2012–13 Budget Estimates Hearings - Water Corporation
Date:Thursday, July 5, 2012
Hearing commenced at 2.07 pm
MR BRIAN ROBERTSON - Manager, Capital Investment Branch, sworn and examined:
MR LLOYD WERNER - Manager, Pricing and Evaluation, sworn and examined:
MR ROSS HUGHES - Chief Financial Officer, sworn and examined:
MRS SUSAN MURPHY - Chief Executive Officer, sworn and examined:
Hon ALISON XAMON: I refer to the southern seawater desalination —
Mrs Murphy: Stage 2.
Hon ALISON XAMON: Yes. How confident are you that the additional water supply is going to ensure that Water Corp will be able to achieve its target of reduced extraction for the 2012–13 year? Also, if you think it is likely to be successful, understanding that we still do not know what sort of rainfall we are going to be looking at for winter, what sort of estimate are you looking at in terms of requiring abstraction?
Mrs Murphy: Our long-term abstraction plan, which has been developed in conjunction with the Department of Water, is that the long-term sustainable take from all the aquifers is about 120 gigalitres a year.
Hon ALISON XAMON: That is including the Jandakot mound?
Mrs Murphy: That is including Jandakot. Our plan over the next five years is to remove almost all of the bores from the superficial aquifer, which is the one that tends to be linked to the environmental wetlands, and be looking long-term at more permanent non-moving yields, if you like, from the Perth Yarragadee, the Leederville and a bit from Jandakot. The only superficial that we are looking to continue to take and maybe develop is just on the coast near Eglinton, as the superficial is flowing out to sea, so there is a possibility of taking some water there. Our aim is to keep that 120 as a baseload.
Hon ALISON XAMON: Can I just clarify that? Are you talking about 120 being the baseload in five years’ time?
Mrs Murphy: No, as of this year. Assuming there is some rain over winter, we are very hopeful that next year we will take only 120. This year we have taken a lot. Southern seawater desal stage 2 will be coming online and that is our plan, because that is where we want to be for the long haul. Over and above that, the big issue for us for next year is to move groundwater replenishment from a trial to a full-scale approved project.
Hon ALISON XAMON: That was my next question.
Mrs Murphy: It is the 120, plus whatever we put in. The concept for the long term is a 120 base and the water we are putting into a deep aquifer. We will be injecting into the Leederville and the Yarragadee, not the superficial. For every gigalitre in, a gigalitre is to be added to our abstraction licence.
Hon ALISON XAMON: If you get down to 120, I, for one, will be very pleased. That is obviously a step in the right direction. The concern has been that we have been looking at very serious extractions occurring, particularly over the last few years. I am also concerned that Perth is growing, so we have population pressures. What I am trying to get from you is how confident you are actually feeling—it sounds like you are fairly confident —
Mrs Murphy: Very confident.
Hon ALISON XAMON: —that the extra 50 gig coming online is not just going to have to meet increased demand, but is also going to be able to deal with pulling back extraction to sustainable levels.
Mrs Murphy: Absolutely. Even though we have been taking a lot more than we would choose out of the groundwater system in the last couple of years, we have moved our abstraction pattern and we are taking the bulk of the water from the deeper aquifers now and very little from the superficial.
Hon ALISON XAMON: It has been too late for some of the wetlands though, as you are aware. Mrs Murphy: I know. But we are not the only people removing water. In fact, the superficial aquifer is used by a lot of people.
Hon ALISON XAMON: I am aware of that.
Mrs Murphy: Every one of our bores is licensed. I think my staff do an amazing job. I think this year, touch wood, at the moment it appears with all of the Perth borefield that no individual bore will over-abstract at all. It is a huge juggling act.
Hon ALISON XAMON: You are probably aware of the work I have been doing in hounding the DOW about the rest of the bores over the Gnangara, so I recognise that the Water Corp is only one of them, but it is the main one.
Mrs Murphy: Yes. We are a big invisible target and we must be good corporate citizens and do exactly what we can. I absolutely agree.
Hon ALISON XAMON: Okay. I wanted to ask about the groundwater replenishment as well. Obviously, we are hoping that the trial is ultimately deemed to be successful. Do you want to give some comment on that?
Mrs Murphy: Certainly. I think it is one of the most exciting possibilities for Perth water supply that I have ever seen, because your source of water grows with your population so it gives you the ability to actually be truly climate independent. The aim of the trial is not to get water but to get a regulatory framework that enables a full-scale project to go ahead. So far with the MOU and the work that we have done with Health and the Department of Environment and Conservation, everything is looking really prospective. There has been nothing untoward. Everything is going well. That trial completes at the end of December. There is then a bit of processing time. We would hope that by around April we will be in a position to get a formal go ahead from government. That, by coincidence, fits the political timetable well, because I doubt we will get a decision in March.
