Financial Framework (Supplementary Powers) Amendment (Climate Change, Energy, the Environment and Water Measures No. 2) Regulations 2026

EXPLANATORY STATEMENT

Issued by the Authority of the Minister for Finance

Financial Framework (Supplementary Powers) Act 1997

Financial Framework (Supplementary Powers) Amendment

(Climate Change, Energy, the Environment and Water Measures No. 2) Regulations 2026

The Financial Framework (Supplementary Powers) Act 1997 (the FFSP Act) confers on the Commonwealth, in certain circumstances, powers to make arrangements under which money can be spent; or to make grants of financial assistance; and to form, or otherwise be involved in, companies. The arrangements, grants, programs and companies (or classes of arrangements or grants in relation to which the powers are conferred) are specified in the Financial Framework (Supplementary Powers) Regulations 1997 (the Principal Regulations). The powers in the FFSP Act to make, vary or administer arrangements or grants may be exercised on behalf of the Commonwealth by Ministers and the accountable authorities of non‑corporate Commonwealth entities, as defined under section 12 of the Public Governance, Performance and Accountability Act 2013.

The Principal Regulations are exempt from sunsetting under section 12 of the Legislation (Exemptions and Other Matters) Regulation 2015 (item 28A). If the Principal Regulations were subject to the sunsetting regime under the Legislation Act 2003, this would generate uncertainty about the continuing operation of existing contracts and funding agreements between the Commonwealth and third parties (particularly those extending beyond 10 years), as well as the Commonwealth’s legislative authority to continue making, varying or administering arrangements, grants and programs.

Additionally, the Principal Regulations authorise a number of activities that form part of intergovernmental schemes. It would not be appropriate for the Commonwealth to unilaterally sunset an instrument that provides authority for Commonwealth funding for activities that are underpinned by an intergovernmental arrangement. To ensure that the Principal Regulations continue to reflect government priorities and remain up to date, the Principal Regulations are subject to periodic review to identify and repeal items that are redundant or no longer required.

Section 32B of the FFSP Act authorises the Commonwealth to make, vary and administer arrangements and grants specified in the Principal Regulations. Section 32B also authorises the Commonwealth to make, vary and administer arrangements for the purposes of programs specified in the Principal Regulations. Section 32D of the FFSP Act confers powers of delegation on Ministers and the accountable authorities of non-corporate Commonwealth entities, including subsection 32B(1) of the FFSP Act. Schedule 1AA and Schedule 1AB to the Principal Regulations specify the arrangements, grants and programs.

Section 65 of the FFSP Act provides that the Governor-General may make regulations prescribing matters required or permitted by the FFSP Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the FFSP Act.

The Financial Framework (Supplementary Powers) Amendment (Climate Change, Energy, the Environment and Water Measures No. 2) Regulations 2026 (the Regulations) amend Schedule 1AB to the Principal Regulations to establish legislative authority for government spending on the Upper Murrumbidgee Drought Operating Framework (the Framework). The Framework will be administered by the Department of Climate Change, Energy, the Environment and Water.

The passage of the Water Amendment (Restoring Our Rivers) Act 2023 included a commitment from the Government for a range of measures to improve the health of the Upper Murrumbidgee. The Framework was established as part of these measures to provide a short‑term response during drought‑like conditions. Its objective is to maintain the river flows necessary to protect the environmental health of the upper Murrumbidgee River and safeguard endangered native fish species. The Framework will help preserve habitable conditions for aquatic fauna in waterholes along the Upper Murrumbidgee River, preventing catastrophic events such as algal blooms, fish deaths, and critical population loss.

The Framework requires Snowy Hydro Limited (SHL), as the sole operator of the Tantangara Dam, to release additional water when specified environmental conditions are met and makes compensation payable to SHL for foregone electricity generation that would result from those water releases. Funding of up to $20.0 million over two years from 2025-26 is available to compensate SHL for the cost of foregone electricity generation.

Details of the Regulations are set out at Attachment A. A Statement of Compatibility with Human Rights is at Attachment B.

The Regulations are a legislative instrument for the purposes of the Legislation Act 2003.

The Regulations commence on the day after registration on the Federal Register of Legislation.

