So I'd like to welcome everyone to the second in the webinar series that we're doing with HRSA. This one's called Watermarket Fundamentals and How to Make it Work for You. You'll see on the front here we've got some acknowledgments that I'm Rod Kahn with Marsden Jacob. I'm also being supported by Simo Turbin and Stuart McGlocklin from Marsden Jacob Associates. As an opening I'd like to do the welcome to country, an acknowledgement of country. As host this webinar I first need to acknowledge the traditional owners. As this meeting includes representatives from other parts of the country it's important all of us to reflect, acknowledge and pay respects to traditional owners and their nations of the entire River Murray system. I recognise and acknowledge that the traditional owners and their nations of the River Murray have a deep and ongoing cultural, social, environmental, spiritual and economic connection to their lands and waters. On behalf of all of us joining in this webinar today I pay my respects to the Elders, past, present and emerging and acknowledge all Aboriginal and Torres Strait Islanders joining us here today. Firstly I'd like to do some introductions and then just talk a little bit about the process that we're going to go through with these webinars to our session that we've got ahead of us now. So firstly introductions I'm obviously Rod Kahn with Marsden Jacob. In this first session I'll also be joined by one of my colleagues Stuart McLaughlin who's a senior consultant with Marsden Jacob and Jared Eaton has also volunteered to also participate in the session in the department so that he can respond to questions. I'd note that this session is being recorded so that it can be loaded up onto and it will be available on YouTube following the two-hour session so that you can review it afterwards. I'd also like to acknowledge the work that's been done by Percival Solutions in putting this together and particularly to Tasha McGregor and Rachel Kelly who provided a huge amount of assistance to us in putting together both the slides and the content and the framing of this water literacy program that we're doing. There will be a question an opportunity for you guys to ask questions. If you have any questions please jump onto the Q&A box you should see on the screen a Q&A section. If you jump in there type in your question and press send. One of my team Amanda Lay is sitting in the background and is capturing those as we go and we'll do our best to answer many of your questions as we can and if we don't get to all of them we'll endeavor to get back to you subsequently with responses or answers to those but we hope to be able to answer as many of them as we possibly can through the sessions today. In terms of what's the plan for the webinar first of all over this first section of the webinar we're going to do a bit of an update on how things have evolved since the last update that we provided. That will go for about 40 minutes followed by a Q&A session at the end of that and then after that we will call this webinar to an end and you should have received a couple of links but we'll also put them in the chat for you where you can make a choice. Then there are two half hour sessions so there'll be a risk management strategies session and at the same time as that we'll be running an emerging water market products session and so if you choose to join one of those for half an hour and then we basically give you a we will repeat those sessions again over another half hour and so you can have the opportunity to participate in both of them. The second half of the sessions will have the opportunity to be more interactive so that we'll be running it such that if you've got a question or want to ask something that you can raise your hand in those sessions and then participants can basically be unmuted but this first session that we're running through now basically we ask you submit any questions via the Q&A. A quick disclaimer the information that we're providing in this presentation does not constitute financial or other professional advice and is general in nature. We're basically here to give you an overview of the products available how they were used in the marketplace and it doesn't take into account your specific circumstances or requirements so if you're thinking about using one of these we encourage you to undertake the research and get the advice that you need before you make that. If you've asked a question in the Q&A and you want to direct it at someone in particular please include the name of that person who you'd like to have answer it and as I said before we'll look to answer as many questions as we possibly can. So at that point I'm now going to jump into the slides you should be able to see the first slide here which is the webinar cover page. The outline of the presentation today we're going to give you an update and an outlook basically looking at what's changed since the April webinar I presume a number of you also listened in on that one. We're also going to do a bit of a refresher about the basics a big part of this exercise is really helping people understand the opportunities but part of that is working through some of the complexities and doing some 101 on markets. We're going to be talking about intervalley trade opportunities to South Australian irrigators so the focus of this session is very much on irrigators and essay looking for opportunities and how do you deal with intervalley trade considerations and then we're going to look at water market products available to you that can help you manage your requirements and also to manage risks. So a quick outlook what's happened since the April webinar. So Southern Connected Temporary System well prices have continued to soften not surprisingly because we've had some good inflows into the system. Damn storage levels still got a way to go before we get up to the levels where we'd like to be but the bomb outlook is looking pretty positive at this point in time in terms of median chance of rainfall is really quite high and so the outlook remains good and not surprisingly what we've seen in the Southern Connected Temporary Market is a significant softening of market prices which is a great way to the end of the year if you're looking to acquire a bit more water. The allocation outlook we're indicating sort of low water availability with forecast water being I guess below under extreme dry and average circumstances where we thought they would be compared to 2019-20 and also below the 10-year average even under wet scenarios being in place. Let's have a look at how it's changed. So things have improved we've still got low water availability under the driest conditions the extreme die and the dry conditions but the outlook has quite fortunately improved compared to where we were and this is sort of based on what the outlook is like in terms of available allocation as at February 21 so I think that's good news but it still means that with the amount of water that is likely to be available through allocation in the system that water prices are going to remain at more of an elevated level unless we see significant inflows into the system. Let's now move to some key concepts and definitions and so this is what we've called the South Australian Water Markets 101 session. One of the key things that confuses a lot of people who we talk to about water markets is the range of terminology that's out there and as you can see from here there's all sorts of different descriptions that apply for I guess effectively similar issue or similar matters that are being considered. So across South