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Factors for water recovery

Long-term diversion limit equivalent factors (known colloquially as the cap factors) have been established to accurately assess how much water has been recovered for the environment, and to guide future water recovery decisions.

There are over 150 different classes of water entitlements in the Murray–Darling Basin. The factors are a method of comparing each of these entitlements, so they can be considered on equal terms.

The factors provide a consistent accounting system to ensure water recovery has occurred as planned and indicate where any future water recovery may be required.

These factors are focused on historical patterns, they are not a prediction or a guide of future water use.

The factors have no impact on entitlements or allocations.

Updating the factors

A set of factors across the Basin were adopted by the Murray−Darling Basin Ministerial Council in 2011, in order to account for the water recovery associated with the development of the Basin Plan. These factors were derived from a range of different sources, and did not provide a consistent basis for water accounting across the Basin. In 2015, all Basin Government Ministers agreed to update the original 2011 factors, ahead of the accreditation of all water resource plans.

Updated factors are being developed now, ahead of the accreditation of each water resource plan, to ensure plans are aligned with, and consider, the most recent information. The factors will be used to determine if the water recovery required in each catchment has been completed by June 2019, as required under the Basin Plan.

Once water resource plans are accredited, the agreed arrangements for water sharing and water allocation between entitlement classes will begin to operate. The factors will not be used any further, except for additional water recovery where required.

Planning assumptions

To establish the updated factors, planning assumptions have been established for each water resource planning area in New South Wales. Up-to-date information has now been considered in this work.

Water usage patterns consistently demonstrate over the long-term that many entitlement holders do not use all the water allocated to them. Usage is an individual business decision, where entitlement holders consider climate and rainfall, the cropping cycle, and their own business plans.

Generally, the assumptions for the updated factors have considered:

  • recent information on water usage, along with historical information on usage and carryover
  • climatic patterns over the past one hundred years
  • water trade patterns, including interjurisdictional change and trade between entitlement types
  • local rules regarding water access in each area through individual water sharing plans.

Entitlements, allocations and usage

Water markets in the Basin were established based on a 'cap and trade' system, where the cap represented the total pool of water available for consumptive use. This system is transitioning to sustainable diversion limits, which set a new limit on water diversion under the Basin Plan.

Since the introduction of the cap in water use in 1995, available water in each water year has been distributed to users via water rights administered by Basin states.

The relationship between aspects of the water market: entitlements, allocations and usage

relationship between water entitlements, allocations and usage will be different in wet and dry years. Your entitlement is the same but in a wet year more water is available but you might use less. Your allocation in a dry year will be less, but you might use more water.

Water entitlements

Water entitlements are rights to an ongoing share of water in a system. The financial value of water entitlements is determined by the water market, which operates like any other free market. The value of an entitlement is subject to market change. Entitlements are prioritised in various ways across the Basin. 

How the arrangements in New South Wales are prioritised by entitlement type

the allocations are prioritised in NSW in the following order from highest to lowest: domestic and stock, local water utility, high security, general security, supplementary

Water allocations

Water allocations are the amount of water distributed to users (water entitlement holders) in a water year. Allocations against those entitlements change according to rainfall, inflows into storages, and how much water is in storage. Each Basin state has a different process and different rules for allocating water.

Reliability

Reliability is a measure of the likelihood of an amount of water being allocated to a particular class of entitlements over a period of time. 

Water usage

Water usage is how much water is actually used from the water that is allocated. When water is allocated to an entitlement holder, they use it as needed—sometimes they only use only a proportion of their allocated water—for example sometimes they will use 30 per cent, sometimes they’ll use 95 per cent and sometimes they’ll carryover to the next year. This is an individual business decision, where entitlement holders consider climate and rainfall, their cropping cycle, and their own business plans.

Water usage is the primary consideration in establishing the updated factors. These factors are used to determine the water recovery required to meet the outcomes of the Basin Plan.

Water recovery

It is in the interest of all stakeholders that the amount of water recovered accurately reflects the targets established under the Basin Plan.

The updated factors will affect the amount of water recovered against the targeted recovery in some catchments. There are a number of issues which will impact on future recovery, including the factors and the delivery of currently contracted water.

The final outcome will be known closer to the deadline of June 2019, as state water resource plans are finalised, and recovery programs and projects are completed. 

For more information on water recovery, visit the Department of Agriculture and Water Resources.