning and management
Transparency is a necessary first step to address emerging funding challenges in groundwater
planning and management. Governments and agencies need to disclose the current level of
groundwater planning and management expenditure, and how this differs from the level of
expenditure that is needed for efficient delivery of required services. They must then communicate
this information and supporting evidence to resource users and the public. Unless there is broad
agreement among governments, agencies and resource users that there is a funding problem that
needs to be fixed, there is little prospect of change.
Currently, little public information exists to inform funding decisions or public debate. This may lead to
an inability to identify emerging funding shortfalls, thereby compromising service standards and the
integrity of groundwater resources.
An open examination of the adequacy of current funding arrangements for groundwater planning and
management (including current cost recovery from users) will have benefits regardless of how
governments choose to fund any shortfalls. In particular, it will help to:

identify emerging risks to the quality of services and the integrity of resources due to underfunding
in specific areas

identify the magnitude of required expenditures and how this affects different parties under
current funding arrangements. If a government elects to bear most groundwater planning and
management costs, for example, it will need to know the implications for their budgets so it can
make the necessary provisions in advance. If it is likely that public funding for groundwater
planning and management will be constrained in the near term, resource users should know how
this may affect service levels and be presented with alternative options.
While this information might not change governments’ views about the appropriate mix of public and
private funding for groundwater planning and management, it at least it ensures they can make wellinformed funding decisions.
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Mechanisms to help improve transparency of funding needs
Cost recovery design is not simply about designing user charges; it also relates to broader
accountability mechanisms to ensure agencies have adequate funding to undertake required
groundwater planning and management activities, and undertake those activities in an efficient
manner.
Simply improving the quality of public information on groundwater planning and management costs
and funding arrangements is a worthwhile first step, as it will contribute to better-informed funding
decisions. It would make government and user funding obligations more transparent. However, it may
provide relatively limited incentives for efficient service delivery and charges.
A further step would be to introduce independent and public monitoring/review of groundwater
planning and management costs and charges (drawing on stakeholder input), but with government
retaining control of price setting. An added benefit of this approach is that it would provide a greater
assurance to the public and groundwater users that expenditures and charges are appropriate and
efficient.
An even stronger type of institutional reform would be to give an independent review body the
authority to estimate a revenue requirement to undertake required and efficient groundwater planning
and management activities, and then set or oversee charges to recover the user share of costs (e.g.
NOW, Victorian water corporations). The added benefit of this approach is that is can avoid the
inherent conflicts that can arise where governments have responsibility for setting charges (to ensure
revenue adequacy and efficiency), on the one hand, and addressing social or other policy objectives
on the other. It can also create stronger incentives for efficient service delivery and investments. For
example, the potential for regulators to omit inefficient capital expenditure from an agency’s regulated
asset base creates a financial incentive to ensure investments are prudent and deliver clear benefits
to users.
Accountability mechanisms can have a major influence on the overall performance of cost recovery
arrangements. For example, our assessment found that groundwater charges imposed by agencies
subject to independent economic regulation performed well across a range of criteria, such as
revenue adequacy, efficiency, transparency and equity.
In practice, the benefits of increased accountability need to be weighed against the costs imposed on
agencies and government, such as the cost of setting up a new review process. The appropriate
institutional model in each jurisdiction will depend on contextual factors such as the significance of
groundwater planning and management costs, and whether it is possible to extend the functions of an
existing review body rather than create a new one. The case for introducing stronger accountability
mechanisms for groundwater planning and management will also depend on whether they will also
apply to agencies’ other water planning and management activities. For example, the upfront costs of
setting up an independent review process may be largely fixed in nature while the benefits could
increase if this process applies to other water planning and management activities (not just those
relating to groundwater).
Setting groundwater charges
In general, the approaches to setting groundwater charging that perform best are those that reflect the
underlying cost structures of groundwater planning and management services. This promotes both
efficient use of government resources and revenue adequacy for agencies. A greater reliance on fixed
charges rather than usage charges appears to be consistent with the largely fixed nature of many
groundwater planning and management activities. Similarly, the use of a building block approach to
price setting creates a strong link between agencies’ costs and funding needs, and allows agencies to
fully recover their efficient costs.
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In contrast, charging structures that seek to incorporate objectives such as groundwater conservation
(e.g. increasing usage charges to reflect scarcity) or affordability (e.g. charging less than the full costs
attributable to users) can compromise efficiency, revenue adequacy and transparency. While they
have some benefits, general state levies (e.g. the Victorian Environmental Contribution) provide
limited revenue certainty for specific groundwater planning and management activities because
agencies must bid for funding (despite the fact that the funding may be for core services such as
maintaining state monitoring bores).
There will inevitably be practical considerations that will affect the approach to setting groundwater
charges in each jurisdiction (e.g. coverage, differentiation of prices by region, charging structures).
These include the ability to attribute costs through reliable data and the significance and nature of
current and future planning and management costs. Further, there will be implementation and
transitional issues that may require short-term trade-offs between efficiency and customer impacts
(e.g. phasing in prices). As noted above, effective review processes can help deal with these issues
by transparently examining the merits of different charging options against regulatory principles (e.g.
efficiency, revenue adequacy, equity) and drawing on public input.
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Appendix A: NWI pricing principles—
recovering the costs of water planning and
management activities
Principle 1: Water planning and management activities
Water planning and management activities include the activities outlined in the water planning and
management activities framework provided (below).
Principle 2: Government activities
Water planning and management charges levied on to water users should exclude the cost of
activities undertaken for government such as policy development and Ministerial or Parliamentary
services—Paragraph 67(ii)(a) of the NWI refers. These activities are marked with an asterisk in the
activities framework provided in Appendix B, and the associated activity costs should be allocated
entirely to governments.
Notes:
I.
Policy development includes the development and/or refinement of overarching policy
frameworks designed to plan for, and manage, water resources. Policy development will
typically be characterised by the development of comprehensive strategies that articulate the
long-term policy objectives for sustainable water management, and the overarching policy
and institutional framework for achieving these objectives. This includes overarching
legislation—e.g. Water Act 2000 (Qld), Water Management Act 2000 (NSW), Natural
Resources Management Act 2004 (South Australia)—or overarching policy frameworks—e.g.
the Department of Water Strategic Plan (WA), Securing Our Future Together—White Paper
(Victoria) and the State Water Management Outcomes Plan (NSW). Developing and refining
statutory, catchment/valley/regional-level water plans or other secondary/subordinate
legislation that operationalises water planning and management activities does not constitute
policy development or a Ministerial or Parliamentary service, so the associated activity costs
should not be exempt from cost recovery.
II.
Ministerial or parliamentary services include reporting to parliament, advising parliament on
issues where the agency has expertise, answering parliamentary questions, briefing Ministers
and responding to Ministerial correspondence.
Principle 3: Cost-effectiveness test
Having identified water planning and management costs to be recovered from water users, in whole
or in part, activities should be ‘tested’ for cost-effectiveness by an independent party and the findings
of the cost-effectiveness review should be made public.
Principle 4: Cost allocation
Costs are to be allocated between water users and governments using an impactor-pays approach.
Notes:
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I.
An impactor is any individual, group of individuals or organisation whose activities generate