Australia, Vic, New South Wales and Queensland, water entitlements go by slightly different sorts of names. The usable portion could be called your allocation or your seasonal determination or your available water determination or an announced allocation. Different terminology is applied to concepts such as permanent transfer, temporary transfer. The regulated water sources could be called regulated as in Vic and New South Wales prescribed water course as in South Australia or supplemented in Queensland. Unregulated also has some different terminology and then the entitlement types also have different names. So in South Australia we tend to be talking about class 1, 3 or 5 when we're looking from an irrigation perspective when we're in Victoria we are talking generally about high and low reliability entitlements. New South Wales high in general security entitlements and Queensland high and medium priority entitlements. So we put this together for you basically as a bit of a resource so that you can refer back to it and understand some of the differences that are in place in terms of the terminology across the system. Let's look a little bit as well about how much water there is under these. So this is just a brief summary for you. I'm not going to go through this in detail but it really highlights that class 3a which has a quite high security character attached to it is a very significant proportion of the entitlements on issue and it also benefits from some features around carryover and tradeability and the like which are not present for necessarily for some of the others. And this being the final slide in this quick overview, historical allocations. There's a bit of information here but in essence what it shows you is if you look at the purple line that's class 3a allocations in South Australia depending obviously on the amount of water that's available in the system. On the whole 100% has been achieved over the last few years but obviously the back end of the millennium drought allocations were constrained. If we look at the blue which is high security zone 11 obviously it achieved nearly 100% allocations back end of the of the drought and similarly some sort of things with the high reliability zone 7 but obviously what this highlights is how allocations build up over time and that's just an important thing to always be mindful of is that an opening allocation which may be lower there is always the potential for that allocation to increase significantly over the course of the water year. Next I want to talk a little bit about intervally trade opportunities. So in putting together these slides one of the things we want to help everyone to understand is what are the opportunities that exist in this state for you guys as water users. Rather than just looking at SA, how do you navigate a market that has intervally trading opportunities but also a range of constraints. And one of the reasons why this exercise is being supported by HRSA and also by Marsden Jacob is that one of the things that we've developed in recent times is a free application that I hope most if not all of you have now signed onto and it takes a fairly brief amount of time but it's called Waterflow and Waterflow has in the back of it a complex rules engine which helps you to navigate the market and this is a visual representation of what sits in the back there. Basically what you can see is that allocations can be traded across catchments and state boundaries effectively subject to state limits. Benefit of this is it increases the amount of market size that you have available if you start looking into state. So just highlighting what's possible from a zone 12 perspective where you've got this sort of pinky purple color here basically identifies where a trade have an allocation is always allowed. This is basically coming from and this is going too. So you might be a seller or a buyer and these are areas where it's always allowed but equally you can trade into other zones as well but if you're trading into those other zones you need to be mindful of the potential for limits to come into place and again we've done this as a bit of a star as a sort of visual representation of it but you can see that if you were looking at zone 1a a couple of things you might want to think about is the golden back trade limit and the upper golden back trade limit depending on where you are trading from. We're commonly asked about things like the potential for the barma choke to kick in so you can see that if you're trading with zone 6b or 6 or 10 there are scenarios where the barma choke might kick in actually you know barma choke is over here 6 and 10 where you might actually have a constraint that emerges or you could have a low broken back trade issue that emerges so there's a range of constraints that emerge in the market but we encourage you to be looking across the market and at broader opportunities in the market because you start bringing into play a lot more water potentially and for comparison there's 608 gigalitres of class 3 water in South Australia about 938 gigalitres in Victoria zone 7 and then across New South Wales you've got 164 gigs of high security in zone 11 and nearly 2000 gigalitres of general security in terms of entitlements on issue so there's a lot of water that could potentially be available subject to what is actually announced by the straight as available allocations but you need to be mindful of whether you can buy water or sell water into those as a function of what these different trade limits are doing at that point in time and we'll talk a little bit about more though those trade limits and how they work on the subsequent slides so it's also important to think about things like how the entitlements work and what characteristics they have on them so here we talk about things like carryover capacity and what's available against the different entitlements in terms of carryover capacity by entitlement type and by class type so that's also something that's worth thinking about in terms of your opportunity to access carryover and basically if you've got spare water this year and you want to carry it over next year you could carry it over obviously on your existing allocation assuming it has that ability attached to it or alternatively you could look to see whether there might be an opportunity to carry it over interstate on another license coming back to connectivity it really underpins water delivery to South Australia under temporary you know under current rules temporary water can always be traded to South Australia from a number of zones and we've highlighted them on the map here for you 6B and 7 and New South Wales zones 11 without limits so these are areas where the risk of a market constraint coming in and coming to play is really mitigated but there are a number of main trade limits out there ones the key ones that you guys presumably aware of include the Barma Choke, the Government IVT and the Mahindraji IVT and I just want to run through some of those so here's the Barma Choke again visually represented you can see where the limits present from a seller and a buyer side but equally what this graph shows you is how much is available and you can see in here that there are significant periods of time when it's not possible to move water across the Barma Choke and the Gulban IVT is the same so here's the Gulban IVT we've got it highlighted a green zone here this is the area that's effectively affected by the presence of this limit and if you look at this trace here it basically shows you at times you can move water in and at other times you can can't move