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Corporate Governance Regimes of Australian Irrigation Water Supply Businesses
 

CRC Irrigation Futures

Project Title

Policy Research on Water Services Providers Institutional Arrangements. Brochure available (PDF 1009KB)

Web Resources

SA Policy online has put up this web site which is an early report (The Corporate Structure of Australian Water Utilities) prior to the Benchmarking study starting.

Abstract:
With a brief description of the physical setting and institutional history of the Australian water sector, this paper reviews the water institutional reforms in Australia focusing especially on the nature and extent of reforms initiated since 1995 and provides a few case studies to highlight the issues and challenges in effecting changes in some key reform components.

The reforms initiated in 1995 are notable for their comprehensiveness, fiscal incentives and clear and time-bound targets to be achieved. Although water institutions in Australia have undergone remarkable changes, thanks to the reforms, there are still issues and challenges inherent in reforming maturing water institutions.

Regional diversity in legal systems and quality standards as well as conflicts between private interest and public welfare are still serious to constraining market-based water allocation and management. While Australia still needs further reforms, its recent reform experience provides considerable insights into the understanding of both the theory and the practice of water institutional reforms.

Project Leaders and Organisation

Professor Jennifer McKay (University of South Australia)

Partner Institutions

University of South Australia, Department of Natural Resources and Mines (Qld), Mines and Energy, University of Western Sydney, the Department of Primary Industries | Agriculture (NSW), and the Department of Primary Industries (VIC).

Associated body

The Australian Water Association

Time Frame

Commencement Date: 15 July 2004
Duration: one year and one month
Completion Dates: 31 December 2006

Visionary Goal

To benchmark water allocation law and institutional arrangements in Australian rural and urban water businesses to identify inconsistencies between and within Australian jurisdictions and to make recommendations specific to water businesses to assist in law and policy reforms.

Key Deliverables

Benchmarked water allocation law and institutional arrangements including a unique examination of the issues of legal and commercial inconsistencies in Australian irrigation rural and urban water businesses and how these impede or foster the adoption by the community of better irrigation practices.  Recommendations will be presented for more effective laws and arrangements for sustainable irrigation communities characterised by triple bottom line outcomes.

Summary Budget & Resources

Year 1  01/07/04 – 30/06/05 Cash  $92,130 In Kind  $79,922 Total  $172,052
Year 2  01/07/05 – 30/06/06 Cash  $18,870 In Kind  $16,317 Total  $35,187
Total: Years 1 and 2 Cash  $111,000 In Kind  $96,329 Total  $207,329


The project has produces two major data sets. The first one deals with a content analysis of the Top Management Reports of the major Water Supply Businesses in Australia. There are over 200 such businesses and these have 16 corporate forms from local government to Corporations law companies.  The content analysis examined the self reporting of the businesses and classified the reports into 60 broad headings which have been grouped into 10 major subheadings.

These are Water content, Headings, acknowledgements, non water, current drought, staff, governance, customers, elections, and mission. more details about this headings will appear on this site soon and CRC if site.  The papers presented from the work have revolved around the interpretation of sustainability demands by the multiple businesses with special emphasis on the impact of corporate governance form. this has been presented to the CRC IF twice, the OECD, the 15th Stockholm water symposium, the IWA meeting in Chile and the national Australian eurpote Centre meeting on sustainable water management in Canberra. over 175 businesses have been involved in the study.

The second data set is the outcomes of a survey of the CEO'S of those businesses. This is almost complete as of March 2006. The survey asked the respondent s a wide range of questions about the achievements of ESD and asked them to identify barriers.
Project officer
Adam Gray
adam.gray@unisa.edu.au 
 

The document below gives a listing of the content categories established for the Content analysis of Top Management reports of over 190 large Australian water Supply Businesses. The authors and CRC welcome other users of this information and we are willing to manipulate the data to provide answers to specific questions. for reasons of privacy we cannot reveal information about individual water supply businesses but can group by State region, type of corporate governance structure.
Content Analysis Technique
 

The sustainability reporting of 139 Water supply businesses in Australia is available at "OECD Workshop on Agriculture and Water: Sustainability, Markets and Policies" (restricted access) and enter the Username: water and Password: australia
http://www.oecd.org/agr/env Organisation for Economic Co-operation and Development
 

March 2006 (Volume 1 Issue 1)
Water Utility Management International is a new publication focusing on the needs and interests of senior water utility managers.  The aim of this publication is to provide those heading water and wastewater utilities with an international reference point on the strategic issues affecting their organisations.
 

