Termination Fees For Irrigation Services And Landholder Decisions
A Paper For The Australian Competition And Consumer Commission
Many irrigators in Murray-Darling Basin access water by holding tradeable water entitlements, which relate to a specific water resource such as a dam. In recent years governments have taken steps to reduce barriers to water entitlement trade in order to promote efficient resource use. One potential impediment to entitlement trade is the use of termination fees by irrigation authorities, which are intended to recover the fixed cost of maintaining infrastructure when irrigators leave the system and are often incurred by water users when they sell their entitlements.
Our paper investigates the importance of termination fees for landholder decision-making, including decisions to trade entitlements.