water in but you can take it out and so it's quite volatile in terms of what you're seeing here because it's responding to effectively what the market is doing a third key limit in the system is the Murrumbiji IVT like the Gulban it can be closed in or out really depends on water availability drivers as to whether which way it is and prices as to which way trading has gone but it's really just important to note that it can restrict trade effectively in both directions and in recent years we have seen it switch so you can see here a period where it was restricted one way and another period recent times where it wasn't it was the other way and and it's reversed subsequently so it's really important that if you're thinking about doing a trade in to of your water into the Murrumbiji or you're buying water out of the Murrumbiji that you understand where the limit is at and that you take that into consideration when making your decision as to whether you're going to be able to realise the water that you've either sold in or acquired out of that region. Lastly and I'm going to now hand over to my colleague Stuart I'd just like to flag that there are actually lots of great resources I mentioned before that we've put together Waterflow which has a whole heap of free resources but if you want to know more about the Barma Choke then I would encourage you to go and have a look at the great resources on the MDBA website about the Barma Choke. If you want to know more about what's happening in the Gulbunmari and what's in particular happening in terms of the trade review there's some great resources that have been put out by the department and they've released a number of documents and you can access them at this location on the water register. If you want to know more about the Victorian trading rules jump on to the trade rules site and the New South Wales register also has a wealth of information on what's possible from the New South Wales side of the perspective. So I'm now going to hand over to Stuart who's going to talk us through the managing risks part. Thanks Rob. Good afternoon everyone so today I'm just going to touch and discuss on how water markets can help you manage for risk. We're going to be in the emerging water market session after this we're going to be having some breakout sessions which Rod will touch on and in there we're going to have a bit more of a detailed discussion on some of the risks facing businesses and and how some of the options to reduce your risks from both traditional products and emerging market products so this will be just a brief overview but please join us in the breakout session for more details. So if we consider really three key overarching risks and water availability is probably the key one and it's probably the most influential risk and that is where really the rainfall and allocation yield is not sufficient for your watering requirements for that year and we've certainly seen that over the over this recent year with the significant droughts. There's been a reduced water availability and this is certainly a risk for lots of people who have been managing for temperature. Similarly over recent years we've seen increasing periods of above average temperatures and even new record set especially across the southern connected. South Australia's frequently 44 degrees in summer which certainly has an impact on evaporation. Three price so we all know that there are a range of drivers affecting price from rainfall to market sentiment to temperature and so we really see these as three key overarching risks that we are managing for. Next we to help manage these risks we're going to just touch on some of the options that we have available in terms of water market products and this is not an exhaustive list there are others out there options and and so on but these are really the five key ones we've got out mature products which temporary water and we've got permanent entitlements we've then got emerging and secondary products and these are leases forwards and carryovers and so next with the emerging and secondary products we can consider that what is an entitlement lease so an entitlement holder a leaser that transfer complete access of the entitlement to a second party a leasy for a specified period of time might be one year might be multiple years and at the end of that period the access to the entitlement returns to the leaser so whilst the entitlement whilst whilst you if you have access to that entitlement lease then you will see whatever allocations are given to that entitlement and that will be the water you will receive. Forward allocation trade so allocation water is traded with a future delivery date and that's at an agreed price the data delivery may be in the current water year or similarly it might be over multiple water years and lastly carryover parking so certain types of entitlements as Rob touched on they can allow unused allocation water to be carried over from one water year to another so in carryover parking contract a party with excess allocation water will place a will rent the carryover space from an entitlement holder to carry water over that parked allocations then return to the place in the following year there are some considerations which we'll touch on in the breakout such as risk of spill and how that might impact on what water you receive once the water years changed over or whether that risk of sill is placed on you or placed on the holder depending on the contract that's set out and so we can see here that really the timeline this just shows an overview of when each of these products can be delivered and there's a question here that yes these slides will be available at the end so I know there's a lot of detail in here so don't worry they will be available for you to sift through when we're finished in review and so forward allocation and entitlement lease we've got multi-year delivery options carryover parking allocation transfer to the parking license then in the next year allocations returned permanent and temporary trade with occurring within the one water year and next we will Rob will you briefly touch on the breakout sessions yeah thanks Stuart so so that you guys are aware in the next part so we're going to have a bit of a Q&A session now and I noticed that we've had a few questions that would be good to respond to in the next several minutes but following the end of the question and answer stage of this we'll then have two breakout sessions that I mentioned before the first breakout session is called emerging water products and we'll be taking a little closer look at three different products their characteristics and really how they can help you with managing risks so we've given you a very quick intro in the slides Stuart that you've just presented but we'll be looking a bit further at forwards leases and parking it'll be a half hour session we'll be looking at those for the first 10 or 15 minutes and then basically opening it up for questions from participants while that's happening there will be a second session running which is entitled risk management strategies and in that we're going to go through some case studies where we look at sort of illustrating some of the options that you have available to you to utilise market products with a focus on mitigating risks in the next quarter year basically we'll be talking through some of the options that you have available depending on your circumstances and there'll be some illustrative options in there is a bit of a teaser as to what you might see in there if you are a grower we look at some of the options around whether