costs, or a justifiable need to incur costs. The impactor-pays approach seeks to allocate costs
to different individuals, groups of individuals or organisations in proportion to the contribution
that each individual, group of individuals or organisation makes to creating the costs, or the
need for the costs to be incurred.
Principle 5: Differentiation of costs
Water planning and management costs are to be identified and differentiated by catchment or valley
or region and by water source where practicable. Water planning and management charges should, in
turn, recover the costs of the activities concerned and be differentiated by catchment or valley or
region and by water source (e.g. regulated, unregulated or groundwater sources) where practicable.
Notes:
I.
It would not be considered practicable to differentiate water planning and management
charges by catchment or valley or region where a jurisdiction can demonstrate that water
planning and management costs do not vary significantly across catchments or valleys or
regions or by water source, or it is excessively costly to determine costs at these levels.
Where this is currently the case, a broader charge (such as a statewide charge) may be
applied.
Principle 6: Community Service Obligations
Where practical, jurisdictions should aim to reduce or eliminate subsidies or CSOs. Any shortfall
between the revenue required to achieve cost recovery from water users and the total costs
recovered through water charges should be transparently reported.
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Appendix B: Framework for classifying
water planning and management activities
This Appendix (from the NWI pricing principles—COAG 2010) outlines a framework that classifies
water planning and management activities. The costs of some of these activities will be allocated
entirely to governments (e.g. water reform, strategy and policy). An asterisk (*) denotes the activities
where this is the case.
There will be capital and corporate services costs associated with each of the activities listed in the
framework.
Capital costs can include the provision of infrastructure (e.g. physical works such as streamflow
gauging stations, monitoring bores and control weirs) and systems (e.g. water registers and water
accounting systems).
Corporate services also include the delivery of corporate services (e.g. legal, information technology,
communications, human resources, financial management, records management) and corporate
planning functions (business and strategic planning, and reviewing performance against these plans).
A. Water reform, strategy and policy (*)
1. Development of intergovernmental agreements
a) e.g. the National Water Initiative, Murray–Darling Basin Agreement, Lake Eyre Basin
Intergovernmental Agreement, etc.
2. Development of broad strategies for managing water
a) e.g. Department of Water Strategic Plan (Western Australia), Securing Our Future Together—
White Paper (Victoria), State Water Management Outcomes Plan (NSW).
3. Development and/or refinement of overarching statutory instruments
a) e.g. Water Management Act 2000 (NSW), Water Act 2000 (Qld).
Overarching legislation does not include statutory-based, catchment/valley/regional-level water plans
or other secondary/subordinate legislation that operationalises water planning and management.
B. Water planning
1. Water resource planning
a) Development of water resource plans:
i)
Cross-border water plans—sharing and management (including allocation) of water
resources in cross-border areas
ii)
Regional water plans—sharing and management of water resources between catchments
where interconnectivity occurs (either naturally, or as a result of infrastructure, i.e. a
pipeline)
iii) Catchment-scale water plans—allocation and sustainable management of water
resources (strategic and operational), including planning for current and future water use,
and environmental flow arrangements
iv) Localised water plans—plans developed to address specific water resource problems
(quantity or quality) at a local level
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v) Other water plans—plans developed at a local or catchment level to address other water
management issues, such as water or floodplain harvesting or drainage issues.
b) Operationalisation and implementation of plans:
i)
development of rules for water sharing (including environmental shares)
ii)
determining water availability and distribution (e.g. announced/seasonal allocations)
iii) establishing system operating rules, monitoring and reporting requirements, etc.
iv) storage and delivery of water to achieve environmental outcomes.
c) Monitoring and evaluation of planning outcomes and progress against targets (including
compliance)
d) Review of water resource plans/development of new plans.
2. Environmental and ecosystem management planning
a) Development of environmental management plans where related to water resources
(e.g. salinity, blue-green algae, riverine management)
b) Development of plans to manage water-dependent ecosystems (e.g. riverine zones,
estuaries, wetlands).
C. Water management
1. Measures to improve water use
a) Water use efficiency programs (irrigation, commercial, urban)
b) Development of property-level water management plans
c) Great Artesian Basin Sustainability Initiative
d) Floodplain management.
2. Construction of works (not significant water supply infrastructure)
a) Construction of weirs, replacement of bores, etc. to achieve water management outcomes.
3. Environmental works
a) Works to reduce or remediate environmental impacts arising from water use.
D. Water monitoring and evaluation
1. Monitoring and evaluation of water resources
a) Water resource monitoring:
i)
Streamflow gauging
ii)
Groundwater bore monitoring (pressure and levels)
iii) Water quality monitoring (surface water and groundwater resources).
b) Water use monitoring:
i)
Collection of water use information (metering, surveys).
c) Water resource assessment:
i)
Hydrological and hydraulic assessment
ii)
Water quality assessment (e.g. turbidity, nutrient monitoring, salinity, algal blooms)
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iii) Surface water – groundwater interconnectivity
iv) Effects of land use change, land clearing, climate change, etc.
2. Monitoring and evaluation of water-dependent ecosystems
a) Monitoring and evaluation of riverine health (flow and non-flow elements), wetland health,
estuary health.
E. Information management and reporting
1. Water resource accounting
a) Development of frameworks and systems
b) Data collection and processing.
2. Publication of water resource information
a) Water-use statistics, water-trading statistics, resource condition and assessment reporting,
etc.
F. Water administration and regulation
1. Administration of entitlements and permits
a) Granting of water allocations, entitlements and permits to users (including bulk water
entitlements)
b) Processing of applications and transactions
c) Management of bulk water entitlements
d) Ensuring compliance with licence and other conditions
e) Regulation of water-related works or developments (e.g. dams, bores, pumping equipment)
f)
Benchmarking costs and standards of water planning and management activities (where
applicable).
2. Development of entitlement frameworks
a) Overland flow, interception, non-use ‘entitlements’.
3. Administration of water-trading arrangements
a) Development and regulation of trading frameworks
b) Facilitation and administration of water trading.
4. Business administration
a) Pricing review and implementation
b) Financial management and reporting (e.g. costing, revenue monitoring)
c) Billing and debt management.
5. Administration of water-metering arrangements
a) Development of metering requirements and standards
b) Implementation of metering requirements
c) Ongoing management of metering activities.
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G. Water industry regulation
1. Oversight of water businesses
a) Review of water business operations to ensure compliance with statutory requirements.
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Appendix C: Current cost recovery
arrangements for groundwater
Table 9: Cost recovery for groundwater planning and management—Australian Capital Territory
Issue
Responsibility for,
and estimated cost
of, groundwater
planning and
management
activities
Notes
The Environment and Sustainable Development Directorate (ESDD), which absorbed the
former Department of the Environment, Climate Change, Energy and Water (DECCEW), is
the main agency responsible for surface water and groundwater planning and management
in the ACT. Its functions include resource planning and policy development.
The ACT Environment Protection Authority (EPA) (which is a statutory position occupied by a
public servant and supported by ESDD staff) administers licences to take water, bore works
licences and waterway works licences.
NWC (2012) estimates the ACT Government incurs approximately $393 397 per year in
direct groundwater planning and management costs, with an additional $49 554 in overheads
(based on 2010–11). These costs exclude policy development. The assumptions
underpinning this estimate are presented in NWC (2012).
Current sources of
funding
The ACT predominantly funds its water planning and management activities though a Water
Abstraction Charge (WAC) levied on surface water and groundwater licence holders under
the Water Resources Act 2007.
In 2011, DECCEW received $18.6 million from the WAC and $0.7m from EPA administrative
fees. Annual revenue from groundwater charges was approximately $145 000, around 75%
of which came from the WAC. The ACT occasionally receives external funding to undertake
groundwater-related projects. For example, the ACT aquifer storage and recovery feasibility
study under the National Groundwater Action Plan (GAP) provided $410 000 from August
2009 to December 2011.
Approach to cost
allocation
The ACT attributes all water planning and management costs incurred by the ACT
Government to water users. However, it does not use a formal cost allocation framework
such as that outlined in the NWI pricing principles.
Cost recovery
mechanisms
The WAC is a volumetric charge, which designed to reflect:

