Auditor - General's Report

A question put forward to the Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Aboriginal Affairs and Reconciliation) regarding the Auditor Generals Report.

The Hon. J.M.A. LENSINK: At page 1814, referring to a contract management framework for the renewable energy and operations and management of the desalination plant, the report in one of the dot points says that 'significant changes were required to incorporate the [Adelaide desalination plant] requirements into that framework'. Can the minister outline what sort of changes were required?

The Hon. I.K. HUNTER: Could you repeat the question?

The Hon. J.M.A. LENSINK: I am reading from page 1814, the second to last dot point, that says there were significant changes to the draft contract management framework for the Adelaide desalination plant in relation to operation and management and the renewable energy contract. I was just wondering if the minister could outline what that means and what level of change is needed to be made.

The Hon. I.K. HUNTER: My advice is, and I hope I get this right, that the contract initially was established to manage a privately-owned plant. However, we have a separate energy contract to manage the electricity at the plant and we needed to make changes to the management framework to allow for efficient use of the electricity during the operation of the plant.

The Hon. J.M.A. LENSINK: So, that is efficiency as in cost or efficiency as in consumption?

The Hon. I.K. HUNTER: Both.

The Hon. J.M.A. LENSINK: Is the minister able to provide more detail about the operations and management contract changes that needed to be made?

The Hon. I.K. HUNTER: The honourable member may want more detail: if she wants more she can come back to me. I understand that the changes at the detailed level of the management contract are because, essentially, the desal plant that we have is a peaking plant, whereas the management contract framework was in fact based on the Riverland 10 plants, which are base load plants. We needed to build more flexibility into the system so that it could be used on/off rather than a base load delivery of water.

The Hon. J.M.A. LENSINK: On the next page, 1815, it refers to procurement practices and issues that have been raised. Can the minister outline whether these are small-scale things or whether they are much larger things, such as the construction of water treatment plants and the like, or whether it is throughout the system?

The Hon. I.K. HUNTER: I understand this issue mentioned in the report does not go to the actual contracts, whether they are small or large: it is about the governance of the contracts, how they are managed and the use of probity auditors on all our contracts.

The Hon. J.M.A. LENSINK: Page 1818: so we are onto income now and we have it nicely spelt out how much the income has been increasing, courtesy of water and wastewater charges. The community services obligations, however, have been reducing. Can the minister explain why that is the case?

The Hon. I.K. HUNTER: My advice is that we need to make up the difference between revenue received and the cost of providing services. We are basically talking about the gap between income and cost. As income has gone up the gap has reduced and hence the difference. 

The Hon. J.M.A. LENSINK: I know that involves the subsidy for country customers but where in the scheme of things does the CSO part 4 concession fit in? Is that in this bit as well?

The Hon. I.K. HUNTER: I guess the short answer is yes. The CSO payments, of course, match the level of concession. When the government puts up concessions then the CSO also goes up.

The Hon. J.M.A. LENSINK: Water usage: the table on the top of page 1819 shows that—I assume these are done in financial years—water usage is expected to exceed 190 gigalitres. Is that correct?

The Hon. I.K. HUNTER: The amount, I suppose, is the amount that is the agreed basis used by ESCOSA in the pricing order. It is a little bit early to tell how close we will get to that estimate but my advice is that currently we are running just below, a fraction below, and so it seems like it may well be a very good guess.

The Hon. J.M.A. LENSINK: Can you be more specific than just 'a fraction'? Can you give us a percentage?

The Hon. I.K. HUNTER: My maths is not that good but it would be in the order of a couple of gigalitres.

The Hon. J.M.A. LENSINK: So what is likely to happen to water prices in the following financial year if that target is not reached?

The Hon. I.K. HUNTER: I am advised that it should have no impact. The water prices have been set by the agreement with ESCOSA and my understanding is that the agreement stipulates that water prices will go up by around CPI.

The Hon. J.M.A. LENSINK: Still on SA Water, page 1821, we are on to expenses now. The first dot point refers to increased borrowing costs. I assume that is referring to additional interest payments as well. Can the minister advise how much that interest payment would have increased in the current financial year as a result of those increased expenses of some $343 million?

The Hon. I.K. HUNTER: I think, taking advice, that this is probably more of an estimates question than an Auditor-General's question, but essentially our borrowings have gone up due to our capital investment program. There is no surprise there.

The Hon. J.M.A. LENSINK: A different issue but still on expenses: there is a dot point that refers to the increase in employee benefits due to additional staff hired between 2009 and 2012 due to water restrictions, drought initiatives, capital and operational projects. Can the minister explain what sort of tasks those staff would have been doing but that are no longer required, I assume?

The Hon. I.K. HUNTER: My advice is that the additional staff are mainly in the area of capital programs and water conservation programs. For instance, our capital spend went from about $120 million up to $900 million a year at its peak, so I guess those staff are required to work with that increase in capital spending. Also, in addition to our water conservation program, we had additional staff in the water call centre dealing with extra inquiries and permits that were requested for exceptions to restrictions—for instance, watering of newly laid lawns, etc.

The Hon. J.M.A. LENSINK: There is an item which I assume is new, which is $16 million that SA Water pays to, it says, 'the responsible government agency'. Can the minister advise which agency that is, what this particular payment is called and the rationale for it?

The Hon. I.K. HUNTER: My advice is that $16 million payment goes to DEWNR. It is the water planning and management charge that used to go to the department for water. Now it goes to the amalgamated DEWNR. It is for the policy functions that they undertake in terms of water resource planning and water allocation.

