1 Foreword Fortunes changed in late summer when rain returned to most of our districts. Our drought I am pleased to submit Southern Rural Water’s preparedness efforts moved to fire recovery 2020-21 Corporate Plan – the third under the support, including managing the critical water 2018-2023 Pricing Determination. replacement program and working with DELWP and other agencies on the risks of water supply As we prepare this plan we are in unprecedented caused by fire impacted catchments. The rain times both globally and locally in response to continued over autumn leading to 100% COVID-19. The work that we have completed as allocation high and low reliability in all our an organisation over the past 12 months to focus regulated systems. We expect strong opening our business to be future ready has been critical allocations in 2020-21. in our response, enabling us to quickly pivot our organisation to remote working whilst delivering During this plan we will work on our drought the essential service we provide to our preparedness initiatives, including the expansion customers and the community. of the drought relief bore network, improved water trading through more information and We have done this by limiting outdoor work to better processes, and enhancing our supply those essential for service delivery and dam options in the Werribee and Bacchus Marsh safety. Other than our field crews, staff have areas. worked from home and adapted quickly to provide customer service to the usual high Our focus on the modernisation of our assets standard. Despite the challenge of operating and systems to improve service to our customers our water ordering and delivery systems as an continues and we are pleased to confirm funding isolated workforce, there have been no delays or for Phase 2 modernisation works for Macalister outages in water supply associated with our Irrigation District. The $62.7m program of works COVID-19 response. is being supported by $31m from the Federal Government, $10.4m from the State Government We are in the process of developing the next and the remainder from customers. In this way, evolution of our corporate strategy, which we can position the business to help make our remains consistent with our vision of excellence customers successful, in turn promoting strong in rural water management, driving growth and regional economies and employment customer productivity in southern Victoria. opportunities.

The new corporate strategy will strengthen our We will implement important government focus on contributing to thriving regional initiatives relating to compliance and communities, along with the absolute safety of enforcement, our metering action plan and our people, customers and the community in enhancing recreation facilities around our major mind. We recognise the important role we play in dams. We are very proud to be working closely supporting our agricultural sector and regional with Traditional Owner groups to enhance customers with a culture of excellence, and a cultural access to water. Each group has unique diverse and inclusive workplace. needs and circumstances and it is a privilege to learn about their history and culture as we work As we review the past irrigation season we see a on a more collaborative future. significant turnaround in conditions across our entire region. The lead-in to the season saw We will continue to reduce our carbon emissions extremely dry conditions, with many customers in line with our Zero 2025 strategy and continue saying they were experiencing worse conditions to deliver important initiatives such as our Health, than during the millennium drought. While Safety and Wellbeing Strategy, and our Diversity regulated systems had good allocations, our and Inclusion plan. unregulated surface water systems had extensive restrictions, with some systems on I look forward to working in partnership with our total ban. This was followed by unprecedented customers, stakeholders, and government to fires in our East Gippsland communities, having bring this plan to fruition. significant impacts. Diane James AM Chairman

2 Table of Contents Operational risks and controls 40 1 Macalister Irrigation District 41

Foreword 2 2.1 Overview 42 Corporate Overview 5 2.2 Service measures 43 2.3 Pricing 43 5 Overview 43 1.1 Statement of corporate intent 6 Specific prices 43 Our services 8 Bill impacts 44 Our structure 9 Werribee Irrigation District 45 Performance measures and targets 10 3.1 Overview 46 Governance 11 3.2 Service measures 47 1.2 Business plan 12 3.3 Pricing 48 Corporate strategy – overview 12 Overview 48 1.3 Government priorities 24 Specific prices 48 Climate change 24 Bill impacts 49 Customer and community outcomes 24 Bacchus Marsh Irrigation District 50 Water for Aboriginal cultural, spiritual and economic values 25 4.1 Overview 51 Storage operator costs 51 Resilient and liveable cities and towns 27 4.2 Service measures 52 4.3 Pricing 52 Recognising recreational values 28 Overview 52 Leadership and culture 30 Specific prices 52 Financial sustainability 30 Bill impacts 53 Compliance and enforcement 30 Groundwater and Rivers 54 1.4 Capital expenditure 32 Overview 32 5.1 Overview 55 5.2 Service measures 56 Significant projects 33 5.3 Pricing 57 1.5 Changes from 2019-20 plan 36 Overview 57 COVID-19 36 Specific prices 57 Business operating model 36 Bill impacts 58 Strategy review 36 Application fees 59 MID 2030 Phase 2 37 Latrobe Bulk Entitlements 60 Capital program 37 6.1 Overview 61 Werribee System Bulk Entitlement amendment 37 6.2 Service measures 61 6.3 Charges 62 Financial position 37 Werribee and Maribyrnong Bulk Entitlements 1.6 Risk 38 63 Our risk management approach 38 7.1 Overview 64 Corporate risks and controls 39 7.2 Service measures 64

3 7.3 Charges 65 8.5 Financial performance indicators 74 Financial Statements 66 8.6 Quarterly financial statements 75

8.1 Preface 67 Quarterly operating statement 75 Overview 67 Quarterly balance sheet 76 Financial assumptions 67 Quarterly statement of cash flow 77 Sensitivity analysis 69 Quarterly financial performance indicators 77 Specific issues 70 Appendices 78 8.2 Operating statement 72 8.3 Balance sheet 73 Detailed tariff schedule 79 8.4 Statement of cash flow 74 Notes to tariff schedule 81

4

Corporate Overview

5

1.1 Statement of corporate intent

Southern Rural Water is future ready in the face of changes in climate, population trends and the emergence of new technologies. Over the last year we’ve implemented an organisational culture program focused on building a collaborative leadership cohort with a philosophy of ‘us.’ We’ve implemented a new organisational structure designed to better connect our people so they are equipped to deliver greater value for our customers, and we’ve delivered on our modernisation programs enhancing water security and reliability for our irrigation district customers. Successful delivery of the mySRW customer portal is improving our customer experience as functionality and uptake grows over the next twelve months and we further enhance through learnings from our customers. We are committed to achieving our vision of excellence in rural water management, driving growth and customer productivity in southern Victoria.

We have commenced the review of our corporate strategy which will ensure our focus remains on having our customers at the heart of everything we do, whilst maintaining absolute safety for our people, customers and the community – all delivered through a culture of excellence.

Our strategy is summarised below. It forms the basis upon which this Corporate Plan has been developed.

This strategy supports our vision of driving growth and productivity across southern Victoria by: ▪ making more water available for productive uses ▪ giving water users more flexibility and control in the way that they access water ▪ providing sustainable access to water in ways more efficient and convenient for our customers

▪ managing assets in a manner that is sustainable in the long run.

Further detail on our strategy, including 2020-21 targets for each objective, is included in Section 1.2 – Business Plan (page 12).

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7

Our services

Irrigation

We manage the release and delivery of water to the Werribee, Bacchus Marsh, and Macalister Irrigation Districts.

This includes operating and maintaining regulated channel, pipeline networks, maintaining drainage systems and supply of recycled water.

Managing dams

We operate and maintain seven dams to harvest water on behalf of irrigators and other Bulk Entitlement holders, including power generators and urban water utilities.

We also work with Catchment Management Authorities, Melbourne Water and the Victorian Environmental Water Holder to manage the release of environmental flows.

The following table lists the storages we manage and the customers they service.

