COMMISSION INTERNATIONALE DES GRANDSBARRAGES ------VINGT TROISIEMECONGRES DES GRANDSBARRAGES Brasilia, juin 2009 ------- NEED FOR OPERATIONAL CONSIDERATIONS IN WATER RESOURCES ALLOCATION AND TRADING AGREEMENTS* B. Mwaka Director of Water Resource Planning Systems Department of Water Affairs and Forestry, South Africa C. Ntuli Systems Operation Analyst: Water Resource Planning Systems Department of Water Affairs and Forestry Abstract: Water storage dams in South Africa are used for a variety of purposes like irrigation, hydropower generation, domestic and industrial supplies, among others. Operation of such multi-purpose reservoirs requires numerous decisions to regulate the water resources in an attempt to reconcile water availability with the requirements. The regulations are based on operating rules, which are instructions for managing release or pumping flow rates depending on the system’s hydrological state and allocation agreements. Due to economical and socio-political developments rigid operating rules can easily be derailed with serious consequences. Besides the allocable volume of water, other variables like risk, flow rates and pressure head count significantly in the resulting system performance especially for systems involving hydropower generation. The prevailing situation where Eskom is not able to meet the electricity requirements fully, is a good case study that will be used to illustrate how once-off water allocation operating agreement are not good for efficient use of the water resource. The agreement between Eskom and the Department of Water Affairs and Forestry (DWAF) for the operation of Gariep and Vanderkloof Dams on the Orange River system will be used to demonstrate how the legal agreement, without due consideration to other operating principles, can lead to even higher risk of failure for both all water users on the system. Because of the increasing water demand and competition, various concepts are proposed for sharing and trading the resources. Water banking is one of the concepts that are being debated with much vigor for DWAF to adopt for water allocation and trading. A critical review of the water banking philosophy will be made. Key words: Water allocation, sustainable water supply 1. INTRODUCTION Water resource systems operation is the regulation of the systems in order to reconcile water availability with requirements and mitigate against risks over a given period of time. The regulation is based on operating rules, which are instructions for controlling release and/or pumping flow rates depending on the system’s hydrological condition, water allocation agreements and infrastructural maintenance schedules, among others. In earlier phases of water resources management water was not a limitation. It is the infrastructure that was limiting. The main focus was therefore on the development of dams and their associated infrastructure, which characterized the period as a development phase, to increase yield and facilitate storage and transfer of water. Initially operating rules were once-off statements and because competition for water was still low, the focus was on supplying water to those with the ability to pay so that more money could be generated for further infrastructural developments. However, over time especially due to economical and socio-political developments rigid operating rules can easily be derailed with serious consequences. Water itself is an annual renewable resource and the allocated water rights licensed to users are based on long-term average yields of systems, which cannot be guaranteed for all years. Every year the hydrology and level of development of a given system, yields an amount of water that is seldom the same for different years. The main function of water resources systems operation, therefore, is to repeatedly assess the prevailing hydrological conditions against expected demand patterns in order to balance the available water against the requirements But presently water for allocation is the main limitation given the ever-increasing demands (competition) against the finite water resource. This means that water management is now in the water allocation phase. Besides, the hydrology is becoming highly variable, probably due to changing climate and/or land use. Because of this the once-off rules cannot suffice. Regular operational analyses are required to make water reconciliations based on envisioned hydrological conditions, water allocation agreements and infrastructural maintenance schedules. The main deliverables of systems operation analyses include annual water allocation, operating rules and related (DSS) for benchmarking and managing the performance of the systems in terms of efficiency and risk. Effective water resources systems operation, therefore, requires good reflection of systems hydrology and hydraulics. Systems water allocation and trading licensing, however, is largely driven by socio-economical and legal considerations, and sometimes even emotional historical legacies. Because of this, systems operation to implement water allocation is increasingly being compromised. This paper aims to illustrate the need for operating considerations in water allocation and trading management. Two examples, one on hydropower generation and another on water banking allocation approach, will be used to demonstrate the significance of operating parameters in order to effectively implement water supply agreements. 