water supply costs: government expenditure on activities such as catchment
management, environment protection, and water policy and administration

scarcity: the value associated with the consumptive use of water in the Territory
preventing its alternative use for other economically valuable purposes

environmental impacts: costs relating to environmental flow, including the effect of storing
water in dams on downstream flows.
The WAC is differentiated according to licences held for the urban supply network and other
licences. All groundwater licences fall under the latter category and attract a lower charge
(i.e. $0.25/kL of water taken rather than $0.51/kL).
Other fees and charges that apply under the Water Resources Act 2007 (NSW) include
application fees (e.g. Bore Work Licences) and licence administration fees. These fees offset
the cost incurred by ESDD in administering the entitlement and licensing system.
The Minister for the Environment and Sustainable Development sets fees and charges for
water planning and management activities based on advice from the ESDD.
Review
mechanisms
Proposed ESDD expenditure on water planning and management activities is subject to
normal budgetary processes, involving scrutiny of the proposed expenditure and approval by
Cabinet, but is not subject to any external review or consultation.
The Independent Competition and Regulatory Commission (ICRC) undertook a review of the
WAC in 2003 but this largely focussed on its application to surface water rather than
groundwater. Since November 2007, the validity of the WAC has been litigated before the
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Issue
Notes
Federal Court.
Administrative fees are not subject to any external review or consultation.
Sources: NWC (2007, 2011), ACCC (2009), DECCEW (2010), ACT Government (2011a, 2011b), ACT
Government (pers. comm.).
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Table 10: Cost recovery for groundwater planning and management—New South Wales
Issue
Notes
Responsibility
for, and
estimated
cost of,
groundwater
planning and
management
activities
The NSW Office of Water (NOW) is responsible for the strategic management of the state’s freshwater
resources. Its activities include:

monitoring the quantity and quality of the state’s water resources and sharing this information

collecting data to gain a better understanding of the levels of extractions as well as the potential
implications of this extraction for river and groundwater systems

developing models to assess water-sharing arrangements

developing and implementing policies to manage the resource

developing and implementing plans to allocate water among users and the environment, and to
remediate problems such as salinity, acidification and blue-green algae

monitoring the effectiveness of, and compliance against, the plans.
NWC (2012) estimates that NOW incurred approximately $14 336 000 in 2010–11. Refer to this report
for the assumptions underpinning this estimate.
Current
sources of
funding
NOW receives revenue from regulated water charges set by the Independent Pricing and Regulatory
Tribunal (IPART). IPART forecasts that regulated groundwater charges will fund 87% of NOW’s efficient
groundwater planning and management costs, attributed to groundwater users, by 2013.
The NSW Government (Treasury) is responsible for funding the government’s share of NOW’s efficient
groundwater planning and management costs and any shortfall between the notional user share of costs
and revenue from user charges. In the event NOW over-recovers significant levels of revenue (due to
higher than forecast water usage), the excess revenue is given to Treasury.
In addition to revenue from user charges, NOW receives funding from external grants. For example:
Approach to
cost allocation

NOW has received Commonwealth and state funding to install telemetered water level data loggers
at 206 groundwater sites across NSW in water sharing plan areas and establish an internet interface
for NSW groundwater monitoring bore data. The Commission contributed $300 000 in 2008–09 and
$372,000 in 2009–10, and the NSW Government contributed $710 000.

NOW has received Commonwealth funding to extend bore monitoring across the NSW Great
Artesian Basin (GAB). It received $463 700 in 2009–10 and $519 860 in 2010–11.

NOW received $2.9 million in 2007–08, $1.8 million in 2008–09 and $3.6 million in 2009–10 in
capital funding from the BoM for replacing data loggers, obsolete gauging and stations structures,
improving water datasets and accessing groundwater data, replacing water quality sensors, and
improving databases and transferring the information to the BoM.

Under rural water use and infrastructure funding, the Commonwealth has allocated, in principle, up
to $131 million for the installation and upgrading of metering for groundwater and unregulated rivers.
The project, managed by NOW, will install or upgrade about 9,000 meters.
IPART has adopted a 'building-block' approach in allocating costs and setting the NOW’s charges. The
steps involved in this process include:
1.
Setting efficient operating and capital costs for NOW’s service delivery (including for groundwater).
2.
Determining the share of these costs that should be paid by water users, applying the impactor-pays
approach to each water management activity concerned. Unique cost shares are applied to the
costs of each activity to derive costs attributable to the government and the user. For example, the
user shares of groundwater quantity and quality monitoring, asset management, and asset renewal
costs are all 100%.
3.
Allocating costs attributed to users to each valley and water source—regulated rivers, unregulated
rivers and groundwater—using unique cost drivers developed by the NOW.
4.
Setting the two-part tariff and the split between fixed (access) and usage charges, based on NOW
recovering 30% of expected revenue from usage charges and 70% from fixed charges.
5.
Determining forecasts for entitlement and usage volumes, and setting access and usage charges
based on these volumes in conjunction with the costs attributed to users.
6.
Establishing the efficient, incremental cost of specific activities such as meter services and licensing
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Issue
Notes
transactions, and setting separate charges for these activities on a statewide basis.
Cost recovery
mechanisms
7.
Assessing impacts of the charges on users, and making relevant adjustments.
8.
Establishing an ongoing reporting framework for the NOW.
NOW’s groundwater charges apply as follows:

for licence holders with a meter—an access charge based on entitlement in megalitres (ML) plus a
usage charge based on usage for the year

for licence holders without a meter—an access charge based on entitlement in ML only

for supplementary licence holders with a meter—an access charge based on allocated share of
water under the available water determination plus a usage charge based on usage for the year