you're parking it in Victoria or New South Wales or selling allocation and purchasing it forward so there's a range of different scenarios that a grower can face so we'll be running through a series of scenarios on that to look at how those options might be beneficial to you in in terms of your considerations obviously as I mentioned before none of this is financial advice but basically the intention of these sessions is really to help you to understand the options and the opportunities that you have available to manage risk both within South Australia but also most particularly from an interstate perspective and from an emerging product perspective as well so we've had a few questions I know coming in on the chat line and as I mentioned before we've also got Jared Eaton who's available to support us with responding to some of these questions and so even when now finished that first part of the presentation I would suggest we switch across and answer questions about 10 or 15 minutes depends on how many questions so keep the questions coming and we'll endeavor to answer as many as we possibly can and then we'll have a brief break for five minutes and then we will open up the breakout sessions so what will happen is when we move to the breakout sessions we'll ask you to basically move on to whichever of these you're looking to move to first and we hope you can stay for both because you have opportunity over the hour to to participate in both if you're going to risk management you'll need to click on the risk management strategies think first and then for the second half hour you'll need to click on the emerging water products session second or vice versa depending on where you're at okay so let's have a look at the questions that we've got that have come in via the chat line thank you everyone for the questions that you have been posting Jared there's one here that I wanted Jared if you're in a position to help us answer and it's around do we think that constraints on delivery via the bomber choke are likely to impact the market and and access and I guess I can answer a bit of that to start with but Jared I expect you might have perspectives on this as well so obviously the bomber choke does impact on the market it effectively results in sub markets emerging once the the choke trade limit is at a point where transfers across the choke are closed in one direction or another so that means that water may not be available that would otherwise be available for trading if the choke was open Jared do you have any further comments on what might be anticipated around the choke it's a very good question rod and certainly what you've said there is correct I guess one of the challenging issues to deal with at this point in time is the eroding capacity at the bomber choke as well so while we're talking about trade opportunities delivery of water downstream of the bomber choke is also another big issue which the states are currently dealing with and what we've seen over time is a progressive reduction to the capacity of the bomber choke to be able to deliver on some of the downstream requirements as well so there are certainly issues there the Murray Donald Basin Authority is currently looking at different options around he can improve the capacity of the choke and he can bypass the bomber choke which they currently do you through using Murray irrigation escapes at Moala Canal and while I've got you there Jared there's another one here which I think I wonder if you might also respond to one of the business said interested in understanding rules of parking water interstate that's a very good question again certainly there are a lot of people who look at parking water interstate in particular Victoria seems to be one of the the go-to places in terms of parking water we strongly encourage people to go and have a look at the websites which are available in Victoria particularly the DELP website that has a lot of good information in there about the rules associated with parking water interstate but certainly if people are looking to do that as an option to be able to put water upstream for next year for example we strongly encourage people to go and talk to a water broker about that certainly one thing to look for if you are entering into arrangements with someone upstream to park that water is be very aware of the contractual obligations that are put in place there's a whole range of issues that people need to be aware of around risk of spill and the like which that would obviously have implications for whether people may or may not park water interstate yeah it's a really important point Jared isn't it the sense that there's some great resources out there from Victorian side but also I've fallen the same camp it's really important to get some good advice on this if you're thinking about doing it there's a number of really excellent brokers out there who really understand what the options and the opportunities are if someone's thinking about doing some parking of water interstate so that they've got it available next year and you know I always encourage people to be looking to work with brokers who are with the Australian Water Brokers Association personally because there goes the practice and the like while we've got you Jared there's a couple of questions that have come in around quarterly meter balancing that I imagine you can see there and how decision making works on those is there any commentary you can add on that yeah okay so obviously the current government policy is that people need to undertake that quarterly reconciliation to ensure that they have sufficient water on their accounts to cover off use so this is a obviously a relatively new policy that has come into place and it's certainly a lot different to the end of year reconciliation which people previously undertook so we strongly encourage people to avoid any of the potential I guess financial penalties that come along with not being compliant at the end of each quarter to make decisions quite early in the quarter about ensuring they have sufficient water on their accounts to cover off on the water use for that quarterly period thanks so much Jared um now in terms of okay I think I've got a question here Stuart you might want to answer this one cost effective interstate options to carry over unused South Australian water so someone's obviously got a bit of water in their account and they're thinking about their options so strikes me as a aligning with a session that you'll be running next in terms of the risk management strategies consideration yeah that's that's correct so in in the risk management we're going to be running through if we've got time to case studies we're going to be looking at you know you've got a grower that's got 500 mega litres it's at the end of the season they've got some unused allocation what are their options and we'll go through interstate options options within South Australia and so we'll be touching on a range of products that they can use and the current costs looking at using the current market prices and what that'll mean for them in the long term and there's a few questions emerging on the mechanics of parking water and you've already mentioned that for us that you're in essence you're striking arrangement with another person another water license holder in essence aren't you Stuart that enables you to park your allocation so that it's available for you when you want to have an agree point next year but there are risks and considerations that need to be born in mind around that as well yeah that's correct so there'll be more about that in that risk