State Water Corporation Operational Audit 2012/13 · State Water Corporation Operational Audit ... 4 IPART State Water Corporation Operational Audit 2012/13 1.1 ... State Water Corporation

Independent Pricing and Regulatory Tribunal

State Water Corporation Operational Audit 2012/13Report to the Minister

Water — Compliance ReportDecember 2013

State Water Corporation Operational Audit 2012/13 Report to the Minister

Water — Compliance Report December 2013

ii IPART State Water Corporation Operational Audit 2012/13

© Independent Pricing and Regulatory Tribunal of New South Wales 2013.

This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism and review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgement of the source is included.

ISBN 978 1 925032 59 8 CP81

The Tribunal members for this review are:

Dr Peter J Boxall AO, Chairman

Mr Simon Draper, Part Time Member

Dr Paul Paterson, Part Time Member

Inquiries regarding this document should be directed to a staff member:

Gary Drysdale (02) 9290 8477

Maria Morahan (02) 9113 7752

Independent Pricing and Regulatory Tribunal of New South Wales PO Box Q290, QVB Post Office NSW 1230 Level 8, 1 Market Street, Sydney NSW 2000

T (02) 9290 8400 F (02) 9290 2061

www.ipart.nsw.gov.au

Contents

iii IPART State Water Corporation Operational Audit 2012/13

Contents

Executive Summary 1 Overview of audit findings 1 Annual Statement of Compliance 2 IPART’s Recommendations 2

1 Introduction and Scope 3 1.1 Purpose and Structure of this report 4 1.2 Audit scope 4 1.3 Audit process 4

2 Summary of audit findings and recommendations 7 2.1 Asset Management 8 2.2 Water Delivery Operations 9

3 Progress on previous audit recommendations 10

Appendices 11 A IPART Compliance Grades 13 B 2012/13 Audit Scope 15 C Operational Audit Report 2012/13 – State Water 39 D State Water’s Statement of Compliance 109

Executive Summary

State Water Corporation Operational Audit 2012/13 IPART 1

Executive Summary

The Independent Pricing and Regulatory Tribunal of New South Wales (IPART) has completed the audit of State Water Corporation’s (State Water) compliance with the requirements of its 2008-2013 Operating Licence (the licence). This audit covers the period from 1 July 2012 to 30 June 2013.

The audit is the main regulatory instrument that we use to assess compliance with the licence. We applied a risk based approach to the audit. Under this approach, we assess the risk of non-compliance with a licence obligation to determine an appropriate audit frequency for that requirement. We audit those clauses that we consider to be ‘high risk’ more frequently, while low risk clauses are audited less frequently. We audit all requirements of the licence at least once during the 5-year term of the licence.

Further, in determining the scope of the audit we consult with the NSW Ministry of Health (NSW Health) and seek public submissions. This year, NSW Health did not identify any areas of interest and we received no public comment. We also engaged a specialist auditing firm (BBTech Consulting) to assist with the 2012/13 operational audit.

Adopting a risk based approach has improved the effectiveness and efficiency of the auditing process, without increasing risks to the community. The approach allows audit resources to be targeted to areas of higher risk. It also reduces the overall burden of compliance for the utility.

Overview of audit findings

This year State Water demonstrated Full Compliance with the licence clauses audited. In summary, the audit found that State Water achieved:

Full Compliance with requirements relating to Asset Management.

Full Compliance with requirements relating to Water Delivery Operations.

State Water’s compliance is summarised in Table 1 over the page.

Executive Summary

2 IPART State Water Corporation Operational Audit 2012/13

Table 1 State Water’s compliance in 2012/13, the 5th year of its 2008-2013 Operating Licence

Licence Part Number of

audited clauses

Compliance grade awarded

Full High Adequate

Part 3 – Asset Management 1 1

Part 6 – Water Delivery Operations 6 6

Total 7 7

Source: BBTech, Independent Pricing and Regulatory Tribunal State Water Corporation 2012/13 Operational Audit – Final Report 20 November 2013.

Annual Statement of Compliance

In preparing this report we have also reviewed State Water’s annual Statement of Compliance (Appendix D). This is an exception based report, certified by State Water’s Chairman and Chief Executive Officer, which lists any licence breaches that occurred during the year. Further, the Statement identifies any remedial action that has been taken, or is in the process of being taken.

This year State Water identified 1 licence breach, related to State Water’s Community Consultative Committee. State Water did not appoint new members to the committee in accordance with the operating licence. We note that the requirement to maintain the committee was removed in State Water’s new 2013-2018 licence. We therefore consider this breach is immaterial, requiring no further action.

IPART’s Recommendations

Since the audit has awarded Full Compliance, we make no recommendations relating to State Water’s compliance with its operating licence. Further, we note that State Water has addressed all outstanding recommendations from previous operating audits.

1 Introduction and Scope



State Water is a State Owned Corporation owned by the NSW State Government. Its primary objective is to capture, store and release water in an efficient, effective, safe and financially responsible manner for customers in various locations in NSW. These roles and responsibilities, as well as State Water’s other objectives, are prescribed by the State Owned Corporations Act 1989, the State Water Corporation Act 2004 (the Act), and the Operating Licence issued to State Water under Part 11 of the Act.

State Water was subject to 2 separate Operating Licences during the 2012/13 audit period. The 2008–2013 Operating Licence expired on 23 June 2013. An interim licence with largely the same conditions was granted for the period 24 June 2013 to 30 June 2013. The auditable obligations of both licences were consistent, allowing a single audit to cover both licenses. A new 5-year operating licence commenced on 1 July 2013.

IPART has completed the annual operational audit of State Water’s compliance with the obligations outlined in its Operating Licences. We do this by receiving and reviewing reports, interviewing utility staff and undertaking site visits. At the completion of the audit we publish the audit report, and report our findings to the Minister.

We applied a risk based approach to the audit of State Water as outlined in the executive summary.

Further, we assess compliance by reviewing an annual Statement of Compliance prepared by State Water (Appendix D). This is an exception based report listing any licence breaches that occurred during the year. It also lists what remedial action has been taken, or is being taken, to resolve the matter.



1.1 Purpose and Structure of this report

The purpose of this report is to inform the Minister for Primary Industries of State Water’s performance against its audited licence obligations for the audit period, and to set out any recommendations in response to these findings.

Chapter 1 explains the scope of the audit review and the process followed in undertaking the audit

Chapter 2 presents a summary of the audit findings and recommendations

Chapter 3 summarises the progress by State Water to address and implement recommendations from previous audits

Appendix A contains the table of compliance grades used for this audit

Appendix B contains the audit scope

Appendix C provides the auditor’s detailed audit report

Appendix D provides State Water’s annual Statement of Compliance.

1.2 Audit scope

This audit covers the period from 1 July 2012 to 30 June 2013.

The audit scope for this year included obligations relating to:

Asset Management (Part 3) – requirements relating to State Water’s asset management systems and processes.

Water Delivery Operations (Part 6) - requirements relating to State Water’s operation of infrastructure, and management of allocated water.

1.3 Audit process

We engaged BBTech Consulting to assist with the 2012/13 audit of State Water. The auditor was required to undertake the following tasks.

1. Liaise with NSW Health and other relevant departments to determine the agencies’ views on State Water’s licence compliance and whether any licence obligations should receive special focus as part of the audit.

2. Receive stakeholder submissions and comments for inclusion in the audit scope.

3. Prepare an information request (questionnaire), setting out all information and evidence requirements, 2 weeks prior to the commencement of audit interviews.

4. Review reports and documents provided by State Water in response to the questionnaire.

5. Conduct face-to-face interviews with State Water staff at their offices.



6. Conduct site visits to view a physical asset or facility and assess the implementation of State Water’s systems and procedures.

7. Assess the level of compliance achieved by State Water against each of the obligations of the licence set out in IPART’s risk-based audit scope, providing supporting evidence for this assessment and reporting compliance according to IPART’s compliance grades (Appendix A).

8. Assess and report on progress by State Water in addressing any comments made by the relevant Minister and/or recommendations endorsed by IPART pertaining to previous audits, providing supporting evidence for these assessments.

9. Verify the calculation of performance indicators associated with requirements of the relevant operating licence and undertake an assessment of any underlying trends in performance arising from these indicators.

10. Provide the drafts of the audit report to IPART and address comments from State Water and IPART regarding the draft audit findings.

11. Prepare a final report on the findings of the audit.

As part of the audit process, we sought submissions from the public on any matter related to the operating licences prior to the commencement of the audit interviews. We advertised for public submissions in the Sydney Morning Herald, The Daily Telegraph and the Newcastle Herald on 29 May 2013, and in The Land on 30 May 2013. No submissions from the public were received.

We contacted NSW Health prior to the audit interview to seek its views on compliance, or any other areas which should be reviewed as part of this audit. NSW Health advised that there were no specific issues it required to be addressed in the audit.1

The auditor adopted an audit methodology that was consistent with the following Standards:

ISO 19011:2011 Guidelines for auditing management systems

ASAE 3100:2008 Compliance Engagements

AUS 110 Assurance Engagements other than Audits or Reviews of Historical Financial Information.

The guidelines contained within the above standards set out a systematic approach to defining the requirements of an audit, ensuring that it is conducted in accordance with an established and recognised audit protocol.

1 Email from Paul Byleveld, NSW Ministry of Health, 16 May 2013.



The auditor also carried out the audit according to our Audit Guideline for Public Water Utilities.2 Under this guideline, auditors can either make recommendations or suggest opportunities for improvement. Where we support an auditor’s recommendation, we follow up the matter to ensure that it is addressed.

Where auditors have suggested opportunities for improvement we take a different approach. The utility can decide whether to implement an opportunity, based on its own assessment of whether the improvement is a prudent and efficient way to achieve its outcomes. We take this approach to balance improved performance with the investment required to improve it. That is, we want the utility to consider the pricing implications of continued improvement and value for money before the utility implements further improvements. We do not follow up these matters.

We held a project start up meeting with the auditors on 29 July 2013 to agree on the project milestones and timing of the audit, as well as outline IPART’s expectations of the audit. We also held an audit inception meeting with State Water and BBTech on the first day of the audit interviews, 9 September 2013. At this meeting a mutual understanding and expectation of the audit was established and protocols for the conduct of the audit were agreed. All parties adhered to the agreed protocols throughout the audit.

The operating licence audit interviews were conducted on 9 September 2013 at State Water’s offices in Sydney.

The auditor also undertook site visits at the following locations on 10 September 2013:

Burrendong Dam

Various metering sites along the lower Macquarie River near Dubbo.

State Water’s compliance with the relevant requirements of the operating licence was assessed according to the compliance grades outlined in Appendix A.

Annual Statement of Compliance

Prior to the audit, State Water provided a Statement of Compliance (Appendix D of this report). This statement identified 1 licence breach, related to State Water’s Community Consultative Committee. State Water did not appoint new members to the committee in accordance with the operating licence. We note that the requirement to maintain the committee was removed in State Water’s new 2013-2018 licence. We therefore consider this breach is immaterial requiring no further action.

2 IPART, Audit Guideline – Public Water Utilities, May 2013. This Audit Guideline is on our website (www.ipart.nsw.gov.au).

2 Summary of audit findings and recommendations



This chapter provides a summary of the auditor’s findings and recommendations for each of the audited clauses and sub clauses of the licence. The 2012/13 audit is the 5th and final audit of the 2008-2013 licence period.

For each of the audited licence clauses, we have included a table comparing State Water’s performance in audits since its first operational audit in 2006.

The sources of data for these tables are the audit reports listed below:

05/06 audit grades – Halcrow – Operational Audit of State Water Corporation,May 2007

06-08 audit grades – Halcrow – 2008 Operational Audit of State WaterCorporation, November 2008

08/09 audit grades – Halcrow – 2009 Operational Audit of State WaterCorporation, November 2009

09/10 audit grades – Halcrow – 2010 Operational Audit of State WaterCorporation, November 2010

10/11 audit grades – t-cAM – State Water Corporation Operational Audit 2010/11,December 2011

11/12 audit grades – t-cAM – State Water Corporation Operational Audit 2011/12,December 2012

12/13 audit grades - BBTech, Independent Pricing and Regulatory Tribunal StateWater Corporation 2012/13 Operational Audit – Final Report, 20 November 2013(Appendix C of this report).

Compliance grades for the years 2005/06 to 2011/12 in the tables are abbreviated according to the following convention:

Full = Full Compliance; High = High Compliance; Mod = ModerateCompliance; Low = Low Compliance; NC = Non Compliance; Insuff =Insufficient information; - = No requirement/not audited, NA= non-auditableclause.



We introduced new simpler compliance grades this year to provide increased clarity and consistency with other water utility audits. Compliance grades for the years 2012/13 in the tables are abbreviated according to the following convention:

Full = Full Compliance; High = High Compliance; Adeq = AdequateCompliance; NC = Non-Compliant; NR = No requirement.

2.1 Asset Management

State Water achieved Full compliance for the 1 audited clause for 2012/13.

Part 3 of the licence outlines State Water’s obligations relating to asset management. Under the risk based auditing framework, we consider that the 3 auditable clauses in this part of the licence pose low, medium and high risks, with respect to both the likelihood and consequence of non-compliance. This year 1 clause, which represents a high risk, consisting of 4 sub-clauses, was audited.

Table 2.1 Summary of compliance with the Asset Management part of the licence

Clause Requirement Compliance Grading

2005/06 2006-08 2008/09 2009/10 2010/11 2011/12 2012/13

3.1 Asset Management Obligation

- Full Full Full High High-Full

Full

3.2 Reporting on the Asset Management System

- - - - - Full -

3.4 Augmentation of Water Management Works

- Full Full Full Full - -

Sources: Auditor reports listed on page 7 of this report.

The auditor found that State Water demonstrated that it manages its assets in a manner consistent with clause 3.1 of the Operating Licence, through the approach set out in its Asset Management Framework document.

The auditor noted that State Water has a number of internal planning procedures within its Asset Management Framework that allows it to effectively manage its assets in accordance with regulatory requirements, while achieving lowest cost service delivery and managing business risks.

For this reason, the auditor awarded Full Compliance. The auditor did not make any recommendations or identify any opportunities for improvement in relation to Clause 3.1.



2.2 Water Delivery Operations

State Water achieved Full compliance for the 6 audited clauses for 2012/13.

Part 6 of the licence outlines the obligations relating to its water delivery operations. Under the risk based auditing framework, we consider that the clauses in this part of the licence pose low, medium and high risks with respect to both the likelihood and consequence of non-compliance. This year 6 of the 7 clauses in this section of the licence were audited.

Table 2.2 Summary of compliance with the Water Delivery Operations part of the licence

Clause Requirement Compliance Grading

2005/06 2006-08 2008/09 2009/10 2010/11 2011/12 2012/13

6.1 Water infrastructure operations

- - Full Full Full Full Full

6.2 Management of allocated water

- - Full Full Full Full Full

6.3 Water conservation Full Full Full Full Full Full Full

6.4 Supply Constraints Full Full Full Full Full Full Full

6.5 Water Metering Mod-Full

Mod-High

Mod-Full

High-Full

Full - Full

6.6 Water Balances Mod High Full High-Full

Full - Full

6.7 Fish River water balance and system yield

Full Full Full Full Full Full -

Sources: Auditor reports listed on page 7 of this report.

The auditor found that State Water has a comprehensive array of well developed, sophisticated methodologies for the various aspects of water delivery operations.

The auditor noted that State Water had received Full Compliance on all audited clauses for the previous 2 years, and that State Water continued to maintain the methodologies and systems that underpinned that performance.

For this reason, the auditor awarded Full Compliance for all audited clauses. The auditor did not make any recommendations or identify any opportunities for improvement in relation to the audited clauses.

3 Progress on previous audit recommendations



The previous audit in 2012 identified areas where State Water’s performance with its licence obligations did not receive Full Compliance. We made recommendations to address these issues. The following table outlines State Water’s progress in implementing these recommended actions.

Table 3.1 State Water’s progress in 2012/13 to address IPART’s recommendations from previous audits

Recommendation Progress

2010/11-6 State Water must continue to implement its asset management system in accordance with its scheduled program

Addressed The auditor found that State Water had made sufficient progress with its asset management implementation program to assure the accuracy and reliability of its decision making and risk assessment processes. The auditor considered that State water had addressed the recommendation.

2011/12-1 State Water must develop processes to ensure that asset investments are evaluated against quantifiable corporate objectives

Addressed The auditor found that State Water had demonstrated alignment between its asset management practices and the strategic themes set out in the State Water Corporate Plan 2012-2015. The auditor considered that State water had addressed the recommendation.

Source: BBTech, Independent Pricing and Regulatory Tribunal State Water Corporation 2012/13 Operational Audit – Final Report, 20 November 2013.


Appendices


A IPART Compliance Grades





B 2012/13 Audit Scope





State Water – Operating

Licence 2008-2013

2012-13 Audit Scope

Peter Burgess

State Water Corporation – 2012-2013 Audit scope

Key to Table 1

Requirement Meaning

Audit” Clause to be audited for 2012-2013. Note for this year these subclauses are denoted Audit/SC so there is no confusion as to the need to also provide a statement of compliance.

SC Clause where IPART will rely on the utilities statement of compliance. As below, all clauses require a Statement of Compliance unless there is a designation No requirement.

NR No requirement (for audit or statement of compliance).

Auditors should note any Tribunal directions shown as comments column.

This scope is based on the audit schedule determined for the operating licence 2008 -2013 Trim Record Number D13/9964.

Recommendations from previous years

Outstanding audit recommendations from previous years are shown in table 2. These recommendations are reviewed to determine progress and are reported on separately within the audit report.

Statement of Compliance

By 1 September each year, the utility is required to provide a Statement of Compliance (SC) signed by the Managing Director and a Board Member for all licence clauses (no matter whether they are scheduled to be audited or not in that year). We may request evidence or an interview to assess compliance with any clause in more detail.

Page 1

Table 1 Audit scope 2012-2013 State Water Corporation

Licence Clause

Operating Licence Obligations Requirement

2012/13

Comments

1.8 Availability of the Licence

State Water must make the Licence available to the public.

SC

2.1 Responsibility of State Water under the Licence and other laws

2.1.1 State Water must comply with the Licence and all applicable laws. Note: State Water has obligations under a number of laws including: (a) State Water Corporation Act 2004; (b) Water Management Act 2000; (c) Water Act 1912; (d) Protection of the Environment Operations Act

1997; (e) Independent Pricing and Regulatory Tribunal Act

1992; (f) Environmental Planning and Assessment Act

1979; (g) State Owned Corporations Act 1989; (h) Dams Safety Act 1978; (i) Fisheries Management Act 1994; (j) Public Health Act 1991; (k) Fluoridation of Public Water Supplies Act 1957;

and (l) Water Act 2007 (Cth).

NR

2.3 Memoranda of Understanding

2.3.1 State Water must use its best endeavours to maintain a Memorandum of Understanding (MoU) with each of the Directors-General of DWE, DPI and DECC for the term of the Licence.