for supplementary licence holders without a meter—an access charge based on allocated share of
water under the available water determination only.
A minimum annual charge applies per licence holder.
NOW also charges fees to cover the assessment and processing costs of applications for access
licences, water supply works approvals, water use approvals, controlled activity approvals and water
dealings lodged under the Water Management Act 2000 (NSW). These apply on a statewide basis
because the cost of processing transactions is the same across all valleys.
Metering charges recover the cost of reading and servicing meters for water extraction by licence holders
and also apply on a statewide basis.
Review
mechanisms
IPART sets the maximum prices that can be levied by NOW, on behalf of the Water Administration
Ministerial Corporation, on bulk water users for its water planning and management (WPM) services and
for administering WPM transactions, such as issuing water licences and approvals, and water trading.
IPART’s price determination for NOW includes public reporting and independent review of operating and
capital expenditures.
Sources: NOW (2010, 2011a), IPART (2011).
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Table 11: Cost recovery for groundwater planning and management—Northern Territory
Issue
Notes
Responsibility
for, and
estimated
cost of,
groundwater
planning and
management
activities
The Department of Natural Resources, Environment, The Arts and Sport (NRETAS) is the main agency
responsible for groundwater planning and management in the Northern Territory. The Water Resources
Branch of NRETAS is responsible for the development of Water Allocation Plans across the Northern
Territory and ensuring that licensing, regulation and compliance are undertaken in a thorough and
transparent manner.
Current
sources of
funding
In 2010, NRETAS funded approximately 50% (or $0.54 million) of its groundwater planning and
management activities through its internal budget, with the rest coming from external government
funding.
NWC (2012) estimates the NRETAS incurred approximately $4 788 000 in groundwater planning and
management costs. Refer to this report for the assumptions underpinning this estimate.
Examples of external government funding include the following:

assessment of major spring systems in the Oolloo, Dolostone and Daly River regions, which
included research to fill key knowledge gaps concerning the water balance components of the
system. The Commonwealth provided $1.12 million plus GST from April 2009 to December 2011
from the Groundwater Action Plan fund

the Northern Territory groundwater stocktake to update and improve current data and groundwater
resource understanding in the Northern Territory. The Commonwealth provided $825 000 plus GST
from April 2009 to December 2011 from the Groundwater Action Plan fund

BoM has funded various projects under the Modernisation and Extension of Hydrologic Monitoring
Systems Program. For example, BoM provided $792 700 in 2010 for activities including installation
of continuous logging systems for Northern Territory Groundwater monitoring bores

the Raising National Water Standards strategic assessment and management of priority/stressed
groundwater catchments. This project included helping to develop water allocation plans for the
aquifer providing spring inflow into the Roper River in the Mataranka area and the NT portion of the
GAB. It also aided in the development of a water resources management strategy for the Berry
Springs Dolomite aquifer. A water planner was appointed to manage these projects. The project
involved matching Commonwealth/jurisdiction funding.
NRETAS notes that some external funding contributes directly to NRETAS’s water planning and
management functions (e.g. co-funding water planning activities), while other funding relates to activities
that contribute to broader national priorities (e.g. information collection) and/or provide information inputs
to inform NRETAS activities.
Approach to
cost allocation
The NT Government has previously noted that it allocates 80% of planning and management costs to the
Government on the basis that at least 80% of surface water and groundwater is reserved for nonconsumptive cultural and environmental uses. The NT Government has not sought to recover the
remaining 20% of costs from water users.
Cost recovery
mechanisms
NRETAS’ administrative fees are generally small and limited in coverage. For example, NRETAS
charges users for the cost of advertising an application to grant or renew a licence to take or use
groundwater, but it does not charge for the cost of processing the application itself.
Review
mechanisms
There is no formal review process for water planning and management costs and fees. NT Treasury
determines required funding for NRETAS through internal budget processes.
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Table 12: Cost recovery for groundwater planning and management—Queensland
Issue
Notes
Responsibility
for, and
estimated
cost of,
groundwater
planning and
management
activities
The Department of Natural Resources and Mines (DNRM) is the main agency responsible for
groundwater planning and management in Queensland. Its activities include water planning, water
management, information management and reporting, water monitoring and evaluation, water
administration, and regulation.
Current
sources of
funding
Most of DNRM’s groundwater planning and management activities are funded from consolidated
revenue. However, DNRM (and its predecessor the Department of Natural Resources and Water) have
received Commonwealth and state grants for specific groundwater projects, including:
NWC (2012) estimates DNRM incurs approximately $40.542 million per year in groundwater planning
and management costs. Refer to this report for the assumptions underpinning this estimate.

the Water Smart Australia Bundaberg groundwater rescue feasibility study and preliminary design.
The Australian Government provided $227 000 from the Water Smart Australia program and the
Queensland Government provided $227 000

the Raising National Water Standards strategic assessment and management of priority/stressed
groundwater catchments (Queensland). The project involves assisting in the identification of source
aquifers to significant springs that are dependent on groundwater from the GAB and carry out a
groundwater resource assessment of aquifer systems in the Eastern Darling Downs. The project
involves matching Commonwealth/jurisdiction funding.
Water charges recover a small proportion of the total water planning and management costs incurred by
DNRM (e.g. less than 5%). Specific information on the cost of groundwater planning and management
activities and revenue from groundwater charges is not available.
Approach to
cost allocation
The Queensland Government developed a cost allocation policy for water planning and management
activities to underpin the introduction of new charges in 2006. However, these measures were
suspended indefinitely in the same year. Under the (currently suspended) new water charges policy,
costs are attributed between the Queensland Government (on behalf of the public) and private water
users on an impactor-pays basis. Independent consultants were used to apportion these costs on an
activity basis.
Cost recovery
mechanisms
Queensland’s Water Regulation 2002 provides for a range of fees, charges and royalties for
management of the state’s water and related resources. DNRM notes that revenue from charges goes
towards ‘meeting the cost of ensuring that water planning, allocation and management activities are
effective in securing sustainable water allocations and environmental flows’. However, the ACCC has
noted that these charges relate to water planning and management costs generally, and are not specific
to any type of activity.
DNRM determines and administers water licence fees, water harvesting and groundwater charges, and
meter service charges.
Water licence fees
Water licence holders pay an annual fee of $64.55 unless they have a water licence to:

take only supplemented water

take water for stock or domestic purposes (except underground water for stock and domestic
purposes from the GAB).
This fee is no longer paid once a water licence is converted to a water allocation.
Harvesting and groundwater charges
Holders of unsupplemented water entitlements in declared groundwater management areas pay
groundwater charges. Charging arrangements are determined separately for each area, but entitlement
holders generally pay either:

a Part A charge (applied to the entitlement volume) and a Part B charge (applied to water taken) or

an annual charge per meter.
Charges that apply in water management areas can be found in Schedule 14 to the Water Regulation
2002. Examples of Schedule 14 fees includes the following groundwater charges:
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Issue
Notes

Border Rivers groundwater management area (Minimum charge—$121.60, Part A—$1.32, Part B—
$0.88)

Coastal Burnett groundwater management area (Kolan–Burnett) (Minimum charge—$122.90, Part
A—$3.50, Part B—$1.17).

