Murrumbidgee Inter-Valley Trade Explained

Inter-valley Trade

How does the Murrumbidgee IVT work?

The IVT account reflects the volume of undelivered Murray water in the Murrumbidgee, essentially water that is in the Murrumbidgee but is owed to the Murray and transferable when desired. Trade between the two zones can affect the IVT balance the following ways:

  • Trading out of the Murrumbidgee increases the balance and vice versa
  • When water is physically delivered from the Murrumbidgee to the Murray the IVT reduces. The delivery volume is measured at Balranald.
    • Water is very occasionally physically delivered from the Murray to the Murrumbidgee (into Billabong Creek) using Murray Irrigation Limited infrastructure, subject to agreement. This increases the IVT balance.
  • Water can be physically transferred between the Murray and Murrumbidgee systems through the Snowy Scheme.
    • Conditions are rarely suitable and cooperation from Snowy Hydro Limited is required.
    • Depending on the direction of the transfer this will increase or decrease the IVT.

Summary of the Murrumbidgee IVT balance in the 2020-21 season

On 3 December 2020 the balance of the Murrumbidgee IVT was at 108.6GL, with transfers between the Murrumbidgee to the Murray closed with the capacity being at -8.6GL; trades from the Murray to Murrumbidgee were open with a capacity of 108.6GL being able to be transferred.

On 9 December, the Murray-Darling Basin Authority (MDBA) requested that WaterNSW deliver a volume of up to 45 GL for the month of January, which is in addition to the volume of 40GL requested for delivery from early December 2020. On 11 December the IVT balance was 102.3 GL.

On 19 November 2020 WaterNSW announced that deliveries of the Murrumbidgee IVT from Balranald would commence from the first week of December 2020, with a subsequent announcement on 9 December 2020 stating that the deliveries have been extended until the end of January. These deliveries will result in a total of 78GL being delivered in the system by the end of January 2020. On the day of the announcement the IVT balance was at 102.1GL, since the announcement the balance increased to a maximum 109.4GL on December 2, before decreasing by approximately 1GL per day since December 3rd.

On 18 December, WaterNSW announced that, as a result of feedback from customers and in consultation with the Department of Planning, Industry and Environment (DPIE – Water), the decision has been made that if the 85GL trigger that opens the IVT trade account is not reached by 22 December 2020, it will delay its opening until 5 January 2021.

On 22 December the IVT balance was at 86.1GL resulting in the IVT successfully opening on 5 January 2021.

On 25 January 2021 WaterNSW announced that the Murray-Darling Basin Authority requested that 45GL be delivered through the Murrumbidgee IVT in the month of February. This resulted in an estimated daily clearance rate of 1,700ML per day for February. The IVT balance on 25 January 2021 was at 86.4GL.

On 1 February 2021, the IVT opened, with a maximum of 16.3 GL of water to be transferred from the Murrumbidgee to the Murray. Transferring water through the IVT is highly sought after, with over 69GL in the queue as of 2 February 2021, making it a very competitive space. The IVT is forecast to open once more before the end of February

As anticipated, the Murrumbidgee IVT opened for the fourth time this season on Monday 15 February 2021, with a balance of 80.5GL, meaning that a total of 19.5GL was able to be transferred from the Murrumbidgee to the Murray. This balance was filled almost instantly and there was an additional 33GL in the queue.

On 19 February 2021 WaterNSW announced that they will continue to deliver water throughout March, at an average rate of 1.25GL / day with a delivery target of 40GL for the entire month.

A month since the fourth IVT opening (15/03/2021) the Murrumbidgee IVT opened for the fifth time of the 2020/21 water season, with a balance of 85.0GL; however, only 5.7GL of water was transferred through the IVT before the restriction was closed. This was due to a large parcel being at the top of the queue, resulting the IVT to close prematurely. This larger parcel was transferred through the IVT in the following days.

On 16 March 2021 WaterNSW announced that it would continue to deliver water throughout April, at an average clearance rate of 1.5GL per day, with a target of 45GL to push delivered for the entire month. This is an additional 45GL to the 170GL delivered through the IVT by WaterNSW since December.

The Murrumbidgee IVT announcement on 16 March 2021 also announced that deliveries in the month of March were to end by 25 March 2021. As such there will be no more deliveries of IVT water in the final days of March before deliveries are resumed on 1 April 20201.