SC

2.3.2 The purpose of the MoUs is to form the basis for co-operative relationships between the parties to each MoU, in particular:

NR

2.3.2 (a) the MoU with DWE is to: i. recognise the roles of DWE in regulating

water access, use and management and State Water in releasing water and managing assets; and

ii. address the co-ordination of Functions andassociated responsibilities between DWE and State Water in undertaking their respective roles;

SC

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Licence Clause


2012/13

Comments

2.3.2 (b) the MoU with DPI is to: i. recognise the role of DPI as the agency

responsible for fisheries management in the State; and

ii. address the impact of State Water’soperations and information sharing arrangements on the aquatic habitat and fish passage;

SC

2.3.2 (c) the MoU with DECC is to: i. recognise the role of DECC as the agency

responsible for environmental protection and conservation of natural and cultural heritage; and

ii. address the impact of State Water’soperations and information sharing arrangements on river health and water quality.

SC

2.3.3 Clause 2.3.1 does not limit the persons or regulatory agencies with whom State Water may enter into a MoU.

NR

2.3.4 State Water must make available to the public the MoUs referred to in clause 2.3.1.

SC

2.3.5 State Water must, by no later than 1 September each year, report to IPART on its performance against, and compliance with, the MoUs referred to in clause 2.3.1 for the preceding financial year, including such relevant information as may be required by IPART to be included in the report.

SC

2.3.6 State Water must make available to the public the report referred to in clause 2.3.5.

SC

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Comments

2.4 Functions of State Water arising from other legislation

Note: Section 6 of the Act specifies the principal Functions of State Water as follows: (a) to capture and store water and to release water:

i. to persons entitled to take the water, includingrelease to regional towns;

ii. for the purposes of flood management; andiii. for any other lawful purpose, including the

release of environmental water;(b) to construct, maintain and operate water

management works; (c) any other Functions conferred or imposed on it by

the operating licence or by or under this or any other Act or law.

In addition, under section 12 of the Act the Licence may confer on State Water specified Functions of the Minister administering the Water Management Act 2000 under that Act or the Water Act 1912 or the Ministerial Corporation under any Act or law. Functions conferred on State Water may also be exercised by the Minister o Ministerial Corporation unless these Functions are exclusively conferred on State Water. The Functions conferred under this clause are not conferred exclusively.

NR

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Comments

2.4.1 The following Functions under the specified sections of the Water Management Act 2000 are conferred on State Water by the Licence: (a) debiting water from water accounts and/or

imposing civil penalties under section 60G, subject to the condition that State Water provide 14 days written notification of any proposed action to the Executive Director, Water Legal and Compliance of DWE or the Deputy Director General, Water Management of DWE prior to taking that action;

(b) approving the form of an application for an assignment dealing with an access licence under section 71L, subject to any requirement approved by the Minister.

(c) granting consents to temporary water transfers under sections 71T and 71V;

(d) debiting and crediting of water accounts under sections 76, 85 and 85A, subject to the condition that State Water provide water account information to DWE;

(e) suspending access licences under section 78 and suspending approvals under section 109 in relation to a failure to pay any fees, charges or civil penalties imposed by State Water;

(f) authorising the taking of water by means of a metered work while its metering equipment is not operating properly under section 91I(3) subject to any requirement approved by the Minister

(g) imposing and recovering fees and charges under section 114 consistent with any relevant determination in relation to the price of Bulk Water made by IPART or any other pricing authority vested with the power to determine water prices for State Water;

(h) directing temporary water restrictions under section 324 where water restrictions are required as a result of an emergency works failure. In such cases, State Water must notify in writing to the Executive Director, Water Legal and Compliance of DWE or the Deputy Director General, Water Management of DWE as soon as practicable after making any direction;

(i) issuing directions under section 325 concerning taking and using water in accordance with any mandatory guidelines established under section 336B and/or waste of water subject to any requirement approved by the Minister and provided directions concerning the waste of water are not contrary to any applicable mandatory guidelines under section 336B,

(j) issuing directions to install metering equipment under section 326, subject to any requirement approved by the Minister

(k) issuing directions to stop work where unlawful activity is occurring under section 327, subject to any requirement approved by the Minister;

(l) issuing directions concerning unusable Water Management Works under section 329, subject to any requirement approved by the Minister;

(m) issuing directions for temporary stop work orders under section 330, subject to any requirement

NR

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2012/13

Comments

approved by the Minister; (n) issuing directions to holders of basic landholder

rights under section 331, subject to any requirement approved by the Minister;

(o) ordering landholders to take specified measures to prevent damage to water management works by straying stock under section 332, subject to any requirement approved by the Minister;

(p) issuing directions to protect water sources under section 333, subject to any requirement approved by the Minister;

(q) issuing directions to prepare reports under section 334, subject to any requirement approved by the Minister applying to the Land and Environment Court for an injunction under section 335, subject to any requirement approved by the Minister

(r) taking remedial measures when a person fails to comply with directions, under section 336A, subject to any requirement approved by the Minister;

(s) issuing directions concerning the production of information and records under section 338A(1) to require production of information and records related to metering;

(t) issuing certificates under section 362B, subject to any requirement approved by the Minister;

(u) recovering fees, charges and civil penalties under sections 362A and 362C, subject to any requirement approved by the Minister

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2012/13

Comments

3 Asset Management


3.1 State Water must ensure that its Assets are managed in a manner consistent with: (a) its obligations in the Licence and all applicable

laws, policies and guidelines with which State Water must comply, including the requirements of the NSW Dams Safety Committee;

(b) the principles of the NSW Government’s Strategic Management Framework and the NSW Government’s Total Asset Management (TAM) Policy and Guidelines;

(c) achieving the lowest cost of service delivery across the whole life of the Assets; and

(d) identifying business risks related to the Assets and managing them to a commercially acceptable level.

Audit/SC

3.2 Reporting on the Asset Management System

3.2.1 At least once during the Licence, at a time agreed with IPART, State Water must report to IPART on the state of each group of Assets managed by State Water.

SC

3.2.2 The report under clause 3.2.1 must include the following information: (a) a description of the processes, practices, systems

and plans State Water uses in managing the Assets;

(b) a description of each group of Assets; (c) an assessment of the expected capability of the

Assets to deliver the services required to be delivered by State Water and meet the existing obligations of State Water, consistent with the Licence and all applicable laws with which State Water must comply;

(d) an assessment of the major issues or constraints on current and future performance of the Assets;

(e) the strategies and expected costs of future investments in the assets;

(f) progress in implementing any recommended improvements in processes, practices, systems and plans for the management of the Assets; and

(g) such other information reasonably required by IPART.

SC

3.3 Auditing the Asset Management System

3.3.1 At least once during the term of the Licence, IPART must (at any time it decides) conduct an audit of State Water’s compliance with this clause 3. The audit may form part of an Annual Audit or be conducted separately from an Annual Audit, at the discretion of IPART.

NR

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Comments

3.3.2 In addition, IPART may at any time audit State Water’s compliance with this clause 3 for the purpose of: (a) investigating and reporting on, or reviewing the

pricing of State Water’s services under the Independent Pricing and Regulatory Tribunal Act 1992; or

(b) investigating compliance by State Water with specific areas of State Water’s management of its Assets.

NR

3.3.3 Any audit undertaken under this clause 3.3 must comply with the audit scope and audit specifications determined by IPART.

NR

3.3.4 The provisions of clause 11 apply to an audit under this clause 3 as if the audit under clause 3 was an Annual Audit under clause 11.1 or an Additional Audit under clause 11.4.

NR

3.4 Augmentation of Water Management Works

When considering any augmentation of a Water Management Work, State Water must consider any additional scope for cost effective demand management strategies by Customers.

SC

4 Customers’ rights and consultation

4.1 Community Consultative Committee

4.1.1 State Water must continue to consult regularly with the state-wide community consultative committee established under clause 4.1.1 of the Previous Licence (the CCC) to enable community involvement in issues relevant to the performance of State Water’s obligations under the Licence, except in relation to the Fish River Scheme.

SC

4.1.2 State Water must appoint the members of the CCC consistently with the Licence. The membership of the CCC must include one representative from each of the following: (a) Customers (excluding Fish River Customers); (b) Environment groups; (c) Basic water right holders; (d) Regional business and consumer groups; (e) Catchment Management Authorities; and (f) Local government.

SC

4.1.3 The term of a member of the CCC will expire two years after his or her appointment. A member will be eligible for re-appointment for one further consecutive term.

SC

4.1.4 State Water must provide the CCC with information within its possession or under its control necessary to enable the CCC to discharge the tasks assigned to it, other than information or documents over which State Water or another person claims confidentiality or privilege.

SC

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2012/13

Comments

4.2 Valley based customer service committees (excluding Fish River customers)

4.2.1 State Water must continue to consult regularly with the valley based customer service committees established under clause 4.2.1 of the Previous Licence (together the CSCs) to enable Customer involvement in issues relevant to the performance of State Water’s obligations to Customers under the Licence, or the customer service charter referred to in clause 4.3. For the purposes of this clause 4.2, Customer does not include a Fish River Customer. The membership of the CSCs must also include a representative of DECC or its nominee to represent the public interest in the provision of water for environmental purposes and representatives from Unregulated River water users, Ground Water users and the relevant Catchment Management Authority.

SC

4.2.2 State Water must provide the CSCs with information within its possession or under its control necessary to enable each CSC to discharge the tasks assigned to that CSC, other than information or documents over which State Water or another person claims confidentiality or privilege.

SC

4.3 Customer Service Charter (excluding Fish River)

4.3.1 State Water must, in consultation with the CSCs, continue to have in place a customer service charter (the Charter).

SC

4.3.2 The Charter must set out the mutual responsibilities or obligations of State Water and its Customers (excluding Fish River Customers) consistently with the Licence, the Act, the Water Management Act 2000 and the Water Act 1912.

SC

4.3.3 State Water must make the Charter available to the public.

SC

4.3.4 Following the release of the Annual Audit Report, State Water must, in consultation with the members of the CSCs, review, and if necessary update, the Charter in light of the Annual Audit Report.

SC

4.3.5 State Water must by no later than 1 September each year, for the preceding financial year, report to IPART on its overall performance against its obligations under the Charter and where appropriate State Water is also to report on its performance against its obligations under the Charter in relation to each Valley.

SC

4.3.6 State Water must make available to the public a copy of the report referred to in clause 4.3.5.

SC

4.4 Fish River Customer council

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2012/13

Comments

4.4.1 State Water must regularly consult with the Fish River Customer Council to enable Fish river Customer involvement in issues relevant to the performance of State Water of its obligations to Fish River Customers under the Licence and any customer Contract.

SC

4.4.2 State Water must appoint the members of the Fish River Customer Council consistently with the Licence. The membership of the Fish River Customer Council must include one representative from each of the following: (a) Lithgow City Council; (b) Oberon Council; (c) Delta Electricity; and (d) Sydney Catchment Authority.

SC

4.4.3 State Water must provide the Fish River Customer Council with information within its possession or under its control necessary to enable the Fish River Customer Council to discharge the tasks assigned to it, other than information or documents over which State Water or another person claims confidentiality or privilege.

SC

4.5 Customer Contracts (Fish River customers only)

4.5.1 State Water must use its best endeavours to enter into agreements with its Fish River Customers during the term of the Licence, in relation to the arrangements to apply to the supply of water by the operation of the Fish River Scheme.

SC

4.5.2 The terms of the arrangements must, as a minimum, include: (a) the standard of the quality of water supplied; (b) the continuity of water supplied (i.e. interruption,

disconnection and reconnection to supply); (c) the metering arrangements; (d) the costs to be paid by Fish River Customers for

the supply of water and other services to them; and

(e) any other terms agreed between State Water and its Fish River Customers.

SC

4.6 Code of Practice and Procedure on Debt Management

4.6.1 State Water must maintain a code of practice and procedure on debt management (the Code).

SC

4.6.2 The Code must: (a) provide for deferred payment or payment by

instalment options; and (b) require that State Water provide a point of contact,

notified on bills, for customers in financial hardship.

SC

4.6.3 A copy of the Code must be made available to the public.

SC

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Comments

4.6.4 State Water must report to IPART and the Minister quarterly, no later than one month following the end of each quarter, commencing 1 July 2008, on: (a) the number of requests by Customers for

assistance with paying Bulk Water bills under the Code, including which valleys they are located in; and

(b) the number of Customers in receipt of assistance with paying Bulk Water bills under the Code, including which valleys they are located in.

SC

4.6.5 The report referred to in clause 4.6.4 must detail the types of assistance under the Code that have been requested by, and provided to, Customers.

SC

5 Compliant and Dispute Resolution

5.1 Internal Dispute Resolution Process

5.1.1 State Water must have in place internal complaints handling procedures for receiving, responding to and resolving complaints by Customers and the community against State Water.

SC

5.1.2 The internal complaints handling procedures of State Water must be based on the Australian Standard AS ISO 10002-2006 Customer satisfaction – Guidelines for complaints handling in organisations.

SC

5.1.3 State Water must make information concerning its internal complaint handling procedures available to the public.

SC

5.1.4 By no later than 1 September each year, State Water must report to IPART on an exception basis, for the immediately preceding financial year on the following details concerning Complaints made against State Water which are handled by its internal complaint handling procedures: (a) the total number of Complaints; (b) the number of Complaints received by the category

of Complaint; (c) the number and type of Complaints resolved or not

resolved in sufficient detail and using sufficient classifications to enable IPART to gain a reasonable understanding of how and how well those Complaints were resolved, or why the Complaint was not resolved, as the case may be; and

(d) any problems of a systemic nature arising from Complaints.

SC

5.1.5 State Water must make a copy of the report referred to in clause 5.1.4 available to the public within one month of providing it to IPART.

SC

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5.2 External Dispute Resolution Scheme

5.2.1 State Water must continue to have in place a dispute resolution scheme (the Scheme) incorporating a Dispute Resolution Body or be a member of an industry based dispute resolution scheme incorporating a Dispute Resolution Body (an Industry Scheme) to resolve disputes between State Water and its Customers.

Note: The Dispute Resolution Body that forms part of the Industry Scheme of which State Water is a member at the Commencement Date of the Licence is EWON – the Energy and Water Industry Ombudsman of New South Wales.

SC IPART will check that the membership of EWON is current.

5.2.2 The Scheme established by State Water or an Industry Scheme of which State Water is a member is subject to the Minister’s approval.

SC

5.2.3 The Dispute Resolution Body (whether under the Scheme or an Industry Scheme) is to hear disputes and Complaints made by Customers in relation to: (a) Water Delivery; (b) Customer accounts; (c) State Water’s responsibilities in relation to the

communication of water availability and access notifications; and

(d) the exercise by State Water of the Functions conferred under clause 2.4 of the Licence.

SC

5.2.4 The Scheme or Industry Scheme must comply with the minimum standards, so far as applicable, specified in AS 4608-2004 – Dispute management systems.

SC

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5.2.5 The Scheme or Industry Scheme must have the following features: (a) the decision-making process of the Dispute

Resolution Body and administration of the Scheme or Industry Scheme is to be independent from State Water;

(b) State Water must agree to abide by the decisions of the Dispute Resolution Body in relation to disputes referred to it for resolution;

(c) the Scheme or Industry Scheme must adopt informal proceedings which discourage an adversarial approach;

(d) decisions of the Dispute Resolution Body should observe the principles of procedural fairness, be based upon the information before it, and apply that information to specific criteria;

(e) the Scheme or Industry Scheme is to operate efficiently by: i. keeping track of disputes referred to it;ii. ensuring complaints are dealt with by the

appropriate process;iii. the Dispute Resolution Body regularly

reviewing the operation of the Scheme orIndustry Scheme; and

(f) the Scheme or Industry Scheme is to be provided by State Water to Customers free of charge.

SC

5.2.6 State Water must prepare a pamphlet that explains how the Scheme or Industry Scheme operates and how it can be accessed. State Water must make this pamphlet available to the public.

SC

5.2.7 State Water must report to IPART by no later than 1 September each year, for the preceding financial year, on the Scheme or Industry Scheme based on information available to State Water and information reasonably able to be obtained from the Dispute Resolution Body. Where considered appropriate by State Water and the Dispute Resolution Body, confidentiality arrangements are to be made so as not to disclose the Customer’s identity in such reports. The report must taken into account any issues raised by the Dispute Resolution Body and must contain the following information: (a) the number and types of Complaints received by

the Dispute Resolution Body, classified in accordance with the Dispute Resolution Body’s reporting arrangements;

(b) information on any determinations made by the Dispute

Resolution Body; and (c) any other relevant information required by IPART

to be included in the report.

SC

5.2.8 State Water must make a copy of the report referred to in clause 5.2.7 available to the public.

SC

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5.3 Complaints to other bodies

5.3.1 State Water must report to IPART by no later than 1 September each year, for the preceding financial year, on complaints made against State Water to a court or tribunal such as the Land and Environment Court or Consumer Trader and Tenancy Tribunal (based on information reasonably obtained from these bodies and State Water itself as a party to the complaint), and the report to IPART must contain the following information: (a) he number and types of complaints received by

such other bodies; (b) the outcome of the complaints; (c) how the complaints were resolved; (d) any problems of a systemic nature arising from the

complaints; and (e) any other relevant information required by IPART


SC

5.3.2 State Water must report to IPART by no later than 1 September each year, for the preceding financial year, on any civil actions brought against State Water in a court (based on information available from the courts and State Water itself as a party to the civil action) where the civil action claims loss, damage or other relief against State Water. The report to IPART shall contain the following information: (a) the number and types of civil actions commenced; (b) the outcome of the civil actions; (c) how the civil actions were resolved; (d) any problems of a systemic nature arising from the

civil actions; and (e) any other relevant information required by IPART


SC

6 Water Delivery Operations

6.1 Water Infrastructure Operations

6.1.1 State Water must operate its Assets in accordance with any relevant Water Management Work Approval or Water Sharing Plan that may be issued by DWE.

SC

6.1.2 When operating its Assets State Water must: (a) ensure that releases of water are consistent with

any Works Approval; (b) operate its Assets efficiently and effectively; (c) undertake periodic maintenance rehabilitation and

replacement work; (d) undertake enhancement and development

projects; and (e) implement flood planning and other operations

instigated by the Dam Safety Committee.

Audit/SC Audit b, c, d, and e.

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6.2 Management of Allocated Water

State Water: (a) is accountable for the management and delivery of

water allocated to Customers; (b) must manage water orders with a view to ensuring

Customer access to water and the equitable delivery of water when physical supply constraints occur, or are likely to occur;

(c) must process Temporary Water Transfers within a Valley promptly and efficiently; and

(d) must monitor and maintain a water allocation account for each Water Licence issued to each Customer.

Audit/SC

6.3 Water conservation -

State Water must take such steps as are reasonably practicable to conserve water and to minimise losses that result from its operations.

Audit/SC

6.4 Supply constraints

State Water must endeavour to manage its water release Functions under clause 1.1(b) and other operations to ensure the timely availability of water taking into account physical supply constraints.

