Trading water allocations and changing licence categories

Obtain additional water allocations instead of entitlements

Water allocations are credited to the water allocation account of each access licence in accordance with relevant available water determinations that are made from time to time throughout the water year. Water allocations provide licence holders a share of the available water in proportion to the share component of their access licence. Available water determinations are expressed as either a percentage of a licensed water user’s share component or in ML per unit of share component.

Water allocations can be traded on the water market under s71T or 71V of the Water Management Act 2000, subject to any restrictions specified in the Minister’s Access Licence Dealing Principles Order 2004 made under section 71Z of the Act or in a relevant water sharing plan. A local water utility might consider purchasing water allocations through the water market instead of seeking more licence entitlement if there is a temporary or short-term increased need such as to top up a recreational facility during dry times.

Purchasing water allocations as required, instead of obtaining additional licence entitlement provides the following benefits:

• Reduces the risk of impacting other users through a breach of a water sharing plan long-term average annual extraction limit, compared to if additional share component were to be granted. A breach of the long-term average annual extraction limit would result in water availability for lower priority licences being reduced to ensure total extractions remain within the respective limit.
• Retains equity with other water users that can only increase their water extractions by purchasing an additional licence share component or water allocations through the water market.
• It does not reduce water allocations currently required for water-dependent industries, e.g. irrigated agriculture – licence holders will only sell water allocations which are not required for their individual business needs.
• Strengthens the water markets in NSW by broadening the range of water users participating in it, and provide beneficial outcomes for the NSW economy, including contributing to improvements in productivity (Water Markets in New South Wales report).
• The cost of allocations is generally much less than purchase of licence entitlements.
• Increases flexibility as the utility can choose if and when to buy water allocations for a particular year.

Selling local water utility allocations

Water access licence holders, including local water utilities, can make an application to WaterNSW to trade water allocations from their water access licence to another water access licence.

These applications are granted subject to rules in the Water Management Act 2000, the Access Licence Dealing Principles Order 2004 and relevant water sharing plans.

Trade of water allocations by a local water utility from their local water utility access licences or licences with the subcategory ‘town water supply’ is not permitted if in the Minister’s opinion the reduction of water allocations credited to the utility’s water access licence would put at risk their capacity to provide sufficient water to meet the water needs of its supply area.

Local water utilities should also be aware that section 77A of the Water Management Act 2000 requires the Minister to cancel a specific purpose access licence if the purpose for which it was granted no longer exists. Continued selling of water allocations under local water utility access licences or any other specific purpose access licence held by the local water utility may be evidence that the traded water allocations are no longer required for the purpose they were granted. This may then result in the relevant access licence entitlements being reduced.

Unused water allocations from general security licences (which, for example, may occur in wetter periods when less water is required) may be traded to other users.

For further information on trading water allocations visit, trade of water allocations by local water utilities.

Changing licence categories

The conversion of some licences from one category to another is possible under section 71O of the Water Management Act 2000. However, section 71O prohibits changing the category from or to a local water utility access licence. The conversion of access licence category is also constrained by the rules in the Minister’s Access Licence Dealing Principles Order 2004.

The conversion of any category of specific purpose access licence to another category is also not permitted. This is because section 77A of the Water Management Act 2000 requires the Minister to cancel a specific purpose access licence if the purpose for which it was granted no longer exists. An application to convert a specific purpose access licence category would be evidence that the purpose for which the licence was granted, no longer exists.