On 6 April the Murrumbidgee IVT opened, earlier than anticipated, with 16.3GL of water being made available to trade to the Murray. The balance once more, reached its capacity quickly, however unlike previous openings there was only 7GL of water in the queue. The queue was cleared by Friday 9 April, meaning that balance will drawdown at the average rate of 1.5GL per day, resulting in at least one more opening before the end of April.

Deliveries of the Murrumbidgee IVT stopped on 25 April 2021, as announced by WaterNSW. On 19 April WaterNSW announced that delivery of water from the Murrumbidgee IVT has been extended to 20 May 2021, commencing in early May. The Murrumbidgee IVT did not open before 25 April but is expected to open during May.

The Murrumbidgee IVT opened on Monday 10/05/2021, with a space of 19GL being able to be delivered to the NSW Murray. However, only 13.6 GL of water was delivered due to the low demand. As a result of this the Murrumbidgee IVT remained open, with the balance increasing to 8.1GL on Friday 14/05/2021 due to deliveries sill occurring.

'Grandfather' Tags

One potential reason behind this increase in the IVT balance since the announcement could be due to license holders with ‘grandfather’ tags transferring water out of the Murrumbidgee. ‘Grandfather’ tags are tagged licenses that were acquired prior to 22 October 2010 (Clause 12.23(2) of the Basin Plan) and are exempt from certain water trading rules, including rules set by the Murrumbidgee IVT.

Tagged trading complicates trading within the IVT as tagged trades deal with licence holders within valleys that nominate to extract their allocation under their entitlement in a different water source.

E.g. A licence in the Murrumbidgee may establish a tag to a pump in the Murray, such that Murray water is used but the Murrumbidgee account is debited. Water ordered under tagged licenses count towards the IVT balance, in a similar way to temporary trade between two locations. Under Clause 12.23 of the Basin Plan, water ordered under a tagged ‘water access entitlement’ is subject to the same restrictions as temporary trade and subject to the restrictions of the upper and lower IVT limits. As stated above the only exemption to this are ‘grandfather’ tags, meaning that some orders may legally be allowed to push the IVT account outside its upper and lower limits, potentially impacting Murrumbidgee water users.

Pricing Analysis

When the announcement of the IVT delivery was made prices in the Murrumbidgee increased by 5% (compared to the previous trading day), from $66 per ML to $70 per ML. The next trading day saw a 33% price increase in the Murrumbidgee with water trading at an average $103 per ML. In the same time water users saw a decrease in the price of NSW Murray water from $204 per ML to $197 per ML, with prices dropping a further 3% the next trading day to $191 per ML.

In comparison to the 2019/20 season, the first Murrumbidgee IVT delivery occurred in mid-October 2019, 2 months earlier than the 2020/21 season. Upon the initial announcement in 2019 prices in the Murrumbidgee saw a 5% increase from $565 per ML to $595 per ML within the first days of the announcement. Along with this temporary water prices in the Murray saw an 10% increase in price, from $725 per ML to $794 per ML, and continuously increased until the IVT opened 47 days later.

The day before the Murrumbidgee IVT opened in the 2019/20 season, temporary water prices in the Murrumbidgee were at $727 per ML, whilst the prices in the Murray were at $891 per ML resulting in a difference of $164 per ML between the two regions.

On the day the Murrumbidgee IVT opened Murrumbidgee license holders saw prices increase by 1% to $738 per ML, whereas Murray license holders saw the price of temporary water drop by 10% to $805 per ML, a difference of $67 per ML. However, once the IVT closed again prices reverted back to near ‘pre-IVT-opening’ prices with Murrumbidgee temporary water trading at $694 per ML and Murray temporary water trading at $780 per ML, a difference of $86 per ML between the Murrumbidgee and the Murray. The dramatic price difference between the two markets illustrates the motivation behind Murrumbidgee license holders desire to shift their water to the Murray.

How your Broker can help

Due to price discrepancy between the Murrumbidgee and below choke Murray market we anticipate that once the Murrumbidgee IVT reaches 85GL, 15GL of Murrumbidgee temporary water will leave the valley, and the IVT will close as quickly as applications can be sent.

Waterfind and your dedicated account manager can assist in giving you the highest chance of success in moving your water out of the Murrumbidgee valley and into the NSW Murray market, to realise your water asset’s highest return potential. Call Waterfind on 1800 890 285.

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To keep up to date with the current Murrumbidgee IVT account balance follow this link.