Water Utility Management International 1.1 (2006) 8-11
Are utility attitudes to the environment shaped by corporate governance?
Assessing the evidence from Australian utility reports
by Adam Gray and Jennifer McKay This paper was an invited contribution to a new journal called Water Utility Management International which is published by the International Water Association UK. Like much of the rest of the world, Australia is currently adapting its policies, legislation and resource management practices to achieve more environmentally-sustainable water usage. But does the extent to which water utilities implement appropriate measures depend upon their corporate governance? Adam Gray and Jennifer McKay describe ongoing research of utility reports to assess this.
 

No 21: Jennifer McKay
ISBN 0 86803 820 2
Abstract
The early Europeans perceived water and land in Australia in ways that led them to over-allocate and overuse water.  As a result of this misperception Australians as a whole need to devise new policies to ensure that water allocation is within principles requiring environmental, social and economic sustainability.  This will involve reduction of water allocations to growers and significant changes to pricing structures for urban users and industry.  Environmental factors need to be measured and hard choices need to be made.

Since that time over 200 hundred farmers in NSW and Victoria have had a chance to comment on it in the course of some ARC work and then it was republished in 2005 in the Special issue if the international Journal Water Policy in the paper Water institutional reform in Australia vol 7 p35-53.  Since then, the CRC IF work has allowed the 200 CEO'S interviewed( in 2005) from all major and minor irrigation water suppliers to reflect on this corporate organisational structure as well.  The results will be reflected in the next iteration of this diagram.

However, one key feature of this corporate organisational structure diagram (size 217 KB) have achieved universal acclaim.  That is the requirement to limit the taking of dividends by Ministers to an adequate return in capital invested.
 

Adam Gray and Jennifer McKay
Water Utility Management International 1.1 (2006) 8-11
Full Text (PDF 538 kb)

Abstract
Like much of the rest of the world, Australia is currently adapting its policies, legislation and resource management practices to achieve more environmentally-sustainable water usage. But does the extent to which water utilities implement appropriate measures depend upon their corporate governance? Adam Gray and Jennifer McKay describe ongoing research of utility reports to assess this.

The results of the typology are presented below. This work was conducted on major water supply businesses. There are many small water supply businesses in Australia supply particular communities.  This work was conducted in consultation with the many bodies such as the Australian Water Association, the Irrigation Association of Australia and many individuals who gave us information. The initial classification were checked by two senior law students Fiona Partington and Michael Griffin.

Ganesh Keremane and Prof Jennifer McKay gave papers at the ANCID Australian National Committee on Irrigation and Drainage Conference in Darwin last week.  ANCID has many members from diverse sectors of the economy such as a farm business members, ecology researchers, private sector, government local State and Federal. The Director of the National Water Initiative and the MDBC conducted a forum on the impact of the drought.  Ganesh gave a paper in the session called Community Partnerships and Jennifer in the session called Entitlements, Development and sustainability. 
Ganesh
The role of Community Participation and Effective Partnerships in Implementing sustainable Waste Water irrigation Scheme; The Adelaide Experience
Jennifer
Barriers to the Achievement of ESD in Water Utility Management- responses from CEOs'

Prof McKay was invited by the Attorney Generals Department to celebrate with Minister Ruddock the 50th anniversary of the organisation Emergency Management Australia. The event took place in Mt Macedon Victoria.  EMA publishes the Australian Journal of Emergency Management at Prof McKay is on the Editorial Advisory Board of that journal which has a wide circulation nationally and internationally.

an image of the irrigation system

Only one-third of water supply chief executive officers surveyed across the nation are confident that their companies or enterprises can achieve sustainable water management, a University of South Australia study shows.  Like many countries worldwide, Australia is adapting its policies, legislation and resource management practices to achieve more environmentally sustainable water usage.