Storage River Customers

Gippsland Water, power generators, licensed diverters, Victorian Blue Rock Latrobe Environmental Water Holder, Department of Treasury and Finance

Lake Narracan Latrobe Power generators, Department of Treasury and Finance

Macalister / Macalister irrigators, licensed diverters, Victorian Environmental Water Lake Glenmaggie Thomson Holder

Rosslynne Reservoir Maribyrnong Western Water, Melbourne Water, licensed diverters

Melton Reservoir Werribee Werribee irrigators, Bacchus Marsh irrigators, licensed diverters

Western Water, Werribee irrigators, Bacchus Marsh irrigators, licensed Merrimu Reservoir Werribee diverters, Victorian Environmental Water Holder

Pykes Creek Reservoir Werribee Werribee irrigators, Bacchus Marsh irrigators, Western Water, licensed diverters

Groundwater and rivers

We have been delegated under the Water Act 1989 to manage licensed water use from southern Victoria’s unregulated rivers and groundwater aquifers. Our role includes:

▪ assessing applications to take and use water ▪ assessing applications to construct new farm dams and bores ▪ metering water use and ensuring compliance with legal requirements ▪ monitoring rivers and aquifers and applying rosters and restrictions where necessary to protect environmental outcomes.

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Other functions

We also undertake a range of ancillary functions, including:

▪ managing recreational facilities at our major water storages (Glenmaggie, Cowwarr, Blue Rock, Melton, Merrimu and Pykes Creek) ▪ operating (by appointment) as Resource Manager for some surface water catchments (mostly in Gippsland) ▪ operating and maintaining groundwater pumps in and around the Macalister Irrigation District to manage salinity ▪ providing administrative support to the Victorian Drillers’ Licensing Board ▪ leading, supporting and collaborating on special projects relating to the water sector as required and appropriate.

Our structure

SRW has adopted a new business structure, to enable us to be future ready to continue to meet the needs of our customers, community and stakeholders for the long term. This has been focussed on a culture of ‘us’ and enables our people to be flexible, agile and collaborative in the workplace. The business units that deliver for our customers and community are:

Service Delivery Operating our irrigation districts including the Macalister, Werribee and Bacchus Marsh as well as our major dams and managing license diversions from surface and groundwater, as well as the construction of bores and dams.

Assets and Developing and delivering SRW’s capital plan including critical modernisation projects, Environment with a holistic focus on asset and environmental management.

People, Safety and Supporting the health, safety and wellbeing of our people. Managing the employment, Culture engagement and development of a diverse, knowledgeable and engaged workforce. Managing our procurement, facilities and fleet to ensure contemporary, accessible and sustainable work environments and resources.

Strategy and Strategic planning, including of our water resources, business performance monitoring, Performance pricing and communications and engagement activities for customers, stakeholders and communities.

Customers and Providing customer service via telephone, online and face-to-face channels, supported Technology by digital technologies aligned to customer expectations. Implementation of Information Technology systems and networks, and investment in technology to support our strategic objectives.

Finance and Supporting and delivering financial management, risk management and corporate Governance governance.

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Performance measures and targets

Our service measures have been developed in consultation with our customers, to focus on measuring the elements of service important to them.

Measures and targets relevant to each customer group are detailed in subsequent sections of this plan.

Targets for financial indicators, as required under Appendix 2A of the Victorian Water Industry Performance Reporting Framework, are included in section 8.5 of this plan.

The measures below are specified under Appendices 2C, 2D and 2E of the Victorian Water Industry Performance Reporting Framework.

Target Measure (2020-21) Orders delivered at time agreed [C1.4] 95% Applications (water share transfers) completed within agreed timeframes [C1.5] 99% Groundwater supply (number of transfers processed within target period) [WSR3] 90% Billing complaints (per 1000 customers) [CRR2] <1

Net tonnes CO2 emissions (E2) 1,217 tonnes

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Governance

Southern Rural Water (SRW) is governed by a board of directors; comprising up to eight non-executive directors (including the Chairman) appointed by the Minister for COVID-19 Water, and a Managing Director appointed by the board. In response to the COVID- The board will continue to seek improvement in its 19 pandemic, SRW moved governance planning and practices. to conduct all board and committee meetings via It will do this by: video-conferencing.

▪ conducting an annual review of the board’s We will continue to review performance, and subsequently developing and this practice and will implementing a continuous improvement plan. ensure we are always operating consistently with ▪ establishing and supporting board committees to all COVID-19 response meet governance requirements and to support the measures outlined by the board’s effectiveness. The committees are: government. o Audit, Risk and Governance o Asset Governance o People, Safety and Culture (including remuneration functions).

▪ working closely with our customer consultative committees. These committees comprise a diverse range of customers and provide critical guidance and insight into customer thinking. They are:

o Macalister Customer Consultative Committee o Southern Groundwater and Rivers Forum o Werribee Bacchus Marsh Customer Consultative Committee.

▪ locating board meetings throughout our region to engage with customers and stakeholder groups through field tours, stakeholder receptions, and face-to-face meetings.

▪ reporting on board meetings via our website to our wider customer and community base.

▪ supporting completion of the Company Directors Course (Australian Institute of Company Directors) by all directors, encouraging director attendance at relevant industry forums, and encouraging directors’ continuing professional development.

▪ resourcing the board’s secretariat with appropriately qualified personnel and providing access to relevant professional guidance and assistance.

▪ monitoring government policy and ensuring corporation alignment to policy.

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1.2 Business plan

Corporate strategy – overview

Our vision is:

Excellence in rural water management, driving growth and customer productivity in southern Victoria

This vision recognises the important role we have in supporting Victoria’s economy, relying on secure and reliable water supplies. We have an opportunity to drive growth and productivity, particularly in regional areas, by:

▪ making more water available for productive uses

▪ giving water users more flexibility and control in the way they access water

▪ providing sustainable access to water in ways more efficient and convenient for our customers

▪ managing assets in a sustainable manner in the long term.

This requires investment in infrastructure and information systems. A strategic challenge is achieving the right balance between service improvement, customer prices, and our own financial sustainability. We also need to ensure water for economic growth and customer productivity, does not come at the expense of environmental sustainability for the water resources we manage – particularly in the face of climate change.

The following tables set goals for 2023 and targets for 2020-21 for each of our strategic focus areas.

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Customer, shareholder and stakeholder outcomes

Growth and customer productivity

Context Strategic intent

We can add value to the Victorian community by We enable customers to improve their productivity ensuring water is utilised sustainably and is made and/or production to strengthen local economies. We available to our customers in the most efficient and provide opportunities for business to enter our region effective way facilitating their productivity and production. by providing access to secure and reliable water supplies. Our strategy includes undertaking activities boosting economic activity, such as making more water available for irrigated agriculture and enhancing levels of service in water delivery to promote adoption of more sustainably productive on-farm irrigation practices.

Goals (by June 2023 or as specified below) 2020-21 Targets

• To significantly increase in value, the productive • $5m economic value of additional water made output from our rural water customers over the next available for customers (based on estimated 25 years. economic value of $850/ML).

Affordable prices

Context Strategic intent

Affordability of our services is a critical driver. By keeping prices affordable: Our strategy so far has allowed us to fund a large portion • input costs are lower for producers of our modernisation projects with minimal price impacts. Our 2018 Price Submission proposed stable prices for • Southern Victoria’s agricultural production will most customers through to 2023. We still need to ensure be competitive in national and international prices remain affordable as we complete the final stages markets of modernisation. • customers have more money or resources to invest on farm to boost their own productivity.

