Adelaide Desalination Plant operating contract

I am referring to Part B: Agency audit reports, page 428, under Adelaide Desalination Plant operation and
management contract.

The Hon. J.M.A. LENSINK: I thank the minister for agreeing to start with SA Water. My first
question is in relation to the Adelaide Desalination Plant operating contract, and I am referring to
Part B: Agency audit reports, page 428, under Adelaide Desalination Plant operation and
management contract, which states that the annual cost of this contract in 2015-16 was $21 million.
Further, on page 432, under Expenses, the last dot point there refers to a reduction from $24 million
in the previous year to $21 million. Can the minister advise whether that is actually a fixed cost
annually or does it fluctuate and what are the parameters on which it would fluctuate?
The Hon. I.K. HUNTER: As the honourable member said, the expenditure for the ADPOM
and power supply contracts reduced from $24 million in 2014-15 to $21 million in 2015-16. This was
primarily due to reduced water production. So, it follows from that then that it will fluctuate,
determinant on the production of water at the time.
The Hon. J.M.A. LENSINK: Is the nature of the contract a per volume contract? It is not a
fixed contract annually and it is likely to fluctuate year on year depending on production?
The Hon. I.K. HUNTER: My advice is that the contract is in two parts: part of it is fixed and
that fixed cost component really covers the cost of staff, assets and maintenance, and the plant being
available 24/7. The variable part of the contract basically deals with those parts that you would expect
would vary in terms of volume: so electricity costs, for example, and the cost of chemicals that are
used in the water filtration.
The Hon. J.M.A. LENSINK: Similarly, on page 433—this is in relation to SA Water
generally—there is a dot point there that electricity costs increased in 2014 due to the ADP
commencing operations, but decreased in 2015-16 with a reduction in the use of the ADP. Further
over the page, the second dot point refers to renewable energy and says that in 2015-16 expenditure
for operational power, including relevant used renewable energy certificates, was $17 million, and in the previous financial year it was $22 million. Can the minister advise how much the energy
expenditure was overall for that particular financial year in question and the previous financial year?
We have the information in here in relation to renewable energy certificates, but not in relation to
electricity costs overall.
The Hon. I.K. HUNTER: I advise the chamber that I need to take that question on notice
and bring back a response.
The Hon. J.M.A. LENSINK: On page 428, under Automation Panel review, there is a
sentence that says, 'SA Water uses various remote access and automation technology to manage
its network.' Can the minister provide information about what remote access technology SA Water
uses? Does that include its use for leak detection?
The Hon. I.K. HUNTER: My advice is that there is a continual monitoring department in
Victoria Square, in the SA Water building—centrally monitored. At the pumping stations and
wastewater treatment plants, we monitor continuously the pressure in certain systems and the levels
of water or wastewater. The chemical consumption at the time and the electricity consumption are
also monitored at the pumping stations or the wastewater treatment plants.
If there is a sudden drop of pressure, for example, we might then consider that there has
been some sort of breakdown—possibly a leak—and we would have to send people out physically
to confirm that. There is that level of monitoring at a central level but that is of the pumping stations
and the wastewater treatment plants. It is not extended throughout the pipe network, of course.
The Hon. J.M.A. LENSINK: On page 436, there are references to increases in assets in
2016. There was some $330 million in acquisition of various assets and capital expenditure on a
range of items. Does the government anticipate that there will be any impact on the regulated asset
base into the future because of this increase?
The Hon. I.K. HUNTER: This is an area for the Treasurer, of course. My understanding is
that the regulated asset base is set once, so it is not impacted after that point. The regulated asset
base is set at a particular point in time and adjustments are made based on that regulated asset
base. We do not adjust that operation through Treasury on the basis of increases or decreases in
our operating assets base.
The Hon. J.M.A. LENSINK: My last question for SA Water is in relation to page 441, and
some discussion about pricing orders and ESCOSA. There is an assumption of
190 gigalitres per year of consumption. Can the minister explain what would happen if that
assumption were higher or lower? What impact would that have on water pricing?
The Hon. I.K. HUNTER: My advice is that it is impossible to give an answer to this
hypothetical. Of course, ESCOSA's calculations would be completely different, but at any point if the
assumed consumption was less or more we would have to go back and reconsider all the business
operations concurrently with that changed assumption and re-evaluate what we put to ESCOSA.
There is no easy answer to give to that. ESCOSA would change its calculation, but that is
not the real answer: the real answer is how you build your business case and how you vary that.
Essentially, you base it on your historical average consumption, taking into account variations for dry
years versus wet years. That is the best you can do.
The Hon. J.M.A. LENSINK: I refer to the first page of the DEWNR section, page 113. The
number of FTEs is roughly 1,610. We may well have asked something similar in estimates, but can
the minister provide the number of staff who are based regionally as opposed to in the CBD office
and, separately, how many are NRM staff as opposed to DEWNR staff?
The Hon. I.K. HUNTER: My advice is that there are approximately 900 in the CBD and 800
in regional SA. I cannot provide figures now on how many would be NRM, so I will have to bring that
back.
The Hon. J.M.A. LENSINK: Page 118, and water licence and levy revenue. The audit
identified matters in relation to the WILMA clearing account (not being of the Flintstone variety). Can
the minister provide more details about what those transactions relate to and what the value is?