Callide Valley groundwater management area (Minimum charge—$121.60, for taking groundwater—
$1.47 for each ML of announced entitlement).
Meter service charges for groundwater
Declared metered entitlement holders managed by the DNRM pay meter-service charges. They pay
these charges annually and in advance based on:

meter-use charges being no more than the cost to the department for the initial site assessment,
purchase and installation costs, and borrowing costs of the meter

meter-operating charges being no more than the cost to the department of reading and maintaining
the meter.
Each water user pays different charges based on the cost of the purchase, installation, reading and
maintenance of each meter.
There are currently 31 declared metering areas listed in Schedule 15A to the Water Regulation 2002.
These include groundwater sources such as the Bowen groundwater management area and the Central
Condamine Alluvium groundwater management area.
DNRM also has a range of administrative fees for applications. For example, Schedule 16(41) fees
include applications to renew water bore drillers’ licences (i.e. $445.30).
Review
mechanisms
Between 2003 and 2005, the Queensland Government undertook a review of water planning and
management charges, and developed a policy to increase the level of cost recovery. As a result of the
review, in August 2005 the Queensland Government announced new water charges, but these measures
were suspended indefinitely in 2006.
The costs of water planning and management activities are subject to normal budgetary processes,
involving scrutiny of the proposed expenditure by the Government, but are not subject to any external
review or consultation.
Sources: NWC (2007), ACCC (2009), DERM (2011a).
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Table 13: Cost recovery for groundwater planning and management—South Australia
Issue
Responsibility
for, and
estimated
cost of,
groundwater
planning and
management
activities
Notes
The Department for Water (DfW) and natural resource management (NRM) boards are the main
agencies responsible groundwater planning and management activities in South Australia.
DfW’s activities include:

providing policy advice and Ministerial services

water management

water monitoring and evaluation

information management and reporting

issuing water licences and undertaking the related assessment and compliance activities.
NRM boards activities generally include:

developing water plans

projects to mitigate the negative environmental effects of water extraction

education programs to improve water use by landholders

water health and use reporting.
NRM boards with responsibilities relating to groundwater include:

South East (e.g. Tatiara, Lower Limestone Coast, Padthaway and Tintinara–Coonalpyn PWAs)

South Australian Murray–Darling Basin (e.g. Angas Bremer and Mallee PWAs)

Adelaide and Mount Lofty Ranges (e.g. Barossa PWRA and McLaren Vale PWA)

Eyre Peninsula (e.g. Musgrave and Southern Basins PWAa)

South Australian Arid Lands (e.g. Far North PWA).
NWC (2012) estimates that DfW incurs approximately $13.243 million per year in groundwater planning
and management costs. Cost data for NRM boards were not available. Refer to this report for the
assumptions underpinning this estimate.
Current
sources of
funding
Department for Water
The DfW receives most of its funding for groundwater planning and management from state government
appropriations.
Recent Commonwealth and state grants related to groundwater include:

Water Smart Australia funds for ‘Groundwater management: integrated water resource management
in the South East of South Australia’. This project provided $12.63 million in funding for activities that
help to achieve sustainable management of water resources across the South East region of South
Australia. The Commonwealth Government provided $6.25 million in funding and the South
Australian Government $6.38 million in funding (no date available).

Raising National Water Standards funds for the ‘Allocating water and maintaining springs in the
GAB—SA and NT’ project to improve the understanding of complex surface water and groundwater
interactions and mound spring characteristics in the GAB in South Australia and the Northern
Territory. The project is providing $14.609 million, with funding from the Australian Government
Water Fund ($7.467 million), the South Australian Government ($4.076 million) and Flinders
University, Adelaide University, the University of Bern (Switzerland), and CSIRO Land and Water
(December 2007–March 2012)

Funding under the BoM Modernisation and Extension of Hydrologic Monitoring Systems Program,
including $220 000 for migration of groundwater data to the National Groundwater Information
System (NGIS).
DfW’s total revenue from user charges is small and comes from administrative fees.
NRM board activities
NRM boards receive funding from revenue generated by NRM levies (established under the Natural
NATIONAL WATER COMMISSION — WATERLINES
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Issue
Notes
Resources Management Act 2004) and other external funding sources, such as Commonwealth grants
and the SA Natural Resources Management Fund.
NRM levies include regional NRM levies, which councils collect from ratepayers, and NRM water levies,
which DfW collects from water licence holders in prescribed water source areas (see below). Revenues
from NRM levies are typically earmarked for resource management activities in the same NRM region
they were collected.
The importance of user charges (i.e. NRM levies) and other funding sources varies by NRM region. In
2009–10, for example, South East NRM Board received $2.95 million out of $9.4 million in income from
NRM levies (i.e. $1.65 million from the water levy and $1.3 million from the regional levy). In contrast,
NRM levies in the Arid Lands region provided $112 600 (i.e. $97 000 from the water levy and $15 600
from the regional levy) out of $10.5 million in income.
It is often difficult to separately identify revenue from water levies in PWAs (i.e. groundwater resources)
from other water levy revenue collected in the same NRM region. In total, NRM water levies in South
Australia raised $6.757 million in 2009–10. At least 50% of this revenue is likely to have come from
charges to surface water users. For example, the SA MDB water levy raised $3.7 million in 2009–10.
Over 90% of revenue from the water levies in the SA MDB typically comes from River Murray access
entitlement holders (i.e. surface water entitlement holders).
Approach to
cost allocation
The majority of water planning and management costs incurred by the DfW (including for groundwater) is
notionally attributed to government and not passed on to users.
Although NRM boards recover some planning and management costs through regional NRM levies and
NRM water levies, the NWC has previously noted that the attribution of costs between government and
users is unclear.
A report prepared for DfW in 2010 developed a new cost recovery framework for water planning and
management activities in South Australia (including a cost allocation policy). The proposed cost
allocation policy categorises impactors according to water extractors, non-extractors and government.
For each sub-category of planning and management activity defined under the NWI pricing principles, it
then identifies specific cost shares attributable to each party applying the following general principles:

activities clearly driven by water use were allocated to water extractors

activities considered to have a region-specific, public good aspect were allocated to non-extractors.
Indicative cost allocations include the following:

Water reform, strategy and policy (100% government)

Water planning—water resource planning (75% resource extractors, 25% non-extractors)

Water administration and regulation—administration of entitlements and permit (100% resource
extractors).
The proposed cost shares do not distinguish between surface water and groundwater activities.
However, the report highlights differentiation by region or water source as a potential means for
allocating costs at a more granular level.
Cost recovery
mechanisms
The two main types of water planning and management charges that apply directly to groundwater users
in South Australia are NRM water levies and water licence application and administration fees.
NRM water levies
NRM water levies are payable by persons who are holders of a water licence, holders of imported water
permits or are authorised to take water under s. 128 of the NRM Act. Water allocated for stock and
domestic purposes is exempt from these levies.
DfW collects water levies on behalf of NRM boards to recover a proportion of NRM boards’ operational
costs. NRM boards propose the level and structure of the NRM levy in accordance with conditions in the
NRM Act. The NRM Act provides a number of options for setting water levies, but NRM boards typically
use the volume of water allocated to a licence (entitlement) as the charging base.
The revenue collected from NRM water levies varies across regions. Estimated revenue collected from
water levies in 2011–12 (in regions with PWAs) include the following:

$2.2 million in the South East region (which incorporates the Lower Limestone Coast, Padthaway,
Tintinara–Coonalpyn and Tatiara PWAs)

$6.4 million in the SA MDB region (of which $32 960 is to come from the Angas Bremer PWA)
NATIONAL WATER COMMISSION — WATERLINES
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Issue
Notes