Goals (by June 2023 or as specified below) 2020-21 Targets

• Keep real price rises (relative to 2013-14) over 20 • Real price changes (relative to 2013-14): years to less than: − Macalister Irrigation district 0.7% reduction − Macalister Irrigation District 10% − Werribee Irrigation District 4.6% increase − Werribee Irrigation District 10% − Bacchus Marsh Irrigation District 2.4% − Bacchus Marsh Irrigation District 10% reduction − Groundwater and Rivers 10% − Groundwater and Rivers 11.7% reduction

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Financial sustainability

Context Strategic intent

In simple terms, we define financial sustainability as We manage financial performance, debt and our generating enough revenue to meet our financial $1.4b of assets to ensure we are financially commitments – now and into the future. Any assessment sustainable and support Victoria’s strong financial of our ability to meet future financial commitments will be position. based on assumptions about our future expenditure and the prices we will charge. We need to consider whether As an asset intensive business, we understand the these assumptions reflect a sustainable set of intersection between high quality asset management circumstances. For example: and our long-term financial sustainability. We are committed to a program of work continuing to deliver • If forecasting to meet our financial commitments into significant improvement in the way we manage our the future requires assumptions about price assets, compliant with DTF’s Asset Management increases being unaffordable to our customers, then Accountability Framework we cannot genuinely consider this to represent financial sustainability. • Similarly, if our expenditure forecasts do not include adequate provision for maintaining and renewing assets, then we may be able to meet our financial commitments, but those commitments will not be sufficient to sustain our operations into the future.

Goals (by June 2023 or as specified below) 2020-21 Targets

• Ensure long-term financial sustainability • Update long term financial plan with 25 year capital plan, and assess the actions required to maintain our financial strength to deliver our services over this period.

• Total debt less than $78m • Total debt $68m

• Credit rating at least BBB+ • Credit rating A-

• Interest cover above 1.8 times • Interest cover 3.8 times (end of year)

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Sustainable water resources

Context Strategic intent

The infrastructure we manage and operate, and the We manage the water resources under our extractions we licence, inevitably have environmental stewardship to ensure they are sustainable in the impacts. This can include impacts to the natural flow of long term. water in rivers or changes to groundwater dependent ecosystems. We seek to go beyond just complying with our obligations to achieve real environmental From the dams we manage through to our irrigation improvements and recognise the potential supply systems, we are committed to ensuring we environmental impacts of conducting our business manage our water resources sustainably to optimise and seek to reduce and/or offset these impacts to. water availability and reduce any negative impacts to the environment. We also look for opportunities to improve environmental outcomes, particularly where we are upgrading assets. When managing licence use, or considering a new licence, we employ the precautionary principle to ensure we have sufficient data and technical understanding of the impact our decisions may have on the resource.

Goals (by June 2023 or as specified below) 2020-21 Targets

• Reduce water losses so we might regularly operate • District system efficiency: our irrigation systems at better than 90% efficiency. − Macalister Irrigation District 85% • Ensure long-term environmental sustainability − Werribee Irrigation District 80% − Bacchus Marsh Irrigation District 80%

• Zero net carbon emissions by 2025 • Reduce net carbon emissions to 1,217 tonnes CO2-e (or less)

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Customer value

Modern assets

Context Strategic intent

In 2007 we finalised the MID2030 strategy – an Our assets provide efficient, safe delivery and a infrastructure improvement strategy to transform the reliable service enabling our customers to be efficiency, service levels and environmental footprint of productive. the Macalister Irrigation District. We commenced this strategy with a customer-funded leading works program in 2011, and with subsequent $32m Phase 1A works jointly funded by customers and state and federal governments. The current $60m Phase 1B will be completed in 2021. The commitment to the MID Phase 2 program from both State and Federal Governments provides $62.7m ($31m from the Federal Government, $10.4m from the State Government and the remainder from SRW MID customers) to complete this significant project. The benefits include better performance across some of the final, ageing and inefficient assets in the MID, creating water savings of more than 12 gigalitres. In 2011 we finalised the Western Irrigation Futures Strategy, which provides a number of actions to improve the water security, quality and viability of the Werribee and Bacchus Marsh Irrigation Districts. During 2015-16, we developed business cases to pipe the Werribee Irrigation District and reconfigure the Bacchus Marsh Irrigation district. Since 2015 we have replaced over 18km of channels in Werribee with new pipelines and in Bacchus Marsh, the reconfiguration plan has seen a new river pump station, storage tank and 4km of new pipeline. For our unregulated systems we are introducing new technology to read our meters. The system comprises a low-cost, low-power transmitting device attached to existing water meters, allowing hourly data to be sent digitally via radio technology to high-sensitivity receivers. We completed a pilot using the technology in 2016 and have we since automated around 35% of the meter fleet.

Goals (by June 2023 or as specified below) 2020-21 Targets

• Complete modernisation in each irrigation district’s • MID assets by 2023 − Complete Stage 3 works − Upgrade of outlets and automation − Reconfiguration of west Boisdale Pipeline − Detailed Design for Nuntin and Newry modernisation works (Phase 2) • WID and BMID − Committed to completion of modernisation works to achieve savings and will propose alternative funding arrangements

• Establish automated meter reading and real-time • Automated meter reading installed on at least customer usage information on more than 90% of 48% of our unregulated surface water and our unregulated surface water and groundwater groundwater meters. meters.

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Enhanced customer experience

Context Strategic intent

There is a significant opportunity to enhance the online Our customers have access to systems, processes services our customers increasingly expect. Irrigation and information enabling them to be more district customers can manage their water orders online, productive. and we have provided a platform to facilitate water trading by bringing buyers and sellers together, as well In 2020-21 we will increase focus on enhancing as a platform for conducting online water auctions. customer experience in Werribee and Bacchus Opportunities exist to expand online customer services to Marsh. view and pay bills online without visiting a third-party provider such as BPAY and updating their details. We have recently launched the mySRW portal to give customers a secure online interface to view information on their entitlements and water usage. We are also working with DELWP on a proof of concept for exchanging data in real time with the Victorian Water Register. This will provide a basis for streamlining assessment processes and making transactions available online.

Goals (by June 2023 or as specified below) 2020-21 Targets

• Customers are able to access their information and • Extend customer portal to include water trading undertake transactions they highly value online.

• Customers highly rate their experience in dealing • Overall customer satisfaction >90%: with SRW. − MID continue to exceed 90% − Werribee Irrigation District 63% − Bacchus Marsh Irrigation District 54%

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Increased production

Context Strategic intent

In most years, less than half of the water licensed, Provide the means to increase production through allocated and available is put to productive use. There the efficient and effective use of water. are many different reasons for this, including water being lost from delivery systems, entitlements held by inactive licence holders, and poor commodity markets. We believe there is enough water available to support much greater agricultural production without compromising environmental health. Audited water savings from the modernisation of our irrigation districts have enabled water allocation and shares being made available for our customers to buy, as well as allocations for environmental water. There are also a number of unregulated groundwater and surface water areas having water available for licensing under permissible consumptive volumes set by the state government. In addition, we can assist customers to become more productive through improving water markets and encouraging water to be traded to higher value use. There is potential to partner with other agencies to attract new industries and customers to southern Victoria to better utilise available water. Finally, we will consider how to optimise the benefits of fully modernised irrigation systems to better service customers.

Goals (by June 2023 or as specified below) 2020-21 Targets

• Customers have additional water entitlements for • Macalister Irrigation District water sales 865ML increased production or security as per modernisation business cases: • Werribee Irrigation District 0ML − Macalister Irrigation District 37GL • Bacchus Marsh Irrigation District 0ML − Werribee Irrigation District 3GL − Bacchus Marsh irrigation district 0.6GL.

• We realise the full benefits of our modernised assets. • MID channel pool performance improves from 75% to 81% • WID and BMID continue to exceed 98%

• Additional entitlements created in unregulated • Unregulated water sales: systems within resource limits. − Tambo River up to 1,500ML − Mitchell River up to 1,000ML − Moe GMA up to 2,500ML

• New irrigated land in southern Victoria. • Completion of the Southern Victorian Irrigation Development (SVID) project business case identifying potential new areas for irrigation.