management strategies case studies section so if you're interested in thinking about your options and balancing what the things that you need to consider in terms of cost for instance across your options i'd encourage you to jump into that section of the exercise i've got a question here which is around what are your recommendations for buying high security permanent water for the riverland and look candidly it's not something that we can answer straight up like this this is something that for mine really needs to be framed in the context of what it's being used for so i'm sorry to whoever asked that question we're happy to have a chat at some other time after this but really my my firm recommendation always is on that side of things that you need to really be making decisions that are very cognizant of your situation as as a user of water and ensuring that you're effectively aligning the product type that you're looking to acquire with the way you're using water on your farm and the level of security and reliability that you're looking to achieve and that that is for a place to support you jerry if i can turn back to you for the next question when will my south australian carry over water be available for use in the 2020-21 water year is the next question and i think i just have to yep there you go jared thanks rod yep very good question again um so the process around notification uh to people about when private carryover would be made available will be in september 2020 and there's a couple here who obviously were not aware about the opportunity to carry over water jared could you talk a little bit more about that because it is an opportunity absolutely it is an opportunity for people certainly anyone that holds a class 3a entitlement in south australia can have access to private carryover then if the minister grants access to that um we had an arrangement bought into a place called south australia storage rights that was a change that was made around about eight years ago now in terms of getting a formal carry over right for south australia in the upstream storages and we've had that right in place now for obviously it's about eight years and we've at this current point in time we have just over 100 gigaliters set aside in dartmouth reservoir to meet future private carryover requirements and how does that what are the considerations in that so you can carry over up to 20 percent jared is that it's correct yes um but then that's subject to the amount of water that is then in turn made available through allocation decisions that's correct so when the so from a state level we apply carryover to when the minimum opening allocation is at 50 percent or less and rod you're right it's based on the unused allocation of up to 20 percent of the class 3 entitlements and just noting that um allocations plus private carryover cannot exceed 100 percent also around river Murray carryover obviously the final water meter readings need to be in by 31st of july uh there's no application required for private carryover our licensing department uh look at the numbers in terms of what the carryover eligibility would be during august we go through a process of calculating what the carryover allocations would be and then in september those eligible participants are like it's informed of their carryover volume fantastic thanks jar that's look i think that's that's a level of you know detail that's really beneficial for everyone out there to understand how this works and how it can work um to your advantage um but also what you know what the considerations are where that's concerned as well um got an interesting question here that i might actually direct to simo turban and from our team um could we make some comments about the prevalence of deferred delivery arrangements and how they and the difference to forward contracts yeah thanks rodia deferred delivery is basically another emerging secondary market product that has been out there for a couple of years it's been offered by some of the brokers and exchanges so basically it's very similar to an in-season forward contract so you basically lock in the price of water uh now and get it delivered and paid later if you're a water buyer so for a water buyer the difference to an in-season forward uh well there is no difference basically uh you pay a deposit you're locking the price today and then get it delivered at a uh later stage for the seller of water though there is a difference in a way that if you are selling your water through a deferred delivery contract you get your payment up front so you don't have to wait for that water to be delivered to the to the buyer uh the other main difference is that as far as i know typically these deferred delivery products are only offered during the current season so you can't lock in the price now and get it delivered next year with deferred delivery but with forward contracts you can so those would be the main difference in terms of the prevalence uh it's a niche product so even compared to a forward allocation trade the deferred delivery product is it's still emerging and you know it's it hasn't really taken off uh but yeah it does have some benefit to the participants it can offer Sima well i've got you there another question if i can so one of the participants has asked buying permanent vick water above choke can we register for auto transfer or temporary water to ourselves whenever allowed yeah very good question so obviously the debauchal limit can and it has impacted allocation trades from above the below choke this year the whole season the answer to the question is is yes and no there is no like a state government or mdba product of or a vehicle you can sign up to so there is no such automated uh transaction offered by the governments uh however some of the intermediaries can help you with that obviously as you may know these limits they change very quickly so they may not be able to guarantee that your water will get across but i would suggest you to to talk to an intermediary about this thanks Sima um just looking through some of the other questions here has quarterly balancing and Sima you may want to stay on and comment on this one as well as quarterly balancing reduced opportunities to get access to both cheap temporary and lease water and um what's happening in that area i guess uh we're going to be really careful about looking at markets with hindsight um and going what are the opportunities moving forwards across these but i guess my observation is that when i've looked at this in the past it really depends on what happens in water availability across the water year as to the implications of this because uh i saw many i've seen many circumstances over the years where when south Australian irrigators have been trying to rebalance their accounts late in the water year that they've been paying very high values and often top dollar particularly in a market that is rising over time and so not knowing about this earlier actually would have come at a financial cost in in those circumstances so it really depends on what's happening in the market as to what the implications are in terms of the cost i think i'm always a fan of more information i think you're better off knowing about these need for balancing sooner rather than later in in my opinion simo you've looked at this as well here you know what i agree with you all used there and it's it's in general the the allocation market uh it's it's it's driven by the the broader availability uh drivers and obviously supply and demand obviously you know at times when there are many irrigators looking to to balance their