2. STUDY AREA AND ITS ALLOCATIONS The Orange River rises in the eastern highlands of Lesotho where it is known as the Senqu River and is the largest and longest river in South Africa. This paper will focus on the hydropower dams in the Upper reaches of the Orange River, namely Gariep (total output of 360MW) and Vanderkloof (total output of 240MW). These dams are the two largest reservoirs in South Africa. Katse and Mohale dams in Lesotho are not located in the two WMAs, but have a significant impact on the available water in the Orange River, as the bulk of the water flowing in the Orange River is generated in Lesotho. Water from Katse Dam is transferred via the Lesotho Highlands Water Project to Vaal Dam for Gauteng’s (the country’s economic heartland) water use and Gariep Dam. Also from Gariep Dam water is transferred via the Orange-Fish tunnel to the Fish to Tsitsikamma water management area for Port Elizabeth town. The GIS layout of the Orange River System is given in Figure 1 below. Figure 1: GIS layout of ORS 3. ALLOCATION CHALLENGES Water is released from the two dams to supply downstream users. Eskom uses this downstream water requirement to generate power as water released from the two dams passes through the turbines. However, fluctuating releases from hydropower turbines impact negatively on some users. For example, downstream consumptive users which is mainly irrigation, require a high demand during summer months and a low demand in winter, to overcome this, the mirror image release pattern was developed, whereby storage space is created in Vanderkloof Dam during the summer months and then allow the higher releases from Gariep Dam during winter to be captured in Vanderkloof Dam and at the same time the energy generation from Gariep dam is increased during this period. Upstream water transfers also impact negatively on water availability for power generation. Water is transferred from Gariep dam to Port Elizabeth (PE) through the Orange-Fish transfer and the current allocation is expected to increase in the near future given the economic and social developments in PE. This increase in demand will reduce the amount of water available for power generation. According to the operational agreement between DWAF and Eskom, Eskom is allowed to generate electricity at its full load for four hours per day if they are in crisis/ emergency, unless a drought emergency has been gazetted for the Orange River system. Considering the prevailing situation, where Eskom is not meeting the full supply for power demand/requirement in the country, the Orange River System management may want to employ this emergency Operating rule agreement. However, in hydropower generation, besides volumetric allocation, other variables like water level (H), turbine efficiency as shown in the turbine characteristic diagram below are equally significant. The characteristic curve indicates that the turbines perform most efficiently (93% efficiency) when the net head is between 50m and 65m and the discharge per turbine is between 150 m3/s and 175m3/s. Outside this range, the turbine efficiency decreases. It is also evident that once Gariep dam storage reaches 40%, power generation becomes inefficient. Figure 2: Gariep Turbines characteristic curves 4. PRESENTATION OF WRPM RESULTS The behaviour of selected system components (e.g. projected reservoir storages and simulated flows through water abstraction/supply routes) is presented as probabilistic distribution plots (box plots). A typical box plot indicating the various lines that depict specified exceedance probabilities of a probability distribution is provided in Figure 3 below. Figure 3: A typical box plot Annually, systems operation analyses include annual water allocation, operating rules and related (DSS) for benchmarking and managing the performance of the systems in terms of efficiency and risk. The projected storage derived from 1000 stochastic sequence as shown in the diagram below is among the examples of the DSS for monitoring the performance of the system. Releasing water for power generation at full load for 4 hours as per DWAF/Eskom agreement when the starting storage in May is 90% as it was the case this year, indicates that 90MW of power can be generated for only four months but at the sharp storage drop and the curve plots outside the projected storage as indicated by the pink trajectory. Gariep dam was drawn down to its Minimum Operating Level (MOL) at the 99.5% exceedance probability level towards September 2010. This may result to the implementation of restrictions to other water users in order to protect the resource. Figure 2: Gariep storage with starting storage at 90% Full Supply Level Assuming a scenario where the storage starts