Water reform over the last 20 years has had a profound impact on Murray Irrigation Limited (MIL) and the irrigators within its footprint.
The yield from our general security entitlements has been eroded to the extent they could now be described as low security.
Successive MIL boards and management have had to adapt to this reduction in water availability to keep the company and its irrigators viable.
MIL has done an excellent job of keeping variable fees down to encourage water use when it is available.
MIL is largely a fixed cost business and recovers nearly all those costs from its customers.
MIL had to issue Delivery Entitlements (DEs) to customers as a legal requirement of the Water Act 2007 following the separation of water from land.
A DE was necessary for both the right of access and to provide a mechanism for recovery of costs regardless of customer dealings with water entitlements.
Until now, MIL has levied a charge against DEs for the access rights a DE confers and to recover a significant proportion of the costs for the operation, maintenance and replacement of its network.
The MIL board has proposed a new fee structure for consideration.
The proposal seeks to remove charges against DEs, which completely removes the purpose of a DEs role in recovering fixed costs.
Aligning outlet charges with the actual cost of operation, maintenance and replacement of those assets based on a customer’s direct infrastructure relationship with the company is equitable and welcome.
In general, fixed charges will be drastically reduced, with the income shortfall being made up with more water sales to customers and an almost doubling of the variable delivery charge.
The proposal expands the shift to water sales to customers to raise revenue. 80 gigalitres has been sold to customers in 2025/2026 with a resource distribution of two per cent (20GL).
By contrast, in 2013/2014 MIL made resource distributions of 14 per cent (147GL) against DEs in that year.
Under this proposal, the resource distribution will no longer occur.
Addressing perceived inequity has been stated as the primary reason for the proposal. We beg to differ.
Customers have significant control over their cost base.
Water use, water and DE ownership and outlet numbers are within customers’ control and have a direct relationship with any variation in the cost per megalitre of water used.
Based on the limited information provided, we fear that the proposal in its current state will result in a negative equity shift to those that use most of the water in MIL.
Suggestions that more efficient and productive water use will result from the change are wide of the mark.
No customer inefficiently uses water today and the price signal that this proposal sends will likely impact how, when and what volume customers use.
The impact on the summer irrigation programs from higher variable costs could be significant. These are MIL’s high volume water users.
Sales to and use by these customers is assumed and largely underwrites the proposal.
The decision that the MIL board ultimately makes has the potential to profoundly impact the future of our region, as significantly as the sale of 100GL of the supplementary licence in 2007 by a previous board.
Yours etc.
Laurie Arthur and Jeremy Morton
MIL shareholders
18°C