accounts at the same time and it can be a significant driver driver momentarily and it can have an impact on prices but broadly speaking yeah i think it's the broader terms that sort of dictate the market price for the drivers uh going through a couple more here so some i guess uh processing type things people asking about what's happening with the slides and youtube and that sort of thing so obviously they will be loaded up after the session so just confirming that these sessions will be loaded up or this session will be loaded up onto youtube and some of the information session as part of the breakout will also be put up on youtube so that you've got the ability to look at this and do it afterwards there's a few policy questions that are emerging people asking what's going to be the potential outcome of things like the a triple c review or the 450 gig um unfortunately not going to be able to comment on those this is about um water market literacy and information more so than trying to speculate on um what policy decisions will be taken um i've just also been advised that the youtube isn't going to happen straight away so it's not going to be available at 3 p.m but we're working on getting that up and available shortly after um and we'll email you all uh when it is available so that you can have access to it then um i think that's the end of the key questions that i can see all the all the questions that have emerged thus far so and i think we're right on time so at this point in time i'd like to thank everyone for participating in this session i hope it's been helpful and and useful to you um there are two breakout rooms which we're about to open up in five minutes time so um they'll each one for 30 minutes each and then give you an opportunity to change from one to the other um bring your questions to those sessions if you didn't ask them now um and thank you so much for your time and participation in this session


ey were saying tax actually instead of price. So if the price goes up because the commodity price goes up then that's one that everybody kind of, kind of adjusts to that. But if the tax goes up, people react. Well, if an excess tax causes the price to go up, you don't know why it's... Oh, it's behind the scenes. Yeah, yeah. I do think that there is a common misperception that is frankly based on the evidence intellectually dishonest around describing carbon pricing or cap and invest as inherently regressive, whether or not and how it affects a price and which quintiles of income or portions of the population come out ahead or held harmless or benefit depends entirely on how you design that policy and what you decide to do with the revenue. There's nothing inherently. You could design a carbon pricing policy that harmed the economy or that harmed low income for months or you could design one. So it's all about those design questions of the policy of how does it get implemented and then what do you do with the revenue. It's entirely possible to make sure that rural and low income for monitors come out ahead in a cap and investor carbon pricing situation just comes down to the policy design. So I have a concern that we are setting ourselves up for, we collectively are setting ourselves up for disappointment in the marketplace when we were talking about how much less expensive electric vehicles are to operate. You had to figure out there maybe it was something you mentioned about 60 cents a gallon equivalent or $1.58. And the only conversion factor that I have for miles to KWH is what we have should be bold. We have about 25,000 miles on it. So GM tells us we're using about 40 kilowatt hours per 100 miles. So at that rate, and this is a small hatchback kind of box kind of car. If that car got 40 miles a gallon with a gas motor and electricity costs 17 cents a kilowatt hour and multiplying all that through, it comes after around 270, 275 a gallon. And at, well, I just did a calculation for 60 cents a gallon equivalent and multiplying all that out. Electricity would have to cost three dollar or rather three and three quarters cents per kilowatt hour. So I just don't wanna be promising over promising savings. The savings will come on the maintenance side but it's not there on the operational side. I think it really depends how utilities design those charging rates in terms of that's really encouraging off-peak usage and then it becomes much less expensive to them charging overnight. That's a very important part. Whether or not a person has renewable energy generation outside when they're charging the car also makes a difference because if you're... It's the cost of electricity. What's the cost of electricity? So if the cost of electricity is less than 10 cents or something a kilowatt hour, yeah. Sure. Then it's a lot less expensive than a gallon of gas. Anyway, it's... I'm just concerned about that. Because having worked in energy efficiency in the 90s when everybody said, oh we're saving 20, 25, 30% of... And then when it didn't happen, people get all like, oh this is a waste of time. And it certainly, that was an average figure that was come to by Drive Electric, Vermont and they're the real experts in that space but it's also an average figure and it varies by utility and different... I'm just making a comment. No, that's the right answer, I guess. Sorry. Any other questions for Jerry? Thank you very much for having me. Thank you, Joe. Trade you. Thanks. Welcome, Tom. Thank you so much. Yeah, thanks for joining us. Thank you for the opportunity to be here today. My name's Tom Hughes. I represent Energy Independent Vermont which is a coalition of organizations working to strengthen the Vermont economy, prioritize low income and rural Vermonters in a transition to clean energy and to reduce carbon pollution. Some of the members of the coalition include Vermont Businesses for Social Responsibility, Capstone Community Action, Joey Miller's Vermont Natural Resources Council and many others. What I'd like to do today, what I've been asked to come in my understanding is to sort of book end the week. Earlier this week you had an opportunity to hear from resources for the future and their extensive analysis of carbon pricing and non-carbon pricing models and what they would do for the Vermont economy. And I'd just like to put that in perspective from the advocacy community that's working on some climate initiatives here in the state. So Future, a premier academic research firm located in Washington DC to conduct the work. Resources for the future or RFF has been studying the nexus between environmental and economic policy for seven decades now. They are experts in this field. The report itself provides data and analysis on a number of different policies including the Western Climate Initiative, which is the California and Quebec Carbon Pricing Program, the Transportation and Climate Initiative, which is the program that Governor Scott is participating in but is still in the design phase and very early in the design phase, which would cover transportation fuels only. And then the third policy, which they dove into is what's called the Economy Strengthening Strategic Energy Exchange or Essex Plan, which was a proposal developed by business leaders and low-end chem advocates in 2017 and was a policy that was in legislation last year but didn't move beyond the drafting phase. RFF offers data and analysis. They did not offer policy recommendations. At best you could look at this report as a roadmap. It does a pretty good job of saying where we are and where we need to go and then provides a bunch of different options for how we might get