• 25% reduction in sleeper licences (licences that are We have exceeded this goal not being used over long periods of time). • 35% reduction in sleeper licences

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Business resilience

Business growth and new revenue

Context Strategic intent

In 2015 we developed a strategy to increase revenues. Generation of additional one-off and recurrent unregulated revenue. To March 2019 we had delivered around $8m of one-off revenue, mostly through sales of water savings, and some land sales, which helps to keep prices affordable as we invest in modernisation. The timing of land sales has proven to be more protracted than we anticipated. We secured around 5% of new annual revenue, mostly through new recycled water contracts and the annual charges associated with additional water entitlements.

Goals (by June 2023 or as specified below) 2020-21 Targets

• To deliver $19m of new revenue over the period of • $1.5m of new revenue for the financial year. the pricing submission.

Improved asset management

Context Strategic intent

We are responsible for managing an asset portfolio We manage our assets to meet obligations, provide valued at over $1.4b. agreed customer service levels, and support our strategy, to keep our long-term asset costs as low as In 2018 we undertook an asset management maturity possible and keep our prices affordable. assessment using a framework adopted from the International Infrastructure Management Manual, which also yielded maturity against ISO 5001 and the Department of Treasury and Finance’s ‘Asset Management Accountability Framework’. Based on this assessment, a two-year improvement program was developed, beginning with the development of a Strategic Asset Management Plan which was finalised in 2018. In 2019 we commenced the update of our capital investment prioritisation tool and the development of new Asset Management Plans across SRW. Alongside our 2019 Price Submission, we developed a 25-year capital plan and finalised a Strategic Asset Management Plan.

Goals (by June 2023 or as specified below) 2020-21 Targets

• Achieve a maturity of Level 3 as per the Department • Compliance with DTF AMAF and achieve a of Treasury and Finance (DTF) Asset Management minimum maturity level of 3 Accountability Framework (AMAF). • Complete actions in the 2020-21 Asset Management Improvement Plan including: − Complete condition assessment on existing assets − Asset Management Information System training completed for all super users

• Implement a fit-for-purpose Asset Management • Complete asset management information plan Information System • Update 25 years asset management plan

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Resource stewardship

Climate resilience

Context Strategic intent

We have committed to a Zero 2025 strategy to reduce Reduce carbon emissions and adapt to climate our carbon emissions by 100% from a baseline 1,559 change. tCO2-e by the year 2025. Our Zero 2025 strategy is based on an aspiration to exceed the Victorian Government’s targets and to be the first water corporation to be carbon neutral by 2025. As we operate mainly gravity-fed systems with few pumps and no treatment facilities, we are a low energy user. However, we do operate a relatively large vehicle fleet due to our geographical spread. We actively promote the use of renewable energies, and we have more than 900 solar cells in the Macalister Irrigation District, as well as contracts with third parties to generate hydro-power at our storages.

Goals (by June 2023 or as specified below) 2020-21 Targets

• Reduce gross CO2-e to 1,041tpa by 2025: • Implementation of the Zero Emissions Water project to contribute to our 100% renewable − reduce consumption of electricity by 550 MWh energy target. − increase renewable energy percentage to 100% • Complete installation of rooftop solar projects. by 2025. • Develop and implement carbon offset strategy.

• Incorporate adaption to climate change in business • Complete climate vulnerability workshops decisions. • Update the climate adaptation plan to consider the most recent CSIRO climate modelling and finalise the plan.

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Environmental improvement

Context Strategic intent

Our Environmental Strategy reflects our commitment to, We will actively reduce adverse impacts on the where possible, drive environmental improvement and environment from our operations and will deliver our need to comply with statutory requirements, as well improved environmental outcomes. as our Statement of Obligations, Letter of Expectations, Emissions Reduction Pledge and various government policies (including Water for Victoria). Our waste generation from our general operation is estimated to be 36 tonnes per annum, which is relatively low by industry standards. We are also a relatively low user of potable water, at an estimated 1,955kl per annum. We manage water in a number of ways which can have an impact on waterway health, including: • harvesting and releasing water under a range of Bulk Entitlement obligations • regulating river flows through various dams and weirs • licensing groundwater and surface water extractions • licensing farm dams • operating drainage networks in the Macalister and Werribee Irrigation Districts. We also have extensive land holdings around our storages and within our irrigation districts. As a Regional Catchment Strategy Leader for the Port Phillip and Westernport Catchment management Authority region, we have implemented a number of revegetation projects on previously cleared land. We have also established native vegetation offsets sites that protect high-quality Goalsvegetation (by Juneinto the 2023 future. or as specified below) 2020-21 Targets

• Reduce waste to landfill to 29tpa by 2025. • Reduce waste to landfill to under 31tpa.

• Provide 2,033ML for an environmental entitlement in • No target for 2020-21 (pending completion of the Werribee system. Werribee Irrigation District modernisation)

• Reduce nutrient discharges from the MID by 7.5 • Provide data on nutrient loads and trends to the tonnes per annum, to 50 tonnes per annum by 2030. Lake Wellington Sustainable Irrigation Group in order to inform nutrient reduction activities within the Macalister Irrigation District and broader catchment.

• Establish 65 ha of native vegetation offset sites by • Implement revegetation plan for Pykes Creek 2025. Reservoir land following pine tree removal.

• Increase native vegetation on SRW land by 50 ha by • Implement business case for establishment of 50 2025. ha of native vegetation.

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Leadership and culture

A culture of excellence

Context Strategic intent

We have developed our People Plan which is focussed We create an environment where people: on fostering a culture of excellence. We will achieve this by developing contemporary leaders within a strong and • are committed to delivering SRW’s vision, goals relevant culture that is diverse and inclusive and places and objectives our people at the centre of everything we do. • show pride in their work and demonstrate We have used the People Matter Survey and the Insync accountability Alignment and Engagement Survey to track our • consistently meet or exceed expectations progress. • are encouraged to innovate and become leaders in our industry • are supported in their development • live our trademark behaviours.

Goals (by June 2023 or as specified below) 2021-21 Targets

• Achieve our desired culture as measured in the • Achieve participation rate of 90% in the 2020 Culture Survey. Engagement and Alignment Pulse Survey. • Achieve a 60% ‘favourable’ response to the engagement score • Achieve a 50% ‘favourable’ response to the alignment score

• Successful transition of workforce to modernised • Implementation of actions within our People Plan environment/structure. including: − Strategic Leadership Program − Performance and Professional Development Plans − Learning and Development Program − Diversity and Inclusion Plan

• Improved results from the People Matter survey over • Achieve participation rate in the 2020 People four years: Matter Survey of 90%. − 83% engagement • Improved results from People Matter survey: − 67% leadership − 73% engagement − 66% accountability − 57% leadership − 56% accountability

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Safe, healthy, diverse and caring workplace

Context Strategic intent

We have developed a Health, Safety and Wellbeing A workplace where: Strategy to ensure our workplaces promote good mental health and wellbeing and are free from preventable • everyone is responsible and accountable for injuries – safe for staff, contractors and visitors. health, safety and wellbeing We conduct OHS Management System Reviews every • our people feel valued, included, respected and two years and we have recently completed a Critical Risk connected to reach their full potential Review. Recommendations from both reviews are being • diversity is celebrated. implemented. We have developed a Diversity and Inclusion Strategy and action plan to ensure all our people feel respected, valued and included and have access to equal opportunity, which encourages them to contribute at their full potential. We want to attract people to our workplace with new and different perspectives and experiences, enhancing innovation and performance at SRW. The strategy takes us beyond compliance, recognising diversity and inclusion as a business enabler and a business imperative. Our strategy provides a roadmap to foster diversity and inclusion in our workforce, helping us make positive contributions to social inclusion and workforce participation.

