in sydney, the illawarra, the blue mountains and the southern highlands rely on the catchments of the warragamba, upper nepean, blue mountains, shoalhaven, and woronora river systems to supply their drinking water. this is about 60 per cent of the population of new south wales. these catchments cover an area of almost 16,000 square kilometres. they extend from north of lithgow in the upper blue mountains, to the source of the shoalhaven river near cooma in the south – and from woronora in the east to the source of the wollondilly river west of crookwell. the catchments are the source of the raw bulk water stored in reservoirs, which is then supplied to sydney water, shoalhaven city council and wingecarribee shire council. given low water levels in reservoirs due to drought sydney water announced in 2007 it would build the kurnell desalination plant, powered by wind energy, that would supply up to 15% of the drinking water supply to sydney, the illawarra and the blue mountains. it is the largest water supply project for sydney since the warragamba dam was opened in 1960. responsibility for water supply and sanitation policy and regulation the constitution of the commonwealth of australia states that natural resource policy, including that relating to water, is a responsibility of the states: "the commonwealth shall not, by any law or regulation of trade or commerce, abridge the right of a state or of the residents therein to the reasonable use of the waters of rivers for conservation or irrigation." (section 100) however, this legal position has become less clear as a result of decisions by the australian high court. the commonwealth government has taken a much greater role in the australian water sector in the early 21st century. the minister for water is in charge of water policies at the federal level. (section 109) of the constitution of australia provides that: when a law of a state is inconsistent with a law of the commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid. an example of the expanding role of the commonwealth in the management of water resources is the federal takeover of the murray-darling basin. in april 2007, amid a major drought, john howard, then prime minister of australia, announced that the region was facing an "unprecedentedly dangerous" water shortage and that water might have to be reserved for "critical urban" water supplies. the federal government proposed an a$10 billion commonwealth take-over of the murray-darling basin, arguing that effective management could not be undertaken by competing state governments. while the states of new south wales, queensland and south australia as well as the australian capital territory accepted the proposal, the state of victoria initially refused to co-operate, arguing that its irrigators would be disadvantaged and that it would challenge the takeover in the high court. legislation to create the murray-darling basin commission was passed in both the house of representatives and the senate in august 2007 in the form of the water act of 2007. in march 2008, premier john brumby indicated that the victorian government would participate in the program, in return for $1 billion to upgrade irrigation and continue water security for farmers. national water initiative. in 1994 the council of australian governments (coag) agreed on a water reform agenda to work towards reform in the water industry at the national level. in 2004, this was succeeded by the formation of the national water commission and the adoption of the national water initiative (nwi). the nwi "aims at increasing the productivity and efficiency of australia 's water use and establishing clear pathways to return all water systems – rivers and groundwater – to environmentally sustainable levels of extraction". the government has also established drinking water guidelines as part of a national water quality management strategy. the government of former prime minister kevin rudd had announced that it would invest in greater use of recycled water, water desalination and stormwater through a $1 billion urban water infrastructure fund. the government also announced that it would assist households to install water and energy efficient products, with rebates for rainwater tanks and solar hot water. state-level regulation. various state agencies regulate water supply and sanitation in each state, with different arrangements found throughout australia. state agencies with responsibilities in the sector include water commissions, environmental protection agencies and competition authorities. they operate under different departments (ministries) such as natural resources and water departments and trade departments. for example, in queensland under the water act 2000 water policy is the responsibility of the queensland water commission, which is under the department of natural resources, mines and energy and the minister of trade. service provision at the local level, commercialisation and corporatisation of many australian urban water businesses has led to management responsibilities being vested in commercial utilities, in contrast to earlier arrangements where services were provided directly by an arm of government. the role of the utility's board members is to provide commercial skill and focus, as well as to buffer the organisation from arbitrary political interference. the private sector is involved primarily through build-operate-transfer (bot) contracts for major treatment plants, including desalination plants. the institutional arrangements for service provision vary among states and territories. in parts of queensland and in tasmania, for example, local government is responsible for the provision of water services. in other states and territories, different arrangements have evolved. in new south wales, victoria and parts of queensland, there are separate municipal retail service providers and state bulk service providers that cover large parts of each state. in other states, such as south australia, western australia and the northern territories integrated state-level water utilities are in charge of both bulk water supply and retail distribution. south east queensland has reformed its water sector in 2008. under the new structure three state-owned authorities (seqwater, linkwater and the seq water grid manager) are in charge of bulk water supply: seqwater supplies water from conventional sources such as dams, weirs and treatment plants as well as water from non-conventional sources such as the gold coast desalination plant and the western corridor recycled water project. linkwater owns the transport infrastructure, and the seq water grid manager operates the transport infrastructure. there are three retail utilities, each owned