Audit/SC

6.5 Water metering

6.5.1 State Water must read Customer meters and audit the compliance of meters against any Commonwealth or State metering standard adopted by the Government.

Audit/SC For clause 6.5. It is acknowledged that the majority of customer meters are not compliant with the Commonwealth/ State metering standards. Therefore, limit audit to State Water’s water meter reading activities (i.e. the percentage of meters actually read and the frequency of that reading), how State Water deals with the uncertainty of measurement, and whether the new metering pilot program will lead to any rethink on estimating the actual usage of water.

6.5.2 State Water must report to IPART by no later than 1 September each year on what action it has undertaken over the preceding financial year to address the issue of metering accuracy (for example, the number or percentage of Customer meters State Water has audited or calibrated) and its findings in carrying out this action.

SC

6.5.3 State Water must, by no later than 31 March 2009, submit to IPART, for IPART’s approval, proposed performance measures with respect to State Water’s performance in ensuring compliance with metering conditions as imposed by Water Management Works Approvals.

NR

6.5.4 State Water must comply for the term of the Licence with the performance measures approved by IPART under clause 6.5.3 with respect to State Water's performance in ensuring metering accuracy.

SC

6.5.5 State Water must maintain record systems that are sufficient to enable it to measure accurately its performance against the performance measures approved under clause 6.5.3.

SC

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6.5.6 State Water must report to IPART by no later than 1 September each year on its performance against the performance measures approved under clause 6.5.3 for the preceding financial year, including analysis of any systemic problems.

SC

6.5.7 As part of its report, State Water must provide IPART with physical and electronic access to the records kept by State Water that enable it to prepare the report under clause 6.5.6.

SC

6.5.8 State Water must make a copy of the report referred to in clause 6.5.6 available to the public.

SC

6.6 Water balances

6.6.1 State Water must prepare by no later than 1 September each year, draft annual water balances, and by 1 December each year, final water balances, each in the form of the template at Table 5-1 of the final report by Sinclair Knight Merz entitled “State Water Operating Licence – Water Balance Template” dated 30 March 2005 and in accordance with the requirements of that report. Note: A copy of this report can be found on IPART’s website at www.ipart.nsw.gov.au.

Audit/SC

6.6.2 State Water may, in preparing the annual water balances referred to in clause 6.6.1, deviate from this template provided that it has obtained the prior written approval of IPART to do so.

SC Prior notice of change IPART to be advised of any changes prior to finalisation of audit scopes. Audit if there is a change.

6.6.3 State Water must make the annual water balances referred to in clause 6.6.1 available to the public.

SC

Page 16

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6.7 Fish River water balance and system yield

6.7.1 In relation to the Fish River Scheme, State Water must: (a) prepare by no later than 1 September each year,

draft annual water balances for the Fish River Scheme, and by 1 December each year, final water balances, each in the form of the template at Table 4-2 of the final report by Sinclair Knight Merz entitled “Outcomes of consultation on performance standards and indicators for the Fish River Water Supply Scheme” dated 11 March 2005 and in accordance with the requirements of that report; and

Note: A copy of this report can be found on IPART’s website at www.ipart.nsw.gov.au. (b) report to IPART, at least once during the term of

the Licence, on system yield at a specified level of reliability of supply to be determined by State Water in consultation with the Fish River Customer Council. For the purpose of this clause 6.7, “system yield” is the average annual volume of water that can be supplied by the water supply system, subject to system inflows, an adopted set of operational rules (including the release of environmental water) and a typical demand pattern, without violating a given level of service standard. “Reliability of supply” is the proportion of time that a supply system is expected to be able to meet demand, often expressed as the probability that restrictions of any given severity will not be imposed in a given year or month.

SC

6.7.2 State Water may, in preparing the annual water balance referred to in clause 6.7.1(a), deviate from the template referred to in that clause provided that it has obtained the prior written approval of IPART to do so.

SC

6.7.3 State Water must make the annual water balance referred to in clause 6.7.1(a) available to the public.

SC

7 The Environment

7.1 Environment Management Plan

7.1.1 7.1.1 At least once during the term of the Licence, prior to 30 November 2010, State Water must review and update its document entitled Environment Management Plan 2006-2011 (the Environment Management Plan).

Note: The Environment Management Plan was developed during the term of the Previous Licence and remains in force until 2011. The latest version was last updated in June 2007.

NR

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7.1.2 In undertaking this review State Water must consult with: (a) DECC; (b) DWE; (c) DPI; (d) IPART; and (e) peak environmental non-government

organisations;

for the purpose of considering the views of those organisations consulted, including whether they seek amendments to the Environment Management Plan.

NR

7.1.3 State Water must engage in Public Consultation when conducting this review.

NR

7.1.4 The Environment Management Plan may be developed for all of State Water's operations (including the Fish River Scheme) or alternatively State Water may develop separate plans for the Fish River Scheme and the rest of its operations, in which the provisions of this clause 7 will apply to each Environment Management Plan prepared.

NR

7.1.5 The Environment Management Plan must: (a) include details of State Water’s program for

addressing its environmental impacts and achieving environmental improvements, including (but not limited to): i. management and mitigation of riverbank and

bed erosion;ii. management and mitigation of water quality

issues associated with storage and release(including mitigation of thermal impacts);

iii. management and mitigation of barriers to fishpassage;

iv. an algal management strategy;v. energy management and consumption; andvi. waste management and minimization;

(b) adopt Ecologically Sustainable Development principles;

(c) be integrated into State Water’s business plans; (d) include indicators to measure the environmental

impact of State Water’s Asset operations and maintenance; and

(e) incorporate environmental improvement targets and timetables for State Water to achieve those targets over the term of the Environment Management Plan.

SC

7.1.6 The Environment Management Plan must be provided to IPART on its completion and made available to the public.

SC

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7.1.7 State Water must, by no later than 1 September each year, or an alternative later date specified by IPART, for the preceding financial year, report to IPART on its environmental performance including its performance against or compliance with: (a) its Environment Management Plan; (b) any environmental provisions of each Water Management Plan and the State Water Management Outcomes Plan issued under the Water Management Act 2000 where applicable to State Water; (c) any environmental regulatory requirements applicable to State Water, including those under the Water Management Work Approval(s) issued under the Water Management Act 2000 and the Fisheries Management Act 1994; and (d) the environmental provisions of any MoUs referred to in clause 2.3 including any performance standards and indicators established under these MoUs.

SC

7.1.8 State Water must make available to the public the report referred to in clause 7.1.7.

SC

8 Performance Indicators

8.1 State Water must maintain record systems that are sufficient to enable it to measure accurately its performance against: (a) the performance indicators set out in Schedule 1; (b) any system performance indicators specified in

any instruments that give effect to the National Water Initiative; and

(c) any service quality and system indicators in any other instrument determined by IPART.

SC

8.2 State Water must report to IPART, by no later than 1 September each year on its performance against the performance indicators specified under clauses 8.1 (a), (b) and (c) for the preceding financial year, including an analysis of any systemic problems.

SC

8.3 As part of its report, State Water must provide IPART with physical and electronic access to the records kept by State Water that enable it to prepare the report under clause 8.2.

SC

8.4 State Water must make a copy of the report referred to in clause 8.2 available to the public.

SC

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9 Pricing

State Water must apply the level of fees, charges and other amounts payable for its services subject to the terms of the Licence, the Act and the maximum prices and methodologies for State Water’s monopoly services as determined from time to time by IPART or any other pricing authority vested with the power to determine water prices for State Water. Note: Part 3 of the Act governs the nature of fees and charges which may be imposed by State Water. Under the terms of the Independent Pricing and Regulatory Tribunal Act 1992, State Water is a government agency for which IPART has standing reference to conduct investigations and report on the determination of pricing for monopoly services supplied and pricing policies.

NR

10.3 Operating guidelines

10.4.2 State Water must take into account any policies or guidelines made and issued by the Government as required for the purposes of meeting its obligations under the Licence.

NR

10.4 Area of Operations

The Licence authorises State Water to exercise its Functions within the area of operations of: (a) Sydney Water Corporation; (b) Sydney Catchment Authority; (c) Hunter Water Corporation; or (d) a Water Supply Authority; subject to State Water obtaining the written agreement of the relevant body.

Note: the Area of Operations for State Water and the capacity for the Licence to authorise the exercise of Functions within, and outside of that Area of Operations is prescribed by section 15 of the Act.

NR

Page 20

Table 2 Progress on Recommendations from previous audits

Recommendation Number

Operational issue/(Licence clause where applicable)

IPART Recommendation To Minister

Progress at 2011/12 audit

Guidance for 2013 audit

2011/12-1 licence clause 3.1 (Asset Management obligation)

State Water develops processes to ensure that asset investments are evaluated against quantifiable corporate objectives.

New for 2011-12 Audit to check this aspect of asset management system and determine progress.

2010/11 - 6

licence clause 3.1 (Asset Management obligation)

Continue to implement its asset management system in accordance with their scheduled program.

Not complete. State Water high-full rating for this clause but has made significant progress. Further details are presented in section 2.2 of audit report.

Check on progress

Page 21

C Operational Audit Report 2012/13 – State Water





BBTech Consulting

in association with

Cobbitty Consulting

Pty Ltd

Independent Pricing and Regulatory Tribunal

State Water Corporation

2012/13 Operational Audit

Final Report

20 November 2013

Revision Details Date Authority

00 Original 1 Oct 13 BB

01 QA and Peer Review 3 Oct 13 JS

02 First Draft 3 Oct 13 BB

03 Second Draft 28 Oct 13 BB,JS

04 QA and Peer Review 19 Nov 13 BB, CB

05 Final Report 20 Nov 13 BB

06 Revised Final Report 22 Nov 13 BB

© BBTech Consulting, Cobbitty Consulting Pty Ltd, 2013.

Copyright in the information, data and other content of this document is the property of BBTech Consulting and Cobbitty Consulting Pty Ltd (the BBTech team).

This document and all included data and information have been prepared for the sole purpose of fulfilling the requirements of the contract between BBTech Consulting and its client, IPART. This document or any part of the document may not be used or reproduced by any means for any other purpose without express written permission.

The BBTech team has prepared this report for the sole use of BBTech Consulting’s client, IPART, and for the intended purpose as stated in the agreement between BBTech Consulting and IPART, under which this work was completed.

The BBTech team will not be liable for any claim by any third party acting on any information contained in this report. In particular, this report should not be used as the basis for any commercial decision and those so doing do so at their own risk.

Contents

Executive Summary .............................................................................................................. 1

1 Introduction .................................................................................................................... 2

1.1 Objectives ........................................................................................................... 2

1.2 Audit method ....................................................................................................... 2

1.3 Regulatory regime ............................................................................................... 5

1.4 Quality assurance process .................................................................................. 6

1.5 Stakeholder consultation ..................................................................................... 8

2 Asset Management ........................................................................................................ 9

2.1 Summary of findings ............................................................................................ 9

2.2 Recommendations .............................................................................................. 9

2.3 Previous recommendations ............................................................................... 10

3 Water Delivery Operations ........................................................................................... 11

3.1 Summary of findings .......................................................................................... 11

3.2 Recommendations ............................................................................................ 12

3.3 Previous recommendations ............................................................................... 13

Appendices ........................................................................................................................... 1

A. Detailed audit findings ......................................................................................... 2

B. Stakeholder Comment ....................................................................................... 47

C. Audit methods ................................................................................................... 49

D. Glossary ............................................................................................................ 50

BBTech Consulting in association with Cobbitty Consulting Pty Ltd

State Water Corporation 2012/13 Operational Audit Page 1

Executive Summary

Auditor Declaration The Independent Pricing and Regulatory Tribunal of NSW (IPART) commissioned BBTech Consulting (BBTech) to undertake an operational audit of State Water Corporation (State Water) covering the period 1 July 2012 to 30 June 2013 (audit period).

IPART’s instructions for this audit included an audit scope which set out a selection of requirements from State Water’s 2008 – 2013 Operating Licence that IPART has chosen for detailed assessment during this audit by BBTech. The audit scope also identifies certain matters from previous audits that IPART requires BBTech to examine. Our task as auditors is to express an opinion on State Water’s compliance during the audit period with those Operating Licence obligations that have been included in the audit scope and to express an opinion on State Water’s progress in addressing matters from previous audits that have been identified by IPART.

The BBTech audit team declare that we:

have seen sufficient evidence on which to base our conclusions;

confirm that the audit findings set out in this report accurately reflect our professional opinion;

have conducted the audit, determined the audit findings and prepared this report in accordance with IPART’s Audit Guideline – Public Water Utilities May 2013 and the audit deed; and

confirm that the audit findings have not been unduly influenced by State Water or any of its associates.

We have exercised due and customary care in preparing this report and have endeavoured to provide objective, accurate and reliable analysis, commentary and conclusions. We have prepared this report from material provided by State Water, discussions held with State Water personnel and stakeholders, and other sources as referenced. We have accepted information provided to us as accurate and complete and have not independently verified such information, except where specifically stated.

Due to the inherent limitations of the information available to us and our evidence gathering procedures, it is possible that fraud, error or non compliance may occur and not be detected. An operational audit is not designed to detect all instances of non compliance with an Operating Licence, as it is not performed continuously throughout the audit period and the audit procedures are employed on a test basis and in conformance with IPART’s risk based audit scope. The conclusions expressed in this report have been formed on this basis.

Major findings

In our opinion, State Water has performed very well against those requirements of the Operating Licence that were included in our audit scope. We assessed State Water to be fully compliant with all seven (7) Operating Licence clauses that we audited.

Recommendations

We have made no recommendations for improved compliance.



1 Introduction

1.1 Objectives

The Independent Pricing and Regulatory Tribunal of NSW (IPART) commissioned BBTech Consulting (BBTech) to undertake an operational audit of State Water Corporation (State Water) covering the period 1 July 2012 to 30 June 2013 (audit period).

The objective of this audit was to assess State Water’s compliance over the audit period with matters included in IPART’s Audit Scope. This is the final audit of State Water’s compliance with its 2008-2013 Operating Licence (as renewed from 24 June 2013 until 30 June 2013) and has been conducted pursuant to clause 11.1 of that Operating Licence.

1.2 Audit method

1.2.1 Audit scope

For some years IPART has adopted a risk based approach to compliance assessment. This means that, each year, IPART determines a subset of Operating Licence obligations for which compliance will be assessed through a formal audit process of detailed investigation. IPART also obtains a certified self-assessment report from State Water that declares compliance with all Operating Licence obligations. The risk-based approach to auditing is explained in more detail in IPART’s Audit Guidelines – Public Water Utilities – May 2013 (2013 IPART Audit Guideline). Apart from these selected Operating Licence obligations, IPART may also include investigations to monitor progress on outstanding matters from previous audits within the audit scope.

For this audit, IPART requested that State Water provide a Statement of Compliance covering all Operating Licence clauses and determined that this operational audit should examine, assess and report compliance with the following seven (7) State Water Operating Licence obligations:

Clause Detail Special Conditions


6.1.2 Water Infrastructure Operations Parts (b), (c), (d) and (e) to be audited


6.3 Water Conservation

6.4 Supply Constraints

6.5.1 Water metering Audit limited to State Water’s water meter reading activities, how State Water deals with uncertainty of measurement, and the likely impact of the new metering pilot program on current estimates of actual water usage.

6.6.1 Water balances

IPART also determined that the audit should include an investigation to monitor progress on the following outstanding matters from previous audits:

1. Recommendation 2011/12 – 1 from the 2011/12 Operational Audit; and

2. Recommendation 2010/11 – 6 from the 2010/11 Operational Audit.



1.2.2 Audit standard

In conducting this audit, we have adopted the audit standard ISO 19011:2011 “Guidelines for auditing management systems”. This standard provides a systematic and reliable approach to defining the requirements of the audit; planning audit activities; interpreting Operating Licence conditions; collecting audit evidence, objectively assessing the evidence; and reporting in a clear, fair, comprehensive and accurate manner. It also ensures that the audit is conducted in accordance with an established and recognised audit protocol.

We were also guided by the following standards, especially where these provided specific detail that was particularly appropriate to this audit:

Standard on Assurance Engagements ASAE 3100 Compliance Engagements, (reissued September 2008); and

Auditing and Assurance Standard AUS 110 Assurance Engagements other than Audits or Reviews of Historical Financial Information, Australian Accounting Research Foundation, 2004.

1.2.3 Audit steps

The steps that we have followed in conducting this audit were aligned to the guidance set out in the 2013 IPART Audit Guideline and the audit methods set out in Appendix C. These are summarised as follows:

Stage 1 Project establishment and audit questionnaire

Participated in a telephone meeting with IPART’s water licensing team to confirm the scope, approach and schedule of the audit;

Reviewed the Operating Licence, previous audit reports and relevant matters outstanding from previous audits to generate an audit questionnaire so that State Water could provide information prior to audit, thereby improving the smoothness and efficiency of the audit interview process;

Checked the questionnaire to ensure that questions were reasonable and relevant to the audit scope and our audit objectives; and

Contacted NSW Health, as requested by IPART, to seek the views of relevant officers on any areas of concern that relate to State Water’s Operating Licence compliance.

Stage 2 Preparation for audit interviews

Reviewed documentation provided by State Water as evidence of its compliance with its obligations under the Operating Licence. This documentation informed our audit meetings and requests for further records; and

Prepared an audit plan, contributed to the development of a schedule for the audit interviews and discussed relevant venues for site visits where the implementation of management systems and the preparation of operational data could be observed.

Stage 3 Inception meeting, interviews and site visit with State Water

Participated in the inception meeting with State Water and IPART to introduce the BBTech audit team and meet the State Water regulatory compliance team, discussed the general audit process and timetable, and established appropriate protocols for the audit;

Interviewed State Water staff and reviewed documents and records provided to demonstrate that procedures were established, were being followed, and that



associated activities were consistent with the procedures, the Operating Licence, and relevant obligations;

Discussed general compliance for each area included in the audit scope;

Reviewed progress in addressing recommendations made by IPART and outstanding matters resulting from previous audits;

Conducted a closing meeting to identify outstanding information and future actions; and

Accompanied State Water representatives on a tour of Burrendong Dam and a selection of water metering sites, and discussed the practical application of asset management and water delivery procedures with operational staff.

Stage 4 First Draft Operational Audit Report

Carried out investigations, analysis and assessment of the audit interview findings and other evidence that we had collected;

Clarified some outstanding issues from the audit interview meetings with State Water;

Identified any factors that may have affected State Water’s performance during the audit period in relation to the audited obligations;

Considered recommendations on how State Water could improve its compliance or opportunities for improvement to ensure future compliance;

Prepared the First Draft Audit Report in accordance with the 2013 IPART Audit Guideline, including the assignment of preliminary compliance grades, performance recommendations, requests for outstanding evidence and assessment of State Water’s progress in addressing outstanding recommendations and actions from previous audits; and

Submitted the First Draft Audit Report to IPART and State Water for comment.