But the extent to which water utilities implement appropriate measures often depends on the way in which these corporate utilities are governed, according to the Director of UniSA’s Centre for Comparative Water Policies and Laws, Professor Jennifer McKay. Prof McKay examined the impact of the corporate governance structures of Australian irrigation water supply businesses on compliance with the 2005 National Water Initiative’s (NWI) reforms concerning environmentally sustainable development (ESD).

Barriers to achieving compliance with NWI reforms and other factors that inhibit ecological sustainability were identified by 183 CEOs from Australian water supply businesses.  These water supply businesses range from fully private to hybrid local governments with corporations, law companies and government owned enterprises. In all, the bodies are very different to each other, with different reporting responsibilities and financial and environmentally sustainable development reporting requirements under other Acts within states.

“Following the Council of Australian Government (CoAG) water reforms of 1994, future water projects in each state had to be based on seven ESD principles, with both the private sector and the community involved in water planning at a regional level,” Prof McKay said.

The ESD principles state that decision making processes should effectively integrate long and short term economic, environmental, social and equity considerations; lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation (the Precautionary Principle); the global dimension of environmental impacts of actions should be recognised and considered; the need to develop a strong, growing and diversified economy that can enhance the capacity for environmental protection should be recognised; the need to enhance and maintain international competitiveness in an environmentally sound manner should be recognised; cost effective and flexible policy instruments should be adopted; and broad community involvement should be facilitated.

“Each state has set in train different processes to achieve ESD, however, both within and between the states is a plethora of ESD definitions and very little guidance for officials on how to make choices between the ESD aims,” Prof McKay said.  These ESD requirements, supported in the National Water Initiative, became the subject of a large-scale research project funded by the Cooperative Research Centre for Irrigation Futures. Prof McKay is a key researcher in the CRC, which aims to halve water usage within Australia and define sustainable irrigation areas and practices.

Water supply business CEOs surveyed were asked to respond to more than 200 questions relating to their knowledge of ESD, their attitude to water reforms, trust of the state government water planning processes and community involvement.  “The vast majority felt well informed by their state government about state policy but only 13 CEOs considered that water planning processes instigated by their government have worked well,” Prof McKay said.

“In relation to ESD, the process was considered transparent by less than 12 per cent of CEOs. The responses of CEOs could be split into three groups - exhibiting no trust, neutral, and a high degree of trust in their particular state government.  “When asked to rank the seven commonwealth principles in order of their difficulty to achieve in their area, most CEOs were unsure how to consider the global dimension and how to implement the precautionary principle.

“The research revealed that CEOs put their greatest efforts into ESD principles that achieved broad community involvement in regional water planning, cost effective and flexible policy instruments, and decision making that integrated both long and short term measures,” Prof McKay said.

The Water Report Journal
Telephone interview with Prof Jennifer McKay
Monday, 6 November 2006 Vol33/#3, ps. 12-13.
EWN Publishing

Only one-third of water supply chief executive officers surveyed across the nation are confident that their companies or enterprises can achieve sustainable water management...[full article can be found here (PDF 710 KB)]

an image of the glass of water

ABC North & West SA (Port Pirie)
News - 02/11/2006 - 06:30 AM; 07:31 AM; 08:31 AM
Morning Show - 02/11/2006 - 08:41 AM

The University of South Australia asked water managers if they were meeting environmentally sustainable principles agreed to in the 1990s. The study found that two-thirds of managers responsible for water boards or corporations were not confident they were using water resources in a sustainable way.  Professor Jennifer McKay says water management is governed by different laws across the country and handled by different bodies such as councils or corporations, making it difficult to determine best practice for water.  Professor McKay says it leads to frustration for people managing water systems. "We've given responsibility to organisations, and while that is a good thing in many ways, it is also a very hard thing to resource," she said.  "Many of the bodies don't feel they have enough funds such as getting a social and economic dividend out of water."  Professor McKay says no one would be managing water badly on purpose. "There's nothing deliberately bad," she said. "I think there possibly, on occasions, there are decisions being made without enough information, which might ultimately turn out to be not optimal, but given the state of public policy, that's always the case."