there and describe those options but doesn't make any recommendations. The report, one way to think about this report and it's a hefty 170 plus pages is to think about what the impacts of any policy would be on Vermont's economy, on equity for low income and rural Vermonters and for the environment. From the economic perspective, they looked at again these three carbon pricing models and found that the economic impacts would be very small, a 0.002 to 0.05 range of impacts on the Vermont economy. Just to put that in perspective, as Jared mentioned, we've got about a $32.2 billion GDP. 0.002% is about $6 million of that total gross state product. Of the policies that they modeled the Essex Plan was the one that modeled most favorably with a small net positive for the state economy. That's just on the economics side of things. When you factor in also the health benefits of reduced air pollutants that come with reduced carbon emissions, you can add in an additional seven to $19 million in health care benefits, avoided health care costs if you were to pursue one of these three strategies. In terms of equity, one of the key findings from this report is that using carbon pricing revenues and then providing them using the proceeds as rebates to Vermont households. Again, as Jared described, designing the program to benefit low income and rural Vermonters, a carbon pricing program can be highly progressive. Anywhere from 40 to 60% of Vermont households can come out ahead and those households are the ones at the lowest two to three tiers of the economic ladder. Again, while the differences aren't large between a Western climate initiative or a transportation climate initiative or an Essex plan, the Essex plan did model out slightly more progressive in terms of its economic impacts than the other two. The third dimension which this study looks at and which I encourage you to think about climate policy is on the environment and on the climate. And one of the stark things that we just have to find ourselves every day is that we're not anywhere close to hitting our goals and that without new policies, we're not gonna hit them. Those goals that the last three governors have established and that the legislature put into statute. What the researchers showed was that carbon pricing can play an integral role in a broad suite of policies to reduce carbon emissions. But there's no carbon pricing program on the table in Vermont or under consideration that could do it all. Now the price you would have to apply is politically untenable in the state. Again, however, the Essex plan would reduce carbon emissions slightly more than the other two policies that are under consideration. On the roadmap analogy, one of the hopeful things that this report does lay out is that we can get there from here, it's just gonna take more than carbon pricing to do it. We're gonna have to put carbon pricing together with a suite of other non-pricing initiatives in order to meet Vermont's climate emissions goals. What the report doesn't do, however, is it doesn't delve into what the economic and equity dimensions of those other policies would be. What does providing a $5,000 rebate or incentive for an electric vehicle, whether it's 100 electric vehicles or 1,000 or the 50,000 that the governor was mentioning in yesterday's budget address, where does that money come from and how do we get it in order to devote it to climate action. Last slide here, the top takeaways from this study. With the policies we currently have in place, Vermont's not going to get to our climate and clean energy goals. New policies are needed and necessary. The Trump administration isn't gonna help us and that means that we are on our own as states either individually or working in partnership with other states. However, there is a way to get from point A to point B and carbon pricing in combination with some of the other ideas that the Vermont Climate Action Commission has proposed and others could help us get there. The challenge to you all as this committee and the legislature and lawmakers in general is to reach that goal while also strengthening the economy and making sure that low income and rural remoders aren't left behind. Tom, as you said, the RFF reports us that carbon pricing alone won't get us there. Carbon pricing plus non-pricing incentives penalties will help us achieve those goals. But with the Essex plan or any other plan to office rebates, tumor monitors, if you give the money back in some form, then how do you achieve the non-pricing goals? So it means that you're gonna have to have a source of revenue in addition or take money from the someplace else in order to implement the non-pricing. That's true. And in that sense, carbon pricing is the low-hanging fruit of the next, it's the next step that we can take. Because all of the other proposals on the table are gonna require additional revenues. Carbon pricing is the revenue. The question is what do you do with those revenues to achieve the three goals that we think you should be working towards environment equity and economy? So with a cap-and-trade system or some other, you could use the revenues from the penalties in order to do the non-pricing things. But then you don't really, then you have the question of equity in terms of income levels. That's right. If you design a cap-and-trade program and you used all the money for rebates for electric vehicles, only those who take advantages of those incentives for electric vehicles come out ahead where as everybody who's paying the higher price might have a negative economic impact. I don't envy your position here, but there is, the report does lay out pretty clearly that there is a economic advantage, there's an environmental advantage, and there is a way to do climate carbon reductions equitably through a carbon pricing program, whether it's WCI, TCI, or the Essex plan. This probably is more of a question for the folks at RFF than you, but if you, I'm not sure whether there are analysis looked at using part of the revenues from a carbon price or a cap-and-trade system for non-pricing incentives, and what that would do to their numbers in terms of what quintiles benefit and which don't. Yeah, they did not, they discussed a little bit, I don't know if it was in your joint committee hearing or at a different hearing at some point later in the week, but they made clear one that they just looked at 100% rebates or return, but policies don't have to be 100% one way or 100% of the other way. You could certainly design a policy that was a mix between rebates and using the revenues for investments in clean energy. So the Scott administration has put their toe in the water transportation climate initiative and exploring that, so we'll see where that heads, and potentially that could make a meaningful move toward meeting the Paris commitments that we've made as a state. We actually have a witness coming in, I'm not here for an hour, coming in next week to talk about some of the things that maybe the administration's thinking about or some of the climate study work that was done, I guess completed about a year ago. Are there things, I'll just, since you're sitting in the witness chair, I'll ask you, are there things that you would highlight in addition to some of the things you've noted on carbon pricing? There's things that you would highlight that came out of that report that you would prioritize, or Jared, you feel free to chime in as well, that you would prioritize as places we should look. RFF was talking about pricing and non-pricing solutions. They would work better together, but there really