Stage 5 Second Draft Operational Audit Report

Considered comments and additional evidence from IPART and State Water in response to the First Draft Audit Report and assigned final compliance grades; and

Prepared and submitted the Second Draft Audit Report to IPART and State Water for factual correction and editorial comment.

Stage 6 Tribunal Briefing

Prepared a presentation of high level findings and recommendations of the audit to the IPART Tribunal, if required.

Stage 7 Final Audit Report

Prepared the Final Audit Report taking due account of any factual and editorial comments on the Second Draft Audit Report provided by IPART and State Water;

Provided the draft Final Audit Report to Cath Bayly of Elevate Solutions Ltd, an IPART accredited lead auditor in asset management, for a quality assurance review; and

Incorporated any edits arising from the quality assurance review and submitted the Final Audit Report to IPART.

1.2.4 Audit team

This audit was led by Bob Burford, an IPART accredited retail supply lead auditor. Bob Burford audited State Water’s compliance with Water Delivery Operations obligations. Jim



Sly, an IPART accredited infrastructure performance lead auditor with Dam experience, audited State Water’s compliance with Asset Management obligations. Jim Sly also audited State Water’s progress in addressing outstanding recommendations from previous audits.

Each auditor reviewed the work of the other for quality control and fact checking. The Final Audit Report was subjected to a quality assurance review by Cath Bayly who is an experienced, IPART accredited, lead auditor in asset management.

Bob Burford attended all audit interviews to ensure consistency of audit approach and to ensure that audit protocols were observed.

1.2.5 Audit grades

We assessed State Water’s compliance with the various Operating Licence obligations and progress in addressing outstanding actions from previous audits and awarded grades for compliance with each requirement. The grades were awarded at the clause and sub-clause level to align with the approach taken during previous State Water Operating Licence audits. The compliance grade scales are shown in the following table.

Compliance Grade Description

Full Compliance Sufficient evidence to confirm that the requirements have been fully met.

High Compliance Sufficient evidence to confirm that the requirements have been generally met apart from very few minor shortcomings which do not compromise the ability of the utility to achieve defined objectives or assure controlled processes, products or outcomes.

Adequate Compliance Sufficient evidence to confirm that the requirements have been generally met apart from a number of minor shortcomings which do not compromise the ability of the utility to achieve defined objectives or assure controlled processes, products or outcomes.

Non Compliance Sufficient evidence has not been provided to confirm that all major requirements are being met and the deficiency adversely impacts the ability of the utility to achieve defined objectives or assure controlled processes, products or outcomes.

No Requirement The requirement to comply with the Operating Licence condition does not occur within the audit period or there is no requirement for the utility to meet this assessment criterion.

1.3 Regulatory regime

State Water is a State Owned Corporation that delivers bulk water to rural and regional New South Wales. State Water provides services to about 6,300 customers who source water from ‘regulated rivers’ being rivers where downstream flows are regulated by a major storage or dam to supply irrigation water.

State Water’s services include managing water from dams to meet customers’ water allocations and provide for environmental flows, administering water accounts and water usage, and ensuring compliance with water usage.



The NSW Office of Water (NOW) within the NSW Department of Primary Industries manages unregulated rivers and groundwater systems.

State Water’s role, functions and objectives are set out in the State Water Corporation Act 2004. Other regulatory instruments that govern State Water’s operations include:

Operating Licence: The Operating Licence is granted to State Water by the NSW Governor for a period of up to five years and is administered by IPART. The licence that was granted in 24 June 2008 expired on 23 June 2013. To allow the new licence to align with financial year reporting and auditing periods, the 2008 licence was renewed for the period 24 June until 30 June 2013. As a renewal, the provisions of the 24 June 2013 to 30 June 2013 licence were identical to those of the previous 24 June 2008 to 24 June 2013 licence. Technically, this audit measures State Water’s performance against the requirements of both of these licences. The NSW Governor has granted a new Operating Licence for State Water covering the period 1 July 2013 – 30 June 2018.

Water Licences and approvals: Water in NSW is managed by the NSW Office of Water (NOW) under the Water Management Act 2000 and the Water Act 1912. When State Water was formed, NOW issued a deemed approval for the operation of State Water’s existing structures. This approval however, did not include detailed conditions necessary to guide the use of the works in each river system such as for releasing environmental water, transferring bulk water, delivering water, managing floods and water quality issues, or to undertake monitoring and reporting. NOW has progressively replaced this deemed approval with 'water supply work approvals' which contain conditions for the applicable Water Sharing Plan and other conditions that address how the specific water infrastructure (the works) may be used1.

Dam Safety: The NSW Dams Safety Committee (DSC) is constituted under the NSW Dams Safety Act 1978 to ensure the safety of dams in NSW.

Water Pricing: Pricing of State Water’s operations is currently determined by IPART. Pricing for operations in the Murray-Darling Basin will transfer to the Australian Competition and Consumer Commission (ACCC) from 1 July 2014. IPART will continue to regulate prices for State Water services in other areas.

1.4 Quality assurance process

This audit was carried out in accordance with our quality management system, consistent with the International Standard on Quality Control, ISQC 2009. The Project Director, Bob Burford, was responsible for overall quality assurance. He prepared a quality assurance plan identifying the required quality control processes, together with peer reviews of all audit judgements and recommendations.

The quality assurance plan included:

Review of the audit questionnaires prior to submission to IPART;

Processes to control all documents used in the audit;

Accuracy checks of reported data and the completeness of audit trails;

Review of preliminary findings included in the First Draft Audit Report;

Review of the treatment of comments received on the draft report and the feasibility of recommendations and opportunities for continuous improvement; and

Review of the draft Final Audit Report by Cath Bayly and final review by Bob Burford.

1 http://www.water.nsw.gov.au/Water-licensing/Corporate-licences/Major-utilities/State-

Water/State-Water/default.aspx

http://www.water.nsw.gov.au/Water-licensing/Corporate-licences/Major-utilities/State-Water/State-Water/default.aspx

http://www.water.nsw.gov.au/Water-licensing/Corporate-licences/Major-utilities/State-Water/State-Water/default.aspx



This audit quality assurance methodology ensured that the accuracy of each section of the report was checked through quality control steps and all audit judgements, conclusions and recommendations were validated through peer review. Bob Burford reviewed the Final Audit Report prior to release.



1.5 Stakeholder consultation

Under Part 11 of State Water’s 2008-2013 Operating Licence, IPART may undertake any public consultation it considers appropriate. IPART requested that BBTech contact NSW Health for feedback.

We contacted NSW Health and were advised that NSW Health had no issues regarding State Water’s performance with respect to the Operating Licence. Comments provided by NSW Health are included in Appendix B.



2 Asset Management

Part 3 of the Operating Licence outlines State Water’s obligations in respect of the management of its assets. More specifically, it outlines requirements in respect of:

the manner in which the Assets are to be managed (clause 3.1);

reporting on the Asset Management System (clause 3.2);

auditing of the Asset Management System (clause 3.3); and

the augmentation of Water Management Works (clause 3.4).

The audit scope required audit of State Water’s compliance with clause 3.1 of the Operating Licence.

2.1 Summary of findings

Clause 3.1 – Full Compliance

In assessing compliance with this clause, we considered each of the contributing elements, as well as overall compliance, namely that State Water should manage its assets in a manner consistent with:

various statutory obligations, including those of the NSW Dam Safety Committee (sub-clause 3.1(a));

the principles of the NSW Government’s Strategic Management Framework and its Total Asset Management Policy (sub-clause 3.1(b));

achieving the lowest cost of service delivery across the whole life of the assets (sub clause 3.1(c)); and

identifying business risks related to the Assets and managing these risks to a commercially acceptable level (sub-clause 3.1(d)).

In the 2011/12 audit, State Water was assessed as High Compliance for this clause. The 2011/12 auditor explained that the asset management data collection and verification was insufficient and that the asset management system was inadequately linked to corporate service objectives2.

We found that State Water was able to demonstrate that it manages its assets in a manner consistent with the requirements of clause 3.1 of the Operating Licence, as summarised above. Furthermore, we found that State Water had substantively addressed the issues raised in the 2011/12 audit. We therefore assessed full compliance with the requirements of clause 3.1.

Detailed audit findings are presented in Appendix A, Table A.1 (clause 3.1 overall) and Tables A.1.1 to A.1.4 (sub-clauses).

2.2 Recommendations

Recommendations

We have made no recommendations in relation to this Part of the Operating Licence.

2 T-cAM Consulting, et al, Final Report; State Water Corporation Operational Audit 2011/12,

December 2012, page 9.



Opportunities for improvement

We have suggested no opportunities for improvement in relation to this Part of the Operating Licence.

2.3 Previous recommendations

The audit involved a review of action undertaken by State Water in response to recommendations arising from previous audits, specifically:

Recommendation 2011/12-1 from the 2011/12 Operational Audit; and

Recommendation 2010/11-6 from the 2010/11 Operational Audit.

Both of these recommendations are associated with the Asset Management Obligation in clause 3.1.

Recommendation 2011/12-1 - Addressed

Recommendation 2011/12-1 requires State Water to develop processes to ensure that asset investments are evaluated against quantifiable corporate objectives.

We found that State Water has demonstrating alignment between its asset management practices and the strategic themes set out in the Corporate Plan 2012-2015. State Water is implementing processes to ensure that asset management decisions are evaluated against quantifiable corporate objectives. Therefore, we consider that State Water has addressed this recommendation.

Recommendation 2010/11-6 - Addressed

Recommendation 2010/11-6 requires State Water to continue to implement its asset management system in accordance with its scheduled program.

We found that State Water had made sufficient progress with its asset management implementation program to assure the accuracy and reliability of its decision making and risk assessment processes. Therefore, we consider that State Water has addressed this recommendation.

Detailed findings of the review of actions taken in response to these previous recommendations are presented in Appendix A, Tables A.1.5 and A.1.6.



3 Water Delivery Operations

Part 6 of the Operating Licence includes several obligations relating to State Water’s river operations. Specifically, this part of the licence requires State Water to:

operate its infrastructure prudently (clause 6.1);

manage allocated water efficiently (clause 6.2);

conserve water (clause 6.3);

manage allocations fairly, especially when its supply is constrained (clause 6.4);

manage water metering (clause 6.5); and

prepare water balances for certain river systems (clause 6.6 generally and clause 6.7 in relation to the Fish River Scheme).

The audit scope included six (6) of the seven (7) clauses in this part of the Operating Licence, namely clauses 6.1 to 6.6. The audit scope did not require all sub-clauses to be audited. It included sub-clause 6.1.2 of clause 6.1, sub-clause 6.5.1 of clause 6.5, and sub-clause 6.6.1 of clause 6.6.

3.1 Summary of findings

State Water has a comprehensive array of well-developed, sophisticated management methodologies for the various aspects of water delivery operations. These are backed by systems, processes and practices that are appropriate and robust. The effectiveness of State Water’s water delivery operations has been demonstrated at each of the four previous audits of this Operating Licence, where State Water has achieved high - full compliance with the requirements of Part 6. More importantly, State Water has achieved full compliance with all clauses included in this years’ audit scope for the past two years. We found that State Water has continued to maintain the methodologies and systems that underpin this performance. Implementation of the Computer Aided River Management (CARM) project will further improve many aspects of State Water’s water delivery operations.

Clause 6.1.2, parts (b) – (e) – Full Compliance

In assessing compliance with the auditable sub-clauses (sub-clause 6.1.2 (a) was excluded from the audit scope), we considered each of the contributing elements, as well as overall compliance, namely that State Water must:

Operate its assets efficiently and effectively (sub-clause 6.1.2 (b));

Undertake periodic maintenance (sub-clause 6.1.2 (c));

Undertake enhancement and development projects (sub clause 6.1.2 (d)); and

Implement flood planning and other operations instigated by the NSW Dam Safety Committee (sub-clause 6.1.2 (e)).

We found that State Water was able to demonstrate that it satisfactorily met the requirements of all of the above auditable elements of clause 6.1.2 of the Operating Licence. We therefore assessed full compliance with the auditable requirements of clause 6.1.2.


In assessing compliance with the sub-clauses, we considered each of the contributing elements, as well as overall compliance, namely that State Water must:

be accountable for the management and delivery of water allocated to customers (sub-clause 6.2 (a));

manage water orders with a view to ensuring customer access to water and the equitable delivery of water when physical supply constraints occur, or are likely to occur (sub-clause 6.2 (b));



process temporary water transfers within a valley promptly and efficiently (sub-clause 6.2 (c)); and

monitor and maintain a water allocation account for each water licence issued to each customer (sub-clause 6.2 (d)).

We found that State Water was able to demonstrate that it satisfactorily met the requirements of all of the above auditable elements of clause 6.2 of the Operating Licence. We therefore assessed full compliance with the auditable requirements of clause 6.2.


This clause requires State Water to take such steps as are reasonably practicable to conserve water and to minimise losses that result from its operations. We found that State Water met these requirements. We therefore assessed full compliance with the requirements of clause 6.3.


This clause requires State Water to endeavour to manage its water release functions and other operations to ensure the timely availability of water, taking into account physical supply constraints. We found that State Water met this requirement. We therefore assessed full compliance with the requirements of clause 6.4.

Clause 6.5.1 – Full Compliance

In clause 6.5, only sub-clause 6.5.1 was included in the audit scope. This sub-clause requires that State Water must read Customer meters and audit the compliance of meters against any Commonwealth or State metering standard adopted by the Government. IPART provided extra guidance for the audit of sub-clause 6.5.1, as follows:

It is acknowledged that the majority of customer meters are not compliant with the Commonwealth/ State metering standards. Therefore, limit audit to State Water’s water meter reading activities (i.e. the percentage of meters actually read and the frequency of that reading), how State Water deals with the uncertainty of measurement, and whether the new metering pilot program will lead to any rethink on estimating the actual usage of water.

We found that State Water met the requirements of sub-clause 6.5.1. We therefore assessed full compliance with the requirements of clause 6.5.1.

Clause 6.6.1 – Full Compliance

In clause 6.6, only sub-clause 6.6.1 was included in the audit scope. This sub-clause requires that State Water must prepare by no later than 1 September each year, draft annual water balances, and by 1 December each year, final water balances, each in the form of the template at Table 5-1 of the final report by Sinclair Knight Merz entitled “State Water Operating Licence – Water Balance Template” dated 30 March 2005 and in accordance with the requirements of that report.

We found that State Water met these requirements. We therefore assessed full compliance with the requirements of clause 6.6.1.

Detailed audit findings are presented in Appendix A, Table A.2.1 to A.2.12.

3.2 Recommendations

Recommendations

We have made no recommendations in relation to this Part of the Operating Licence.



Opportunities for improvement

We have suggested no opportunities for improvement in relation to this Part of the Operating Licence.

3.3 Previous recommendations

There were no outstanding recommendations from previous years to be addressed.


State Water Corporation 2012/13 Operational Audit Page A - 1

Appendices



A. Detailed audit findings



Table A.1 Detailed audit findings – Clause 3: Asset Management

Sub clause Requirement Compliance grade


State Water must ensure that its Assets are managed in a manner consistent with: (a) its obligations in the Licence and

all applicable laws, policies and guidelines with which State Water must comply, including the requirements of the NSW Dams Safety Committee;


(c) achieving the lowest cost of service delivery across the whole life of the Assets; and


Full compliance

See Section 1.2.5 for a description of Compliance grades.

Risk

This clause represents a high operational risk. The risk is generally managed by an asset management framework that is compliant with all relevant laws, policies and guidelines.

Target for full compliance

State Water to demonstrate that it manages its assets in a manner consistent with: (a) all applicable laws, policies and guidelines with

which State Water must comply, including the requirements of the NSW Dams Safety Committee;


(c) achieving the lowest cost of service delivery across the whole life of the Assets.; and


Evidence sighted

State Water, Asset Management Framework, June 2013, DOC 13/19964.

State Water, Corporate Plan 2012-2015, undated.

State Water, Total Asset Management Plan, June 2013, DOC 13/21170.



3 State Water, Asset Management Framework, June 2013, page 4, DOC 13/19964.

4 State Water, Corporate Plan 2012-2015, undated.

5 State Water, Asset Management Framework, June 2013, page 9, DOC 13/19964.

6 State Water, Total Asset Management Plan, June 2013, section 3.2, DOC 13/21170.

7 State Water, Total Asset Management Plan, June 2013, page 18, DOC 13/21170.

Summary of reasons for grade

State Water demonstrated that it manages its assets in a manner consistent with the requirements of clause 3.1 of the Operating Licence, as outlined in detail relative to each of the four contributing requirements in the following Tables A.1.1, A.1.2, A.1.3 and A.1.4.

Discussion and notes

State Water’s approach to the management of its assets is outlined in its Asset Management Framework document. The Framework document notes3 State Water’s recognition that managing its infrastructure and other assets is central and fundamental to achieving its principal objective, which is: “To capture, store and release water in an efficient, effective, safe and financially responsible manner”.

The Framework sets out the manner in which State Water’s corporate objectives are realised through the management of its assets. It is noted that the first strategic theme identified in State Water’s Corporate Plan4 is to “Build core business strength: resilient and profitable”, and the primary supporting strategy is to “Develop and maintain safe and sustainable assets that reflect best practice standards of fiscal responsibility and public risk”.

The Asset Management Framework addresses the primary phases of the asset lifecycle; accordingly, it outlines five ‘process groups’,5 namely Strategy, Drivers, Planning, Implementation and Performance. Each of these processes is outlined in terms of the inputs, process activities and outputs, with detail being provided in the Total Asset Management Plan.

State Water’s current approach to the management of its assets is consistent with the principles of the NSW Government’s Strategic Management Framework and Total Asset Management (TAM) Policy and Guidelines (refer Table A.1.2 for further discussion).

Under the provisions of its 2013-2018 Operating Licence, State Water is required to develop an asset management system consistent with ISO 55001 Asset Management (or another system agreed by IPART). In its Total Asset Management Plan,6 State Water outlines its proposed approach and program for the further development of its Asset Management System such that it achieves certification to ISO 55001. It is noted that State Water proposes to engage expertise held within the Australian Asset Management Council, through its mentoring program, to support the development of an ISO 55001 compliant asset management system. State Water notes that it has previously consulted the Asset Management Council in developing its existing asset management plans.7

Further, more detailed assessment of compliance with the requirements of the sub-clauses within this clause is presented relative to each of the four contributing requirements in the following Tables A.1.1, A.1.2, A.1.3 and A.1.4.



Table A.1.1 Detailed audit findings – Clause 3: Asset Management


3.1(a) Asset Management Obligation

State Water must ensure that its Assets are managed in a manner consistent with: (a) its obligations in the Licence and

all applicable laws, policies and guidelines with which State Water must comply, including the requirements of the NSW Dams Safety Committee;

Full compliance


Risk

This clause represents a high operational risk. The risk is generally managed by an asset management framework that is compliant with all relevant laws, policies and guidelines.


