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Bulk water trade adjustments trials

To continue to support the efficient functioning of water markets in the River Murray system, the MDBA and water agencies and authorities from NSW, Victoria and South Australia have been investigating better ways to make trade adjustments.

Trade adjustments are made to the states’ bulk water accounts in water storages to match the volumes of water traded between states. For most trades, the adjustments are gradually made over the irrigation season to match the expected demand.

New ways to make trade adjustments are being trialled by the MDBA, as requested by NSW and Victoria with support from South Australia.

Prior to the trials, all trade adjustments between NSW and Victoria occurred in Hume Reservoir. These trade adjustments change the states’ water shares in storage which can result in a state closing trade if their share of Hume Reservoir gets too high.

Three trials will commence on 1 July 2019 for a period of three years. The trials will effectively reduce the volume of trade adjustments to be made in Hume Reservoir, and will better align water accounting with both the location and time of the trade delivery.

The aim of the trials is to reduce the frequency of water trade closures and thereby increase opportunities for inter-state water trades for the benefit of water market participants. With the significant growth in inter-state trade seen in recent years, rules such as the NSW to Victoria trade limit have the potential to be triggered and close trade more often.

The trials will only change how the states’ bulk water accounts are adjusted for trade. There will be no change to the processes for retail trades between water market participants.

The trials

Three new accounting methods are being trialled to move trade adjustments out of Hume Reservoir and to better align water accounting with the location and time of the trade delivery. These three trials commence on 1 July 2019 and continue to 30 June 2022. The trials have been endorsed by the Basin Officials Committee and agreed by the NSW and Victorian governments with support from the South Australian government. The trials are called:

  • Hume to Dartmouth triggers
  • Directed inter-valley trade
  • In-stream adjustments for return flows

The MDBA and partner states will monitor the trials and undertake formal reviews at the end of the second and third years. If successful, the trials may lead to the modification of associated legislative protocols to formally incorporate the new and improved methods.

A brief description of each trial follows.

Hume to Dartmouth triggers

Trade adjustments will be moved from Hume to Dartmouth Reservoir when the State receiving the net trade adjustment has more than a 50 per cent risk of spill in Hume Reservoir.

Moving a trade adjustment between reservoirs is a bulk water accounting process. The physical volume of water stored in each reservoir, and the volume of water transferred from Dartmouth to Hume Reservoir, will not change - only the distribution of states’ shares in each storage would change. There would be no change to water held in South Australia’s Storage Right as a result of this trial.

A similar arrangement for moving trade adjustments from Hume to Dartmouth Reservoir was used from September 2011 to June 2013. This arrangement enabled trade between NSW and Victoria to continue when Victoria might have otherwise restricted trade.

Directed inter-valley trade

This trial will use Victoria’s inter-valley trade (IVT) accounts to keep track of the destination of traded water. Rather than making trade adjustments in Hume Reservoir, the adjustments will be made in the River Murray when the IVT water is delivered.

This arrangement better matches the location of the trade (i.e. from the State’s tributary) and the timing of the river operations’ demand for traded water.

Note that the trade rules for allocation trade and tagged entitlement delivery between state tributaries and the River Murray will continue to apply.

In-stream trade adjustments for return flows

The trial seeks to change the location of trade adjustments for return flows to move them in-stream, closer to the source and timing of such trades. 

A return flow is defined here as a volume of water that has previously been ‘used’ and accounted for at one location within the southern Murray-Darling Basin, and has subsequently been returned to the River Murray. Examples of return flows can include held environmental water delivered from a tributary or a flow entering the River Murray system from a recognised return flow point.      

Project contributors

This is an initiative of the joint jurisdictional program for managing the River Murray system and arose from two prior reviews of the Murray–Darling Agreement.

The project team includes Basin state representatives from NSW, Victoria, South Australia and the ACT, along with Australian government representatives from the MDBA, Department of Agriculture and Water Resources and the Australian Competition and Consumer Commission.