Goals (by June 2023 or as specified below) 2020-21 Targets

• >38% women at SRW • >34% women at SRW • 50% women in executive positions • 50% women in executive positions • >35% women in leadership positions • >31% women in leadership positions • >50% women in degree-required positions (other • >40% women in degree-required positions (other than STEM) than STEM) • >40% women holding degree-required STEM • >34% women holding degree-required STEM positions positions • >15% women in field positions • >9% women in field positions • >8% employees under 25 • >5% employees under 25 • >2% employees identify as Aboriginal or Torres Strait • >2% employees identify as Aboriginal or Torres Islander. Strait Islander.

• SRW has achieved a Mature Safety Culture. A • Safety Culture Index Results improvement: positive safety culture with proactive safety systems where nothing takes precedent over safe work − Currently ‘maturing’ at 54.11 Safety Culture practices under any circumstances. All staff share Index the same responsibility for health safety and − Achieve ‘Maturing’ rating of 60.0 or higher wellbeing.

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1.3 Government priorities SRW is proud to be leading implementation of the priorities below, specified in the government’s Water for Victoria policy. Below we describe how we will address and deliver on the seven priority areas identified in the Minister’s Letter of Expectations. Implementation of these priorities strongly aligns with our vision of ‘excellence in rural water management, driving growth and customer productivity in southern Victoria’. We have considered the impacts of COVID-19 on delivery of these initiatives. We have not identified specific impacts in most cases, however where any impacts are likely we have identified these in a sidebar.

Climate change

We have committed to a Zero 2025 strategy to be carbon neutral.

For 2020-21, our target is to reduce carbon emissions to 1,217 tCO2-e (or less). This will be achieved through:

▪ establishing and implementing the strategy and framework for managing the Large-scale Renewable project (Zero Emissions Water - a collaboration across the Victorian water sector) to achieve 100% renewable energy ▪ completing installation of rooftop solar projects ▪ developing and implementing a carbon offset approach.

Following the release of CSIRO models in late 2019 a number of climate vulnerability workshops have been conducted internally and our draft climate adaption plan will be updated to include any changes for these models.

For further context on our climate change targets and initiatives, refer to the following objectives within our corporate strategy:

▪ Sustainable water resources (page 15) ▪ Climate resilience (page 20)

Customer and community outcomes

We pride ourselves on our strong relationships with COVID-19 customers, recognising the products and services we supply are critical inputs for their business. To maintain the health, safety and wellbeing of We maintain customer interfaces through: our people, customers ▪ offices in each of our main districts and community in ▪ field staff response to COVID-19 ▪ a multi-site customer services call centre team we have closed our face- ▪ regular meetings and interaction with our to-face customer service customer committees from our offices consistent with ▪ digital engagement, including the mySRW government customer portal, website and social media requirements. platforms.

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Our ongoing engagement with customers and communities includes:

▪ Customer Consultative Committees (CCCs) in the irrigation districts and a Southern Groundwater and Rivers Customer Forum ▪ strong connection between our field staff and customers ▪ a dedicated ‘Customer First’ internal team, reviewing the ways we provide service and conducting regular site visits to a range of customers ▪ regular board engagement with stakeholders and customers, including tours to their businesses to hear about their priorities and challenges ▪ focused communications and engagement plans for all major initiatives ▪ detailed customer surveys every two years ▪ short, transactional customer surveys and feedback for specific issues ▪ media releases, case studies, videos and interviews to show how we create value for our customers and our communities ▪ targeted sponsorship of community groups’ initiatives and activities ▪ education tours ▪ regular newsletters, website content and social media updates.

Our communications and engagement priorities for 2020-21 include actions and initiatives arising from our Strategic Engagement Plan 2019-22.

This includes support for all our decision processes, major projects, along with stakeholder, customer and community engagement across a range of platforms. In 2020-21, we will engage with Macalister Irrigation District customers on the delivery of the $62.7m Phase 2 program of works, including discussions on the funding model, water savings and the potential future price impacts.

We are continuing to build our digital strategy and increase opportunities and ways for customers to remain informed about matters relevant to their business, and to interact with us.

Our 2020-21 targets for performance measures C1.4 and C1.5 under Appendix 3A to the corporate planning and reporting guidelines are included in section 1.1 (page 10). Further measures and targets relevant to each customer group are detailed in subsequent sections of this Plan, as are bill impacts for individual customer groups.

We will also support development of land and recreation management plans for storages which have recreational value.

During 2020-21, we will work with DELWP, Agriculture Victoria and other stakeholders to implement drought initiatives and improve customer education about climate resilience.

Water for Aboriginal cultural, spiritual and economic values

Covering almost 40% of southern Victoria, our region intersects with several Traditional Owner groups, six of which are Registered Aboriginal Parties (RAPs) see map (below).

Our Aboriginal engagement strategy is to seek opportunities to develop meaningful working relationships with Traditional Owner and Aboriginal communities in the regions we cover, helping them to meet their objectives, including employment and capacity-building, economic development, cultural respect and acknowledgement.

We are members of a multi-agency partnership agreement with the Gunaikurnai Land and Waters Aboriginal Corporation (GLaWAC), the Registered Aboriginal Party (RAP) for the 25

Gunaikurnai people. The agreement was developed jointly with 13 other organisations, including water corporations and natural resource managers in Gippsland. The GLaWAC-GEA (joint) Working Group will continue to meet throughout 2020-21 to share knowledge and deliver on the actions in the agreement regarding: cultural respect and education, employment and economic development, joint management of the 10 parks and reserves, and community education.

We continue to further develop our relationships with Aboriginal Victorians and Traditional Owner groups across the state. This will include discussions about joining, or establishing, similar multi- partner agreements, which respects Traditional Owner groups may prefer a joint approach, giving them a strong voice at the table.

During 2020-21 SRW will:

▪ continue to work with DELWP on a framework for Aboriginal access to water for cultural, spiritual and economic values ▪ build capacity in Aboriginal Victorians around participation in water management matters, including shadowing and mentoring ▪ work with Traditional Owners to develop our understanding of their cultural values and ecological knowledge of water on Country. ▪ continue to invite Traditional Owner groups as important members of any stakeholder engagement activities on Country ▪ advise Traditional Owners groups of opportunities to access new water entitlements ▪ work on the Lake Condah restoration project with the Gunditj Mirring Traditional Owner Aboriginal Corporation, DELWP and Glenelg Hopkins Catchment Management Authority ▪ support the DELWP Aboriginal Procurement Framework, which has a target of 1% of all contracts and purchase orders to be sourced from Victorian Aboriginal businesses ▪ explore opportunities for Aboriginal enterprises to manage native vegetation and/or carbon offset sites that we develop ▪ extend cultural awareness training and include it as a module in the staff onboarding process ▪ refer all significant surface and groundwater applications to Traditional Owner groups for consultation

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Resilient and liveable cities and towns

While SRW does not provide drinking water for cities or towns, we manage the harvesting and release of raw water under bulk entitlements on behalf of urban water businesses, and we also manage licences held by urban water businesses to extract raw water from surface and groundwater for town supplies.

We partner with Melbourne Water to provide irrigators in Werribee with recycled water sourced from Western Treatment Plant. Further, we are investigating opportunities for use of alternative water in Bacchus Marsh.

We are involved with the 11 Integrated Water Management (IWM) groups that operate across our region. We also sit on several of the project control groups, and support working groups with relevant surface and groundwater information strategies and projects where they intersect with our areas of responsibility. This can include groundwater supply or diversions from dams or unregulated rivers.

As part of the Werribee catchment IWM forum, in 2019-20 SRW initiated the Werribee System Water Security Project. The project is considering the current and future water balance of the Werribee catchment, outlining options to provide a secure, reliable and fit for purpose water supply for the Bacchus Marsh and Werribee customers in the context of a drying climate.