State Water to demonstrate that the asset management system is comprehensively and effectively consistent with all applicable laws, policies and guidelines with which State Water must comply, including the requirements of the NSW Dams Safety Committee.

Evidence sighted




State Water Presentation, Asset Management, undated, DOC 13/29463.

State Water, Fish Superhighways; A strategic program for securing fish passage (V13), May 2011.

NOW, NSW Cold Water Pollution Strategy: Guidelines for managing cold water releases from high priority dams, April 2011.

State Water Presentation, An Overview of Dam Safety, 2013, DOC 13/29465.

SKM, Portfolio Risk Assessment of 18 Major Dams 2012; Cover Report, May 2013 and supporting reports (one for each dam assessed).

State Water, Burrendong Dam; Intermediate Surveillance Report, September 2012;

State Water, Hume Dam; Intermediate Surveillance Report, October 2012;

State Water, Windamere Dam; Comprehensive (5-yearly) Surveillance Report, November 2012;

State Water, Burrendong Dam; Comprehensive (5-yearly) Surveillance Report (Draft), March 2013.

Visual Inspection and Seepage Reports; Burrendong Dam, DOC 13/29117.

Burrendong Dam Piezometer Readings for 9 April 2013, DOC 13/29118.

State Water, Dam Safety Surveillance Manual – A Guide to Dam Safety Surveillance duties at State Water Storages, Revised and updated May 2013.

Burrendong Dam Staff – Dam Surveillance Training, undated, DOC 13/29471.

Dam Safety Surveillance Certificates, DOC 13/29472.

Dam Operators Qualifications, printed 13 September 2013, DOC 13/29475.



8 State Water, Total Asset Management Plan, June 2013, section 2, DOC 13/21170.

9 State Water, Fish Superhighways; A strategic program for securing fish passage (V13), May 2011.

10 NOW, NSW Cold Water Pollution Strategy: Guidelines for managing cold water releases from high

priority dams, April 2011.


State Water demonstrated that it manages its assets in a manner consistent with its obligations under this Operating Licence and applicable laws and guidelines, including, but not limited to:

the requirements of the NSW Dam Safety Committee (and related legislation);

environmental requirements in respect of cold water pollution; and

obligations in respect of the provision of fish passage.

This assessment is based on review of State Water’s asset management documentation and a sample of records that demonstrate implementation.


State Water must manage its assets in a manner consistent with its obligations under its Operating Licence, and all applicable laws, policies and guidelines including the requirements of the NSW Dams Safety Committee. Relevant laws are listed in sub-clause 2.1.1 of the Operating Licence; the specific obligations and the manner in which they are addressed are outlined in the Total Asset Management Plan.8

State Water is addressing its environmental obligations through the implementation of its Environmental Planning and Protection Thematic Plan, which addresses four key themes including:

Environmental Compliance – consisting of Environmental Planning, Auditing, Sustainability and Training;

Heritage Management;

Environmental Management System – development and certification of an ISO 14001 compliant Environmental Management System (EMS) by 30 June 2018, as required by State Water’s 2013-2018 Operating Licence; and

Fish Passage – implementation of the strategic program outlined in State Water’s Fish Superhighways document.9

Works Approvals issued by the NSW Office of Water set out State Water’s obligations in respect of matters including environmental water, bulk water transfer, water delivery, floods, cold water pollution and monitoring. State Water’s obligations in respect of water delivery are more specifically addressed by Part 6 of its Operating Licence. Cold water pollution is managed through operating protocols developed in accordance with the NSW Cold Water Pollution Strategy: Guidelines for managing cold water releases from high priority dams10 and monitoring in accordance with State Water’s Water Quality Monitoring Program. To improve its capacity to manage cold water pollution, State Water is about to trial a ‘curtain’ mechanism to control releases from storages that do not have multi-level off-take facilities.

Dam safety is clearly a primary focus for State Water as outlined in its presentation An Overview of Dam Safety. Management of the portfolio of dams is undertaken in accordance with guidance provided by the NSW Dams Safety Committee under the provisions of the NSW Dams Safety Act 1978. NSW Dams Safety Committee Guidelines are based predominantly on Guidelines published by ANCOLD (Australian National Committee on Large Dams).



11

State Water Presentation, An Overview of Dam Safety, 2013, Slide 19, DOC13/29465. 12

State Water Presentation, An Overview of Dam Safety, 2013, Slide 28, DOC13/29465.

Key elements of the Dam Safety Program implemented by State Water include:11

Operations and Maintenance;

Surveillance (routine, intermediate and comprehensive);

Special inspections (undertaken in the event of emergencies such as floods or earthquakes);

Safety Reviews;

Risk Assessments;

Reporting;

Education and Training;

Information Management (undertaken using SWIM and FMMS systems); and

Emergency Preparedness.

In respect of dam safety obligations, a Portfolio Risk Assessment was completed during the 2012/13 financial year. The outcomes of the assessment are documented in the report SKM, Portfolio Risk Assessment of 18 Major Dams 2012; Cover Report, May 2013 and supporting reports (one for each dam assessed). A Consequence Study, undertaken as part of the Portfolio Risk Assessment, led to the revision of the Consequence Category for some dams.12

A copy of the 2012/13 Dam Surveillance Inspection Program was provided for review at the interviews. Implementation of planned intermediate (annual) and comprehensive (5-yearly) dam safety reviews was evidenced by a sample of the resultant reports, including:

State Water, Burrendong Dam; Intermediate Surveillance Report, September 2012;

State Water, Hume Dam; Intermediate Surveillance Report, October 2012;

State Water, Windamere Dam; Comprehensive (5-yearly) Surveillance Report, November 2012; and

State Water, Burrendong Dam; Comprehensive (5-yearly) Surveillance Report (Draft), March 2013.

In each case, the report date indicated that the inspections had been undertaken in accordance with the program.

Review of the draft Burrendong Dam; Comprehensive (5-yearly) Surveillance Report revealed a comprehensive document that addresses relevant items consistent with the guidance provided by Dams Safety Committee Form 15 Requirements for Surveillance Reports. More specifically, the report comprised:

Executive Summary;

Recommendations (including new maintenance issues);

General Information (which addressed Background; Dam Details; Consequence Category; Foundations; Outlet Works; Spillway; Geology; Inspection Details; Monitoring; Engineering Information; and Studies Undertaken);

Record of Inspection;

Review of Surveillance Procedures;

Operation, maintenance and Emergency Management;

Mining Activities;

Review of Dam Status; and

Signatures.

Evidence of routine surveillance activities was sighted as follows:

Burrendong Dam (records sighted during site visit and copies subsequently provided): o Visual Inspection and Seepage Report; Burrendong Dam for weeks ending 4 May

2013, 11 May 2013, 18 May 2013, 25 May 2013 and 1 June 2013; and o Burrendong Dam Piezometer Readings, 9 April 2013 (read at four weekly intervals).



13

State Water, Dam Safety Surveillance Manual – A Guide to Dam Safety Surveillance duties at State Water Storages, Revised and updated May 2013. 14

NSW DSC, Dam Safety Surveillance Seminar Notes, undated; NSW DSC, Dam Safety Surveillance Manual, undated; and DEUS, Dam Safety Surveillance Manual, March 2004. 15

Burrendong Dam Staff – Dam Surveillance Training, undated, DOC 13/29471. 16

Dam Safety Surveillance Certificates, DOC 13/29472. 17

Ibid. 18

Dam Operators Qualifications, printed 13 September 2013, DOC 13/29475.

Windamere Dam (records sighted at interviews): o Daily Visual Inspection and Seepage Reports for weeks ending 5 January 2013

through 27 July 2013; o Piezometer Readings for 22 April 2013, 22 May 2013 and 26 June 2013; and o Hydrostatic Settlement Gauge Readings recorded on 20 July 2012 and 13 March

2013.

Guidance for undertaking dam surveillance activities is presented in State Water’s Dam Safety Surveillance Manual,13 which addresses, for example:

Visual Inspection;

Monitoring and Instrumentation; and

Automated Monitoring and Telemetry.

This guidance is further supported by NSW Dam Safety Committee and Department of Energy, Utilities and Sustainability (DEUS) Dam Safety Surveillance Manuals, copies of which were available for inspection during interviews.14

Evidence of Dam Safety Surveillance training was provided, as follows:

A summary Burrendong Dam Staff – Dam Surveillance Training (provided in response to a specific request);15

Copies of certificates of completion of a Dam Safety Surveillance Training Course by relevant staff;16

Copies of Certificates of Accreditation to conduct dam surveillance at Burrendong Dam for relevant staff;17 and

State Water Dam Operators Qualifications.18

Qualification records provided were generally consistent; however, it was noted that there were some minor discrepancies between dates shown on certificates and those recorded in the qualifications register.





3.1(b) Asset Management Obligation

State Water must ensure that its Assets are managed in a manner consistent with: (b) the principles of the NSW

Government’s Strategic Management Framework and the NSW Government’s Total Asset Management (TAM) Policy and Guidelines;

Full compliance


Risk

This clause represents a high operational risk. The risk is generally managed by an asset management framework that is consistent with all relevant principles, policies and guidelines.


State Water to demonstrate that the asset management system is comprehensively and effectively consistent with the principles of the NSW Government’s Strategic Management Framework and the NSW Government’s Total Asset Management (TAM) Policy and Guidelines.

Evidence sighted



State Water, Asset Management Systems Report, August 2012, DOC 12/31242.

State Water, Asset Management Plan; Burrendong Dam – 2013/14, March 2013, DOC 13/20647.

State Water, Lachlan Customer Service Committee; Minutes of Meeting held 19 March 2013, DOC 13/30437.

State Water Presentation, Overview of business unit Maintenance and Services (Burrendong Dam, Windamere Dam and the Macquarie Valley), undated.

Maintenance Work Orders for Job Numbers P0042572 (DOC 13/29110), P0037974 (DOC 13/29111), P0042574 (DOC 13/29113) and P0038649 (DOC 13/29115).

State Water, Future Asset Service Potential (FASP) Process and Asset Renewals, October 2012.


State Water demonstrated that it manages its assets in a manner consistent with the principles of the NSW Government’s Strategic Management Framework and the NSW Government’s Total Asset Management (TAM) Policy and Guidelines. More specifically, its asset management system aligns with the four primary phases of the asset lifecycle as reflected in the TAM Guidelines.

This assessment is based on review of State Water’s asset management documentation and a sample of records that demonstrate implementation.



19

NSW Treasury, Total Asset Management Guideline; Asset Strategic Planning (TAM 06-1), June 2006. 20

NSW Treasury, Total Asset Management Guideline; Capital Investment Strategic Planning (TAM 06-2), November 2006. 21

NSW Treasury, Total Asset Management Guideline; Asset Maintenance Strategic Planning (TAM 06-3), June 2006. 22

NSW Treasury, Total Asset Management Guideline; Asset Disposal Strategic Planning (TAM 06-4), June 2006. 23

State Water, Asset Management Plan; Burrendong Dam – 2013/14, March 2013, DOC 13/20647.


State Water’s asset management system documentation, principally its Asset Management Framework and Total Asset Management Plan, clearly demonstrates alignment with the principles of the NSW Government’s Strategic Management Framework and the NSW Government’s Total Asset Management (TAM) Policy and Guidelines.

TAM Guidance comprises a range of Guideline documents that address specific aspects of asset management. The principal guidelines relate to four (4) primary phases of the asset lifecycle, as follows:

Asset Strategic Planning (TAM 06-1);19

Capital Investment Strategic Planning (TAM 06-2);20

Asset Maintenance Strategic Planning (TAM 06-3);21 and

Asset Disposal Strategic Planning (TAM 06-4).22

Other guidelines address a range of issues including (for example) asset information, heritage asset management, life cycle costing and risk management.

State Water’s asset management system is based around four phases, aligned with the TAM guidance, as follows:

Strategy and Planning;

Creation;

Operations and Maintenance; and

Disposal and Renewal.

Apart from the Asset Management Framework and Total Asset Management Plan, State Water’s Asset Plans are used as a short term (1-3 years or 1-5 years) planning tool that provides more specific asset information. A review of the Burrendong Dam Asset Management Plan23 revealed that as well as providing overview information in respect of the asset, it addresses:

Levels of Service;

Demand;

Description of the Asset (including principal components);

Options Analysis (including identification of opportunities and a gap analysis);

Resource Requirements (financial, information and human);

Evaluation of the Asset (performance, condition, inspections and audit); and

Plan Improvement and Monitoring.

Level of service requirements are addressed at all relevant levels, including:

Legislative – requirements in respect of various items of legislation are identified;

Regulatory – requirements specifically embedded in the Operating Licence;

Corporate – asset levels of service as outlined in the State Water Business Plan 2013/14; and

Customer Research and Expectations – includes recognition of level of service requirements as identified through the relevant Customer Service Committee.



24

State Water, Lachlan Customer Service Committee; Minutes of Meeting held 19 March 2013, DOC 13/30437. 25

State Water, Total Asset Management Plan, June 2013, DOC 13/21170. 26

Ibid, Figures 26-31 and Tables 15-20. 27

State Water, Operation and Maintenance Manual for Lock and Weir No 10, Wentworth, 4 March 2013, DOC 10/446. 28

Source: State Water Presentation, Overview of business unit Maintenance and Services (Burrendong Dam, Windamere Dam and the Macquarie Valley), undated, slide 9.

State Water’s engagement with its customers in respect of asset management is demonstrated by reference to the minutes of the Lachlan Customer Service Committee Meeting held 19 March 2013.24 Section 10 of the minutes addresses Asset Management, including:

Asset Management Report – issues discussed related to recommendations in respect of fishways; Wyangala Dam upgrade works; and the Capital Expenditure Program;

Asset Management Inputs to the ACCC Submission – prioritisation of discretionary projects was discussed;

Lake Brewster – update in respect of embankment protection works; and

NSW Metering Update – update in respect of the metering project and related activities.

State Water’s approach to capital investment (asset creation) is captured in its Capital Investment Strategy, an outline of which is presented in the Total Asset Management Plan.25 Asset acquisition and creation is managed in accordance with its Project Management Guidelines, the core element of the State Water Project Delivery System. Project delivery comprises four phases; Project Identification, Project Planning, Project Evaluation and Project Completion. Capital Investment Process Flowcharts and Descriptions presented in the Total Asset Management Plan26 demonstrate the rigour applied to the delivery process.

During interviews, State Water outlined how risk based staging of dam safety improvement works has been used to prioritise, and where appropriate, re-prioritise capital investment. For example, proposed improvement works at Burrendong Dam were re-prioritised in response to higher than expected cost estimates following detail design of works initially planned as part of the Stage 1 improvements.

Operation of State Water’s assets is undertaken in accordance with asset specific Operations and Maintenance Manuals. By way of example, a copy of the Operation and Maintenance Manual for Lock and Weir No 10, Wentworth27 was provided for review at the interviews. Review of the document revealed that it addresses relevant items, including:

General Information;

Water Operations Procedures;

Structure Operating Procedures (including OH&S Management; Access; Main Weir Structure; Lock Chamber Operation; Other Works; and Fishway Operation);

Works Maintenance Procedures (including reference to FMMS);

Dam Safety and Surveillance;

Site Security;

Facilities;

Responsibilities, Accountabilities and Reporting; and

References.

Asset maintenance is managed through the Facilities Maintenance Management System (FMMS), a computer based system. Take up of maintenance activities captured by (managed using) FMMS has increased from approximately 15% (2009) to 90% (current); this improvement is illustrated by the following chart 28:



29

Job Numbers P0042572 (DOC 13/29110), P0037974 (DOC 13/29111), P0042574 (DOC 13/29113) and P0038649 (DOC 13/29115).

Implementation of asset management practices was reviewed during a site visit to Burrendong Dam and associated facilities. A number of completed Maintenance Work Orders related to Burrendong Dam were sighted;29 these jobs included:

Job No: P0042572 – 6 month Ring Follower Valve Upstream 750mm Mechanical Test;

Job No: P0037974 – 12 month Portable Hydraulic Units (3) Mechanical Inspection;

Job No: P0042574 – 6 month Minor Pipes and Valves Mechanical Test; and

Job No: P0038649 – 1 year 150kVA Emergency Generator Mechanical Inspection.

An on-line review of FMMS was also undertaken with records for Job No: P0038643 being sighted. This job comprised the 6 monthly inspection of the DN1500 Hollow Jet Valve No 1 on the Burrendong Dam Outlet Works (reference BUGD-03-02-07). Off-site repair of a training bearing was required. It was noted that job numbers are coded:

P – indicates programmed activity;

C – indicates conditional activity, i.e. activity generated as a result of a maintenance audit or surveillance inspection; and

B – indicates activity in response to a breakdown.

Reports recording the outcomes of the following Maintenance Audits were reviewed;

Fish River Water Supply – audit undertaken 7-10 May 2012 (file reference 8201450);

Hume Dam – audit undertaken 17-19 September 2012 (file reference 0122778); and

Burrendong Dam – audit undertaken 8-9 May 2013 (file reference 0122145).

These audit reports demonstrated that the effectiveness of maintenance activities and condition of assets is reviewed independent of the maintenance crews.

Total Number of Completed Jobs

2659

3438

5142

7060

8153

259

992

3678

4207

4459

0

2000

4000

6000

8000

10000

12000

14000

2009 2010 2011 2012 (16-7-12) 2013 (1-8-13)

Year

Nu

mb

er o

f Jo

bs

Total B & C Jobs Completed

Total Planned Jobs Completed



30

State Water, Future Asset Service Potential (FASP) Process and Asset Renewals, October 2012.

State Water’s asset renewal planning is driven by its Future Asset Service Potential (FASP) process. This process, an outline of which is presented in a guideline document,30 involves an assessment of asset condition (remaining life) which is then further assessed with asset criticality and probability of failure being taken into consideration. A risk cost assessment is then undertaken to prioritise investment.

Application of the FASP process in respect of the Dam Safety Upgrade Program was demonstrated during interviews; this led to revised prioritisation of works so as to achieve maximum risk reduction for dollar spend across the dam portfolio (eg. revised staging for Burrendong Dam upgrade works, as previously mentioned).




31

State Water, Asset Management Systems Report, August 2012, page 42, DOC 12/31242.


3.1(c) Asset Management Obligation

State Water must ensure that its Assets are managed in a manner consistent with: (c) achieving the lowest cost of

service delivery across the whole life of the Assets;

Full compliance


Risk

This clause represents a high operational risk. It is generally managed by an asset management framework that includes appropriate consideration of risk, life cycle cost and the whole of life of Assets.


State Water to demonstrate that the asset management system is comprehensively and effectively consistent with achieving the lowest cost of service delivery across the whole life of the Assets.

Evidence sighted




State Water letter to the NSW Dam Safety Committee (reference STW8201225, dated 9 March 2009): Review of the Surveillance Regime and Proposed Changes to Surveillance at State Water Storages (February 2009).


State Water demonstrated that it manages its assets in a manner consistent with achieving the lowest cost of service provision, principally through the implementation of a risk based approach to the management of its assets. It is also evident that State Water identifies and pursues opportunities for cost reduction/minimisation.