The Hon. J.M.A. LENSINK: Does that planning apply across the state, or is it just to the regions that are covered by the SA Water network?

The Hon. I.K. HUNTER: My advice is that it is comprised of the proportion that can be attributed to SA Water activities.

The Hon. J.M.A. LENSINK: Moving on to page 1826 or thereabouts and pricing issues, I understand that ESCOSA is undertaking a review of water and sewerage charges at the moment. I appreciate that it is probably within the current revenue envelope that the ESCOSA review is taking place, but does the minister have a view as to what structural changes might come out of that review?

The Hon. I.K. HUNTER: The simple answer is we do not know, but we do know that the ESCOSA review will be looking at the fixed element charge in terms of water billing. They will also be looking at the property base charges for wastewater sewerage, but we really have no idea where ESCOSA will take themselves. It is not our responsibility.

The Hon. J.M.A. LENSINK: Renewable energy certificates for the Adelaide desalination plant: how much do they cost us?

The Hon. I.K. HUNTER: My advice is that that figure is commercial in confidence.

The Hon. J.M.A. LENSINK: On page 1828, there is a little table for the current 2013-14 financial year through to 2015-16. The drinking water retail services is $778.7 million for those three financial years. On what basis is that figure static? It is the same number for each financial year.

The Hon. I.K. HUNTER: My advice is that figure is in nominal terms and it has not been inflated year on year by CPI.

The Hon. J.M.A. LENSINK: So what will happen in the forward years if the consumption is less than 190 gigalitres a year?

The Hon. I.K. HUNTER: My advice is that SA Water would bear the costs incurred during the regulatory period but there will be an opportunity in the next pricing regime to reflect that next determination of the costs that were borne.

The Hon. J.M.A. LENSINK: The item that appears once again is the crown land based information. Can the minister explain why this project continues to appear in these papers and what the long-term plan is?

The Hon. I.K. HUNTER: My advice is that the Auditor-General's Report comments that the department has not been able to formulate suitable methodology for determining the value of unalienated crown land. I am advised that a methodology for evaluating unalienated crown land was not progressed substantially during the year 2012-13 due to the process of the restructure being undertaken throughout the year both to merge two former agencies into the current department and integrate NRM boards. We set a different priority, I guess.

It is also important to note that during 2012-13 the Department of Planning, Transport and Infrastructure commenced a two-year project to replace the Land Ownership and Tenure System (LOTS) with the South Australian Land Integrated System (SALIS). This new system will capture more accurate information for all land ownership in South Australia, including crown land. I am advised that this project is currently scheduled to be completed in December 2014. The department is being consulted in finalising the new system.

The Hon. J.M.A. LENSINK: Referring to page 545 in relation to purchase cards, clearly there has been some misuse of those and the Auditor-General's Report advises that purchase cards may be suspended or cancelled. Can the minister advise whether that has taken place under any circumstances, and how many cards have been suspended or cancelled?

The Hon. I.K. HUNTER: My advice is that none have been cancelled or suspended to this point. We are in the process of updating our policies and procedures and undertaking training for staff around these issues.

The Hon. J.M.A. LENSINK: Regarding the Coorong, Lower Lakes and Murray Mouth projects, some $118 million is to be expended to 2015-16.

The Hon. I.K. HUNTER: Sorry, what page?

The Hon. J.M.A. LENSINK: Page 551. Can the minister advise what the status is of that particular project, and are some of these projects depending on the Lake Albert salinity scoping study?

The Hon. I.K. HUNTER: I do not really have sufficient information before me to answer that question, but I will take it on notice, if the honourable member is happy.

The Hon. J.M.A. LENSINK: Chowilla would come under the Murray Futures project, I assume. Similarly, if the minister is able to take on notice as to where the Murray Futures funding is at and how much has been expended to date, particularly in relation to the water buyback from willing sellers. Does the minister have that information available?

The Hon. I.K. HUNTER: No. My advice is that I will need to come back with further detail on that one.

The Hon. J.M.A. LENSINK: That is all I have on DEWNR.

The Hon. I.K. HUNTER: The EPA is next.

The Hon. J.M.A. LENSINK: I refer to page 511. There was a decrease in tonnages processed during the 2012-13 financial year. Can the minister explain why that took place?

The Hon. I.K. HUNTER: My advice is that this is a trend that we are currently observing. We believe that it probably affects the general economic activity in the state. There is a decrease across the commercial and residential sector, but it has been a recent trend and we are watching it and waiting for it to tick up again.

The Hon. J.M.A. LENSINK: You are optimistic, but you cannot guarantee that it will return to previous levels. So what does that do to—and this may well be a budget question—the anticipated fund amount for the Waste to Resources Fund?

The Hon. I.K. HUNTER: My advice is, in fact, that tonnage going down is a good thing. We actually budget, I am told, for the impact of our regulations to bring down the tonnage. That is the whole point of trying to reduce the amount of waste that goes to landfill. So it is budgeted for, as is generally the case, and at this point in time it will have no real dramatic impact.

The Hon. J.M.A. LENSINK: I was asking you a financial question, not a policy question about whether we think that less landfill is a good thing or not. Under the Waste to Resources Fund, on page 513, it advises that there is $43.7 million in that fund. What does the government anticipate will be in that fund at 30 June 2014? In other words, how much does it expect to expend?