The Water Report
Monday, 6 November 2006. Vol 33/#3, ISSN 1038-8508

Water Management Policy
Interviewees: Professor Jennifer McKay, University of South Australia
ABC Gippsland (Sale)
Mornings - 06/11/2006 - 08:42 AM

Professor Jennifer McKay, Director Centre for Comparative Water Policies and Laws University of South Australia is in New Delhi talking about Australia's groundwater management systems to Indians on behalf of the Indian Government. Says the premier’s meeting with the PM has a potential for real change and importantly to harmonize and move forward. Says she would like to see the Lexicon Provisions come out of this meeting.

In his Australia Day Address today, the Prime Minister John Howard announced a 10 billion dollar, 10-point plan to overhaul the management of Australia's water resources. 

The Australian Science Media Centre has collated a range of reactions from water experts around the country.  Further information on the Prime Minister's plan is available at: www.pm.gov.au/docs/national_plan_water_security.pdf . 

Feel free to use these quotes in your stories or if you want to interview one of these experts, contact the AusSMC on (08) 8207 7415 or email us at info@aussmc.org

Any further quotes will be posted on our website as soon as they are available at www.aussmc.org 

Professor Gary Jones is Chief Executive of eWater Cooperative Research Centre
“Mr Howard has put forward a bold and well-funded plan that offers a way forward for the better use and management of water in inland Australia. The plan provides significant funding for water science and technology, especially in the measurement, monitoring and reporting of water resources data.

Nevertheless, it is important that the needs of the environment are not forgotten with the ever increasing focus on new infrastructure and efficient water use. It would be an opportunity missed if our rivers and wetlands do not get the lion’s share of the 50% of recovered water that is to be retained by the Commonwealth from funded water savings.

Further, the water resources of northern Australia are outstanding ecological assets, and we must make wise choices about where and how they are developed - we should not repeat the mistakes made in exploiting the Murray-Darling Basin (MDB) in the past.
The Prime Minister's new plan will give further impetus to eWater CRC's model development work in water systems operations and ecological management.”

Professor Tally Palmer is Director of the Institute for Water and Environmental Resource Management at the University of Technology, Sydney

"The Prime Minister’s plan begs significant questions, for instance;

- Will the new plan mean a move to environmental flows linked to clear environmental outcomes? The NWI needs to have very strong water resource protection implementation if the Prime Minister¹s goal of 'returning our river and groundwater systems to environmental health' is to be realised.

- Can we challenge the PM to expand on solving over-allocation of the Murray Darling - does he mean the river gets some its own water back as well as equitable sharing among users?

The PM notes the need for, and commitment to water development in the North
- is there an equal commitment to ensuring that this development is sustainable?

If I had one suggestion for the PM, it would be for the government to look at the South African model of the Water Research Commission and consider serious commitment to water research in engineering, science and social science so we manage this resource with the best possible information, knowledge and wisdom. Australia may have limited water resource, but it is rich in innovation and excellent water researchers who are able to translate research into practical solutions to problems."

Gary Foley is Acting Director of Meteorology at the Bureau of Meteorology

"The Bureau of Meteorology welcomes the government's announcement and appreciates the recognition by government of the Bureau's ability to develop the rigorous and nationally-consistent water monitoring network that they consider necessary in support of good decision-making. The Bureau recognises the challenges ahead in achieving this goal but it is very much looking forward to the task."