State Water achieves the lowest cost of service delivery through the use of a risk based approach to the management of its assets. This approach, which is discussed further in Table A.1.4, uses risk assessment to prioritise expenditure on the basis of risk cost to ensure the maximum benefit (in terms of reduced risk) per dollar spent.

State Water also seeks to identify operational and investment opportunities to reduce the cost of service delivery. Examples include:

Reduced surveillance activity – as identified in the Asset Management Systems Report,31 State Water was successful in a submission to the NSW Dam Safety Committee to reduce the frequency of some visual surveillance and monitoring frequencies during the recent drought. This led to a further review of monitoring frequencies, based on downstream consequence, where appropriate instrumentation



32

State Water, letter to the NSW Dam Safety Committee (reference STW8201225, dated 9 March 2009): Review of the Surveillance Regime and Proposed Changes to Surveillance at State Water Storages (February 2009).

and telemetry is available. Whilst initiated in 2009,32 this approach continued to be implemented during the Audit period.

Fish passage offsets – Keepit Dam presents a significant barrier to migrating fish on the Namoi River. The implementation of Dam Safety Upgrade works triggered section 218 of the Fisheries Management Act 1994 (NSW), which requires the provision of fish passage. Compliance was estimated to cost in the order of $60 million, however, State Water has negotiated the provision of ‘trade-off’ fishways at Mollee and Gunidgera Weirs, and the removal of the Weeta Weir at an estimated total cost in the order of $15-20 million.




33

State Water, Asset Management Systems Report, August 2012, page 15, DOC 12/31242. 34

State Water, Total Asset Management Plan, June 2013, Section 5, DOC 13/21170.


3.1(d) Asset Management Obligation

State Water must ensure that its Assets are managed in a manner consistent with: (d) identifying business risks related

to the Assets and managing them to a commercially acceptable level.

Full compliance


Risk

This clause represents a high operational risk. It is generally managed by appropriate processes and systems to identify and mitigate and manage risks.


State Water to demonstrate that the asset management system is comprehensively and effectively consistent with identifying business risks related to the Assets and managing them to a commercially acceptable level.

Evidence sighted





State Water demonstrated that it manages its assets in a manner consistent with identifying business risks related to the Assets and managing them to a commercially acceptable level. This is done by assessing risk costs and using these in conjunction with State Water’s Future Asset Service Potential (FASP) assessment process to inform decision making.


State Water operates within a Risk Management Framework, with the objective of achieving “the efficient delivery of corporate and operational objectives within the context of uncertainty.”33 Risk management in respect of its assets is principally achieved in conjunction with the Future Asset Service Potential (FASP) assessment process.

The assessment of risk is undertaken from both business and technical perspectives; it involves assessment of the probability and consequence (criticality) of asset failure, together with the risk cost of failure. Assessed asset condition is adjusted on the basis of risk cost, which is then used to inform investment decisions.

This risk cost assessment process is outlined in the Total Asset Management Plan.34 As noted in Table A.1.2, application of the process in respect of the Dam Safety Upgrade Program was demonstrated during interviews; this led to revised prioritisation of works so as to achieve maximum risk reduction for dollar spend across the dam portfolio (eg. revised staging for Burrendong Dam upgrade works).



Table A.1.5 Detailed audit findings – Prior Year issues

Clause 3: Asset Management

35

IPART, State Water Corporation; Operational Audit 2011/12; Report to the Minister, January 2013, page 11.

Reference Recommendation Finding

Rec 2011/12-1

Asset Management Obligation

State Water must develop processes to ensure that asset investments are evaluated against quantifiable corporate objectives.

Addressed

Evidence sighted





Summary of reasons for finding

State Water has addressed recommendation 2011/12-1 by:

demonstrating alignment between its asset management practices and the strategic themes identified in its Corporate Plan 2012-2015; and

implementing processes to ensure that asset investments are evaluated against quantifiable corporate objectives.

As acknowledged by IPART in making its recommendation, this recommendation will be further implemented by State Water as it moves to achieve ISO 55001 certification of its asset management system (a requirement of its 2013-2018 Operating Licence).


In the 2011-12 Compliance Report,35 IPART noted that:

“State Water is in the final year of its current operating licence. The current licence review by IPART has identified asset management as a critical issue. The next operating licence will include a requirement for State Water to develop an asset management system in accordance with the soon to be released ISO 55000 asset management standard, which we consider will address the concerns of the auditor.

In light of this, we wish to provide a recommendation that sits in line with the proposed requirements of the new operating licence. We recommend that:

1 State Water develops processes to ensure that asset investments are evaluated against quantifiable corporate objectives.

We expect that State Water can implement this recommendation as part of the introduction of the new ISO 55000 standard asset management system. The standard requires the development of a strategic plan for asset management which shows the relationship between the asset management objectives and the organisational objectives. This requirement would adequately address both our and the auditor’s recommendations.”



36

State Water, Total Asset Management Plan, June 2013, section 3.2, DOC 13/21170. 37

State Water, Asset Management Systems Report, August 2012, page 11, DOC 12/31242. 38

State Water, Corporate Plan 2012-2015, undated. 39

State Water, Total Asset Management Plan, June 2013, section 3.3, DOC 13/21170. 40

State Water, Total Asset Management Plan, June 2013, section 2.7, DOC 13/21170.

IPART’s comments have been taken into account in assessing State Water’s response to this recommendation.

As IPART has noted, State Water is in the process of developing an Asset Management System that will be in accordance with the soon to be released standard, ISO 55001. Its proposed approach and program for the further development of the System such that it achieves certification to ISO 55001 is outlined in its Total Asset Management Plan36.

Examination of State Water’s asset management system demonstrated that most elements have been developed to be consistent with the (expected) requirements of ISO 55001 and are currently operational and implemented. However, it is also expected that some elements will require further development and implementation.

In considering the alignment between State Water’s investment in its assets and its corporate objectives, State Water notes in its Asset Management Systems Report,37 that:

“In 2009, State Water Corporation developed its current Asset Management Framework. This framework provides the asset management direction for the business by translating overarching corporate objectives and strategies as well as the operating context into comprehensive asset management actions. This framework also aligns State Water’s functional structure with specific asset management responsibility areas and includes corporate oversight and feedback/improvement processes.”

Alignment between State Water’s asset management practices and its Corporate Plan 2012-201538 is summarised more specifically in its Total Asset Management Plan,39 as follows:

“In addition to meeting the regulatory requirement set out in the operating licence, the asset management activity proposed over the next operating licence period is also consistent with State Water’s corporate plan.

The first strategic theme of State Water’s Corporate Plan is to ‘Build core business strength: resilient and profitable’ with the subsequent corporate strategy ‘Develop and maintain safe and sustainable assets that reflect best practice standards of fiscal responsibility and public risk’. The Asset Management function aligns with the corporate plan given State Water’s asset management objective:

To provide and manage assets so that:

The required service, legal compliance and other corporate goals are met, now and in the future ensuring current performance and long term business viability;

The assets remain fit for purpose over their full life cycle;

The least whole of life cost is achieved within affordability, cash flow and other business constraints;

The appropriate safety, environmental and overall duty of care is provided; and

Risks are managed acceptably.”

The Total Asset Management Plan40 also identifies specific tactical actions that are being implemented to support achievement of the Strategic Themes and Strategies identified in the Corporate Plan 2012-2015.

From a tactical perspective, State Water’s corporate objectives are reflected in its Asset Management Plans through the identification of levels of service. ISO55000 defines a level



41

State Water, Asset Management Plan; Burrendong Dam – 2013/14, March 2013, DOC 13/20647. 42

State Water, Asset Management Framework, June 2013, page 34, DOC 13/19964. 43

State Water, Asset Management Framework, June 2013, page 35, DOC 13/19964.

of service as “parameters or combination of parameters that reflect social, environmental and economic outcomes that the organisation has agreed to deliver”. In the Burrendong Dam Asset Management Plan41 State Water identifies the applicable level of service requirements, including:

Legislative – requirements in respect of various items of legislation are identified;

Regulatory – requirements specifically embedded in the Operating Licence;

Corporate – asset levels of service as outlined in the State Water Business Plan 2013/14; and

Customer Research and Expectations – includes recognition of level of service requirements as identified through the relevant Customer Service Committee.

The effectiveness of State Water’s asset investments in achieving its corporate objectives is assessed through its internal governance arrangements and by reporting to both internal and external stakeholders.

In respect of internal governance, the roles of the Budget and Expenditure Review Panel (BERP), established in 2009 to provide corporate oversight in line with the Asset Management Framework, include:42

“Review annual business unit operating and capital budget submissions for consistency with corporate objectives and strategies;

Review investment proposals for consistency with corporate objectives and strategies;

Review corporate implementation strategies and outcomes against corporate plans, and undertakings made in the Statement of Corporate Intent, the Operating Licence, and in other relevant documents.”

Furthermore:43 “The capital works program is reported to a variety of internal and external stakeholders to ensure that:

work is carried out in accordance with objectives, and particularly, compliance with regulator requirements & expectations is achieved;

expenditure is in accordance with project budgets; and

annual capital expenditure is in line with the program forecasts.”

This evidence demonstrates that State Water has adequately addressed the recommendation 2011/12-1.



Table A.1.6 Detailed audit findings – Prior Year issues

Clause 3: Asset Management

44

IPART, State Water Corporation; Operational Audit 2010/11; Report to the Minister, December 2011, page 13. 45

T-cAM Consulting, et al, Final Report; State Water Corporation Operational Audit 2011/12, December 2012, page 46.

Reference Recommendation Finding

Rec 2010/11-6

Asset Management Obligation

State Water must continue to implement its asset management system in accordance with its scheduled program.

Addressed

Evidence sighted




Summary of reasons for finding

The discussion presented in Tables A.1.1 to A.1.4 has led to the assessment that State Water has continued to implement its asset management system in accordance with the requirements of clause 3.1 of the Operating Licence.

Whilst State Water has acknowledged the opportunity for further improvement by implementing a project to consolidate its asset information into a single source database, it has made sufficient progress to assure the accuracy and reliability of its decision making and risk assessment processes.


This recommendation arose from the 2010/11 audit of clause 3.1, as reflected in the Compliance Report:44

“IPART recommends that State Water: 6 Continues to implement their asset management system in accordance with their

scheduled program. (Clause 3.1 (a) to (d).)”

Progress on this recommendation was assessed at the 2011/12 audit; the auditor noted:45 “State Water has continued to implement its comprehensive plan for Asset Management implementation across the organisation based on the July 2010 gap analysis report that identified and prioritised the key projects it needed to implement to be provided and has also identified its intention to work towards compliance with the ISO 55000 series of Asset Management standards.

The targeted work program to achieve best appropriate practice in Asset management is ‘appropriate’.”



46

Ibid. 47

T-cAM Consulting, et al, Final Report; State Water Corporation Operational Audit 2011/12, December 2012, page 34. 48

Ibid. 49

State Water, Asset Management Systems Report, August 2012, page 22, DOC 12/31242.

However, the auditor also noted:46 “While a qualitative statement of progress with regard to populating Maintenance Managed Item (MMI) components was provided, there was no evidence allowing quantification of overarching progress or completion provided.”

When considering progress against the 2010/11 recommendation in 2011/12, the auditor noted:47

“State Water has made significant progress in implementing its Asset Management improvement program. It is also progressing with its data integration and validation activities which are based on sound industry accepted processes, however ‘hard’ evidence or estimates of progress on this particular issue from a total or overarching perspective was not provided. This issue is considered by the auditor to still be in-progress rather than completed.”

The auditor provided some insight into the target for assessed completion of this recommendation, as follows:48

“… some target for full compliance should be set, however in deciding on a target that would justify Full compliance, there are five issues – On the one hand (1) accuracy/reliability of decision making and (2) accuracy/reliability of risk assessments and on the other hand are (3) the cost and time to 100% complete the task (4) materiality and (5) the fact that there will always be some ‘error’ due to renewal/ replacement/ new/ retired/ changed condition assets.

Given materiality from a dam safety perspective, the auditor considers that 95% of the data collection and validation for dam sites would be acceptable and for the mechanical and electrical assets – 80% would be acceptable for an assessment result of Full Compliance.”

On this basis, it is apparent that the previous auditor considered the integrity of the data collection aspects of the asset management system to be reflective of effective implementation of the asset management system, and that ‘Full compliance’ would be achieved when sufficient data had been incorporated to assure the accuracy and reliability of decision making and risk assessment, taking account of the materiality of unincorporated data and the ‘diminishing returns’ gained by achieving 100% completion of the task.

In considering IPART’s recommendation, the discussion in Tables A.1.1 to A.1.4 has led to the assessment that State Water has continued to implement its asset management system in accordance with the requirements of clause 3.1 of the Operating Licence. In particular, this point is illustrated by the extent to which maintenance activities have been captured within the maintenance management system, shown in the graph in Table A.1.2.

However, the previous auditor’s comments should be taken into account in assessing progress against this recommendation. State Water currently holds asset information in three main sources:49

State Water Asset Bank – an MS Excel based data bank containing information in respect of some 12,000 water infrastructure assets;

Facilities Maintenance Management System (FMMS) – a stand-alone computer based system used principally for managing the maintenance (including surveillance and inspection activities) of the assets; and

Fixed Asset Register – a database within the Asset Module of State Water’s finance system used principally for accounting purposes.



The Asset Bank contains information including the following, which is used for long term asset planning, renewal planning, capital project prioritisation and asset valuation purposes:

Hierarchy code;

Asset description;

Service potential data;

Criticality data;

Age and life data;

Asset values (MEERA); and

Formulae for probability and risk cost, depreciated values and depreciated state.

The FMMS holds information primarily related to asset maintenance and condition. As previously reported (refer Table A.1.2), take up of maintenance activities captured by (managed using) FMMS has increased from approximately 15% (2009) to 90% (current), thereby substantially improving the base of knowledge.

In acknowledgement that its asset information is held across multiple sources, State Water is currently implementing a project to consolidate its asset information into a single source database, thereby improving its data management. It is expected that this process will also result in validation and improved quality of information.

From a practical viewpoint, State Water’s knowledge of its dam assets (for example) is demonstrated through its implementation (and reporting) of processes such as the Portfolio Risk Assessment and the intermediate and comprehensive dam surveillance inspections (refer Table A.1.1 for further discussion). Decision making in respect of the management of its assets is supported by implementation of its Future Asset Service Potential (FASP) processes in conjunction with the assessment of risk costs, as previously discussed (refer Tables A.1.1 to A.1.4.

This evidence demonstrates that State Water has adequately addressed the issues in recommendation 2010/11-6.



Table A.2.1 Detailed audit findings – Clause 6: Water Delivery Operations


6.1.2 Water Infrastructure Operations

When operating its Assets, State Water must: (b) operate its Assets as efficiently as

possible;

Full compliance


Risk

This clause represents a high operational risk. State Water should operate assets to maximise benefits for the asset owners and customers.


State Water to demonstrate that it operates its assets as efficiently as possible.

Evidence sighted

Audit interview on 9 September 2013, with State Water nominated staff and management and IPART observers.

CAIRO demonstration.

State Water, Utility response to Audit Questionnaire, DOC 13/25659.

State Water, Water delivery operational surplus performance indicator, DOC 12/31295.

State Water, Water operations schematic 1 – For IPART, DOC 13/28034.

State Water, Water operations schematic 2 – For IPART, DOC 13/28036.

State Water, 2012-13 Report to IPART under the Operating Licence, 1 September 2013.

State Water, Minutes of Lachlan Customer Service Committee 19 March 2013, DOC 13/30437.


We consider that State Water has fulfilled the Operating Licence requirements of clause 6.1.2 (b). We found that river operations are efficiently managed through the use of CAIRO, a computer based tool to manage river operations. State Water has also developed and trialled an upgraded river management system, CARM. State Water has demonstrated efficient operation of its assets by meeting water delivery and minimum flow performance indicators.


There is overlap between the requirements of the various elements of this clause and the sub-clauses of clause 3.1, “Asset Management Obligation”. We have discussed State Water’s performance against the requirements of clause 3.1 in Table A.1 and Tables A.1.1-A.1.4 above. In those tables, we concluded that State Water has managed its assets in a manner consistent with the requirements of clause 3.1. From an asset management perspective, therefore, State Water meets the requirements of clause 6.1.2 (b).

However, we interpreted the intent of this clause to focus on the water delivery aspects of State Water’s asset operations as well as the management of those assets.



50

The description of CAIRO is summarised in State Water response to Audit Questionnaire, DOC 13/25659, page 15. Further details are provided in State Water Annual Report 2003/04, page 15. 51

These processes are illustrated in Water Account Mapping - Operations Flow Chart, DOC 13/28033; Water operations schematic 1 - For IPART, DOC 13/28034; and Water operations schematic 2 - For IPART, DOC 13/28036. 52

https://www.statewater.com.au/current+projects/Water+efficiency+projects/iSMART 53

http://www.carmproject.com.au/ 54

State Water, 2012-13 Report to IPART under the Operating Licence, 1 September 2013, page 37 55

State Water, Lachlan Customer Service Committee; Minutes of Meeting held 19 March 2013, DOC 13/30437. 56

Ibid, page 3. 57

State Water, 2012-13 Report to IPART under the Operating Licence, 1 September 2013, page 37.

State Water uses the Computer Aided Improved River Operations (CAIRO) system as the main decision support tool to forecast the volume of water that needs to be released from storages to meet operational and environmental service obligations. This tool takes account of transmission losses and other requirements of the river system50. Improvements to customer ordering through the internet Water Accounting System (iWAS) and better water monitoring in rivers through SCADA (these matters are further addressed in Tables A.2.6 and A.2.8. of this report) has led to more efficient operation of CAIRO51. State Water is updating its SCADA through the introduction of the iSMART automation and telemetry52.

State Water is developing the Computer Aided River Management (CARM) system. This system is being implemented in the Murrumbidgee basin and State Water is in the process of rolling it out into other systems53. CARM has the capacity to eventually replace CAIRO, thereby providing several enhanced capabilities. CARM is further discussed in Table A.2.3 of this report.

Schedule 1 of the Operating Licence requires that State Water compile a set of Performance Indicators for Water Delivery. These performance indicators show that State Water is achieving very satisfactory performance in both water delivery and meeting minimum flow requirements54. We confirmed that State Water also provides quarterly reports on an agreed set of key performance indicators to the Customer Service Committees in each valley. The minutes of the Lachlan Customer Service Committee Meeting held 19 March 2013 reference the tabling of the Performance Indicator and Exception Report55 and the Water Delivery Report56.