at 100% full supply storage in May, which is taken as the decision month as this is the month when most summer rains have been captured into storage and the dams are mostly full and if Eskom generates at full load for four hours. It was found that 90MW of power per machine can be generated for the whole year as the storage manages to recover during the summer rains. Gariep dam was drawn down to its Minimum Operating Level (MOL) at the 99.5% exceedance probability level towards the end of November 2010. The short term analysis results for Gariep Dam storage for this scenario are presented in Figure 6 and indicate that the full starting storage operating rule protects the resource adequately Figure 6: Short-term Projected Storage Trajectories for Gariep Dam (100% full scenario) For the scenario where the dam is assumed to start at 60% live storage and Eskom generates as per emergency agreement, it was found that the dam level drops drastically and does not even reach the summer period for the storage to recover. Projected storage trajectories of Gariep Dam show that this Scenario operating rule does not protect the resource to such an extent that the worst sequence projection (99.5% exceedance) is drawn down to the MOL as early as December 2009, Figure 7. This is due to the fact that the dam staring storage was low and the resource was fully utilized. Figure7: Short-term Projected Storage Trajectories for Gariep Dam (100% full scenario) Emergency Release Drawdown Curve 57 56 Water level (head) m 55 54 53 100%start 90%start 80%start 52 51 50 49 48 47 46 May June July Aug Sept Oct Nov Dec Jan Time (months) Figure 83: Emergency release drawdown curve Feb Mar April The figure above shows the different starting storages of the dam and the impact of generating at full load for four hours on power generated. When the dam starts at 100% in decision month, May 90MW power per machine can be generated at full load for the whole year, however when the dam starts at 90% power can be generated efficiently i.e. at 90MW on 4 machines until September, however, in October power generation will be reduced to 80MW per machine. It is however very rare to have the 100% full storage in the dams which seems to be the only curve running throughout the year when the power is generated at Eskom’s full load for 4hours per day as indicated in the figure below. Time (Months) 80%Full 90%Full 70%Full Ap ril ar ch M t Se pt em be r O ct ob er No ve m be r De ce m be r Ja nu ar y Fe br ua ry Au gu s Ju ly Ju ne M ay %Exceedance % Exceedance of Storage 100 90 80 70 60 50 40 30 20 10 0 60%Full Figure 9: Storage % of exceedance As indicated previously, when Gariep dam level reaches 40% which is equivalent to 42m power generation is stopped. The power generation at this level is 60MW at 91% turbine efficiency, Figure 10 below. 100%Full Power generation at different water levels 58 56 54 Water Level (m) 52 90MW 80MW 70MW 60MW 50 48 46 44 42 40 150 155 160 165 170 175 180 185 190 195 200 Flow (m3/s) Figure 40: Gariep Power generation levels at different water levels 5. WATER BANKING Water banking also known as capacity sharing, refers to the apportionment system of issuing water use entitlements against shares of the storage capacity of large government dams, storage shares can be available for rental or purchase by individual stakeholders. (Pott et al). The system enables water users to bank their water in large government dams. Where there is storage works, the total potential storage capacity is divided and portions of the total available storage made available for rental or purchase by individual stakeholders, hence the term capacity sharing (Dudley, 1992). Fractional water allocation refers to entitlements issued against run-of-river flows (where there is no storage). Fractional Water Allocation and Capacity Sharing (FWACS) system allows water users to get entitlements on both the portions of dam storage and inflow into the dam. The proportions in the dam are allocated according to the price the user pays for water or the priority classification of the user. The National Water Act (1998) No. 36 (the Act) classifies the water use into levels of priority with the reserve (basic human and ecological needs) having the highest priority, followed by international obligations, strategic use, future use and all other uses. The same classification is used in water pricing. This concept is being debated with much vigor for DWAF to adopt for water allocation and trading. Pott (2008) argues that defining water use entitlements in terms of water banking encourages the development of a water market thus improving water use efficiency while accounting for undesirable externalities associated with water quality, the environment and equity considerations in South Africa. FWACS was developed in Australia as a possible solution to efficient allocation of water (Dudley and Musgrave, 1988). It was developed to enable individual irrigators to manage their own risks and avoid being adversely affected by the decisions of others (Dudley and Musgrave, 1988). They could allocate