Hopefully by April we can get a decision to move ahead to a full-scale scheme. The first stage we would be looking at is a seven-gigalitre project, because we can do all of that on the existing footprint of our Beenyup waste water treatment plant. So there would be no impact on anybody around us as there are no pipeline routes, there is no clearing, no nothing—it is on that same footprint. We would be treating then seven gigalitres of water and injecting that into the Leederville. With one bore—one Yarragadee bore—proposed as we get that going, we would then augment in lots of seven gigalitres as we gain confidence and as we need the water.
Hon ALISON XAMON: Could you please explain to me the time frames that are intended with that, particularly when the end of the stage 1 is anticipated to be?
Mrs Murphy: Stage 1 is 2015, to have it totally complete.
Hon ALISON XAMON: Yes. When in 2015?
Mrs Murphy: I think it is the end of 2014–15 financial year, is it not?
Mr Robertson: Yes.
Mrs Murphy: So the middle of —
Mr Robertson: The middle of the year, so in time for the summer.
Mrs Murphy: We worry about summers —
Hon ALISON XAMON: Yes.
Mrs Murphy: So for the summer at the end of 2015. But the timing for the next tranches is climate dependent, so what we will do is—if we get rain we will always use the rainwater first. So if we were to get more rain, we would delay augmenting the plant; if the weather is dryer—if it just stays dry like it is—we would probably keep going straight on and augment. So it gives us a bit of flexibility in how we deliver the capital. Also, the people of Perth have been doing a very good job in the demand management stakes. At the moment we are saving more water than Perth is growing, so the delivery of water has been dropping. We are actually delivering less water this year than we did last year, even though Perth is growing. So we are absorbing quite a lot of growth at the moment. Clearly that has an endpoint, but at the moment I think there is still a long way to go in that space and we will be keeping going with that as well.
So the aim for Perth, hopefully by the end of five years, is that if we get rain we will always use it, and that we can use the lowest-cost source water first. But if we have a winter when we get no rain we still survive as a city—no, we do not survive; we thrive as a city in the same way we do now. We are embedding water efficiency legislation in the way things happen; the two-day-a-week that keeps Perth green and enables gardens to survive is permanent. The winter sprinkler ban, so you do not water when it is raining, is permanent, and you do not water in the day, when the water just evaporates, is permanent. By embedding those and keeping demand down and working with the garden industry and landscapers and developers we can actually absorb a lot of the growth anyway, and then we can use groundwater replenishment in increasing blocks to meet future demand. I do not see Perth needing another major new source other than the ground water replenishment for 15 or 20 years.
Hon ALISON XAMON: I do not know whereabouts I can look in the line items so I just want to ask about it, and that is the water pressurisation trials. What has happened with that? We have not been hearing much about that recently. Could you tell me if that has fallen off the agenda or if there is a suggestion that that might start to look at being rolled out going into the future?
Mrs Murphy: The reason you have not heard anything about it is because nothing has happened, so that is not surprising. It has not fallen off the agenda; it is not something we have been pursuing aggressively—we have had a whole lot of other things happening—but I think next year there is some money in the —
Mr Robertson: Yes, funding being provided for it.
Hon ALISON XAMON: Do you mind telling me which line item it is?
Mrs Murphy: It will be in a bundle.
Hon ALISON XAMON: You can see that it is very broad.
Mrs Murphy: Is it opex or capex?
Mr Robertson: It is capex.
Mr Hughes: It will be somewhere on page 860.
Hon ALISON XAMON: Okay; I refer to page 860!
Mrs Murphy: I realise you are asking questions based on the budget, and because we are a corporatised entity the budget has capital revenue and CSO, so it does not necessarily give you the detail.
Hon ALISON XAMON: Are you able to give me the detail in —
Hon KEN TRAVERS: The SCI would give us more detail.
Mrs Murphy: No, it would not; the SCI does not have very much detail.
Hon ALISON XAMON: So I was not wrong then when I thought it had fallen off the agenda, but I am glad to hear that it is probably going to be coming back.
Mrs Murphy: It is funded in this current financial year to get started again.
Mr Robertson: Yes.
Hon ALISON XAMON: Could I please get the amount for that funding, and also forward estimates? I am happy to take that on notice if that is easier. The other thing is, if you could also identify which areas have been identified for further rollout, because I am aware that it cannot occur everywhere; and also the time frames for when those areas are going to be rolled out? I am happy to take all that on notice.