Jennifer McKay is Professor of business law at the University of South Australia’s Centre for Comparative Water Policies and Law."

 The main new idea is to demand transfer of power from the states to the Commonwealth over water in the Murray Darling Basin. This overcomes the constitutional constraint imposed by Section 100 inserted by NSW and Victoria at Federation as they were scared of Commonwealth power. Hence this mechanism of transfer of power is an elegant solution to Section 100 and has been used before in relation to de facto children and the Family law act."

Associate Professor Hector Malano is an irrigation engineer with the CRC for Irrigation Futures (CRCIF) and Department of Civil and Environmental Engineering at the University of Melbourne.

"Investment in irrigation infrastructure is desirable, however, investment has to be carefully targeted and we need to be able to ascertain cost effectiveness of this investment in minimising water losses. In order to be able to quantify the cost effectiveness, we need to have in place appropriate accounting systems for water. The existing systems are not really adequate to quantify the water savings that may arise from this water saving investment.

It is also important to emphasise that as well as investment in infrastructure we need to invest in implementation of more comprehensive accounting infrastructure. Current infrastructure for accounting is inappropriate and inadequate to pick up eventual savings that may occur from this investment. As well as infrastructure, we should invest in improved water accounting systems."

Dr Wayne Meyer is Chief Scientist at CRCIF. He is an internationally recognised irrigation scientist with experience in crop water requirements and salinity management in irrigated regions."

A major and systematic plan to improve on-farm irrigation technology across a range of irrigated commodity production systems in Australia is very welcome. This can build on the very considerable investment that has been going on in many irrigated regions. The program has the promise of greatly speeding up adoption of more water control and its management. Work in the CRCIF clearly shows that to ensure the maximum benefit from this program will require not only technology but commitment to improve management skills and ongoing service levels in regions. Both public and private sector interests and institutions will need to be involved.

The need for complete and improved metering of all water use is a critical part of improving our irrigation management. Making best use of existing and new technology to control water and achieve optimal economic crop yields needs accurate measurement. The commitment to improve metering of both surface water and groundwater is really important because of the critical linkage between these waters particularly in irrigated regions."

Shahbaz Khan is Professor of Water Hydrology at Charles Sturt University (CSU)

"In addressing once and for all water over-allocation in the MDB we need to analyse spatial, water availability, allocation use and productivity on a catchment by catchment basis and this initiative will be very effective in bringing the balance between rural water use and the environment if it is implemented in the right places. Regional communities need to be fully consulted, involved and be provided with the right level of compensation for water and structural adjustments.

The sustainable cap on surface and groundwater use in the Basin is a very welcome initiative in terms of recognising surface and groundwater as a single resource. Balancing the consumptive and environmental use from surface and groundwater is only possible if the short and long term water balance of surface and groundwater is factored in the cap, taking on board water balance impacts of climate change, bush fires, improved irrigation efficiency and farm dams. Development and management of such a cap will need to be underpinned by independent scientific evidence of exchange rates between these two sources, both within and outside the irrigation area under a range of scenarios."

Presents
Dr. Jennifer McKay
Centre for Comparative Water Policies and Laws
University of South Australia
Tuesday February 20, 2007
5:00 – 6:00 p.m.
Bren Hall 1414

"Achieving Environmentally Sustainable Development in Australian Water Corporations"

Presented by:
the Governance for Sustainable Development Program and the Water Policy Program
Research Interests

• Corporate governance especially third party effects of corporatizing government business enterprises such as the prospectus provisions, codes of conduct, directors duties and directors as whistleblowers

• Comparative water resources laws and policies, especially regimes established to achieve sustainable water allocation policies.

• Corporatisation and privatization of water: social, environmental and economic impacts.

• International trade law, especially the trade in food as trade in virtual water.

Dr. Jennifer McKay is a lawyer with over 20 years of experience writing and researching on national and international water policy and law issues. She has contributed more than 50 articles to major refereed national and international journals and has received multiple research grants from the Australian Research Council and Land and Water Australia. She serves on the editorial board of the journal Water International and on the technical organizing committee for the World Congress on Water Resources of the International Water Association.