by a group of local governments: queensland urban utilities, which distributes water in five council regions (brisbane, ipswich, lockyer valley, scenic rim and somerset). unity water serving the sunshine coast and moreton bay, and allconnex serves logan. north west queensland. in the wide bay–burnett region of queensland and in north west queensland, the government-owned corporation sunwater provides bulk water to industrial, mining and power companies as well as local governments and farmers. in sydney, new south wales, a catchment authority (sydney catchment authority) has been established to supply water in bulk to the retail water and wastewater utility sydney water, a statutory state owned corporation, wholly owned by the new south wales government. in melbourne, victoria, three government-owned companies (city west water ltd., south east water ltd., and yarra valley water ltd.) are the retailers and the wholesaler is a government-owned corporation, melbourne water. the wholesaler also controls the catchment for most of its supply. in adelaide, south australia (sa), water and sanitation services are provided by sa water. in 1996 the sa government awarded french-owned united water a 15-year contract to manage and operate the metropolitan adelaide water and wastewater systems on behalf of sa water. sa water retains ownership of all infrastructure, sets service standards, and implements the government's pricing policy. sa water also maintains control of all asset investment decisions, billing and revenue collection. when the contract expired in 2011 sa water decided not to short-list united water for the follow-up contract. the south australian government had accused the company of overcharging. in january 2011 the follow-up operation and maintenance contract with a duration of 6 years, plus another 6 years based on the performance during the first 6 years, was won by allwater, a consortium consisting of degremont and suez environnement from france as well as the australian company transfield services. in western australia the water corporation, a government-owned corporation, provides urban water services. canning dam, one of perth's major dams, at 34.4% of capacity in canberra, and the australian capital territory generally, a public-private multi-utility partnership (actewagl), of which 50% is owned by the state-owned asset-holding company icon water, provides electricity, gas, water and wastewater services since 2000. a government-owned multi-utility, the power and water corporation, provides services to the larger and less remote communities in the northern territory, including alice springs and darwin. most organisations providing urban water services in australia have experienced some degree of organisational reform in the 1990s, which has clarified accountabilities by separating policy, regulatory and commercial (operational) functions. the accepted wisdom is that this separation provides urban water businesses with clear commercial goals of customer service, while safeguarding public health and achieving environmental compliance in a sound business operation, free of other conflicting objectives. for a brief profile of each of the 33 of the largest water companies in australia see: wsaa members community consultation the water reform agenda, agreed in 1994, adopted the principle of public consultation by government agencies and service providers when change and/or new initiatives were being contemplated involving water resources. subsequently, the australian drinking water guidelines emphasised the right of communities to participate in the development of policies relating to their water supply. the guidelines also provide advice on how customers should be involved in considering options for effective and acceptable monitoring and reporting on performance of their water supply, and on the frequency of such reporting. the water reform agenda also mentions the need for the public to be informed of the cause and effect relationship between infrastructure performance, standards of service and related costs, with a view to promoting levels of service that represent the best value for money to the community. water tariffs in australia, most water businesses have changed from a charging system based largely on property value to one based on actual water consumed (a user-pays policy), in line with the water reform agenda. hunter water in the newcastle area of new south wales pioneered this policy in australia in the 1980s and reported a fall in household water consumption of 30 per cent over previous trends. this experience encouraged other water authorities to adopt the policy with a view to managing demand for water. however, low-income households in australia spend in proportional terms much more on utility services than high-income households. the implication is that increases in the price of utility services, if not accompanied by other compensation, will have a regressive and disproportionately negative impact on low-income households. it is generally expected that with the advent of expensive desalination water tariffs will have to increase in australia. across australia, the average typical annual residential bill for water supply and sewerage services was a$713 in 2007 (us$557 using the january 2007 exchange rate of 1.28). in south east queensland the average annual water bill of only a$465 in 2005, but that it could increase to a$1,346 by 2017 due to increasing bulk water costs. investment in the capital cities alone, over a$2 billion of expenditure was undertaken in 2007/2008 (us$1.74 billion using the january 2008 exchange rate of 1.15). this expenditure is unprecedented in the industry. urban water utilities invested a$835 million in replacing old and under-performing assets and a$535 million in maintaining asset reliability. demand management and water conservation demand management measures to encourage consumers to use less water include advertising, education, pricing and appliance redesign. furthermore, the use of alternatives to conventional water supply such as effluent reuse, rainwater harvesting and greywater use are also being encouraged through state-based rebates and the national not-for-profit smart watermark label. some water businesses in australia have opted for restrictions on water use to conserve water supplies and minimise capital expenditure. a series of restriction levels, depending on remaining storage capacity in reservoirs, can curb the maximum daily consumption during drought periods. for example, several water authorities in very hot and dry regions of australia have adopted a cooperative policy with consumers to restrict peak water usage on very hot days or to restrict garden watering to periods in which it