their own water through time so as to satisfy individual supply sufficiency requirements. In Australia with the generally arid climate, water rights were mostly defined in terms of stored water. Thus capacity sharing was developed as a best management practice for water systems in which the operation of water in storage was paramount (Dudley, 1992). In the context of Australia water resource availability is highly uncertain and integration of supply and demand management is essential in order to promote economically efficient resource allocation. The aim was to have a system of water entitlements in which individual irrigators could decide on the levels of risk they were prepared to shoulder. In this system the water right holder decides how much water to carry over between irrigation periods. The amount carried over is available to the irrigator when required plus any other allocation due. The water user not the water authority manages this transaction. This enables the right holder to manage variability in risk regarding availability of water. FWACS was devised to provide a basis for private rights to water. Australia users were industry, domestic, irrigation and the environment a case similar to South Africa. This concept has also been widely used in Zimbabwe’s Mazowe catchment as far back as 1984 (DWAF 2006). In Zimbabwe, a combined irrigation scheme consisted of eleven commercial farmers, each subscribing to a defined percentage of cost of construction of a dam and its related infrastructure. This percentage was the basis on which their percentage of the potential annual storage capacity of the dam was calculated. The Mazowe catchment comprised of irrigation users only. 6. OPERATIONAL CHALLENGES Establishing and implementing daily extraction management requires additional infrastructure and management effort including: (a) actual or simulated stream flow data, (b) knowledge of requirements including environmental requirements (c) operational gauges providing daily flow information, (d) announcements to all users of the daily flow class, (e) daily pumping/metering information, (f) improved data storage and management, (g) audit and compliance. In addition, to meet the requirements of constant reviewing of the water sharing plans, reserve allocations, reduction of storage capacity over time, growing basic needs in catchment, etc, constant monitoring is required. The water banking concept might look simple, however its application can be more complicated in South Africa a country with the history of inequalities (the issue of trust). It is still not clear how the issues of risk and water pricing, infrastructure capacity, water quality, seepages as well as the evaporation losses would be addressed once the FWACS concept is applied. 6.1 Risk Currently the assurance of supply is given to water users in terms of the priority levels as classified in the Act. This classification ensures that the resource is protected, managed and used effectively, efficiently and sustainably. During drought periods, users within the lowest priority level and pay less amount for their allocation are restricted first allowing basic human needs and ecological water requirements to be met as well as water for strategic use to be supplied. In the capacity sharing concept, the water use entitlements are homogenous resulting in different allocation system as addressed by the Act. If assurance of supply is incorporated in the banking option analysis, the results show that banking results in negative impacts on water supply, assurance of supply as well as on storage levels particularly during periods of high storage levels in the dams (Fig11) where Scenario A, use a starting storage representative of a relative wet year. The actual storage as applicable to the May 2008 operating analysis was used for Scenario A as the Gariep and Vanderkloof dams were 89% and 83% full respectively. Scenario 1 represents the introduction of the banking option so that in year one the irrigation demand is reduced to 50% of the full requirement. This is then banked to be used the next year, resulting in a 150% of the irrigation demand for the following year. Scenario 2 represents the inverse of the banking option meaning that in year one 150% of the irrigation requirement is used with the following year only 50% of the irrigation demand. From year 3 onwards all scenarios including the base scenarios uses a maximum of 100% of the irrigation demand and curtailments will be imposed on the system for the rest of the analysis period when required. It is also evident from the analysis that water banking results in higher evaporation and spillages from the dams particularly when the starting storages are high 4500 Supply (million m3 /a) 4000 3500 3000 2500 2000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years Base A - 98% Base A Curt - 98% A1- 98% A2 - 98% Figure 11 Supply for different scenarios within main scenario A at 98% exceedance probability level. 