Consultation

In accordance with section 17 of the Legislation Act 2003, consultation has taken place with the Department of Climate Change, Energy, the Environment and Water.

Attachment A

Details of the Financial Framework (Supplementary Powers) Amendment

(Climate Change, Energy, the Environment and Water Measures No. 2) Regulations 2026

Section 1 – Name

This section provides that the title of the Regulations is the Financial Framework (Supplementary Powers) Amendment (Climate Change, Energy, the Environment and Water Measures No. 2) Regulations 2026.

Section 2 – Commencement

This section provides that the Regulations commence on the day after registration on the Federal Register of Legislation.

Section 3 – Authority

This section provides that the Regulations are made under the Financial Framework (Supplementary Powers) Act 1997.

Section 4 – Schedules

This section provides that the Financial Framework (Supplementary Powers) Regulations 1997 (the Principal Regulations) are amended as set out in the Schedule to the Regulations.

Schedule 1 – Amendments

Financial Framework (Supplementary Powers) Regulations 1997

The item in Schedule 1 amends Schedule 1AB to the Principal Regulations to establish legislative authority for government spending on an activity to be administered by the Department of Climate Change, Energy, the Environment and Water (the department).

Item 1 – Part 4 of Schedule 1AB (in the appropriate position in the table)

This item adds one new table item to Part 4 of Schedule 1AB.

Table item 783 – Upper Murrumbidgee Drought Operating Framework

New table item 783 establishes legislative authority for government spending on the Upper Murrumbidgee Drought Operating Framework (the Framework).

The Water Amendment (Restoring Our Rivers) Act 2023 (ROR Act), commenced on 7 December 2023, provides greater flexibility, extended timeframes, increased funding, and stronger accountability to support full delivery of the Basin Plan. One of the purposes of the ROR Act was to recover 450 gigalitres of additional environmental water.

Passage of the ROR Act included the Government commitment of up to $55.6 million for a range of extra measures to improve the health of the Upper Murrumbidgee through the delivery of three key work streams (www.dcceew.gov.au/water/policy/programs/
water-reform/improving-health-upper-murrumbidgee), particularly:

• Restoring the Upper Murrumbidgee Program for on-ground projects to improve river health and resilience, and for science and monitoring projects;
• Review of the Snowy Water Inquiry Outcomes Implementation Deed (SWIOID Review), which will look at ways to modernise water management in the Snowy Scheme and to enhance the health of the upper Murrumbidgee; and
• Drought Operating Framework to release additional water from Tantangara Dam during drought-like conditions.

Legislative authority under table item 783 is required to deliver the third stream. The Framework will also deliver on the Strategy to Improve the Health of the Upper Murrumbidgee, published on 23 December 2024 (www.dcceew.gov.au/water/publications/
strategy-improve-health-upper-murrumbidgee). The Framework aims to enable the river flows required to mitigate risks to the environmental health of the upper Murrumbidgee River and protect endangered native fish species.

Research into environmental flows has indicated that ‘on average, 93 per cent of the annual flow of the Upper Murrumbidgee River, and in some years 99 per cent of flow, is diverted at Tantangara Dam and transferred to Lake Eucumbene in the adjoining Snowy River Basin’ (McGuire & Pittock, 2025). Reduced inflows have led to the accumulation of sand bars which have negative impacts on native species, including the Macquarie Perch, which is listed as endangered under the Environment Protection and Biodiversity Conservation Act 1999.

Water releases under the Framework will help sustain habitable conditions for aquatic fauna during extreme dry periods by maintaining continuous river flows and improving water quality. These releases reduce the risk of catastrophic events, including fish kills and harmful blue-green algae or bacterial water quality outbreaks.