[Supplementary Information No C2.]
Mrs Murphy: So it is the pressure reduction work; what areas; timing; and dollars for the forward estimates periods?
Hon ALISON XAMON: Yes, please.
Mrs Murphy: The timing may be a little bit flexible, because as you do it, sometimes areas that look prospective are not when we get into the engineering. We will give you what we have.
Hon ALISON XAMON: Because of course I am aware there are capital costs potentially involved with that as well.
Mr Robertson: Yes.
Hon ALISON XAMON: So, I am assuming that some preliminary work on that has already been identified as well.
Mrs Murphy: Yes. We did do a trial in the Rossmoyne area.
Hon ALISON XAMON: Yes, I know. I know it was successful, so that is why I have been keen to see it rolled out.
Mrs Murphy: We agree.
Mr Hughes: Unless you are a Rossmoyne resident!
Mrs Murphy: He is a Rossmoyne resident.
Hon ALISON XAMON: You do not like it?
Mrs Murphy: He has no choice but to like it!
Hon ALISON XAMON: That is right!
Can I also have the actual figures for the last financial year, for this financial year and for the forward estimates for the programs for water conservation? By that I mean the public education programs, such as the save six buckets. Do you have that on hand or do you need to take that on notice?
Mrs Murphy: I would have to take that on notice because that is all operating, none of that is capital. The operating line items are not in the budget, but we can certainly dig those out for you.
Hon ALISON XAMON: Are you able to give —
Mrs Murphy: Some are co-funded federally.
Hon ALISON XAMON: Sure. Are you able to indicate—again I am happy to take it on notice— what percentage is federal funding and what percentage is Water Corp? I am also interested to know generally whether there has been increasing funding for these sorts of public education campaigns or if it has remained fairly constant or if it has been going down.
Mrs Murphy: I can tell you that the public education component—I do not have the dollars off the top of my head—is pretty constant; it goes on forever. There is an opportunistic nature to the federally funded programs; we have a suite of programs that we would like to run, and as funding becomes available or they fit a funding criteria we will always try to access that funding. There has been a big tranche of those that are just coming to an end at the moment. But federal government has been very helpful in, for example, the showerhead swap program we have been running—it has funded that all the way through—and we have had some other water efficiency program work where we have come in under budget and it has allowed us to roll those unspent funds into some work going forward. But generally the federal funding, apart from rolling forward some unspent funds, has finished. There is a little bit there, but most of it going forward is all Water Corp funding.
[Supplementary Information No C3.]
Hon ALISON XAMON: Can I confirm then that showerhead swap scheme has now ended?
Mrs Murphy: No.
Hon ALISON XAMON: It is ongoing, is it?
Mrs Murphy: It is ongoing, but we do not have that many left. I think we swapped 100 000, which was the original program, and I think we have another 20 000 we are going with now.
Mr Hughes: We feel like we are getting closer to a saturation point.
Mrs Murphy: The take-up has slowed a lot. But when bills go out, which is happening as we speak—the rates bill—there is usually a flurry again.
Hon ALISON XAMON: Which leads me on to my next point, and I am picking up on your comment about it reaching saturation point. Of course, a whole range of programs were axed in 2009; is it coming around to that time when it is actually going to be useful to start rolling out some of those water conservation measures again? I am aware that we have a whole bunch of people who are now living in homes who would probably want to take advantage of various water conservation measures.
Mrs Murphy: Everything has a use-by date and a point at which the law of diminishing returns kicks in. I do not think we would start the washing machine one again because that program actually changed the washing machine availability. You really have to look to find a water inefficient washing machine in Perth now, so I do not think there is much to be gained by —
Hon ALISON XAMON: But there are a whole range of areas—plants and garden areas and all sorts of things like that—so I was wondering if there is any appetite to actually reinvigorate some of those programs?
Mrs Murphy: We look all the time at where the best bang for our buck is. For us at the moment we have to be very careful that we are not pushing costs onto our customers that we could meet cheaper in some other way; the water we save has to be cheaper than the long-run marginal cost of the water we are supplying, or we are asking our customers to pay for something we can supply cheaper. There has to be an economic justification as well as a “it is a good thing to do” kind of justification. We are looking at those programs all the time. The showerhead swap was a really good one because it saves a lot of water, and once it is in place it keeps saving water. We have some other programs where we have partnered with private sector, such as the Toilets to Go program that does not cost the state or the Water Corporation any money. By getting a competitive price from the private sector, they will guarantee to replace your water-inefficient toilet with a brand-new toilet at a very low cost—it is actually cheaper than just buying the hardware fittings—and they will come and fit it for that. So, what we are looking at is more innovative ways along the way. I do not think just putting your hand in the pocket is always the right answer, and I think we have to keep the story changing. We blitzed gardens for a while because that was where the big water use was. We have now, in the last home water use survey, found that it used to be 45 per cent inside, 55 per cent outside; in the last survey that swapped around, so it is 55 per cent inside, 45 per cent outside—I hope I said that right. Anyway, it has gone the other way. What we thought was we would do a blitz on the in-house, which is why we did the showerhead swaps, and we have done a lot of stuff about not running your dishwasher until it is full and those sorts of things. So I think what it means is that coming into summer, we will move back into ex-house campaigns.
