John Madden Director, Water Reform NSW Department of Plaining, Industry and Environment- Water

Online submission via: http://www.dpie.nsw.gov.au/waternswactreview

Dear Mr Madden,

WaterNSW submission to the five-year review of the WaterNSW Act 2014

WaterNSW welcomes the opportunity to provide a submission on the five- year review of the Water NSW Act 2014 (the Act).

WaterNSW notes that the Issues Paper identifies this five- year review could contribute to the development of broader reforms across the water sector with the intention of improving the sector’s strategic planning, delivery of infrastructure and lift operational performance across the water sector1.

Considering the potential of these reforms, WaterNSW believes that there is an opportunity for this five-year review to be guided by the proposed reforms, rather than the review estimating the extent of the reforms as proposed in the Issues Paper. In particular, this could provide greater clarity on the roles and responsibilities of all agencies, including WaterNSW, in a newly reformed water sector.

A sector wide review will better inform consideration of whether WaterNSW’s legislated objectives and functions need to be updated, amended or expanded to reflect the Government’s reform intent. A sector wide assessment would identify ‘vertical’ alignment and delineation of objectives and functions through the water supply chain and guide ‘horizontal’ alignment of performance standards across similar functions.

Further, a review beyond just the Act will provide a more informed assessment, noting that as identified in the Issues Paper, WaterNSW’s functions can be set through instruments outside of the Act including directions under State- owned Corporations Act and through the conferral of functions in our operating licence. It is important that the functions WaterNSW undertake in practice inform consideration of the statutory functions prescribed in our Act.

In relation to performance standards, WaterNSW is supportive of greater consistency across the major NSW water authorities (DPIE- Water and the State- owned water utilities) to improve transparency and performance. However, these performance standards should be set through a sector wide benchmarking study rather than through alignment of performance standards in existing enabling legislation.

WaterNSW suggests performance standards should be set for functions and not utility specific. For example, performance standards could be set for functions including catchment management, river operations, raw water supply, distribution networks, water conservation and efficiency, wastewater, licensing and approvals, and trade.

1 P1, Statutory Review – WaterNSW Act 2014, Issues Paper: NSW Department of Planning, Industry and Environment

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Authorities performing similar functions should be subject to equivalent performance standards, for example Water and Hunter Water undertaking wastewater functions or WaterNSW and the DPIE- Water undertaking licencing and approval functions.

In considering the development of performance standards, WaterNSW notes that the State- owned water utilities operate in an already highly regulated framework with aspects of this framework including performance standards. These existing requirements should be recognised in any new standards developed by government to avoid duplication or inconsistency.

Further, many of the existing performance standards are input focused. For example, through the Act and operating licence WaterNSW is required to enter into seven MoU/ relationship agreements with government agencies. WaterNSW supports the development of a performance framework that is outcomes, rather than input, focused.

More generally, WaterNSW is of the view that some of the legislated functions of the Act either do not require regulation through an operating licence or are sufficiently authorised under other Acts as to not require authorisation through an operating licence. For example, bulk water supply infrastructure and operations are provided under the Water Management Act 2000 (NSW) and subordinate instruments including Water Sharing Plans and Works Approvals.

This view is consistent with that expressed by the Independent Pricing and Regulatory Tribunal (IPART) who have suggested:

“A review of the listed functions could be carried out in a future review of the Water NSW Act to determine if all of the listed functions should have the regulatory oversight of the operating licence, or alternatively if the functions could be regulated in another way, if at all”; and

“the listed functions appear to overlap with functions and activities authorised by other regulatory instruments and Acts. A review of the listed functions could also consider if it is appropriate to have this potential for duplication and / or to clarify the purpose of the duplication with respect to the operating licence”2

While WaterNSW is supportive of government looking to develop an improved performance standards framework, at the same time consideration should be given during the development of this framework to further reducing the need to authorise or regulate all legislated functions through an operating licence.

Separately, the Issues Paper also identifies a range of inconsistences across the enabling acts of the State- owned water utilities in relation to matters of procedure, governance and powers. WaterNSW is supportive of improving consistency across these aspects but appreciates what that consistency looks like is a matter for government.

2 Page 141, Water NSW operating licences review (Final Report) May 2017, IPART

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Annexure A – specific matters for review of the WaterNSW Act 2014

1. Clarity of roles and responsibilities as they pertain to legislated objectives and functions

We have suggested that a sector wide review will better inform consideration of whether WaterNSW’s legislated objectives and functions need to be updated, amended or expanded. By way of example, the Act includes an objective 6 (1) (d) to “provide for the planning, design, modelling and construction of water storages and other water management works”, however a key function of the Department of Planning, Industry and Environment- Water (DPIE- Water) is described as “development of an integrated water strategy for NSW that addresses water security and supply for both metropolitan and regional areas. As part of this, we plan and deliver major water infrastructure projects.” 3

Read alone, objective 6(1)(d) may seem fit for purpose, however when read with the description of DPIE- Water’s functions, clarity is required both at a sector level, and an operational level for WaterNSW.

Likewise, WaterNSW has a significant licencing and approvals role through functions conferred by our operating licence, however these functions are not prescribed in our Act.

2. Confirmation of powers to impose fees and charges for the purposes of the Water Management Act 2000

WaterNSW generally charges fees for its conferred functions, including for matters such as processing water trades, processing applications for approvals and licences as well as in respect of the supply of Bulk Water to its customers and Fish River water supply.

Section 114 of the Water Management Act 2000 gives a general power to the Minister to “impose fees and charges for the purposes of this Act.” This provision therefore offers an opportunity to confer powers generally on WaterNSW in a manner that reflects its conferred functions.