The Framework policy settings relating to the release of additional water include:

• Objectives to guide drought response – designed to balance the environmental health of the river, the requirements of the National Energy Market and impacts on downstream users in the regulated Murrumbidgee River.
• Flow triggers that define ‘drought-like’ conditions and determine when the Framework is activated. The risk-based triggers are defined by the minimum environmental water requirements, measured as a flow in the river at three river gauging stations. Once these flow triggers are met the additional water releases are made based on a pre-determined water release pattern.
• Water release patterns to maintain river health. The pre-determined flow response (additional water release) has been designed based on maintaining a minimum environmental water requirements and to avoid critical environmental events (fish deaths, poor water quality). The water release pattern is prescribed as a set of flow rules that are operationalised by Snowy Hydro Limited (SHL).
• Water accounting and management arrangements, defined to determine the calculation of water releases from Tantangara Dam and the environmental use/transmission ‘loss’ that occurs as water flows en route through the river channel. Calculating the environmental use provides the basis for mitigating potential impacts on downstream water users through the use of Commonwealth environmental water holdings.
• Method for determining the compensation payable for forgone energy generation. The methodology was developed in agreement with SHL. The methodology takes into account the volume of water reserved within Tantangara Dam, the volume of water released, national energy market contract prices, and other operational assumptions in the management of infrastructure assets by SHL. The agreed methodology ensures reasonable compensation to SHL as water reserved for the program cannot be used to generate electricity. The method balances this forgone generation, value for public money and the environmental needs of the Murrumbidgee River.

Funding amount and arrangements, merits review and consultation

Existing funding of $30.0 million for the program was included in the 2023-24 Mid-Year Economic and Fiscal Outlook under the measure ‘Murray-Darling Basin Plan – delivering’ for a period of three years commencing in 2024-25. Details are set out in the Mid-Year Economic and Fiscal Outlook 2023-24, Appendix A: Policy decisions taken since the 2023-24 Budget at page 223.

The department will deliver the Framework through a limited tender procurement contract with SHL. SHL is an unlisted public company incorporated under the Corporations Act 2001 and is a Commonwealth Company for the purposes of the Public Governance, Performance and Accountability Act 2013 (PGPA Act). SHL is wholly owned by the Australian Government represented by two Shareholder Ministers, the Minister for Finance and the Minister for Climate Change and Energy.

SHL is the sole operator of Tantangara Dam and Snowy Mountains Hydro-electric Scheme. It operates under the Snowy Water Licence issued by the New South Wales (NSW) Government and Water Administration Ministerial Corporation. The Framework requires SHL to release additional water from the Tantangara Dam when certain environmental conditions (flow triggers) are met. SHL will be compensated for foregone electricity generation that would result from those water releases.

The Framework commenced on the agreement of the Water Release Agreement between the department and SHL dated 20 February 2026, and through operational arrangements between the NSW Government and SHL (Operating Protocol). The Water Release Agreement sets out:

• the costing methodology to compensate SHL for the cost of foregone energy generation due to the release of additional water for environmental needs;
• the flow rates that trigger water releases due to low flows during drought-like conditions, and lifting triggers once sufficient flows have been restored; and
• processes to supply data outlining the total volume of water released and associated total compensation amount based on releases over a water year (April-May).

The contract with SHL will be administered by the department. Decisions about expenditure for the Framework will be made by a delegate of the Secretary of the department. The delegate will be a Senior Executive Service officer with appropriate skills and knowledge and responsible for the management of the Framework. Decisions will be made according to the contractual terms and the Commonwealth resource management framework, including the PGPA Act and the Commonwealth Procurement Rules 2025. The decision-maker will not approve funding if there are insufficient funds for the Framework in a financial year.

The department will publish the following information after a payment is made to SHL:

• volume of additional water released from Tantangara Dam under the Framework, with data sourced from SHL;
• flow rates achieved within the upper Murrumbidgee River associated with the flow targets with data sourced from river gauges;
• environmental use (transmission losses) attributable to the additional water releases and debited from the Commonwealth water holdings; and
• compensation paid to SHL for foregone energy from the release of water from Tantangara Dam.

Information on the Framework will be published at www.dcceew.gov.au/water/policy
/programs/water-reform/improving-health-upper-murrumbidgee. A contract notice will be published on AusTender at www.tenders.gov.au.

Decisions made in relation to the Framework will not be subject to independent merits review as they are automatic and mandatory decisions. The contract with SHL sets out clear triggers for the release of additional water. These triggers are based on ecological requirements, and the contract does not allow for subjective assessments as to whether releases are required. The Administrative Review Council (ARC) has recognised that decisions that automatically follow from the happening of a set of circumstances leaves no room for merits review to operate (see paragraphs 3.8 to 3.12 of the guide, What decisions should be subject to merits review? (ARC guide)). 

