Major review looms for NSW water sector

NSW’s Department of Primary Industries Water is set to undertake a broad-ranging review of the state’s water sector, as part of a broader strategy to substantially boost productivity.
Last week, DPI Water Deputy Director General Gavin Hanlon told an Australian Water Association breakfast seminar that if the department is able to get the water industry’s settings right, economic productivity in the state could increase by as much as 30%.
“That may seem like a pretty big statement but if you think about the contribution that water makes to many industries, it can create some big opportunities,” he said.
“By March, we will release an issues paper where we will ask the industry, as far and wide as we can, what are the things the government should be addressing the in short-, medium- and long-term?”
Hanlon said whether the industry had the correct institutional arrangements would be a key priority for discussion.
“There are 105 water utilities in NSW, some of them incredibly mature and world-leading, right through to those who have failed and governments have had to step in and clean up,” he said, adding that not stifling innovation or diversity in practices would be a priority.
Hanlon said methods to foster a more efficient water market across the state would also be a high priority.
“In southern connected systems of NSW, the water market works okay. It’s evolving and this year they are starting to explore derivative-type products,” he said.
“But across the rest of the state we have to ask whether we have a proper water market operating and whether we have the framework between the bulk providers and retailers set up to work properly, or the water sharing plans properly set up.
“There is a real opportunity for us to discuss whether we have the market settings right.”
Hanlon said the spotlight would also be cast on water productivity in the environment, agriculture and communities.
“Last year the environment used the equivalent of $80 million of water in the Murray-Darling Basin,” he said.
“Have we actually considered the opportunity cost of that water and what it would have done if that water was put back into the marketplace or whether it was used elsewhere?
“By productive use of environmental water, can they demonstrate, and I upset a lot of environmentalists when I say these things, that there has been genuine environmental gain from where the water has been used? In a number of cases they can, but they are very bad at communicating it.”
Hanlon said DPI Water itself was currently undergoing major renewal.
“You can’t renew an organisation without renewing its people, which means it is going to be a bit tense inside of the organisation,” he said.
“Any change process creates anxiety and it’s fair to say we are right in the middle of that and will be for another six months or so.”
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