$414 000 in the South Australian Arid Lands region (which includes the Far North PWA). a
Water licence, permit and approval fees
The DfW and NRM boards also apply water licence, permit and approval fees subject to the
requirements of the NRM Act 2004 and the Variation of Natural Resources Management (General)
Regulations 2005. The recent review of cost recovery arrangements found it is likely that many of these
fees cover only the administrative costs of processing the application or request.
Review
mechanisms
In May 2010, the SA Government announced that the DfW was undertaking a project to identify the costs
of providing water planning and management in South Australia, introduce a water planning and
management cost-recovery framework, and set charges in accordance with the framework from 2011–
12. Since then, DfW has engaged a consultant to review current cost recovery arrangements for water
planning and management in South Australia (Deloitte 2010).
The ACCC has noted there does not appear to be any independent review of water planning and
management charges in South Australia, as levies and charges can only be subject to procedural, not
substantive, review by the Essential Services Commission of South Australia (ESCOSA).
NRM water levies are subject to some public scrutiny through the process for developing NRM plans,
which involves community consultation.
a Revenue
by PWA not available.
Sources: ACCC (2009), NWC (2009b), Deloitte (2010), SA Arid Lands NRM Board (2010), SE NRM Board (2010b), South
Australian Government (2010), SA MDB Board (2011).
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Table 14: Cost recovery for groundwater planning and management—Tasmania
Issue
Notes
Responsibility
for, and
estimated
cost of,
groundwater
planning and
management
activities
The Department of Primary Industries, Parks, Water and Environment (DPIPWE) is the main agency
tasked with groundwater planning and management in Tasmania. It does not delegate any tasks to other
government agencies or other groups.
Current
sources of
funding
In recent years, DPIPWE’s groundwater planning and management activities have been heavily reliant on
initiative funding such as Commonwealth grants. For example, DPIPWE has estimated that there is
currently funding for approximately two full-time staff to work on groundwater, with the remaining five staff
reliant on initiative funding. This funding has enabled DPIPWE to considerably advance the policy,
technical and monitoring support required for groundwater planning and management.
NWC (2012) estimates the DPIPWE incurs approximately $700 000 per year in groundwater planning
and management costs (based on 2009–10). Refer to this report for the assumptions underpinning this
estimate.
Examples of external Commonwealth and state funding programs include:

development of groundwater models for Tasmania between mid 2007 and end of 2008. Total
expenditure was $1.54 million, split $1.1 million from the Commission’s Australian Government Water
Fund and $0.43 million from the state government through the SMART Farming program

the Commonwealth Scientific and Industrial Research Organisation (CSIRO) Tasmanian Sustainable
Yields project, to model surface water and groundwater availability to 2030 in light of likely climate
change. The project ran from mid 2008 to the end of 2009. Total funding was $4.2 million, about 30%
of which was for groundwater work. Funding was provided by the Commonwealth via COAG

the Tasmanian groundwater management framework program puts in place a best-practice
framework for managing groundwater in Tasmania. The Australian Government provided $637,000
plus GST from April 2009 to December 2011 through the Australian Government Water Fund.

Strategic Assessment and Management of Priority/Stressed Groundwater Catchments project,
comprising two major components:
 development of the Tasmanian Groundwater Information System (GWIMS) and associated user
interfaces
 development of a strategy and tools to manage surface water–groundwater interaction statewide,
and focusing on two key areas for research and application: Smithton and Sassafras-Wesley Vale.
DPIPWE received $577,750 over 2.5 years through the Commission’s Raising National Water Standards
program.

groundwater sustainability in the Smithton Synclinorium through better understanding of the karstic
aquifer system project. DPIPWE received $550 000 from NWC through the Australian Government
Water Fund

BoM funding, including the Modernisation of Groundwater Monitoring program (which provided $412
459 of funding in 2009–10) and the extension of the statewide Groundwater Monitoring Network
program (which provided $308 000 in 2010–11)

BoM funding for 2011–12 for two additional projects:
 enhancements to the DPIPWE GWIMS to enable the supply of Tasmanian groundwater data to
the NGIS ($400,000)
 assistance for development of Hydrogeological Units – Tasmania ($75 000)

state government funding through the SMART Farming program, for upgrade and expansion of the
groundwater monitoring network ($900 000 between mid 2006 and mid 2010).
Revenue from user charges (groundwater permit application fees) is negligible compared to other funding
sources (e.g. less than $20 000 annually).
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Issue
Approach to
cost
allocation
Notes
Historically, Tasmania has had very limited or zero cost recovery for groundwater planning and
management (partly due to the fact groundwater use has not been licensed). In 2009, DPIPWE
introduced licensing of well drillers and the requirement for well works permits. In the future, some areas
in the state will be declared groundwater management areas and will require a licence (e.g. Wesley
Vale).
The new groundwater licensing system will create additional groundwater management costs for
DPIPWE and could form the basis for greater cost recovery from groundwater users (e.g. through licence
fees).
The DPIPWE is considering a cost attribution model for water planning and management based on the
public/private good nature of activities. Under the model:

costs of activities relating to the water licensing and permitting system (including groundwater) would
be allocated entirely to water licence holders

costs relating to water reform, strategy and policy activities would be allocated entirely to government

costs of water management planning, water resource monitoring and assessment, and dam
surveillance activities would be shared equally between water users and government.
The DPIPWE notes the rationale for allocating costs in this manner is that water licence holders are the
direct beneficiaries of the water access entitlement system, and are able to generate wealth through
exclusive access to a public resource. The water access entitlement system provides resource security,
and the costs of regulation and compliance arise as a result of its implementation.
It further notes water resource monitoring and assessment and water management planning provide
beneficial outcomes to both water users and the broader community, and hence the costs associated with
these activities are allocated equally to water users and government.
In developing this approach, DPIPWE took account of the NWI pricing principles relating to recovering the
costs of water planning and management activities.
Cost recovery
mechanisms
The only user charges that currently apply to groundwater users are application fees collected by
DPIPWE. These fees (e.g. for well permits and drill licences) only cover the cost of the application
process.
Licensing and allocation of groundwater will be put in place for one region in 2011–12. These allocations
will be subject to a water management fee. The current water management fee for groundwater
allocations is a nominal amount ($63/allocation) and is not related to the size of the allocation. The
number of allocations in this region will be fewer than 50.
DPIPWE is seeking to change the fees structure so that the fees for groundwater allocations are per ML
and are equivalent to those for surface water allocations.
Review
mechanisms
There is no direct regulatory scrutiny of the efficiency of the delivery of water planning and management
activities.
In 2009–10, DPIPWE undertook an internal review of the costs of water planning and management
activities under the Water Management Act 1999.
Sources: DPIPWE pers. comm., NWC (2007, 2011).
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68
Table 15: Cost recovery for groundwater planning and management—Victoria
Issue
Notes
Responsibility
for, and
estimated
cost of,
groundwater
planning and
management
activities
The Department of Sustainability and Environment (DSE) and water corporations, such as Goulburn–
Murray Water (G-MW), Southern Rural Water (SRW) and Grampians Wimmera Mallee Water
(GWMWater), are the main agencies responsible for groundwater planning and management functions in
Victoria.
DSE functions include policy development, resource appraisal, providing administrative support and
advice to water corporations (such as initiating advisory committees, guidance on policy requirements),
and implementing government programs. It is also responsible for the state observation bore network.
DSE delegates several functions to the water corporations including preparing groundwater management
plans and licensing activities related to groundwater extraction. These corporations operate in discrete
parts of the state. For example, G-MW is largely responsible for groundwater in northern rural Victoria,
while SRW is largely responsible for groundwater in southern rural Victoria.
NWC (2012) estimates that DSE incurred approximately $11.8 million in groundwater planning and
management costs in 2010–11.
NWC (2012) estimates the water corporations G-MW, SRW and GWMWater incurred approximately $3.5
million, $1.9 million and $0.5 million respectively in groundwater planning and management costs in
2009–10.
Catchment management authorities (CMAs) also undertake water planning and management activities,
such as participating in the development and implementation of groundwater management plans.
Current
sources of
funding
DSE activities
DSE’s activities are funded through a combination of its recurrent budget, state funding through the
Victorian Environmental Contribution (see below) and other grants (e.g. Commonwealth funding). DSE
undertakes many of its groundwater planning and management activities on an opportunistic basis when
additional external funding is available.
The Victorian Government allocates funding from the Victorian Environmental Contribution over four-year
blocks. Funding from the most recent block of funding included approximately $10.3 million for DSE to
maintain the state observation bore network.
Examples of other grants (Commonwealth and state) include:

the Secure Allocation, Future Entitlement (SAFE) project, which includes investigating alternative
management arrangements for groundwater in Victoria. The program is providing $2.4 million plus
GST from 2009 to March 2012 under the NWC Groundwater Action Plan

the Watersmart Australia Sustainable Groundwater Management program, which includes
undertaking groundwater resource appraisals and investigations. There is a proposal for funding of
up to $4.25 million from the Australian Government and $4.25 million from the Victorian
Government.
Some Commonwealth grants focus on broader strategic issues (such as enhancing Victoria’s
groundwater management framework) as opposed to funding DSE’s core groundwater planning and
management services.
Revenues from transaction fees help fund the annual operating cost of the Victorian Water Register.
Water corporation activities
Water corporations in Victoria are subject to economic regulation by the Essential Services Commission
(ESC) and recover the costs of meeting their supply obligations through regulated water charges.
However, water corporations may receive external funding for specific activities (from state government
and CMA contributions) deemed to have broader community benefits.
In 2006–07, combined revenue from groundwater charges and fees for G-MW and SRW was
approximately $3 million.
Approach to
In Victoria, there is no specific formula for allocating costs between the Victorian Government and water
NATIONAL WATER COMMISSION — WATERLINES
69
Issue
Notes
cost allocation
users. The ACCC (2009) has noted that decisions concerning how many water planning and
management activities are funded often appear to be made on a case-by-case basis.
Cost recovery
mechanisms
The main types of charges that contribute to funding groundwater planning and management activities in
Victoria are the Environmental Contribution and water corporation charges and fees.
Environmental contribution
Under the Water Industry Act 1994, the Victorian Treasury collects an Environmental Contribution from
water corporations to offset the cost of state funding for initiatives that seek to promote the sustainable
management of water, or address the adverse water-related environmental impacts in the state. The
Environmental Contribution (which is set by the Minister for Water) is currently the equivalent of 5% of
urban water corporations’ revenues and 2% of rural water corporations’ revenues. Water corporations
pass on the costs of the Environmental Contribution to water customers in regulated water charges. The
Environmental Contribution is rolled into the water corporations’ operating expenditure and is not
itemised on bills.
There is no specific formula to allocate funding from the Environmental Contribution to water planning
and management activities, and no link between the costs of the activities and the total amount of funds
collected through the Environmental Contribution (ACCC 2009).
Previously funded initiatives include groundwater planning and management activities undertaken by the
DSE, water corporations and other parties.
Water corporation charges and fees
Under s. 264 of the Water Act 1989, water corporations can set charges for any functions delegated to
them by government. Examples of groundwater charges include:

groundwater licence fees (fixed charge per licence)

groundwater entitlement fees (per ML)

intensive groundwater management fees (in specific areas which require a higher level of
management).
Water corporations also apply transaction fees for applications under the instruments of delegation.
These fees include groundwater licence and trade application fees.
In some cases, water corporations differentiate fees and charges by region or user type. For example,
SRW’s intensive management fees range from $1.90/ML in Koo Wee Rup to $23/ML in Deutgam, while
G-MW’s fees range from $1.58/ML to $4.44/ML (G-MW 2011; SRW 2011).
Review
mechanisms
Water corporation expenditure and charges
The ESC regulates fees and charges for services provided by the water corporation in accordance with
the Water Industry Regulatory Order 2003 (WIRO) issued under the Water Industry Act 1994.
The process prescribed in the WIRO requires that prices be calculated or otherwise determined in
accordance with the Regulatory Principles related to: recovery of operational, maintenance and
administrative costs; recovery of expenditure on renewal and rehabilitation of existing assets; provision of
appropriate incentives for the sustainable use of water resources; and provision of a sustainable revenue
to the regulated entity to meet efficient delivery of outcomes identified in the Water Plan.
Pricing proposals by corporations are subject to regulatory review and public consultation prior to
receiving the final determinations by the ESC. The review includes independent review of proposed
operating and capital expenditure.
Government expenditure and charges
Requirements for approving initiatives to be funded through the Environmental Contribution (including
groundwater projects) are aligned with the Budget Expenditure Review Committee of Cabinet’s (BERC)
guidelines, being:

initiatives greater than $10 million—BERC to approve

initiatives of $5–10 million in value—joint approval of the Treasurer and Minister for Water

initiatives less than $5 million in value—Minister for Water only to approve.
Under s. 196 of the Water Industry Act 1994, the Secretary of the DSE must review the operation of
s. 193 of the Act (i.e. Obligation to pay the Environmental Contribution) and report to the Minister on the
conclusions of the review.
Consultation regarding the Environmental Contribution, with affected stakeholders, occurred during the
NATIONAL WATER COMMISSION — WATERLINES
70
Issue
Notes
development of the Government’s 2004 white paper, Our Water Our Future.
There is no formal process for reviewing of the costs (and funding needs) associated with groundwater
planning and management activities undertaken by DSE.
Sources: NWC (2007), ACCC (2009), DSE (2011c), G-MW (2011).
NATIONAL WATER COMMISSION — WATERLINES
71
Table 16: Cost recovery for groundwater planning and management—Western Australia
Issue
Notes
Responsibility
for, and
estimated
cost of,
groundwater
planning and
management
activities
The Department of Water (DoW) is the main agency responsible for groundwater planning and
management in Western Australia. Its activities include groundwater licensing and groundwater allocation
and protection planning.
Current
sources of
funding
DoW’s main source of funding for water planning and management activities (including for groundwater)
is appropriations from state government. However, Commonwealth and state government grants have
been important sources of funding for some specific activities (particularly in recent years). For example:
NWC (2012) estimates the DoW incurs approximately $38.9 million annually in groundwater planning and
management costs. Refer to this report for the assumptions underpinning this estimate.