In addition, independent merits review of the contract with SHL would not be considered appropriate as they are decisions relating to the allocation of funding resulting from budgetary decisions of a policy nature, rather than decisions immediately affecting any particular person’s interests. Any funding that has already been allocated would be affected if the original decision was overturned. Further, the remaking of a limited tender procurement decision after entry into a contractual arrangement with a successful provider is legally complex, impractical, and could result in delays to meeting the objectives of the Framework. The ARC has recognised that it is justifiable to exclude merits review in relation to decisions of this nature (see paragraphs 4.11 to 4.19 of the ARC guide). 

The review and audit process undertaken by the Australian National Audit Office provides a mechanism to review Australian Government spending decisions and report any concerns to the Parliament. These requirements and mechanisms help to ensure the proper use of Commonwealth resources and appropriate transparency around decisions relating to making, varying or administering arrangements to spend relevant money.

The Government Procurement (Judicial Review) Act 2018 enables persons affected by spending decisions to challenge some procurement processes for alleged breaches of certain procurement rules. This legislation provides an additional avenue of redress (compensation or injunction), depending on the circumstances.

Further, the right to review under section 75(v) of the Constitution and review under section 39B of the Judiciary Act 1903 may also be available. Persons affected by spending decisions would also have recourse to the Commonwealth Ombudsman where appropriate.

The contract with SHL also provides a dispute resolution mechanism. The Water Release Agreement details the methodology used to calculate the cost of foregone energy generation that underpins the subsequent compensation paid to SHL. The costing methodology will be evaluated when the Framework ends to promote transparency, demonstrate value for money and to inform future water management.

The department undertook public consultation on a draft of the Framework from 21 August to 9 September 2025. Twenty submissions were received, and included submissions from state governments, industry bodies, non-government organisations, businesses, universities, community groups and individuals.

Sentiments received in the submissions were generally positive on the Framework design. Most stakeholders wanted better environmental outcomes for the Upper Murrumbidgee, steady flows to support native fish populations, the need to prevent cease-to-flow events and reduce sedimentation. Some submissions from universities and businesses stated that the program favours power generation over environmental health, and some questioned if SHL should be paid when the environment needs water. Community members asked for stronger ties between local views and decision-makers, asked for the operating arrangements to be reviewed as knowledge grows and flagged impacts on community wellbeing and SHL’s social licence.

Stakeholder feedback in relation to the amount of funding to SHL and the potential volumes of water released will be considered under the SWIOID Review. The responses to the public consultation on the Framework can be found at https://consult.dcceew.gov.au/upper-m-drought-operating-framework.

The department also consulted with NSW Irrigators Council, the ACT & Region Catchment Coordination Group and the NSW Snowy Advisory Committee. Feedback from these groups covered the need to mitigate the environmental pressures on the river during dry periods and avoiding potential impacts on downstream water users in the regulated Murrumbidgee system, downstream of Burrinjuck Dam.

Where possible, stakeholder feedback was incorporated in the final design of the Framework. In response to feedback regarding governance, accountability and transparency, the department has committed to publishing:

• operating procedures;
• water accounting arrangements;
• water release data, including flow rates based on flow targets;
• water use and transmission losses, including water debited from Commonwealth holdings; and
• the compensation paid to SHL for water releases.

The department’s Office of Energy Economics, National Energy Transformation Division, worked with technical experts and SHL to develop and validate the method for determining foregone electricity generation. The Office advised that there will be no discernible impact to the National Electricity Market, in terms of wholesale electricity price, system reliability or system security impacts.

Constitutional considerations

Noting that it is not a comprehensive statement of relevant constitutional considerations, the objective of the item references the external affairs power (section 51 (xxix)) of the Constitution.

External affairs power

Section 51(xxix) of the Constitution empowers the Parliament to make laws with respect to ‘external affairs’. The external affairs power supports legislation implementing Australia’s international obligations under treaties to which it is a party.