2016 Gariep & Vanderkloof Dam Storage Base A 9000 Combined Storage (million m 3 ) Full Supply Volume 8500 8000 7500 7000 Curtailments imposed when required 6500 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Years Base a 50% Base A Curt 50% A1 - 50% A2 - 50% FSV Figure 12: Combined storage for different scenarios within main scenario A The Water Resources Planning Model (WRPM) is an extremely powerful tool used by the DWAF for operational and planning analyses of water resource systems. The WRPM uses the yield characteristics in combination with the user priority classification to supply the system demands at the required level of assurance. Irrigation or domestic users will, for example, be supplied at a lower assurance than domestic users. In the analysis, the users’ demands are therefore sub-divided into different user categories according to their level of priority, which represent different assurance or reliability levels. It is also important to note that water requirement within the lower assurance category (irrigation) is priced less than that in the higher assurance (domestic). The example of the user priority classification definition for the system with two user categories is presented in Table 1 below. Table 1 User category and priority classifications USER CATEGORY LOW (95% ASSURANCE) (1:20 YEAR) HIGH (99,5% ASSURANCE) (1:200 YEAR Portion of water requirement supplied (Mm3) Domestic 0 1 000 Irrigation 2 200 0 Curtailment level Accordingly, the two water allocation categories are distributed using the shortterm yield curves as indicated in figure13 below. It can be noted that in case of shortages such that the target draft is to be restricted, it is the lower assurance water (irrigation in blue block) that is cut-off first. The high assurance water (domestic, in red) will be the last to be curtailed after the low assurance. Figure 13: Short-term yield curve showing water availability against assurance level. However if the water banking concept is introduced and the irrigators decide to draw all of their annual allocation in the beginning of the year, this then implies that their supply risk is changed to the higher assurance category, consequently pushing the domestic water to the lower priority as indicated in figure 14 below. Figure 14: Short-term yield curve showing water availability against assurance level 6.2 Infrastructure As previously mentioned, water banking allows water users to accumulate the part of their share not taken out in a particular year if storage is available. It is however not clear how the issue of dam safety in case of floods control will be addressed. For example, if water has been banked and the big flood comes, this might put the dam as well as the people and infrastructure downstream at risk. This might result to the emergency release of the banked water and in some cases the infrastructure i.e sluice gates and valves might not be sufficient to release that large amount of water. Dam breaks as a result of NOC level being exceeded. To ensure that users abstract their allocated volume only strong voluntary collaboration between users is required and communication of information should be good. The water accounting and ordering system must be developed to enforce transparency and ensure users’ faith in the accounting system. The cost of implementing the system thus become extremely high as computer models will be required to determine water availability and monitor weather patterns on real time basis. Access to share of storage space based on legislation must be highly regulated. 6.3 Inequalities in South Africa A large amount of water use licenses is already in the hands of white south Africans, the government in its initiatives to redress the imbalances of the past is faced with challenges of over allocated catchments and the emerging farmers can not be allocated with water for the their irrigable land. It is said that new users will be accommodated by reduction in allocation fractions of existing users if system is fully allocated. However, capacity sharing concept allows users to trade their share; this trade involves financial transactions between users. The existing users might prefer to trade their allocation before it is reduced. Thus permanent trade needs to be highly regulated by water resource managers due to third party effects that may result (Pott et al, 2008). This may result to the price of water being extremely high than the irrigable land further exacerbating the inequalities problems. In addition, if due to emergency situations during floods water is released and the users are required to abstract their water, some farmers especially emerging farmers might not have the capacity in terms of pumps to abstract the large volumes of their banked water and also the storage capacity to store such volumes. This then implies that they will forfeit their allocation. 