weren't pricing solutions in that report. But are there things there that you would highlight as an advocate for getting our greenhouse gas emissions down for being more energy independent as the things that we should first look at? Sure, well, just to be clear, you're talking about the Vermont Climate Action Commission report from about a year ago. Okay. One of the recommendations, which I wish we had been in there, but I think that probably if they had an opportunity to sit down again, would be in there, is a 100% renewable energy standard. Currently we have a renewable energy standard, but we're driving towards 90% renewable instead of driving towards 100% renewable. And if we could put that 100% renewable into statute, make that the goalpost, the end zone, rather than just getting 90% of the way there, that's a no-cost way of making progress. You know, it's no cost, because you have to change the slope of the curve. Fair enough. And another option is to make whatever goals they are, whether they're the current RES goals or the more ambitious 100% goals mandatory rather than just nice goals that are statutory, but they're just goals, they're not requirements. So I'm wondering whether a better strategy might not be to prioritize non-pricing strategies first, probably with using money revenue raised by some sort of a fee on fossil fuels, but with the goal of being not to use carbon pricing to reduce energy usage in greenhouse gas, but to use that revenue to stimulate really more comprehensive non-pricing strategy, like increasing weatherization, making weatherization available to people above the current income threshold, maybe on a sliding scale, some other ideas I've been thinking about hiring people to enforce the energy codes that we have, which are completely unenforced now, and using that group of people to also basically coach and train contractors about the energy code and how to build better, and maybe also to incentivize contractors to get building performance training themselves, things like that that might have an impact on at least building energy. I mean, there's other things to be done about transportation, but I'm just wondering if that might not be a better strategy to look at this as more of a workforce problem, an economy problem, a cost savings problem rather than this nebulous to a lot of people, and some people even don't think that it's a problem, climate crisis. Well, that's why I encourage you to think about it under those three dimensions of the economy, equity, and the environment. What you're describing is essentially a fee and invests model, all of the additional building expectors, weatherization work that you described there, all necessary to meet the goals that Jared laid out expertly on the charts. Fund that through some sort of price on fossil fuels, whether it be a fee or a tax, what a fine, what have you, it is outside of this building, it is a distinction without a difference for most Vermonters. But it would have to be much less than a carbon tax, to raise significant amount of money from what I'm understanding, but maybe, I'm just learning all this, so I'm just throwing out the idea and for discussion, that's all. Do we have any info on what the economic impact of doing nothing at all is? It may have been mentioned earlier in the week, but we absorbed a lot of information on it. In fact, we're doing nothing. Well, to put that, put a number on it, again, Jared mentioned that we spend about one and a half billion dollars a year on imported fossil fuels. That's all money that leaves our economy. However, if we were generating that same energy through renewable sources that were located closer to home, those energy dollars would circulate in the local and regional economy rather than being shipped out of state. I don't have a particular study that I can point to on that, but at the household level, again, if we can move people to lower cost renewables instead of the higher cost fossil fuels, those households are gonna save money as Jared's charts were showing. Right, and a dollar spent in the state gets recirculated and creates more than a dollar worth of economic activity, so I guess I'm looking for the delta between not just that 1.5 billion, but between that 1.5 billion times, whatever additional GDP would be applied to the state or whatever.  I'm nodding my head because it's a great and important question. I don't think it's been fully answered yet. I think you could fairly say if we do nothing, we'll continue to see 80% of our energy dollars used on fossil fuels and then 80 cents of all of those dollars leaving the states. We'll continue having this net economic drain that's hampering our economic growth and investing in local jobs. I don't know if it hasn't yet been fully calculated within that economic benefit would be. So, okay, go ahead. No, I've just got a point to make on Scott's proposal as far as just single family residential construction goes. As a contractor myself, over the years, I can't think of a house that I've built that the individuals don't buy their own materials. And a lot of them, I think I've built two houses basically that have been built through Craigslist materials. So again, I think it would be a huge increase in costs. I understand the benefits on the energy side of things if you built a certain code, but the costs out there are extreme as it is and to have that level and that residential category alone would be devastating to a lot of folks. So just in the context of committee discussion, I don't mean to ascribe this to your testimony time, but one of the ways I think about your questions is what's the cost of doing nothing? Because that's always the easiest path, let's do nothing. A question, the concern that I have is if we look out 20 years, some would say less, some would say more, that when our economy and our climate is at a point where we are truly in a daily crisis, a concern that I have is that a number of states and a number of countries at that point will genuflect to a solution, which will be very costly. In other words, they're gonna have to compress the amount of change that's gotta occur in the economy into a very small amount of time, whether it's immediately turning off the spigot for using certain types of fuels or in a very compressed amount of time requiring certain changes to occur. And I think it's from an economic standpoint those transitions are better made over a longer period of time. So the extent that we can, one could say we should have been focusing on these things 20 years ago and had a much longer ramp to these solutions, which would have been much less disruptive. But the context in that we give ourselves longer time to make these changes, I think is less economically disruptive. And so starting to look at those things with immediacy will ultimately, I think be less economically disruptive than when we wake up in 2030 and say, you gotta turn this off. That I think is really economically costly. And that's speculative in my part. That's one of the ways I think about this. And just thinking back on that, those solutions we're gonna have, we're turning those solutions over to our children and grandchildren. I don't like my kids very much. Okay, well, there you go. It's easy then. But you can also say it's putting on a credit card for future generations. I kind of equate it to studying for a test. You know the test is coming.  Right. I think that's the path we're on right now. Any other questions for Tom? Yeah. Thank you for the opportunity. Yeah, no, thank you for joining us. Thank you. So that's all that's ready. What we're gonna do today.