WELS REVIEW Stakeholder Forums Brisbane 14 February 2012 Sydney 16 February 2012

1. WELS REVIEW • Stakeholder Forums • Brisbane 14 February 2012 • Sydney 16 February 2012 • Melbourne 17 February 2012

2. Plan for the Forum • Tea and coffee on arrival • Background – why we are here • Changes to the fee structure/transition • What is a model? • Changes to registration arrangements • Compliance & Enforcement • Advertising • Grandfathering • Other Discussion over lunch as required

3. Session 1 Our tools hard copies available now www.waterrating.gov.au/ hard copies available at the end of the day Consultation paper FAQ paper This presentation Discussion today Formal feedback by 29 February

4. THEMES for the day • Where the consultation paper asks for an opinion – options are genuinely open e.g. flow controllers, advertising etc. • Where the consultation paper doesn't ask for an opinion – options are constrained by ministers’ decisions, e.g. 80% cost recovery. • WELS staff to talk as little as possible, we’d like discussion and dialogue with you. • Written feedback after this session encouraged for clarity and, if necessary, confidentiality.

5. Session 1 How we got here 2009-10 2010-11 • Independent Review 2010 • Lots of good things noted • Lots of improvements suggested • Scheme underfunded

6. Session 1 Underfunding reasons • Size: many times bigger than expected • Free additions to FoM: registration effort with no revenue • Inflation: ($1500 then = $1200 now) • 5 year registration: ‘out of sight, out of mind?’

7. Session 1 Decision by State, Territory and Commonwealth Ministers (SCEW) 30 November 2011 • Strategic Plan 2012-15 approved • Joint government response approved • 80% set as industry cost recovery level We have the ‘what’ Consultations now are about the ‘how’!

8. Session 1 Timeline from here Parliamentary Sittings 2012

9. Session 2 Registration changes 1 Registrations are to be annual, regardless of what fee structure is finally adopted. • Keep database current and relevant • Increased flexibility • May assist cash flows and forecasting; vital when fees are major component of income • Option to pay for more than 1 year

10. Session 2 Registration Changes 2 • WELS running costs 11% next year • Requires new interface with improved database to make registration quicker and easier • Automated form filling, uploading pre-populated data • Re-registration by self-certification • Risk based audits • All products to be registered, so they can be identified in database. Unique identifier. • No additions/free registrations. Maximum of 15 items/application (options 2,3 and 4) • Products that are identical, except for brand, must be registered under each brand

11. Session 3 Fee options • ‘BaU’ (except fees are annual) - $3400 • Fee/application of $700, a maximum of 15 products in same product category with same: • Brand • Star rating • Covered by same test report(s) or declaration • Label 3. Fee/ application of $630, a maximum of 15 products in same product sub-category [table 4.2, pg 12] with same: • Brand • Star rating • Covered by same test report(s) or declaration • Label 4. Every product/model pays a fee of $80

12. Annual fee comparison Amounts in (red) are if fee crediting is applied

13. How fee crediting would work I • When the new scheme starts, existing registrations will have periods of < 5 years, < 4 years, < 3 years etc to run • Why not let them run their course? • Any registrants who registered after ~2008 could ‘wait out’ the scheme • Won’t meet cost-recovery target • Unfair for new registrants (would carry almost all costs) • Would require higher fees all ‘round • If you remain registered under the ‘old scheme’, do new provisions apply to you? • Accordingly new fees need to be paid from ‘Day 1’ Crediting Amounts Registered 5 years ago - $0 Registered 4 years ago - $300 Registered 3 years ago - $600 Registered 2 years ago - $900 Registered 1 years ago - $1200 Registered Registered 1 years ago - $1,2003333

14. How fee crediting would work II Existing Scheme New Scheme 5 years ago Credit $0 4 years ago Credit$300 3 years ago Credit $600 2 years ago Credit $900 1 year ago Credit $1,200

15. How fee crediting would work III • We estimate if crediting of fees proceeds approx $1.0m is involved • This is a cost to the scheme, because previous history of underfunding means no spare money in the scheme

16. What is a model? I Why identify each model? Principles • WELS is to provide consumer information • All models and variants should be in the database and be easily found in that database, with a unique identifier • Number of models must be predictable so as to set an accurate fee • Simplicity – ‘rules to register’ are easy to understand and administer