6.4 Water quality Users can decide to either bank or take up all their allocation once and bank the water in their own storages. If most users decide to take up their total annual allocation for the particular year, accumulation of nutrients due to low storage levels will increase resulting to the bad water quality in the dam. Water banking concept does not reflect how this issue will be dealt with in such cases and may need to be modified. In addition, major sources of pollution of surface waters in South Africa are agricultural drainage and wash-off (irrigation return flows, fertilisers, pesticides and runoff from feedlots), urban wash-off and effluent return flows (bacteriological contamination, salts and nutrients), industries (chemical substances), mining (acids and salts) and areas with insufficient sanitation services (microbial contamination). Pollution of groundwater results from mining activities, leachate from landfills, human settlements and intrusion of sea water. High pollution loads may render water unsuitable for uptake by some users. Non-point source pollution may be difficult to monitor on a continuous basis. Concentration of such pollutants may be higher in drought situations and may also vary with depth in a reservoir. This situation favour users who have the infrastructure to draw off water rapidly when its quality is suitable. Water quality monitoring is a critical component of FWACS. However it is important to modify FWACS so that the fraction of shared has both usable and unusable water. Other complications may arise if we consider that users at different locations may have different requirements on water quality and that there may be dilution along the river channel making water suitable for downstream users. Thus FWACS can be an important driver for water quality monitoring. 6.5 Seepage losses A dam or a conveyance system could experience high seepage losses. Such losses can be accounted for through monitoring and modelling. Again it is evident that the total amount of water available to each user is reduced proportionally. Thus those users who have a larger fraction may have more interest in reducing losses. However, seepage losses may become alluvial water, which could become available to some users and not to others because the extent of alluvial storage could be site specific. This could be a potential cause for conflict but could be addressed through considering alluvial storage as part of the water released. Sustainable use of alluvial aquifers can result in optimal use of the water resource. 7. CONCLUSIONS From the above, it can therefore be concluded that the Eskom/DWAF agreement cannot be effectively operationalized when all these operational considerations are taken into account. Once-off dam operations agreement alone can lead to inefficient or in-optimal water use of the resource. Before these agreements can be applied, operational considerations need to be taken into account. This will ensure the sustainable use of water both for economic and social development. Banking of water to be used in the following year in general has negative impacts on water supply to the users as storage levels in the dams over time reduces. It also results to an increase in the level of curtailments required to be imposed on the system and should be avoided particularly in times of high starting storages. The FWACS does not consider the resource availability throughout the critical period and in the long-term resulting to failure in protecting the water resource as required by the NWA. The modification to the current applications of FWACS in Australia and Zimbabwe is required before this system can be applied in South Africa. This principle requires extensive amount of monitoring since near-real time data on incremental and cumulative flow and losses must be captured. Releases from storage also need to be quantified at a point of abstraction. Implementation of all these measurements depends on the existence of infrastructure (metering) to obtain the data for monitoring and high regulation of policies by the department. Cost of installing measuring devices to measure the volume of water should also be thoroughly quantified. A high level of trust and accountability among users cannot be overemphasized unless FWACS can generate chaos. It is therefore important to build the capacity of new users to participate in the FWACS system. 7. ACKNOWLEDGEMENTS We would like to thank the following people for their contributions Jason, Andrew, Manie, Lerato REFERENCES [1] DEPARTMENT OF WATER AFFAIRS AND FORESTRY Orange River System Annual (2008) Operating Analysis. Report compiled by WRP (PTY) Ltd for the Department of Water Affairs and Forestry [2] DWAF, 2008. Orange River system: 2008 additional analysis banking options. Report compiled by WRP (Pty) Ltd for the Department of Water Affairs and Forestry [3] DWAF, 2006. A brief overview of water licensing approaches and the water allocation practice in South Africa. [4] DWAF, 2006. A conceptual analysis of fractional water allocation and capacity sharing. Report compiled by Makgaleng Projects for the Department of Water Affairs and Forestry [5] DWAF, 2006. Fractional water allocation and capacity sharing concepts, principles, assumptions and lessons from selected case studies. Report compiled by WRP (Pty) Ltd for the Department of Water Affairs and Forestry [6] DWAF, A guide to the national