However, WaterNSW is currently conferred only the function under s114(1) to impose fees and charges in relation “to the price of Bulk Water” (see Table A.14 of the Licence).

To avoid the potential for an inconsistent approach for fees and charges for functions conferred under the operating licence a “catch all” function could be conferred under s114 to allow WaterNSW to impose and waive fees and charges for all conferred functions under the Water Management Act 2000. This would clarify that WaterNSW is able to impose fees and charges as determined by IPART in accordance with its conferred functions (see s114(1) and the note to that provision).

3. Water access licence exemption for groundwater testing for essential water supply purposes by WaterNSW

During the recent drought WaterNSW worked with government to identify and develop solutions to reduce water security risks to regional towns and communities. A number of these solutions involved access to groundwater. In developing these solutions there was a need to test groundwater resources for quality and quantity.

3 https://www.dpie.nsw.gov.au/our-work/water

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The amount of water required for this purpose was generally greater than the 3 ML exemption available under clause 7, Schedule 4, Water Management (General) Regulation 2018 (Water Regulation).

To secure sufficient water access licences can take months and may not be possible without a controlled allocation if no purchaser can be found in the market. This is an undesirable outcome in the context to providing security of town water supply during drought.

As such, if government sees WaterNSW having a similar role during future droughts it would be beneficial for WaterNSW to be provided a similar exemption as the Ministerial Corporation under the Water Management (General) Regulation 2018 (Water Regulation) where there is not a licence requirement for the take of water for the purposes of basic human water needs under paragraph 14, Part 1, Schedule 4 (and clause 21).

4. Greater flexibility to generate hydro- electricity

In developing the Renewable Energy and Storage Opportunities (RESO) with the Department of Planning, Industry and Environment (DPIE) WaterNSW identified shortcomings in the current Act with regard to section 35. While s.35 provides for the use of water management works to generate hydro- electricity, this is from devices that are on or in the water management works (i.e. the dams). Through the RESO opportunities were identified for devices not located on or in the water management works but on land owned by WaterNSW. Greater flexibility in relation to s.35 would ensure the full portfolio of hydro- electric power projects from WaterNSW’s RESO could be developed and contribute the State’s installed capacity of firm renewable generation.

5. Exemption from the need for approval for Crown Roads and fees for placement of pipes in public roads

WaterNSW owns and operates certain water supply pipelines from its dams to customer owned water treatment plants. Many of these pipelines pass under, over or in public roads. WaterNSW is also proposing further construction and reconstruction of pipelines which will also pass under, over or in public roads.

Under s33 of the Act WaterNSW has the power to dig up public roads and public reserves for the purposes of its works. These provisions are mirrored in:

▪ Act 1994 (NSW) ▪ Electricity Supply Act (NSW) ▪ Gas Supply Act 1996 (NSW)

While this clause provides certainty in relation to local, unclassified public roads, it is less certain in relation to Crown roads and public reserves. As such, it would be beneficial to clarify that Roads Act 1993 (NSW) approval is not required for Crown roads and that Local Government Act 1993 (NSW) approval is not required for public reserves.

In addition, the Gas Supply Act 1996 (NSW) contains a clause (c.51) that exempts a gas network operator from having to pay charges for the placement of gas works. To minimise the cost of WaterNSW infrastructure to customers a similar provision could be included in the Act works to avoid WaterNSW having to pay charges for the placement of water pipelines.

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6. Local Government Act 1993 (LGA) approval for water supply works – general exemption

The LGA provides that any person who “carries out” an activity of a water supply work is required to obtain an approval. Exemptions are provided for carrying out a water supply work on land within Sydney Water Board and Hunter Water Board operations, or another water supply authority. However, there may be circumstances, particularly for some proposed new infrastructure where part or all of WaterNSW’s water supply work is not within a water supply authority’s area of operations but still within a local government area. Therefore, it would be beneficial to include a general exemption in the Act for water supply works undertaken by WaterNSW or on behalf of WaterNSW.

7. Definition of a “public authority” in the Water NSW Act 2014 (NSW)

A public authority is defined in the Act as an inclusive definition. There is no standard definition of a public authority under the Interpretation Act and the term is defined differently in different Acts. It would therefore be of assistance to define a public authority along the lines of other Acts (such as the Roads Act) as an exhaustive definition, but leaving open the ability of the Regulations to prescribe particular authorities that are, or are not, public authorities for the purposes of the Act and the Regulation. This is particularly confusing for local authorities which can be public authorities under some Acts and not others.

8. Liability provisions – in the light of operations

In the event that the Warragamba Dam Wall Raising proceeds and commences operating for the purposes and key objective of flood mitigation, this will have several implications for WaterNSW (as dam operator).

WaterNSW understands matters in relation to Warragamba Dam Wall Raising, including defences and liability, are currently being considered by government. If appropriate this five- year review of the Act could offer an opportunity to align the WaterNSW Act with the outcomes of this consideration.

9. Responsibility for the Catchment Audit

Clause 42 of the Act requires that there be an independent audit of the health of the declared Sydney catchment area at least every three years. The 2016 audit found “There is overlap and gaps in public authorities’ responsibilities for management of the Sydney Catchment area. To address this, it is suggested the Minister consider appointing the NSW Audit Office to monitor implementation of recommendations from this Audit and to lead subsequent catchment audits to ensure effective and coordinated responses to catchment pressures by the NSW Government.”4

WaterNSW support this recommendation and any amendment to the Act to support its implementation.

4 Page ii – 2016 Audit of the Sydney Drinking Water Catchment (Main Findings), Alluvium

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