McKay is the national coordinator of the Water Management Law and Policy Interest Group for the Australian Water Association, and a key researcher for the new CRC for Irrigation Futures. She has been invited to make water law reform proposals for many state and federal governments and is presently the foundation director of the Water Policy and Law Group at the University of South Australia. Members of the group publish on water-quality laws, surface and groundwater water markets, policy frameworks for water allocation and trading, water property rights, dam safety and capacity sharing, urban reuse of water, Agenda 21, water development for poverty alleviation, corporatisation and privatization of water utilities, and international water law.

McKay is the Water Resources Commissioner on the South Australian Environment, Resources and Development Court and has been appointed by two ministers to the National Heritage Trust-funded Mt. Lofty Ranges Catchment Board. She has been invited to participate in the Rosenberg international forums on water policy since their inception in 1997 and has undertaken water policy work for the World Bank and the government of Singapore. She received her PhD from the University of Melbourne.

Abstract/Summary (Full Text)

The Australian Government has embarked on two phases of ambitious reform of state laws and policies for water management. The first in 1994 was known as Council of Australian Government reforms (CoAG) and the second in 2004 is known as the National Water Initiative reforms. These were prompted by a number of domestic environmental and social issues and international processes targeted at reducing government activity in water management.

The first set required massive changes to water governance that is separating functions into environmental, economic, and water supplier and also requiring Environmentally Sustainable Development (ESD) and integration in all water development proposals. The second phase extends the first but is much more prescriptive and sets out 80 goals that water supply businesses and state governments must encourage rural and urban communities to achieve...

Water firms in over their heads
The Australian, Edition 1 - All-round Country
THU 08 MAR 2007, Page 004
By: Selina Mitchell
 

TWO-THIRDS of water supply company CEOs across Australia are unsure their companies can achieve efficient and sustainable water management.  A survey of 183 water utility CEOs by the University of South Australia has found they are bogged down by a complex governance system and lack of knowledgeable staff. Jennifer McKay, director of the university's Centre for Comparative Water Policies and Laws, told a Canberra conference yesterday water services businesses run by local governments were the least confident of managing conservation, because they had ``too many things to do'' and too few resources. 

Dr McKay told the Australian Bureau of Agriculture and Resource Economics Outlook forum that Australia must develop similar laws for water management across all states and territories.  The forum also heard that demand for water in Australia's cities would continue to grow and past conservation and resource management efforts would not be enough.  Water Services Association deputy director Claude Piccinin said Australia's population would grow by five million by 2030 -- and most would be living in cities.  ``Demand management will play its part, but it will not be able to bridge the gap between water available and water required,'' Mr Piccinin said.  He said cities could not continue to rely on rain-dependent options.  At the same forum, ABARE researcher Peter Gooday warned that groundwater would not be the saviour.

Mr Gooday said there was already substantial over-use of groundwater in some areas and uncertainty about how much was left in many systems.  Increasing groundwater use could dramatically reduce surface water flows as the two sources were often closely connected, he said.  Allocations should be conservative and any trade in groundwater delayed until allocations were properly controlled and monitored.  Earlier, Environment and Water Resources Minister Malcolm Turnbull announced $5.6 million in funds to help accelerate the introduction of surface water trading, which he said was critical to reform.

Prof Jennifer McKay, 2006
Issues for CEOs of Water Utilities with the Implementation of Australian Water Laws
published in Journal of Contemporary Water Research and Education

Paper commissioned by Journal of Contemporary Water Research and Education. ISSN 1936-7031 vol 135, 120 -132 Special edition on integrated water resources management [IWRM]: lessons learned from practice; tools to improve governance; new institutional arrangements; national and regional case studies of successes and failures; future directions. This journal is a peer-reviewed journal of the Universities Council on Water Resources (USA)[www.ucowr.siu.edu]
 

 

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