water act [7] DWAF, 2005. Orange River System Annual (2005) Operating Analysis. Report compiled by BKS for the Department of Water Affairs and Forestry [8] DWAF, 1997. Water resource yield model user guide release 4.1.1 [9] Pott, A.J., Hallowes, J.S., Mtshali S.S., The challenge of water conservation and demand management particularly for irrigated agriculture in South Africa Water Research Commission, 2008 SUMMARY Water resource systems operation is the regulation of the systems in order to reconcile water availability with requirements and mitigate against flooding and drought risks. In the past the focus was on development of water resource infrastructure and operating rules were once-off statements. Competition for water was still low, the focus was on supplying water to those with the ability to pay so that more money could be generated for further infrastructural developments. However, due to the hydrology being highly variable, probably due to changing climate and/or land use, once-off rules cannot suffice. Regular operational analyses are required to make water reconciliations based on envisioned hydrological conditions, water allocation agreements and infrastructural maintenance schedules. Two examples, one on hydropower generation and another on water banking allocation approach, will be used to demonstrate the significance of operating parameters in order to effectively implement water supply agreements. Two dams in South Africa on the Orange are used for hydropower generation, namely Gariep with total output of 360MW and Vanderkloof dam with total output of 240MW. Fluctuating releases from hydropower turbines of these dams impact negatively on some users. According to the operational agreement between DWAF and Eskom, Eskom is allowed to generate electricity at its full load for four hours per day if they are in crisis/ emergency, unless a drought emergency has been gazetted for the Orange River system. Releasing water for power generation at full load for 4 hours as per DWAF/Eskom agreement when the starting storage in May is 90% as it was the case this year, indicates that 90MW of power can be generated for only four months but at the sharp storage drop and the curve plots outside the projected storage At 100% starting storage, it was found that 90MW of power per machine can be generated for the whole year as the storage manages to recover during the summer rains. For the scenario where the dam is assumed to start at 60% live storage and Eskom generates as per emergency agreement, it was found that the dam level drops drastically and does not even reach the summer period for the storage to recover. It is however very rare to have the 100% full storage in the dams which seems to be the only curve running throughout the year when the power is generated at Eskom’s full load for 4hours per day Because of the increasing water demand and competition, various concepts are proposed for sharing and trading the resources. Water banking is one of the concepts that are being debated with much vigor for DWAF to adopt for water allocation and trading. Water banking also known as capacity sharing, refers to the apportionment system of issuing water use entitlements against shares of the storage capacity of large government dams, storage shares can be available for rental or purchase by individual stakeholders The water banking concept might look simple, however its application can be more complicated in South Africa a country with the history of inequalities (the issue of trust). It is still not clear how the issues of risk and water pricing, infrastructure capacity, water quality, seepages as well as the evaporation losses would be addressed once the FWACS concept is applied. If assurance of supply is incorporated in the banking option analysis, the results show that banking results in negative impacts on water supply, assurance of supply as well as on storage levels particularly during periods of high storage levels. Current operation of the dams is such that the lower assurance water (e.g. irrigation) is cut-off first. The high assurance water (domestic) will be the last to be curtailed after the low assurance. However if the water banking concept is introduced and the irrigators decide to draw all of their annual allocation in the beginning of the year, this then implies that their supply risk is changed to the higher assurance category, consequently pushing the domestic water to the lower priority. In conclusion, once-off dam operations agreement alone can lead to inefficient or in-optimal water use of the resource. Before these agreements can be applied, operational considerations need to be taken into account. This will ensure the sustainable use of water both for economic and social development. Banking of water to be used in the following year in general has negative impacts on water supply to the users as storage levels in the dams over time reduces. It also results to an increase in the level of curtailments required to be imposed on the system and should be avoided particularly in times of high starting storages.