Work will continue through 2020-21 in assisting the development of the Werribee catchment scale IWM plan as well as the Western Growth Area IWM Master Plan which focuses on the residential growth areas around Bacchus Marsh, Melton and Wyndham. The purpose of the Master Plan is to map out a portfolio of projects to deliver the desired outcomes for IWM in the growth areas, which include a secure and fit for purpose water supply for irrigators in the Bacchus Marsh and Werribee Irrigation Districts. 27

In addition to this, our irrigation modernisation projects deliver investment and benefits to the local communities; both in the construction period and, more significantly, through improved service and water savings by increasing production, regional economic activity, and environmental benefits.

Recognising recreational values

SRW manages dams in Gippsland and to the west of Melbourne. The reservoirs provide vital water supplies for farming, power generation and town water supplies, along COVID-19 with recreational facilities for the local communities and We have restricted tourism. The dams and their surrounds are popular recreational access to our destinations for a diverse range of activities such as storages in response to picnicking, boating, kayaking, fishing, swimming, and water COVID-19. skiing. Lake Glenmaggie is a popular holiday boating and fishing spot. Blue Rock Lake has become a focus for At the time of writing competitive bass fishing and community recreational use. these restrictions have Pykes Creek Reservoir is particularly popular public eased, and we will recreational area with large numbers using the location during continue to review this to the summer months. ensure we are always operating consistently We work with a number of community groups and agencies so with all COVID-19 we can provide facilities most relevant to community needs response measures and to ensure the information we provide on social media and outlined by the other platforms service community expectations. government. Lake Glenmaggie Centenary

Lake Glenmaggie has been a significant part of life for many in Gippsland. To mark this importance, we are holding centenary celebrations throughout the year, where COVID-19 restrictions allow. A family day was held at the recreation area in December 2019, representing 100 years since construction began at the reservoir. There will be further events, historic research and updated signage through 2020-21 leading up to the 100th year of operation in 2026.

Land and recreation management plans

SRW has developed a land and water management plan for Pykes Creek after a community consultation process involving recreational user groups, local residents, council, and other stakeholders. During 2020-21 we will publicly consult on the draft plan for our Eastern Storages (Blue Rock and Lake Glenmaggie) and look to develop plans for our remaining storages.

The plans will be finalised in consultation with local communities and other stakeholders including urban water corporations, catchment management authorities, DELWP, Landcare groups and recreational user groups (e.g. boating and fishing clubs). The plans focus on recreational usage and the protection of environmental values. They consider short, medium and long-term needs and define agreed actions, responsibilities, and funding arrangements. In doing so, the plans will assist SRW to maintain infrastructure and facilities to support recreational objectives at our water storages.

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Recreational Users Information Needs Assessment (RUINA)

We have worked with the team from DELWP in developing the Recreational Users Information Needs Assessment (RUINA), which has led to the all-abilities playground project at Lake Blue Rock. During 2020-21, we will continue working with the RUINA team to identify projects to close these gaps.

Other opportunities

In recent years, we have made several submissions for funding to improve the recreational value of water at our storages including:

▪ playground and picnic facilities upgrades ▪ jetty installations ▪ disabled access to swimming and boating facilities.

In 2020-21 we will:

▪ complete a new playground and refresh information signage at Blue Rock ▪ install a floating barrier to separate the swimming zone from the boating zone at Pykes Creek ▪ develop options for a new recreation park at Melton Reservoir

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Leadership and culture

Prioritising diversity and inclusion is more than a COVID-19 legislative requirement. It is essential to SRW’s As a result of the COVID-19 success and will support excellence and innovation. At pandemic, we have needed SRW we know our communities are more diverse than to quickly adapt our ever, and our goal is for SRW to look like our workforce by implementing: communities, with a diverse and inclusive workplace that enables our people to achieve their best. • Working from home for SRW is designing a contemporary Diversity and office based staff Inclusion Plan for 2020-2023 which will incorporate • Start and finish at home requirements from the Gender Equality Act 2020 and for field staff Regulations. The focus of the plan is on creating a fair • Closure of face-to-face and equitable workplace through diversity of staff. customer service • New safety procedures The future will bring with it significant challenges and for staff and contractors we want to remain a leader in this dynamic where essential works is environment. Where we cannot foresee change, we will still required always need an agile and innovative workforce taking advantage of change. Our People Plan 2020 is a Our Strategic Leadership program of alignments and engagements for our Team has been instrumental people and enables our leaders to guide them through in leading our people through change. this change. We have implemented many different The People, Safety and Culture Committee provides ways of connecting with our the board oversight of people, safety and culture people such as wellness matters, and the opportunity to shape development of sessions, drop-ins, fitness, SRW’s organisational culture. safety huddles, and varied communication channels. Further context and targets are included against our corporate strategy under the objective of safe, healthy, The health, safety and diverse and caring workplace (page 23). wellbeing of our people has been paramount in all our We will conduct annual reviews of the board’s decisions. performance, to develop and implement appropriate improvement plans.

Financial sustainability

Financial indicators as required under the Corporate Planning and Reporting Guidelines are provided in section 8 of this plan.

Compliance and enforcement

Community interest in the fair and equitable management of water entitlements has increased in recent years, with a particular focus on our licensing decisions and compliance and enforcement processes. In November 2019, the Minister for Water issued the “Non-Urban Water Compliance and Enforcement Guideline” as a continuation of Victoria’s historic best practice approach to compliance and enforcement. The Guideline provides a consistent, risk based approach to 30 compliance and enforcement across the state, and is supported by a number of provisions in the Act, including Penalty Infringement Notices (PINs) and the ability to suspend or cancel a licence for non-compliance.

In response to the new Guideline SRW has developed our Water Resources Compliance and Enforcement Plan. This outlines the approach we will take with respect to education, detection, investigations and enforcement of non-compliance, particularly with regard to unauthorised use of water. During the life of this corporate plan, as part of the implementation our Compliance and Enforcement plan, we will embed procedures to manage the use of PINs, to improve recording early detection of entitlements as customers reach 100% and systemically update the training for all staff with enforcement responsibilities.

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1.4 Capital expenditure

Overview

Our capital expenditure program is summarised below, and assumes: COVID-19

▪ existing dam design standards, as set by the The recent events Australian National Committee on Large Dams associated with COVID-19 (ANCOLD) resulted in number of ▪ existing safety design and construction safety capital projects that would standards have previously ▪ no natural disasters or other major unplanned commenced early in 20-21 incidents. being deferred, as the risk of starting and then having The program includes continuation of modernisation works in to cease these projects was the Macalister Irrigation District. considered high.

At the time of writing, we have completed two thirds of our During 2020-21 we will Werribee and Bacchus Marsh projects. We have been increase our efforts in advised by the National Water Infrastructure Development capital planning and Fund (NWIDF), funding for the remaining third was not preparation for the next included in their most recent round of funding. We are now pricing submission. This will reviewing alternative funding models for consideration to include bringing forward the complete the project and maximise potential water savings. options analysis and The final third is not costed in this corporate plan. preparation of detailed The program includes our forecast at 30 April 2020 of capital design work for high value expenditure for 2020-21. projects for the next pricing submission period.

Note: All other capital works for 2019-20 includes around $7.5m for modernisation in Werribee and Bacchus Marsh.

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Significant projects

MID2030 Phase 1B

Phase 1B of the MID2030 modernisation project is jointly funded by SRW customers and state and federal governments. This phase of the modernisation program covers the Southern Tinamba supply zone, which includes some of the oldest and most inefficient channels that have the highest water losses in the district, and involves modernising approximately 80km of channels in the Tinamba, Mewburn Park and Riverslea areas with a combination of piping and channel automation.

Stage 3 works will complete Phase 1B of the MID2030 Modernisation works.

The scope of work to be completed this winter includes:

▪ installation of 38 flume gates and 5 slipmeters to automate the Riverslea channel system, ▪ desilting, targeted channel reprofiling and tree removal on some of the channel network to facilitate implementation of total channel control (TCC).