17. Session 3 What is a model? II • Options 2, 3 and 4 require clarity on this issue Starting point • To be on one application (2&3) all items have: • Same star rating • Same performance • Same brand • Covered by same test report(s), or declaration

18. Session 3 What is a model? III • Taps, for example, have many variations that don't effect water consumption or overall performance • Handle style and length • Finish etc • Does this mean each of all such possible combinations is a separate model? • For entry in database? – yes – for consumer information and compliance • Pay for each possible combination? – Still under discussion

19. Session 3 A tap example • The ‘Wombat’ tap range comes in: • chrome and white finishes • 7 spout types (some will effect performance)* • 8 handle types • There are 2 (finishes) x 7 (spouts) x 8 (handles), or 112 combinations • These 112 combinations, in groups of 15, could = 8 applications • If finish (for example) doesn’t count as a variant = 4 applications, etc

20. Session 3 Examples of minimum annual fees

21. Session 3 Example of rebranding and effect on fees

22. Session 3 Consolidating Registrations- aligning expiry dates - Year 1 Year 2 Year 3

23. Session 4 Compliance and Enforcement WELSCompliance@environment.gov.au

24. Session 4 Early Approach • WELS compliance focus in early years of the scheme was on information and education visits • Appropriate at that time Maturing Scheme

25. Session 4 Current Approach Since 2010, Compliance action: • Structured program of inspections - Australia wide • Dedicated teams of compliance inspectors • More than 500 inspections have been conducted covering all States and Territories Enforcement action: • Several warrants exercised and 14 EUs in place. • Use of EUs reflects strong emphasis on supporting suppliers to achieve compliance Offences carry criminal penalties • Penalties include: Infringement notices, prosecutions and injunctions

26. Session 4 Future Approach • Compliance Inspections will focus on broader range of suppliers including: • Wholesalers/distributors • Internet sales • Developers e.g. Multi unit sites, display housing • Criminal penalties will remain • Civil penalties will be introduced • Lower burden of proof • Efficient and more cost effective • Proof of registration when a product is supplied Other compliance responses: • Orders requiring new corrected labels, suspension and deregistration of products, directed audits. • Requirement to notify downstream suppliers of the registration and providing evidence of registration.

27. Session 4 Check Testing 2010-11 Proficiency testing • Round robin for showers and lavatory equipment • Testing is now completed and review of report underway Design of a formal check testing for showers and lavatory equipment • Developing procedures and statistical validity criteria for check testing • Will be similar to Equipment Energy Efficiency program (E3) • WELS to pay for first screen test • For adverse results, registrant can either accept result or pay for follow up check testing in an approved facility Other Check Testing • Implementation of formal check testing for showers and lavatory equipment • Proficiency testing and check testing of other products will be considered

28. Session 5 Advertising

29. Session 5 Current Advertising Requirements • In Annex B.1 of AS/NZS 6400, not in legislation • Degree of confusion – all in one place?

30. Session 5 WELS Review Recommendation 7.6 of Independent Review Advertising not be required to display WELS information. Joint Governments’ Response Not agreed – benefits seen in advertising 

31. Session 5 What is being considered - Clarify through legislation, not the Standard - Increased compliance activities - Particular focus on “point of sale” information, including online

32. Session 6 Grandfathering

33. Session 6 Current Grandfathering Provisions • Requires improvement • Provides a fixed 12-month period to move stock when a Standard changes • Triggers fee holiday if re-registration is due in that 12 months

34. Session 6 WELS Review/Joint Government Response • Agreed that time to clear stock is appropriate when a Standard changes

35. Session 6 What is being considered • Indefinite grandfathering to clear stock • However, ‘grandfathered’ stock must remain WELS registered under the ‘old’ Standard • Hence, no fee holiday • Minister can determine date of ‘no further supply’

36. Session 6 What about when a registration is not renewed? • Still an offence to supply an unregistered product • Proof of registration is required when you supply a product • Evidence of registration right through supply chain

37. Session 6 Other • Mandatory registration for flow controllers? • Extending period for holding of evidentiary material? • Publicising breaches of the WELS Act?

38. Session 6 Other • Any ‘person’ rather than a ‘manufacturer’ to apply for WELS registration? • Clarification of supply • WELS future merger with E3 and WaterMark? • Removing Gazettal requirement