Through the development and application of its water delivery tools, State Water ensures that, in undertaking its water delivery activities, it operates its assets as efficiently as possible. This finding is consistent with the customer satisfaction that it has achieved for water delivery operations57 and the strong past audit performance against the requirements of this clause. State Water has been assessed as demonstrating “Full Compliance” for this clause in all past audits of this Operating Licence.

https://www.statewater.com.au/current+projects/Water+efficiency+projects/iSMART

http://www.carmproject.com.au/




58

NSW Treasury, Total Asset Management Guideline; Asset Strategic Planning (TAM 06-1), June 2006. NSW Treasury, Total Asset Management Guideline; Capital Investment Strategic Planning (TAM 06-2), November 2006. NSW Treasury, Total Asset Management Guideline; Asset Maintenance Strategic Planning (TAM 06-3), June 2006. NSW Treasury, Total Asset Management Guideline; Asset Disposal Strategic Planning (TAM 06-4), June 2006.



When operating its Assets, State Water must: (c) undertake periodic maintenance,

rehabilitation and replacement work;

Full compliance


Risk

This clause represents a high operational risk. State Water should maintain, rehabilitate and replace assets to ensure that levels of service are optimised.


State Water to demonstrate that it undertakes periodic maintenance, rehabilitation and replacement work according to a robust asset management framework.

Evidence sighted


State Water, Asset Maintenance Management Policy 21 August 2012, DOC 12/30012.


State Water, Maintenance Work Orders for Job Numbers P0042572 (DOC 13/29110), P0037974 (DOC 13/29111), P0042574 (DOC 13/29113) and P0038649 (DOC 13/29115).


We consider that State Water has fulfilled the Operating Licence requirements of clause 6.1.2(c). We found that State Water has established and maintained plans for periodic maintenance, rehabilitation and replacement work. We also saw evidence that these plans are being implemented.


The requirements of this sub-clause have much in common with those of sub-clause 3.1(b), which requires State Water to manage its assets consistent with the principles of the NSW Government’s Strategic Management Framework and Total Asset Management (TAM) Policy and Guidelines58.

Our discussion of State Water’s performance against the requirements of sub-clause 3.1(b) is set out in Table A.1.2. In that table, we noted that State Water has established and implemented maintenance programs which include elements that relate to rehabilitation and



59

State Water, Future Asset Service Potential (FASP) Process and Asset Renewals, October 2012. 60

State Water, Asset Maintenance Policy, 21 August 2012, page 1, DOC 12/30012.

replacement59. This is in line with the State Water Asset Maintenance Management Policy60 which focuses on optimising levels of services, reducing levels of risk, optimising lifecycle costs, minimising unplanned maintenance and optimising maintenance costs.

In Table A.1.2 we also noted that the asset maintenance program is based on a reliability centred maintenance (RCM) analysis of physical assets, and is managed using the computerised Facilities Maintenance Management System (FMMS). We noted that State Water’s asset renewals decisions are guided by the Future Asset Service Potential (FASP) analysis.

Our inspection of records during our interviews and the site inspection indicated that these programs are being appropriately implemented.

Based on the evidence that we were presented with during this audit, we have assessed that State Water has demonstrated that it undertakes periodic maintenance, rehabilitation and replacement work according to a robust asset management framework. Therefore, we consider that State Water is fully compliant with the requirements of this sub-clause.






When operating its Assets, State Water must: (d) undertake enhancement and

development projects;

Full compliance


Risk

This clause represents a high operational risk. State Water should ensure that enhancement and development projects are undertaken according to a robust asset management framework.


State Water to demonstrate that it undertakes enhancement and development projects according to a robust asset management framework.

Evidence sighted


State Water, Asset Maintenance Management Policy, DOC 12/30012.


State Water, Asset Management Systems Report to IPART, 2011-12, DOC 12/31242.


We consider that State Water has fulfilled the Operating Licence requirements of clause 6.1.2 (d). We found that State Water has established plans for enhancement and development projects and that these plans are being implemented.


State Water’s enhancement and development work is described in the Renewal of Bulk Water Assets section of the Asset Management Systems Report to IPART.

The main renewal projects undertaken relate to the dam safety upgrade program that has been agreed with the NSW Dam Safety Committee. In early 2000, State Water conducted a portfolio risk assessment of its dams which identified some unacceptably high risks that required priority interim actions.

The first phase of this project involved State Water undertaking work at Blowering, Burrendong, Chaffey, Copeton, Keepit, Split Rock and Wyangala Dams to address the most urgent risks. Works in this phase that are currently underway will:

Ensure dams maintain compliance with the DSC Risk Based Policy Framework as required by State Water’s Operating Licence.

Maintain an appropriate level of dam safety, taking account of: o the latest developments in geotechnical and dam engineering; and o revisions of "extreme" rainfall projections from the Bureau of Meteorology.

Phase 2 of this project provides for some extensive work at Chaffey Dam. State Water is considering potential options to optimise and potentially reschedule this phase of the project.



61

Further details of this project are also available in Curbing cold water pollution at Burrendong Dam, State Water Corporation 2011-12 Annual Report, 31 October 2012, page 22.

The most recent portfolio risk assessment, completed during 2012/13, will be used to inform a review of the prioritisation of the Dam Safety Upgrade Program, as discussed in more detail in Table A.1.1.

Another enhancement project involves State Water working with the Lower Hunter Strategy Working Group to assess the feasibility of augmenting Lostock Dam as a future water supply option for Hunter Water.

For some time now, State Water has been developing a Computer Aided River Management (CARM) tool. This development project, which is currently being trialled in the Murrumbidgee basin, will provide an opportunity for State Water to investigate and test new methods of water measurement, flow prediction and monitoring. State Water is considering the extension of this approach to all rivers under its operational control. CARM encompasses a suite of projects that will improve the measurement and monitoring from the major dams upstream as well as weirs and en-route storages. It will also look at ways in which loss of water through evaporation can be reduced.

State Water is developing an innovative solution to manage cold water pollution using a “curtain” arrangement in storages without multi-level off-take facilities. This was more fully discussed in Table A.1.1, which dealt with the Asset Management Obligation61.

Based on the evidence that we were presented with during this audit, we have assessed that State Water has demonstrated that it undertakes enhancement and development projects according to a robust asset management framework. Therefore, we consider that State Water is fully compliant with the requirements of this sub-clause.




62

NSW DSC Correspondence, Copeton Dam - Surveillance Report, 3 November 2011, DOC 11/28036. 63

State Water, Dubbo IMT Exercise 2013 – Post Exercise Report, date of exercise 13 June 2013.



When operating its Assets, State Water must: (e) implement flood planning and other

operations instigated by the Dam Safety Committee.

Full compliance


Risk

This clause represents a high operational risk. State Water should implement flood planning and other operations instigated by the NSW Dam Safety Committee.


State Water to demonstrate that it has implemented flood planning and other operations instigated by the NSW Dam Safety Committee.

Evidence sighted


NSW DSC, Surveillance Report – Copeton Dam, 3 November 2011, DOC 11/28036.

State Water, Dubbo IMT Exercise 2013 – Post Exercise report.


We consider that State Water has fulfilled the Operating Licence requirements of clause 6.1.2 (e). We found that State Water carried out a full flood emergency response exercise during the audit period.


Following review of the 2010 Copeton Dam Surveillance Report by the NSW Dam Safety Committee62, State Water carried out a flood emergency response exercise63. We have reviewed the final report of this exercise and found that the objectives were to:

reinforce flood management procedures;

practice using hydrological information to forecast flood and make release decisions;

manage information in a flood management context;

practice working in a flood management team;

develop knowledge of an unfamiliar catchment;

explore stakeholder management issues; and

work on communications pathways.

The report included eight recommendations to assist State Water in improving the emergency response capability for dam sites. Some elements of the Dam Safety Upgrade Program mentioned in the Table A.2.3 also address flood planning issues. Based on this evidence, we consider that State Water is fully compliant with the requirements of this sub-clause.




64

https://www.statewater.com.au/_Documents/Customer%20Service%20library/Customer%20Service%20Charter.pdf 65

State Water, 2012-13 Report to IPART under the Operating Licence, 1 September 2013, page 14.



State Water: (a) is accountable for the

management and delivery of water allocated to Customers;

Full compliance


Risk

This clause represents a high operational risk. State Water operations should reflect that water it manages is owned by its customers.


State Water to demonstrate that it is accountable for the management and delivery of water allocated to customers.

Evidence sighted


State Water presentation – Customer operations, DOC 13/29461.

State Water, Water account mapping – Operations flow chart DOC 13/28033.

State Water, Lachlan Customer Service Committee; Minutes of Meeting held 19 March 2013 DOC 13/30437.


https://www.statewater.com.au/_Documents/Customer%20Service%20library/Customer%20Service%20Charter.pdf


We consider that State Water has fulfilled the Operating Licence requirements of clause 6.2 (a). We found that the Customer Service Charter recognises that State Water is accountable for the management and delivery of water allocated to customers. The minutes of the Lachlan Customer Service Council demonstrate that this accountability is practiced.


We have interpreted this clause as a requirement for State Water to demonstrate that it is accountable for the management and delivery of water. We assessed State Water’s practices in respect of the management and delivery of water in clause 6.2(b) below.

State Water publishes the Customer Service Charter on its web site64. This Charter states: “We strive to deliver water to our customers on time, through the most efficient and effective means possible, in an environmentally responsible manner.”

The Charter sets out obligations that deal with water ordering and delivery; customer contact; and information and communication. State Water reports annually to IPART on a set of indicators dealing with water management and delivery65. These details are also reported to Customer Service Committees (CSC).

In Table A.1.3 and Table A.1.4, we discussed actions taken by State Water to manage its assets to achieve the lowest cost of service delivery and to identify risks and manage these







66

State Water, Lachlan Customer Service Committee; Minutes of Meeting held 19 March 2013, DOC 13/30437.

to a commercially acceptable level. We concluded in the earlier sections that State Water was addressing these matters. In so doing, State Water demonstrates that it is accountable to its customers. Pursuing the lowest cost of service delivery demonstrates accountability to customers. This accountability is also demonstrated by managing business risks, including the risk of failing to provide customers with timely supply of water.

We reviewed the minutes of the Lachlan CSC meeting66 at which the Performance Indicator Report was tabled. Based on this evidence, we consider that State Water is fully compliant with the requirements of this sub-clause.




67

State Water, Water Account Mapping – Operations Flow Chart, 1 March 2011, DOC 13/28033.



State Water: (b) must manage water orders with a

view to ensuring Customer access to water and the equitable delivery of water when physical supply constraints occur, or are likely to occur;

Full compliance


Risk

This clause represents a high operational risk. State Water should manage water in an equitable manner at all times.


State Water to demonstrate that it manages water orders to ensure customer access to water and the equitable delivery of water when physical supply constraints occur, or are likely to occur.

Evidence sighted


State Water, Water Account Mapping – Operations Flow Chart, DOC 13/28033.

State Water, Water Ordering Procedure, DOC 12/39857.

State Water, Customer Notice, Yanco – extraction reductions, 11 January 2013, DOC 13/11428.

State Water, Customer Notice, Yanco – extraction reductions,14 January 2013, DOC 13/11431.

State Water, Customer Notice, Yanco – extraction reductions17 January 2013, DOC13/11432.

https://www.statewater.com.au/_Documents/Library/Namoi%20channel%20capacity.pdf

https://www.statewater.com.au/Customer%20service


We consider that State Water has fulfilled the Operating Licence requirements of clause 6.2(b). We found that State Water managed water orders to ensure that all customers had access to water and that equitable practices were employed to manage water delivery during periods when water supply was physically constrained.


State Water has two systems in place for the management and delivery of water allocated to customers; the Water Accounting System (WAS) and CAIRO. WAS is used to manage customer accounts and water allocations. CAIRO is used to ensure the release and delivery of allocated water to Customers67.

Available Water Determinations announced by the NSW Office of Water (NOW) are provided to customers via credits to the water accounts attached to their Water Access Licences. These customer accounts are maintained within WAS. WAS is used to monitor water allocations and to ensure that customers have placed water orders according to the





68

State Water, Water Ordering Procedure, dated 29 November 2012, DOC 12/39857. 69

State Water, Customer Notices, Extraction reduction in Yanco, 11 January 2013, DOC 13/11428, 14 January 2013, DOC 13/11431, and 17 January 2013, DOC 13/11432. 70

https://www.statewater.com.au/_Documents/Library/Namoi%20channel%20capacity.pdf 71


conditions of their water access licence conditions. Orders to WAS form the input to CAIRO, which is used by State Water’s River Operations unit to calculate water delivery requirements. Daily flow requirements estimated using CAIRO take into account a number of factors including physical supply constraints, travel times, transmission losses, evaporation losses, weather forecasts and water orders.

State Water has a centralised system for the management and monitoring of its water ordering which ensures that water orders are managed in an equitable manner. The water ordering system enables customers to order water through the internet using iWAS, by phone, email or fax. All orders are entered into WAS before input to CAIRO to determine daily dam release requirements.

State Water provided a copy of its water ordering procedure68. The procedure establishes requirements for receiving and processing customer water orders, including orders received by email, fax, iWAS and by phone.

State Water indicated that there were some supply constraints in the Murrumbidgee, Yanco, Lower Gwydir and Namoi systems in January 2013. State Water’s standard practice to ensure equitable delivery of water during a supply constraint is to allocate available water based on a percentage of the number of unit shares owned by each customer in the affected river section.

In the case of the Yanco system, letters was issued to relevant customers requesting they reduce their extraction by 20% to ensure equitable sharing of the resource69. State Water managed channel capacity constraints in both the Gwydir and the Namoi valleys by rostering in accordance with the process agreed between State Water, customers and NOW70.

Performance in the management of water orders is measured using a number of indicators including customer complaints. Performance is reported regularly to the Customer Service Committees and to IPART. Customer satisfaction surveys distributed every three years include specific questions on water delivery. The State Water’s web site states that a survey is being prepared for 201371.

Based on this evidence, we consider that State Water is fully compliant with the requirements of this sub-clause.






72

State Water, Allocation Assignments Processing Procedures, updated 17 September 2010, DOC 10/11524. 73

https://www.statewater.com.au/Customer%20service/water-ordering-trading-pricing/Current%20Trade%20Statistics



State Water: (c) must process Temporary Water

Transfers within a valley promptly and efficiently;

Full compliance


Risk

This clause represents a high operational risk. Water managed by State Water is owned by the customers. Operations and administration should reflect this.


State Water to demonstrate that it processes Temporary Water Transfers within a valley promptly and efficiently.

Evidence sighted


State Water, Allocation assignment processing procedure, DOC 10/11524.

State Water, Performance Indicator Report 2012/13, DOC 12/31560.

State Water, Trade Data 2012/13, DOC 13/24320.

State Water, MDBA Audit Report, DOC 13/27532.



We consider that State Water has fulfilled the Operating Licence requirements of clause 6.2(c). We found that State Water has established a procedure to deal with temporary water transfers. We also found that State Water has calculated and published performance indicators which demonstrated that it has processed intra-valley temporary water transfers promptly and efficiently.


All water trades are processed by State Water’s trade team in Deniliquin. Trades are received via mail, email or fax and processed in accordance with Water Sharing Plan rules using the Allocation Assignments Processing Procedures72. Trades are entered and approved in the Water Accounting System (WAS).

COAG set a standard that at least 90% of intra-valley trades should be processed within 5 days. However, State Water reports to IPART on the percentage of intra-valley transfers that are processed within four working days. COAG standards are also required to be reported on State Water’s web-site73. Finally, intra-valley water transfer data are reported monthly to CSC’s in the IPART performance indicator report.







74

State Water, Trade Data 2012/13, DOC 13/24320. 75

State Water, Performance Indicator Report 2012-13, DOC 12/31560. 76

http://www.statewater.com.au/About+Us/Publications/Corporate+Publications This link provides access to prior years State Water Corporation Reports to IPART under the Operating Licence. 77

Vincents Audit & Assurance, 2010/11 and 2011/12 Interstate Allocation Trades, 31 July 2013, DOC 13/27532.

In 2012-13, State Water processed 3,695 intra-valley trades. Of these, 98.7% were processed within five (5) working days and 98.5% were processed within four (4) working days.

Details of trades are monitored monthly and the WAS generated reports are supplied to the NSW Office of Water. We reviewed the spreadsheet used to calculate performance against the IPART standard of four (4) days74. We note that this document is marked in cell [o, 111] as “Audited 30th July 2013 – MT”. We also reviewed the spreadsheet used to calculate data for the Performance Indicator Report75.

Performance against COAG and IPART indicators

Year COAG standard (at least 90% of intra-valley trades processed in 5 days)

IPART standard (the percentage of intra-valley trades processed in 4 days)

2009/10 92.8% 91.0%

2010/11 97.0% 96.0%

2011/12 99.5% 99.0%

2012/13 98.7% 98.5%

Over the last four years, performance against the COAG indicator has improved from 92.8% in 2009-10 to 98.7% in 2012-13. Performance against the IPART standard has also improved from 91% in 2009-10 to 98.5% in 2012-1376.

We reviewed a report prepared by Vincents, an auditor engaged by the MDBA77. This audit examined State Water’s trade processes that were in use during the years 2010/11 and 2011/12. The audit did not find any discrepancy of volume between the states. It did, however, identify twelve transactions where discrepancies existed between the details recorded in the transfer register and the source documentation provided by the state authorities. Only one of these discrepancies related to NSW and the auditor noted that this error was obviously typographical in nature and not considered material. Although it relates to transfers processed prior to the audit period, we consider that this audit indicates that the calculation processes used by State Water to derive performance data are robust.


http://www.statewater.com.au/About+Us/Publications/Corporate+Publications






State Water: (d) must monitor and maintain a

water allocation account for each Water Licence issued to each Customer.

Full compliance


Risk

This clause represents a high operational risk. Water managed by State Water is owned by the customers. Operations and administration should reflect this.


State Water to demonstrate that it monitors and maintains a water allocation account for each Water Licence issued to each Customer.

Evidence sighted


State Water, Auscott GS 90AL802245 2009-10, DOC 13/28009.








State Water, Global Ag GS 40AL400068 2009- 10, DOC 13/27997.

State Water, Global Ag GS 40AL400068 2010-11, DOC 13/27998.







State Water, Water Accounting – data billing checks 4th quarter 2012/13. DOC 13/27777.

http://registers.water.nsw.gov.au/wma/DeterminationSearch.jsp?selectedRegister=Determination

https://statewater.com.au/Customer%20service/water-ordering-trading-pricing/Water%20Ordering


We consider that State Water has fulfilled the Operating Licence requirements of clause 6.2(d). We found that State Water has established effective procedures to monitor and maintain a water allocation account for each Water Licence issued to each Customer.







78

http://registers.water.nsw.gov.au/wma/DeterminationSearch.jsp?selectedRegister=Determination 79

https://statewater.com.au/Customer%20service/water-ordering-trading-pricing/Water%20Ordering 80

State Water, Water Accounting – Data Billing Checks 4th Q 2012-13, DOC 13/27777.

81 State Water, sample Water Account Statements (Auscott Properties and Global Ag Properties

Australia P/L, DOC 13/27994 – 28009.