Australia is a party to the Convention on Biological Diversity [1993] ATS 32 (Biodiversity Convention). Relevantly, under the Biodiversity Convention, Australia has committed to:

• promote the protection of ecosystems, natural habitats and the maintenance of viable populations of species in natural surroundings (Art 8(d)); and
• rehabilitate and restore degraded ecosystems and promote the recovery of threatened species, inter alia, through the development and implementation of plans and other management strategies (Art 8(f)).

Australia is also a party to the Convention on Wetlands of International Importance especially as Waterfowl Habitat (Ramsar Convention). Australia has committed to:

• formulate and implement their planning so as to promote the conservation of the wetlands included in the List, and as far as possible the wise use of wetlands in their territory (Art 3(1)); and
• endeavour through management to increase waterfowl populations on appropriate wetlands (Art 4(4)).

The Framework aims to provide compensation to SHL for water releases to help manage drought-like conditions, implementing Australia’s obligations under both the Biodiversity Convention and the Ramsar Convention. Funding will support the maintenance of habitable conditions for aquatic fauna in waterholes along the Upper Murrumbidgee River, avoiding catastrophic events such as algal blooms and fish deaths, and avoiding critical loss.

Attachment B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Financial Framework (Supplementary Powers) Amendment (Climate Change, Energy, the Environment and Water Measures No. 2) Regulations 2026

This disallowable legislative instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the legislative instrument

Section 32B of the Financial Framework (Supplementary Powers) Act 1997 (the FFSP Act) authorises the Commonwealth to make, vary and administer arrangements and grants specified in the Financial Framework (Supplementary Powers) Regulations 1997 (the Principal Regulations) and to make, vary and administer arrangements and grants for the purposes of programs specified in the Regulations. Schedule 1AA and Schedule 1AB to the Principal Regulations specify the arrangements, grants and programs. The powers in the FFSP Act to make, vary or administer arrangements or grants may be exercised on behalf of the Commonwealth by Ministers and the accountable authorities of non‑corporate Commonwealth entities, as defined under section 12 of the Public Governance, Performance and Accountability Act 2013.

The Financial Framework (Supplementary Powers) Amendment (Climate Change, Energy, the Environment and Water Measures No. 2) Regulations 2026 (the Regulations) amend Schedule 1AB to the Principal Regulations to establish legislative authority for government spending on the Upper Murrumbidgee Drought Operating Framework (the Framework). The Framework will be administered by the Department of Climate Change, Energy, the Environment and Water.

The passage of the Water Amendment (Restoring Our Rivers) Act 2023 included a commitment from the Government for a range of extra measures to improve the health of the Upper Murrumbidgee. The Framework was established as part of these measures to provide a short‑term response during drought‑like conditions. Its objective is to maintain the river flows necessary to protect the environmental health of the upper Murrumbidgee River and safeguard endangered native fish species. The Framework will help preserve habitable conditions for aquatic fauna in waterholes along the Upper Murrumbidgee River, preventing catastrophic events such as algal blooms, fish deaths, and critical population loss.

The Framework requires Snowy Hydro Limited (SHL), as the sole operator of the Tantangara Dam, to release additional water when specified environmental conditions are met and makes compensation payable to SHL for foregone electricity generation that would result from those water releases. Funding of $20.0 million over two years from 2025-26 will be provided to SHL, to compensate for anticipated foregone electricity generation.

Human rights implications

This disallowable legislative instrument engages the right to an adequate standard of living, including food, water and housing – Article 11 of the International Covenant on Economic, Social and Cultural Rights (ICESCR), read with Article 2.

Article 2 of the ICESCR requires each State Party to ‘take steps…to the maximum of its available resources, with a view to achieving progressively the full realisation’ of the rights recognised in the ICESCR ‘by all appropriate means, including particularly the adoption of legislative measures’.

Article 11 of the ICESCR recognises the right to an adequate standard of living, including adequate food, water and housing.

The Framework positively promotes the human right to water by ensuring that there is equitable access to water and water management systems, specifically by allowing for the release of water from the Tantangara Dam into the Upper Murrumbidgee River during periods of low-flows or drought-like conditions. This released water may simultaneously be used for the purposes of supporting critical human water needs.

Conclusion

This disallowable legislative instrument is compatible with human rights as it promotes the protection of human rights.

Senator the Hon Katy Gallagher

Minister for Finance