The Hon. I.K. HUNTER: I am advised that the Department of Environment, Water and
Natural Resources raised approximately 14,300 invoices for water levies, penalty charges and meter
rentals for the 2015-16 financial year. The total invoice value was approximately $14.9 million.
The Hon. J.M.A. LENSINK: There are a couple of items—and, again, we may well have
put these questions in estimates as well—which relate to water purchases and sales. There is one
in the substantive report (which is Part B) on page 121, under Income, 'a $7 million increase in other
income reflecting a $7.9 million increase in water sales due to a one-off sale of water entitlements in
2015-16'. Further, in Volume 2 of the Appendix, page 147, there is an item which is Environmental
water purchase. I think these are separate items: this is, in 2016, $807,000. Can the minister provide
more detail on those particular items?
The Hon. I.K. HUNTER: In January 2014, a process was put in place for South Australia to
meet water transfer milestone obligations under the National Partnership Agreement on the South
Australian River Murray Sustainability Program. A process was also put in place by the Department
of Primary Industries and Resources to negotiate contingency arrangements with the Department of
Environment Water and Natural Resources for the acquisition and transfer of water access
entitlements of up to 6.03 gigalitres of long-term average annual yield water.
These water access entitlements enable the Minister for Agriculture, Food and Fisheries to
meet water transfer milestone commitments in 2013-14 and to thereby receive milestone payments
from the commonwealth of $11.2 million. Additional expenditure authority of $8.42 million was
provided to DEWNR in 2013-14 by the Department of Treasury and Finance to fund the purchase of
4.03 gigalitres of long-term average annual yield water from the market.
I entered into a memorandum of understanding with the Minister for Agriculture, Food and
Fisheries that outlined the transfer and return of water between our agencies in 2014-15. When the
MOU was signed, it was intended that DEWNR would enter the water market and sell the water
access entitlements within the 2014-15 year. Proceeds from the sale, expected to be in the order of
$8 million, were to be returned to the Department of Treasury. As at 30 June 2015, DEWNR was not
able to sell water to raise sufficient funds to return to DTF.
During 2015-16, DEWNR negotiated with PIRSA for the transfer of water entitlements
sufficient to meet the revenue measure. In May 2016, DEWNR sold 3,200 megalitres of South
Australian environmental water to the commonwealth for the purpose of bridging the gap to the
Sustainable Diversion Limit target. Proceeds from the sale were returned in full to the Department of
Treasury and Finance in June 2016. So, in essence, we were acting as a broker for PIRSA.
The Hon. J.M.A. LENSINK: Yes, I think this was touched on in estimates. Is that South
Australian water with the commonwealth environmental water holder now or which agency?
The Hon. I.K. HUNTER: My advise is yes.
The Hon. J.M.A. LENSINK: In relation to the lease arrangements for DEWNR, there are a
couple of items. There is one on the opening page, page 113, that states that a $22.1 million lease
incentive was recognised for DEWNR's new CBD accommodation. Further, on page 122, under
Liabilities, there is an increase to liabilities, which refers to a $22.5 million increase in other liabilities
due mainly to the recognition of a lease incentive, etc., due to the office accommodation. Can the
minister explain what this lease arrangement consists of and perhaps what those matters in here
mean?
The Hon. I.K. HUNTER: The Department of Environment Water and Natural Resources has
relocated to 81-95 Waymouth Street, Adelaide. There are approximately 897 DEWNR staff and
17 staff in the Office of Green Industries SA who have relocated to the site. As a result, DEWNR has
recognised a $22.1 million lease incentive, which represents the aggregate cost of the incentives
provided and is amortised over the lease term of 12 years on a straight-line basis. I am also advised
that approximately $3.8 million has been provided rent free, to be amortised over the 12-year period
of the lease contract. Over the 12-year lease term, cost savings in the order of $30 million are also
expected to be made from reductions in lease costs, space savings, cleaning costs and power
expenses over the 12-year lease.