A complete record of each customer’s individual and licence details is contained and maintained in NOW’s Licensing Administration System or LAS78. This information is exported into WAS on a regular basis by way of a data transfer. State Water uses WAS to monitor and maintain water allocation accounts for each Water Licence issued. A number of details are recorded within WAS including the water source, licence number, licence category (eg. domestic and stock, regulated river), and account balances. These details are available to the customer and State Water staff through the use of iWAS.

Customer water accounts are credited with the relevant available water determination (AWD) upon receipt of advice from NOW and on completion of a valid allocation assignment (water trade) from another customer. Accounts are debited after a water order has been processed by State Water and on completion of a valid allocation assignment to another customer. These accounts are reconciled after the water has been delivered and the customers’ meter read. The water account is debited with the greater of the quantity of water ordered or the quantity of water metered. State Water has established various limits and rules that govern specific aspects of water accounting; however, to assist customers, it provides advice about water ordering on its web site79.

Customers can place orders directly using iWAS, which has a built-in cross check to disallow invalid iWAS orders. Orders may also be faxed, phoned, or emailed to the customer helpdesk where officers enter these orders into WAS. Once these orders are received, they are debited from the balances of individual customer’s water accounts and recorded using the ticket system. Reports on complying and non-complying orders can then be obtained.

State Water uses a number of processes and performance monitoring checks with respect to water allocation accounting:

Quarterly billing reconciliation process - this checks the total water billed from the billing module and compares this with what is reported in WAS80. This needs to match before customer billing can proceed. Once these data sets are reconciled, the billing quarter in WAS is locked and no further changes are possible;

Meter reads - these validate previous reads and permit rejection of negative usage entries;

Customer feedback - resulting from iWAS statements and bills received; and

Negative account balances - State Water Compliance Officers monitor and manage negative account balances. Negative accounts are reported monthly to Customer Service Committees and to NOW each quarter. Letters are also sent to customers to manage legal aspects of water accounting.

We questioned whether State Water had systems and processes to provide separate accounting for each Water Licence in cases where the customer had multiple licences. State Water provided evidence that it has the capacity to service customers with multiple Water Access Licences by providing details of four years Water Account Statements for two customers who own Access Licences in different water sources81.







82

State Water, Water Delivery Operational Surplus Performance Indicator 2013-14, DOC 12/31295.


6.3 Water conservation

State Water must take such steps as are reasonably practicable to conserve water and to minimise losses that result from its operations.

Full compliance


Risk

This clause represents a moderate operational risk. Water managed by State Water is a valuable resource that should be conserved.


State Water to demonstrate that it takes such steps as are reasonably practicable to conserve water and to minimise losses that result from its operations.

Evidence sighted


State Water, Water Delivery Operational Surplus Performance Indicator 2013/14, DOC 12/31295.


We consider that State Water has fulfilled the Operating Licence requirements of clause 6.3. We found that State Water has established effective procedures to conserve water and to minimise losses that result from its operations.


State Water operates the river systems using water supply models (CAIRO) to assist in the management of releases from the dams to meet customer demands. State Water attempts to conserve water by limiting the over release of water so that end-of-river system flow requirements set out in Water Sharing Plans are met but not exceeded.

State Water monitors the volume of surplus water, the volume of water that exceeds the minimum requirement outlined in the Water Sharing Plans within the Works Approval. State Water has set a performance target that the volume of this surplus water across all its systems is restricted to 5%.

During 2012/13, State Water provided 4,429 GL of water to customers (not including customers along the Murray River, which is operated by MDBA) with surplus flows being recorded at 175.9 GL. This equates to a 4% surplus, which compares favourably with the State Water target of 5%. All valleys except the Lachlan (7%) and the Hunter (22%), where some operational difficulties were encountered, met the 5% State Water target82.





83

State Water, Performance Indicator Report 2012-13, (Total Combined Page), DOC 12/31560.


6.4 Supply constraints

State Water must endeavour to manage its water release Functions under clause 1.1(b) and other operations to ensure the timely availability of water taking into account physical supply constraints

Full compliance


Risk

This clause represents a moderate operational risk. State Water should endeavour to provide customers with their water in as timely a manner as possible.


State Water to demonstrate that it endeavours to make water available to customers in as timely manner as possible, taking account of supply constraints.

Evidence sighted


State Water, Customer notice – extraction reductions in Yanco, 11 January 2013, DOC 13/11428.




We consider that State Water has fulfilled the Operating Licence requirements of clause 6.4. We found that State Water has established effective procedures to deliver water to customers in as timely manner as possible, including mechanisms to take account of supply constraints.


State Water operates computer-based river management systems to ensure the timely delivery of water to customers. These systems take into account system physical constraints.

The success of these systems is shown by the fact that, of the 128,082 complying water orders, there were 36 complaints (0.03%) due to orders being delivered more than one day from the scheduled day of delivery83.



84

State Water, Customer Notice, Extraction Reductions in the Yanco – Some Additional Minor Improvement 11/01/2013, DOC 13/11428; State Water, Customer Notice, Extraction Reductions in the Yanco – Some Additional Minor Improvement 14/01/2013, DOC 13/11431; and State Water, Customer Notice, Extraction Reductions in the Yanco – Shortfall now reduced to downstream of Darlot 17/01/2013, DOC 13/11432. 85

State Water, Customer Notice, Gwydir Valley Channel Constraints, 13 November, 2012.

Extreme hot weather in the southern valleys during late December and early January led to State Water not being able to meet Murrumbidgee Irrigation demands. These shortages were advised to customers and normal operations were established as soon as practicable84.

State Water also negotiated a block release strategy for summer deliveries in the Gwydir valley to maximise water availability85.






6.5.1 Water metering

State Water must read Customer meters and audit the compliance of meters against any Commonwealth or State metering standard adopted by the Government.

Full compliance


Risk

This clause represents a moderate operational risk. Water is a valuable resource. State Water should endeavour to ensure that water usage is metered as far as is practicable.


IPART’s instructions for the audit of this clause were that State Water should demonstrate that it undertakes sufficient meter reading activities to cover as many meters as practicable and read meters with a frequency that is consistent with likely water usage. State Water should also address how it deals with the uncertainty of measurement, and whether the new metering pilot program will lead to any rethink on estimating the actual usage of water.

Evidence sighted


State Water, Meter Reading Procedure, issued 7 November 2012, DOC 12/37580.

State Water, 91i procedure - “Applying for an authority to take water while metering equipment is not operating properly or is not operating”, issued 29 November 2012, DOC 11/23185.

https://www.statewater.com.au/_Documents/Metering%20Project/Review%20of%20Meter%20Accuracy.pdf


We consider that State Water has fulfilled the Operating Licence requirements of clause 6.5.1. We found that State Water has undertaken a comprehensive program to identify and read water meters. It has read 99.2% of the meters in regulated river basins with an average annual frequency of 4.1 physical readings by State Water officers per meter.


In 2004, National Standards for water meters and meter data collection systems were established under the National Water Initiative. Agreed standards for rural water were confirmed in 2009 and Australian governments undertook to oversee the replacement of all non conforming meters by 30 June 2016.

Within NSW, State Water has responsibility for managing the implementation of this initiative in regulated rivers and NOW has management responsibility in unregulated rivers and groundwater. In response to this responsibility, State Water has identified and verified 5,405 meters on regulated river systems and read 5,363 (99.2%) of these meters in 2012/13. State Water records show that a total of 36,848 readings of these 5,363 meters (6.8 reads/meter) were entered into the Water Accounting System, WAS during 2012/13.





86

State Water, Meter Reading Procedure, Issued 7 November 2012, DOC 12/37580. 87

State Water, Water Usage Assessment Tool, DOC 10/14383. 88

State Water, 91I - Applying for an authority to take water while metering equipment is not operating properly or is not operating, Issued 29 November 2012, DOC 11/23185.

Of these 36,848 readings:

6,700 were operational reads which relate to meter problems or errors, not usage data;

3,832 were entered by customers through iWAS;

4,406 were entered by State Water staff without a physical meter read; and

21,910 were entered by State Water staff following a physical meter read.

This total of 21,910 readings by State Water staff equates to 4.1 physical reads per meter. A comparison with previous years is shown in the following table.

Year Actual Frequency

2009-10 16,564 3.2

2010-11 18,578 3.5

2011-12 21,688 4.1

2012-13 21,910 4.1

It should be noted that 2009-10 and 2010-11 were drought years and included temporary water restrictions in the Lachlan valley. In these years, less water availability and use reduced the need for meter readings.

State Water’s meter reading program is based around the quarterly billing cycle and a frequency guide for meter reads outlined in the meter reading procedure86. According to this procedure, State Water aims for quarterly meter readings of most active meters, however, during peak irrigation periods, meters may be read monthly. On the other hand, meters associated with works that have nil or occasional usage are read less frequently (unused works are read annually to verify nil usage).

Weather is the most significant constraint to meter reading. Extended periods of wet weather or flooding events prevent State Water from taking a meter reading in many locations. If such an event occurs when billing is due, State Water requests that the customer read the meter. The procedure then requires that a verification reading is done once access is available.

Problems with the meter are another constraint to meter reading. In most cases where the meter is faulty or non-operational, it has to be removed and taken for repairs or replaced. In such cases, there needs to be co-ordination between State Water and the customer. An estimate of usage is also required until the meter or a replacement is re-installed87. State Water uses notices issued under Section 91i of the Water Management Act 200088 to ensure that the meter is repaired or replaced and that conditions are put in place to ensure that an appropriate method and estimate of usage is conducted.

Taking these matters into account, we consider that the average frequency of reading of 4.1 physical reads per meter is likely to provide water usage data that is reasonably consistent with actual water usage.

The audit scope asked for comment on the uncertainty of measurement, and whether the new metering pilot program will lead to any rethink on estimating the actual usage of water.

There are two aspects to the uncertainty of measurement: the uncertainty related to the accuracy of a given meter, and uncertainty in the measurement of the total water used.

There are many types of water meter currently owned and used by State Water customers. The accuracy of the individual meters in this fleet covers a wide scale. Modern magnetic flow meters are typically accurate to at least 1% of the measured value. Much less accuracy



89

NOW, NSW Metering Implementation Plan, 2013, page 4. 90


is available from older style meters which incorporate a rotating measuring element. There are a range of other factors, such as installation arrangement, location, temperature and equipment features, that impact on the accuracy of meter readings.

In 2008, the National Measurement Institute (NMI) released standards for metering in full flowing pipes and in open channels and partially filled pipes. In both cases, the maximum permissible measurement error is ± 5% in-situ89.

State Water recently undertook a study to assess and compare the accuracy of new and old meters as part of the NSW Metering project in the Murray and Murrumbidgee valleys90. This independent study comprised an analysis of 120 dual metered sites. Sites chosen had existing meters that remained installed and had adjacent new meters that were installed as part of the NSW Metering Project. New meters at these sites were factory tested to ensure they conform to national and NSW standards prior to installation. A comparison between readings was taken to asses any meter biases.

The results of this study are shown in the above figure. It shows individual meter readings to be highly variable, ranging from -78% to +76%. The results also show that approximately one third of the meters were misreading by more than 20%. However, the report states that the overall average meter error has been calculated at -2.2%, providing a slight overall bias toward under-reading by the existing meters.

The study makes no comment about the degree to which the study sample is representative of the NSW Meter fleet. We have no further data about the representativeness of this study. We simply note that the data for this particular sample of 120 meters shows an overall under-read of 2.2%. Therefore, this imperfect sample from the metering pilot program does not provide any evidence to suggest that current estimates of actual total water usage will change with the installation of accurate, new meters.

0

5

10

15

20

25

30

-80% -70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80%

Meter error

No of dual metered sites




The site visits that we undertook demonstrated the range of meters that was installed and highlighted the associated maintenance requirements, the problems that would be encountered in reading these meters and the diversity of accuracy in these meters.






6.6.1 Water balances

State Water must prepare by no later than 1 September each year, draft annual water balances, and by 1 December each year, final water balances, each in the form of the template at Table 5-1 of the final report by Sinclair Knight Merz entitled “State Water Operating Licence – Water Balance Template” dated 30 March 2005 and in accordance with the requirements of that report.

Full compliance


Risk

This clause represents a low operational risk. Water is a valuable resource. State Water should account for the water that it harvests as accurately as is practicable.


State Water demonstrates that it has submitted all water balances in accordance with the required timeframe.

Evidence sighted



Sinclair, Knight Merz, State Water Operating Licence – Water Balance Template, 2 March 2005.


We consider that State Water has fulfilled the Operating Licence requirements of clause 6.6.1. We found that State Water has provided all 2012/13 draft water balances and all 2011/12 final water balances as required by the Operating Licence.


The draft water balances for the 2012/13 year and the final water balances for the 2011/12 year have been provided to us and published on the State Water web site for the following river valleys:

Bega & Brogo rivers Border rivers Gwydir river

Hunter river Lachlan river Fish river

Macquarie & Cudgegong rivers

Murray & Lower Darling rivers

Murrumbidgee river

Namoi river Patterson river Peel river

Richmond river



91

SKM, State Water Operating Licence – Water Balance Template, Final Report, dated 2 March 2005, page 14. 92


We confirmed that the form of each of these water balance tables was consistent with the format of the template at Table 5-1 of the final report by Sinclair Knight Merz entitled “State Water Operating Licence – Water Balance Template” dated 2 March 200591. However, we did not determine the accuracy of these water balance tables.

We also confirmed that State Water uploaded the Report to IPART under the Operating Licence92, to the IPART web-site on 31 August 2013. The final water balances for 2011/12 are displayed in Appendix 1 and the draft water balances for 2012/13 are displayed in Appendix 2 of this report.




B. Stakeholder Comment





C. Audit methods

Audit methods we employ include:

Principle Definition Example of method

Inspection Examine records, documents or physical assets; consider the source of documentation for differing degrees of reliability.

Reconcile an item of evidence back to the licensee’s internal record keeping system.

Observation Observe processes and procedures being performed by the licensee. Generally, this audit procedure is conducted to confirm that processes and procedures are correctly implemented.

Observe field processes and the application of documented procedures.

Inquiry and confirmation

Seek appropriate information from staff or people outside the organisation.

The response to an inquiry to corroborate information contained in the records.

Inquire how field crews collect data and how this data is logged into the data collection system.

Confirm data recording is accurate.

Computation Check the accuracy of source documents and accounting records; perform independent calculations.

Calculate customer property numbers for a selection of main failures via alternative computation methods.

Analytical procedures

Investigate and analyse data fluctuations and relationships to determine whether there are inconsistencies with other relevant information, or deviations from predicated amounts.

Cross check evidence against alternate sources of information.

We consider that various factors affect the reliability of audit evidence, including:

▼ independence of evidence - evidence from outside the organisation is generally considered more reliable than evidence generated internally;

▼ knowledge and lack of bias of the person providing the evidence to the auditor, and the attention paid to the auditor's request for evidence;

▼ the directness in which it is obtained - evidence received directly by the auditor is generally considered to be more reliable than evidence received indirectly; and

▼ control systems – evidence prepared by utilities under systems of strong internal control is considered more reliable than evidence prepared under ad hoc systems.

We adopted an attitude of professional objectivity throughout the audit in order to ensure information provided is accurate and complete.



D. Glossary

Acronym/Term Description

ACCC Australian Competition and Consumer Commission

Act State Water Corporation Act 2004 (NSW)

ANCOLD Australian National Committee on Large Dams

Auditor BBTech Consulting and Cobbitty Consulting Pty Ltd

AWD Available Water Determination

BERP Business Expenditure Review Panel

CAIRO Computer Aided Improved River Operations

CARM Computer Aided River Management

CCC Community Consultative Committee

CSC Customer Service Committee

DEUS Department of Energy, Utilities and Sustainability, now NOW

DSC NSW Dams Safety Committee

EMS Environmental Management System

FASP Future Asset Service Potential

FMMS Facilities Maintenance Management System

IPART Independent Pricing and Regulatory Tribunal of NSW

iSMART Integrated Surveillance, Monitoring, Automation, and Remote Telemetry

ISO 14001 International Standard on Environmental Management

ISO 55000 Soon to be released International Standard on Asset Management

iWAS Internet Water Accounting System

LAS Licensing Administration System

MDB Murray Darling Basin

MDBA Murray Darling Basin Authority

MMI Maintenance Managed Item

NMI National Measurement Institute

NOW Office of Water within the NSW Department of Primary Industries



NSW Health Environmental Health Branch of NSW Department of Health

PRA Portfolio Risk Assessment

RCM Reliability Centred Maintenance

SCADA Supervisory Control and Data Acquisition

SWIM State Water Information Management

TAM Total Asset Management

WAS Water Accounting System

D State Water’s Statement of Compliance





2012-13 State Water Performance against the Operating Licence

Page 1 of 2

Statement of compliance For 2012/13

Submitted by State Water Corporation

To: The Chief Executive Officer

Independent Pricing and Regulatory Tribunal of NSW

PO Box Q290

QVB Post Office NSW 1230

State Water reports as follows:

1. This statement documents compliance during 2012-13 with all obligations to which

State Water is subject by virtue of its operating licence.

2. This report has been prepared by State Water with all due care and skill to the best of

our knowledge of conditions to which it is subject under the following applicable laws:

a) State Water Corporation Act 2004,

b) Water Management Act 2000,

c) Water Act 1912,

d) Protection of the Environment Operations Act 1997,

e) Independent Pricing and Regulatory Tribunal Act 1992,

f) Environmental Planning and Assessment Act 1979,

g) State Owned Corporations Act 1989,

h) Dams Safety Act 1978,

i) Fisheries Management Act 1994,

j) Public Health Act 1991,

k) Fluoridation of Public Water Supplies Act 1957 and

l) Water Act 2007 (Cth).

3. Schedule A provides information on all obligations with which State Water did not

comply during 2012-13.

4. Other than the information provided in Schedule A, State Water has complied with all

conditions to which it is subject.

5. This compliance report has been approved by the Chief Executive Officer and the

Chairman of the Board of Directors of State Water.

DATE: 29 August 2013 DATE: 29 August 2013

Signed Signed

Name: Bruce Foy Name: Brett Tucker

Designation: Chairman Designation: Chief Executive Officer

2012-13 State Water Performance against the Operating Licence

Schedule A

Page 2 of 2

CLAUSE OBLIGATION NON COMPLIANCE DETAIL Clause

number

List obligations breached, including a brief

description of

each obligation

Describe:

Date or period of non-compliance

Nature and extent of non-compliance (including whether and how

many customers have been affected)

Results of any monitoring (where applicable)

Reasons for non-compliance

Remedial action taken

Actual / anticipated date of full compliance

Clause 4.1.3 Clause 4.1.3 states that “The term of a member

of the CCC will expire two years after his or her

appointment. A member will be eligible for re-

appointment for one further consecutive term.”

In its Issues Paper (July 2012), IPART raised the question about the

necessity to maintain the requirements around Community Consultative

Committee.

The renewal of CCC’s membership has been put on hold during 2012-13.

The requirement for a CCC was removed from the 2013-18 Operating

Licence.