Water industry competition reform in NSW advances with release of draft regulation

Critical reforms for water industry competition in NSW are a big step closer, with the release of the draft Water Industry Competition Regulation 2022 for consultation.

The Draft Regulation supports the reforms in the Water Industry Competition Amendment Act 2021 (WICA21) which, despite being passed by Parliament on 1 November 2021, has not commenced. We expect WICA21 will commence once the Draft Regulation is made. At this stage, that its likely to be early-mid 2023.

Submissions on the Draft Regulation were initially due on 17 October 2022, however, at the request of stakeholders, the submission period has been extended to 30 November 2022.

Water Industry Competition reforms

“Review and reform” has been a constant theme since the enactment of the Water Industry Competition Act 2006 (WICA). Regulators have been striving to balance the public health, competition, consumer protection and reliability of supply issues raised by the legislative scheme, while providing a genuine opportunity for private sector participation in water services.

WICA provides a scheme for the private sector delivery of water and wastewater services, and associated infrastructure, by the private sector.

WICA21 will make some significant amendments to the 2006 Act, including to:

• require scheme approvals for new water industry infrastructure schemes separately from operator and retailer licences;
• provide for both operation and retail last resort providers to step in where there is a declared failure in relation to the existing operator or retailer; and
• provide for a standard customer contract.

Draft Regulation

The Draft Regulation updates the current Water Industry Competition (General) Regulation 2021, to support the reform in WICA21. The Draft Regulation provides further detail as to operation of the licensing and last resort regimes, such as:

• defining the nature and scale of the water industry infrastructure which the approval and licensing schemes cover, including to clarify the new high exposure council recycled water schemes which WICA will regulate;
• the mandatory conditions for scheme and operator approvals and operator and retailer licences;
• the deemed customer contract which applies as between a retailer and its small retail customers, and as between the relevant infrastructure operator and those customers;
• processes for IPART investigations into pricing determinations for monopoly services; and
• the last resort arrangements for the continued provision of water and sewerage services by a declared public water utility or WICA licensee, in the event of a declared failure of an operator or retailer service. This includes (among other things) the appointment of interim last resort providers to particular schemes already in operation, contingency planning and testing for last resort events and cost recovery for contingency planning.

What you should do

Providers or water and wastewater services in NSW, and property developers considering engaging private sector water and wastewater services for their development, should:

• review the Draft Regulation and consider making a submission; and
• prepare for the commencement of WICA21.