Hon ALISON XAMON: I suppose it is always the tension between needing to get favourable economic outcomes with the fact that we have to have favourable environmental outcomes as well.
Mrs Murphy: Yes, but I am not talking about Water Corp making money.
Hon ALISON XAMON: No, no.
Mrs Murphy: What I am saying is, like a rainwater tank; a rainwater tank costs, per kilolitre, more than the water we supply, so for me to say to my customers that they have to have a rainwater tank would be cost-shifting. Now, to say, “By all means put one in, because it is a great visual signal, you learn a lot, it is great and it is a fabulous idea”, is a totally different thing. But with the rainfall patterns in Albany a rainwater tank is actually more cost-effective, so we actually do offer a Water Corp rebate in Albany for a rainwater tank plumbed into your house, but we do not in Perth. There is no silver bullet; it is lots and lots of things. There are lots of campaigns we will run, there are lots of things we will subsidise, there are lots of things other people will subsidise, and we just need to keep changing the message but keep the general direction going.
Hon ALISON XAMON: I also just wanted to ask about the Kwinana industry water recycling program; I wanted to know how that is going. I think the last time I heard, they were recycling about six gigalitres, and I was wanting to know whether there was any scope to increase that or any proposals to increase that beyond that area.
Mrs Murphy: Not at the moment. The foundation customer for that plant—which is to take treated waste water from the Woodman Point treatment plant, treat it to boiler-feed quality and sell it back to industry—was HIsmelt. HIsmelt went into care and maintenance and so they were not taking anywater, and now HIsmelt has gone altogether. We have sold all the HIsmelt water now to other customers.
Hon ALISON XAMON: Is it still the six gigalitres that we are talking about?
Mr Werner: Yes. The plant has not expanded, because the customer who was taking up the capacity left. We have had to actually had to go and sell that capacity to other customers in the area, so that is what has been engaging us over the last year or two for that project.
Hon ALISON XAMON: So it is continuing to be six gigalitres that you are managing to recycle though?
Mrs Murphy: Yes.
Mr Werner: Yes.
Hon ALISON XAMON: And you have been able to find customers?
Mr Werner: Yes.
Mrs Murphy: Yes.
Mr Werner: There are customers who are taking it opportunistically. They have the pipes in place and they have use, so we have been trying to sell it to those customers and we have been successful at that. We are trying to get those customers onto long-term contracts so that we can be assured that they will be taking that six gigalitres year in, year out.
Hon ALISON XAMON: It sounds like there is no expansion in the pipeline, so to speak.
Mrs Murphy: It is ready to be expanded, the gist of the engineering is there, but we need customers. We did go out looking for further customers and we have done expressions of interest a couple of times, and that is how we made up the six gigalitres, but we have not got further
customers at this stage.
Hon ALISON XAMON: Can I ask at what price that water is actually being sold to industry for?
Mr Werner: The stuff that is under contract is probably confidential, I think.
Mrs Murphy: Roughly the long-run marginal cost of water-ish.
Mr Werner: When we first wrote those contracts the price was higher than the potable water supply, and that is because it is a higher quality —
Mrs Murphy: It is a higher quality water.
Mr Werner: —in terms of salinity and stuff like that. So for industrial uses it had higher value. We have changed the structure of the tariffs so the volumetric component for industry has gone up
out of the potable scheme. That is heading towards a couple of dollars a kilolitre.
Hon ALISON XAMON: So it is equivalent?
Mr Werner: The contractual stuff is lower than the portable now, so that has switched around. The discussion we are having with industry is about probably selling that water for about $1.75 if they sign on to long-term contracts, or at $2 if they are just taking it opportunistically. But what is in the actual existing contracts is lower than that.
Mrs Murphy: It is an unusual water recycling scheme in that it is selling boiler quality water. People always assume that recycled water is somehow inferior; this is superior, if you like. I am not sure that water has a personality, but it is a much purer water!
The CHAIR: I think your observation is correct!
Hearing concluded at 4.06 pm