The Hon. J.M.A. LENSINK: On page 120, there is reference to contractor expenses. Can
the minister advise what projects contractors were used for and how many contractors' positions
were turned into permanent staff and in what section?
The Hon. I.K. HUNTER: We do not have that level of detail for the honourable member, so
we will have to bring that back.
The Hon. J.M.A. LENSINK: Page 110 of Part B, under Income, states, 'There has been a
decreasing trend in the solid waste tonnage that has been offset by an increase in solid waste levy
rates.' Can the minister advise what the government attributes the decreasing trend in solid waste
tonnage to?

Question without notice

Auditor General Examination

16AG53/2/001

In reply to the Hon M Lensink MLC (15 November 2016)

Can the minister advise how much the energy expenditure was overall for that particular financial year in question and the previous financial year? We have the information in here in relation to renewable energy certificates, but not in relation to electricity costs overall.

Hon Ian Hunter MLC:

"The Minister for Water and the River Murray has recieved the following advice:

As Presented in SA Water's Audited financial statements, SA Water's electricity costs are:

2014/15  $48.5m

2015/16  $48.9m

In addition, electricity costs are also incurred through SA Water's Alliance Agreement with Allwater for its metropolitan operations as follows:

2014/15  $12.1m

2015/16  $11.2m"

Question without notice

Auditor General Examination

16AG53/2/002

DEWNR Natural Resource Management Staff

In Reply to the Hon M Lensink (15 November 2016)

The number of FTEs is roughly 1,610...how many are NRM staff as opposed to DEWNR staff?

Hon Ian Hunter MLC:

"The Minister for Sustainability, Environment and Conservation has recieved the following advice:

From 1 July 2012, all employees of the Natural Resources Management (NRM) Boards were transferred to DEWNR pursuant to the Public Sector (Reorganisation of Public Sector Operations) Notice 2012 (dated 21 June 2012).

Therefore all CBD and Regional Staff are DEWNR employees."

Question without Notice

Auditor General Examination

16AG53/2/003

In reply to the Hon M Lensink (15 November 2016)

Can the minister advise what projects contractors were used for and how many contractors positions were turned into permanent staff and in what section?

Hon Ian Hunter MLC:

"The Minister for Sustainability, Environment and Conservation has recieved the following advice:

Contractors are generally used to assist with short-term workload pressures, to backfill long term leave vacancies (such as maternity leave or long service leave), or as project resources. In 2015-16, contractors were used as project resources for a range of iniaitives such as:

• Adelaide Living Beaches, helping replenish and maintain Adelaide's metropolitan beaches.
• Coatal protection projects;
• The Nature Based Tourism Strategy which is estimated to inject $350 million per annum into the State's economy and create 1,000 new jobs by 2020;
• National Partnership Agreement that is helping deliver environmental water, improve river operations and infrastructure management;
• South Australian Riverland Floodplains Integrated Infrastructure Programme (SARFIIP) helping improve vegetation, aquatic and marine habitats while also boost the Riverland Region's economy through increased employment opportunities, improved productivity benefits for Pike irrigators and new tourism opportunities.

No Project-based positions have been converted to a permanent role."