funding for groundwater resource assessments was enhanced for 2007–08 ($2.14 million) and 2008–
09 ($3.60 million) as a result of external funding through the Watersmart Australia (WSA) program

funding under WSA (from 2007–08 to 2009–10) and two new resource proposals (2008–09 to 2009–
2010) provided approximately $2 million for water allocation planning. All funding from the WSA
schemes in 2007–08 ($460 657) was for groundwater. In 2008–09, $638 234 was spent on
groundwater out of a total of $721 861 (88% for groundwater)

funding under the Modernisation and Extension of Hydrologic Monitoring Systems Program
administered by the BoM has provided funding for data management (e.g. $242 000 in 2010 for the
collation of key groundwater metadata).
A report undertaken for the Economic Regulation Authority (ERA) of Western Australia estimated that
external funding accounted for approximately 12% of total expenditure on water planning and
management activities by DoW in 2008–09 (i.e. $6.4 million out of $55.5 million). The estimate for
external funding excluded NRM funding for waterways restoration and protection projects, as it was
deemed to fall outside the NWI activity areas.
This figure may have been higher for groundwater planning and management activities, as much of the
external Commonwealth funding was directed at groundwater assessments. For example, external
funding, accounted for 46% ($4.2 million) of direct expenditure on groundwater assessment and
investigation in 2008–09.
DoW derives a limited amount of revenue from administrative fees (e.g. $75 000 in total in 2010) (DoW
annual report). Fees only apply to surface water licences in a few minor catchments, and to any
transfer/trading in groundwater or surface water. DoW estimates that 90% of this revenue would relate to
groundwater.
Approach to
cost
allocation
With the exception of the examples highlighted above, there is currently very limited application of cost
recovery for groundwater planning and management in Western Australia and the WA Government
generally funds these activities. In 2009, the WA Treasurer requested the ERA undertake an inquiry into
potential water planning and management charges for DoW. The ERA delivered its final report to the WA
Government in February 2011. The WA Government is currently considering the ERA’s
recommendations.
The ERA’s inquiry report into water planning and management charges proposed a cost allocation
framework based on the principle that the efficient costs of services provided by the DoW should be
recovered from those for whom the services are provided. It noted:

where services are provided for identifiable private parties, the efficient costs of the services should
be recovered from those parties

public funding is appropriate where there is a component of a public good to some activities, or
where parties benefiting from the services cannot be identified.
In its submission to the ERA inquiry, the DoW noted the ERA’s proposed approach was consistent with
the NWI pricing principles for recovering the costs of water planning and management activities.
Cost recovery
mechanisms
Currently, there is very limited cost recovery for DoW’s groundwater planning and management activities.
The WA Government notes that it does recover some costs related to administrative costs of licensing.
The ERA’s proposed fees to recover DoW costs include the following:

fees for processing and assessing licence and permit applications (including differentiated fees
NATIONAL WATER COMMISSION — WATERLINES
72
Issue
Notes
based on the level of risk and effort associated with each application)

annual fees to licence holders for providing water allocations and managing the ongoing use of water
(these would be deferred until new legislation is passed allowing DoW to charge for allocation
management and planning activities)

the proposed fees would be set on a regional basis, for each water allocation plan area

charges within each plan would reflect the impact of different licence holders on water resource,
management and planning activities (including the effects of the size of individual allocations as a
share of the total catchment allocation, differences in risk between sub-catchments, and the costs
incurred by the Department in the management of activities such as mine dewatering)

metering fees applied per meter (including for upfront provision of meters and meter reading)

an annual licence fee applied to the Water Corporation for the Integrated Water Supply Scheme

annual fees on water businesses for protecting drinking supplies.
Most of the revenue from user charges would likely be generated by fees for processing and assessing
licence and permit applications.
Review
mechanisms
The ERA does not have an ongoing role in reviewing water planning and management charges or costs
(i.e. it undertakes ad hoc inquiries at the request of government).
In 2011, the ERA recommended charges be independently set and reviewed when new water resource
management legislation is in place or in three years’ time, whichever occurs sooner, and then every three
years by the ERA.
a New
resource proposal funding is state consolidated revenue provided for a fixed period of time for a specific purpose.
Sources: DoW (2010), PWC (2010), ERA (2011).
NATIONAL WATER COMMISSION — WATERLINES
73
Glossary of terms
Aquifer: A geological formation that is capable of holding water and through which water can percolate.
Aquifers are capable of yielding quantities of groundwater for economic activities.
Available water: Water potentially available for consumptive or environmental use.
Basin Plan: A plan being developed by the Murray–Darling Basin Authority, for the integrated and
sustainable management of water resources across the Murray–Darling Basin, to be adopted by the
Minister under the Water Act 2007 (Cwlth).
Consumptive use: The use of water for private benefit consumptive purposes, including irrigation,
industry, urban uses, stock and domestic use.
Environmental flow: A water regime provided within a river, wetland or estuary to improve or
maintain ecosystems, where there are competing water uses and where flows are regulated.
Groundwater: Water occurring below the ground’s surface.
Groundwater Action Plan: A comprehensive funding program initiated by the Commission in 2007 to
invest in projects that enhance groundwater management and improve our knowledge and
understanding of groundwater.
Irrigation: Water artificially applied to soils (i.e. does not include precipitation/rainfall).
Monitoring bore: In the context of this project, a groundwater monitoring bore is a jurisdictional
owned bore used as part of the ongoing monitoring of the groundwater resource. The bore forms part
of the groundwater monitoring network. It does not include investigative or private bores such as
those used to monitor salinity, mining, acid sulfate soils, etc., and it does not include bores owned by
private companies such as water utilities.
Recharge: Inflow of water to a groundwater reservoir from the surface. Infiltration of precipitation and
its movement to the water table is one form of natural recharge.
Surface water: Water that flows over land and in watercourses or artificial channels and is able to be
captured, stored and supplemented from dams and reservoirs.
Water access entitlement: A perpetual or ongoing entitlement to exclusive access to a share of
water from a specified consumptive pool as defined in the relevant water plan.
Water allocation: The specific volume of water allocated to water access entitlements in a given
season and given accounting period, defined according to rules established in the relevant water plan.
Water charge rules: Rules made by the Minister for Water under s. 92 of the Water Act 2007 (Cwlth)
that relate to regulated water charges.
Water management areas (WMAs): In general, the water management areas for surface water will
be the surface water management areas and groundwater management units reported in the National
Land and Water Resources Audit 2000, subject to the adjustments to those boundaries made
subsequently by the jurisdictions. In Tasmania, the boundaries used will be those developed for the
Conservation of Freshwater Ecosystem Values Project.
Water plans: Statutory plans for surface water and/or groundwater systems, consistent with regional
natural resource management plans, developed in consultation with all relevant stakeholders on the
basis of the best scientific and socioeconomic assessments, to provide secure ecological outcomes
and resource security for water users. Each jurisdiction refers to these plans by various names.
Water system: A system that is hydrologically connected and described at the level desired for
NATIONAL WATER COMMISSION — WATERLINES
74
management purposes (sub-catchment, catchment, basin or drainage division, groundwater
management unit, sub-aquifer, aquifer, groundwater basin, etc.).
Water resource: Surface water or groundwater; or a watercourse, lake, wetland or aquifer (whether
or not it currently contains water).
NATIONAL WATER COMMISSION — WATERLINES
75
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