MID2030 Phase 2

MID2030 Phase 2 modernisation works is now fully funded with the commitment from both State and Federal Governments. The $62.7m program of works is being supported by $31m from the Federal Government, $10.4m from the State Government and the remainder from SRW MID customers. This will allow us to complete this important project that is providing benefits including improved water delivery and better performance across some of the least efficient zones in MID.

The MID Phase 2 works will reconfigure one of the worst-performing parts of the district – the Newry irrigation supply zone, with pipeline to replace channels and automation of outlets. There will also be upgrades and reconfiguration of the Nuntin supply network. A large proportion of the funding will go towards channel and outlet reconfiguration upgrades across the district.

Maffra Weir Operating Gear

Maffra Weir is over sixty years old and on completion of a review of the operating gear for the spillway gates in 2017, many of the weir’s electrical and mechanical components are at the end of their reliable service life and do not meet modern design criteria, leading to an increasing number of breakdowns in recent years. The operating bridge also does not have the structural capacity required based on modern design standards and analysis techniques.

The objectives of the project are to:

▪ improve operator safety and comply with relevant legislation ▪ improve the reliability of the structure to ensure continuity of supply to customers ▪ reduce operation and maintenance costs.

The project cost is estimated to be $2.5m.

This work commenced in 2018-19 and has progressed to plan and will be completed in 2022 during the winter shut down period for the Macalister Irrigation District.

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Main Southern Channel MID Siphon No 1

Siphon no 1 is critical to the successful delivery of water to approximately 70% of customers in the southern parts of the Macalister Irrigation District. The siphon was constructed in the early 1900s of reinforced concrete. This siphon suffered a major failure in 2019 with emergency repairs completed to allow full supply to be available in time for the peak summer period. This project includes the installation of a new flume with the existing siphon being decommissioned.

Glenmaggie Erosion Works

Glenmaggie dam is SRW’s second largest storage located in the Macalister Irrigation District and has a capacity of 177,000ML. The dam is used to store and release water for the Macalister Irrigation District and is extensively used as a recreational facility for boating, fishing and skiing.

A number of locations along the foreshore have significant erosion due to wave action during high wind days as well as rapid filling and emptying of the dam. There are several high priority erosion areas that need to be treated to avoid damage to private property, ensure public safety and reduce the impact on water quality.

A number of options have been considered and over the next 12 months a gabion basket wall will be constructed at Wootons Cove the highest priority area to halt further erosion. Further erosion works will continue in the outer years of the pricing submission period.

Automated meter reading

We are implementing new technology to read meters. The system comprises a low cost, low power transmitting device that is attached to existing water meters and allows hourly data to be sent digitally via radio technology to high-sensitivity receivers. This removes the need for field staff to physically read meters, which will reduce operating costs and safety risks, and will improve productivity. The data will also be available online.

During 2020-21 we will install an additional 4 base stations and extend automated meter reading to around 500 additional unregulated surface water and groundwater meters in Lake Mundi, Mumbanner, Portland, Noorat, Upper Latrobe and the Warragul area.

Yallourn Weir Right Abutment

Yallourn Weir provides a pool to allow water to be extracted by the Latrobe Valley power generators who supply about 70% of Victoria’s power needs. The water is used for cooling purposes and is essential in the power generation process. The pool level is maintained through the releases made from Lake Narracan Dam located 2.5km upstream of the weir. It is critical to maintain the pool level at a high level or the pumps extracting the water will not function. Without cooling water, the power stations cannot function. Whilst some of the power stations have on site storage that would last 7 to 28 days, some stations have no back up supply and would go offline immediately if they could not draw water from the weir pool.

The pool water is used by Yallourn Power Station (Energy Australia) & the Loy Yang A and B Power Stations. The structure forms part of the Latrobe River storages that are rated as Vital Critical Infrastructure in the state of Victoria.

Due to the criticality of the weir, SRW has undertaken two significant remedial works projects in 2005/06 (installation of anchors and replacement of drum gate with a fixed concrete crest) and in 2013 (stabilization of the downstream apron).

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Stabilization works are required on the right abutment of the Yallourn Weir to reduce the risk of piping in the right abutment embankment. The geotechnical study of the right abutment and foundation properties under the concrete weir section is also part of the project to confirm the existence of soft alluvial soil.

Information Communication and Technology

There are a number of information technology projects required to maintain existing applications and infrastructure with some uplift in customer experience, business continuity and security.

These include works to refresh and upgrade of infrastructure to support SRW wide operations. The upgrade of desktop applications to enhance improved communication and collaboration across the organisation. A continuation of the customer centric digital journey through mySRW and enhanced toolsets to enable improved communication and provision of our services to and with our customers.

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1.5 Changes from 2019-20 plan

COVID-19

At the time of writing, the world is dealing with the implications of a global pandemic. This has implications for a number of aspects of this plan. Where relevant, we have addressed these specific issues in sidebars. These include:

• changes to our way of working, and supporting our people • impacts on our capital program • increased risks for customers and our financial position • access to recreational facilities

Business operating model

SRW has adopted a new business structure, to enable us to be future ready to continue to meet the needs of our customers, community and stakeholders for the long term. This has been focussed on a culture of ‘us’ and enables us to be flexible, agile and collaborative.

Strategy review

We have commenced the review of our corporate strategy which will ensure our focus remains on having our customers at the heart of everything we do whilst maintaining absolute safety for our people, customers and the community. We know we cannot do this without a culture of excellence, underpinning what we do in the future.

The modernisation of our assets to provide growth and productivity continues to build a foundation for us to drive value to our customers, including the management of these assets for the long term.

As an asset intensive business SRW has an aspiration to implement outstanding asset management practices. This means implementing practices contributing to excellent customer, shareholder and stakeholder outcomes by:

• embedding asset management as a core business process in SRW to achieve long term sustainability, efficient whole of life costs and affordable pricing • managing assets to be operated efficiently and reliably to meet customer expectations and provide continued opportunities to optimise their productivity • being prepared for and adaptable to climate change • complying with relevant legislation and government policies • managing asset information to optimise decision making in order to effectively and efficiently manage SRW resources • practising risk-based decision making to assist in prioritising investment aligned with the SRW risk position statement and also to consider future opportunities • protecting the safety of the public and our staff • delivering customer and environmental benefits from the modernisation of irrigation assets

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Asset Management Improvement will be a significant focus area for 2020-21. An asset management improvement plan has been in place since 2018 and we will add additional focus and resources to this work during 2020-21. It is important this work contributes to the development of a firm understanding of SRW’s underlying long term financial sustainability by considering the condition of our assets and the funds required to sustainably maintain SRW’s assets over a longer term horizon (20 to 25 years).

MID 2030 Phase 2

MID2030 Phase 2 modernisation works is now fully funded with the commitment from both State and Federal Governments. The $62.7m program of works is being supported by $31m from the Federal Government, $10.4m from the State Government and the remainder from SRW MID customers.

This will allow us to complete this important project that is providing benefits including improved water delivery and better performance across some of the least efficient zones in MID.

This has been included in our financial forecasts and impacts our capital expenditure, debt and cashflow and it is expected that funding agreements will be signed in 2020.

Capital program

In addition to the inclusion of MID2030 Phase 2, the capital program for 2020-21 has been review and includes a stronger focus on capital planning due to a number of projects needing to be deferred due to COVID-19. This is described in the sidebar on page 32.

Werribee System Bulk Entitlement amendment

During 2019-20 the Minister amended Western Water’s Werribee System Bulk Entitlement, granting an additional 20% share of storage capacity in Merrimu and an additional 10% of inflows. These entitlement shares were previously unallocated and the share of charges paid by DELWP. This change is reflected in the storage shares in section 7.

Financial position

Current irrigation modernisation projects for the Macalister Irrigation Districts introduce $65m of capital expenditure into the business across the 2020-21 Corporate plan period. These modernisation plans have increased from the 2019-20 Corporate Plan by the addition of the MID2030 Phase 2 project and continue to account for the increase in debt described by the forecast Balance Sheet.

Our end of year debt levels across the five years to June 2023 are higher than projected by the 2019-20 Corporate Plan ($19.5m more by June 2023). This change reflects the addition of MID2030 phase 2 capital expenditure costs, offset by government contributions to the project of $41m.

Our forecast of cash interest cover has improved since the 2019-20 Corporate Plan and notwithstanding the increase in debt as a result of the MID2030 Phase 2 project, remains at a financially sound projection throughout the Corporate Plan period (lowest ratio of 2.8 in 2022-23, compared to 2.5 in the 2019-20 Corporate Plan).

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1.6 Risk

Our risk management approach

Our work on risk management continues to be consistent COVID-19 with the International Standard ISO 31000:2018 and requirements under the Statement of Obligations. Given the impact of COVID-19 to our people, customers and Appropriate controls and treatments have been established the community we have to manage each risk. We review these on an ongoing basis. reviewed our corporate risk register in respect to both the Consequence assessment continues to centre around seven current situation and the themes: Reputation, third party losses, customers, potential for a second wave of environment, prices, people and losses. infection. COVID-19 poses Risks are regularly reviewed, and potential new risks and elevated risks throughout the occurrences are considered. Changes are approved by the business and in particular our board followed detailed consideration by the Audit, Risk and corporate risks of: Governance Committee. • Occupational Health and Risks are recorded in a comprehensive risk register. An Safety annual risk review is conducted by management and • Headworks and irrigation presented to the board in June of each year. Corporate risks supply failure are individually reviewed at board committee level • Financial mismanagement throughout the year, allowing for a comprehensive (associated with potential presentation by risk owners, and a thorough examination of loss of revenue due to the topic by the board committee. COVID-19 response) • Align and meet shareholder An attestation by the Managing Director to each board expectations meeting and to the Audit, Risk and Governance Committee, includes risk occurrence for the month, changes to individual The financial risk of lower risk ratings, changes to risk mitigation strategies, and any revenue collection is described emerging risks which may have been identified. by scenario modelling, see Section 8 – Financial Statements

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Corporate risks and controls

The following table identifies our corporate risks and controls. These controls are regularly assessed for their adequacy and their performance.

Risk Primary Controls ▪ Engagement with Ministers and departmental staff ▪ Engagement in policy development processes Align and meet shareholder ▪ Adherence to Southern Rural Water policies and corporate instructions, including expectations licensing practices, purchasing and tendering procedures. ▪ Regular assessment of compliance with Statement of Obligations (and other instruments) via our compliance register ▪ Ongoing monitoring of groundwater systems to detect over-use or salinity intrusion (frequency) Impact of climate change ▪ Modernising irrigation districts to reduce water losses ▪ Irrigation districts being resilient by having multiple water sources Environmental ▪ Monitoring of aquifer levels (and quality if required) by technical staff and hydrogeologists damage due to over extraction from an ▪ Use of groundwater model to assess potential impacts in high-risk aquifers aquifer ▪ Compliance with OHS policies, procedures and work instructions including regular reviews ▪ Regular workplace inspections and safety audits Occupational Health ▪ Periodic third-party structural and mechanical inspections of assets & Safety ▪ Enforcement of Marine Act 2010 & Marine Regulations 2012 ▪ Delivering our Public Health and Safety Strategy ▪ Undertaking and acting on Public Health & Safety Risk Assessments

Failure to manage ▪ Regular engagement with stakeholders, opinion leaders and customers outrage ▪ Public consultation process for significant or controversial applications ▪ Setting and reviewing financial parameters via Water Plan and Corporate Plan, including maintenance of 25-year financial model Financial ▪ Board oversight of budget assumptions and process mismanagement ▪ Reconciliation processes ▪ Internal audit program, including annual verification of debt management practices ▪ Undertaking operation, maintenance, safety and security inspections using Visual Inspection Regimes Headworks supply failure ▪ Undertaking annual emergency and security training exercises ▪ Five-yearly external comprehensive inspections ▪ Ensuring strong government/stakeholder relations through ongoing engagement ▪ Ensuring alternative water supplies for irrigation districts Loss of scale ▪ Delivering our Business Growth and New Revenue Strategy ▪ Imposing exit fees on termination of delivery shares to offset future revenue losses ▪ Monitoring national terrorist alert system or other government advice Terrorism ▪ On-site surveillance and ensuring restricted site access ▪ By design, dams are made highly resilient

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Operational risks and controls

The following table identifies our operational risks and controls:

Risk Primary Controls ▪ Maintaining stream monitoring network Allocation system ▪ Use of water allocation models and procedure failure ▪ Regular review of restriction rules and trigger points ▪ Regular water quality monitoring ▪ Maintaining Blue-green algae Incident Response Plan Failure to manage ▪ Maintaining Storage Sustainability (Safe Drinking Water Risk Management) Plans water quality issues ▪ Chemical control training and procedures ▪ Managing grazing on SRW land to ensure stock exclusion zones within storage margins ▪ Regular review and enforcing of delegations (embedded controls within finance system) ▪ Ensuring Information Technology security Fraud ▪ Compliance with Financial Management Act, and with financial procedures and controls ▪ Internal and external audit programs ▪ Operating in accordance with Enterprise Agreement, policies and procedures Industrial action ▪ Effective engagement with staff ▪ Maintaining safety system and resolution procedures ▪ Rolling asset inspection programs, including critical asset inspections ▪ Ensuring our Disaster Recovery Plan is effective Irrigation supply ▪ Delivering our Dam Safety Program failure ▪ Maintaining supply contingency plans ▪ Maintaining backup communications links ▪ Maintaining and enforcing our instrument of delegation ▪ Adherence to documented processes and procedures, including: o Compliance Guidelines and Procedure Manual o Release and compliance strategies for each storage Legal process failure o Code of Conduct o Privacy Policy ▪ Regular engagement with DELWP staff, government e-alerts, industry forums and professional governance bodies ▪ Regularly assessing compliance via our Compliance Register ▪ Maintaining uninterruptible power supply Loss of critical ▪ Utilising offsite backup and disaster recovery contract Information Technology systems ▪ Using Azure Cloud Services as a buffer to our systems ▪ Ensuring support contracts for critical systems ▪ Maintaining Business Continuity Plans Loss of major office ▪ Ensuring physical security controls ▪ Carrying out Asset Inspection Program ▪ Using water level alarms on automated regulators Third party property ▪ Dam safety surveillance and flood routing training for reservoir operators damage ▪ Observing bio-security procedures ▪ Regular review of calibration for flow monitoring devices 40

Macalister Irrigation District

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2.1 Overview

The Macalister Irrigation District (MID) is the largest irrigation district in southern Victoria. The district is situated around Maffra in central Gippsland and sources water from the Macalister River via Lake Glenmaggie, and from the Thomson River via Cowwarr Weir.

The district has secure water supplies, supplemented by good rainfall. The average annual inflow to the district over the last 10 years has been around 180,000ML.

The region has productive soils, a strong Total area of the district 54,753ha dairy sector, and developing vegetable and cropping industries. Approximately 33,500 Total length of channels 542km hectares are currently used for irrigation, and Total length of pipes 67km of this, 90% is under pasture. Estimates put annual economic contribution, variably in Total length of drains 411km excess of $500m per annum. No. of delivery outlets 2,016

No. of customers (irrigation and stock The irrigation season runs from 15 August to 1,140 15 May. On average, we process up to and domestic) 20,000 irrigation orders each irrigation Total high reliability water shares 155,839ML season in the MID. Total low reliability water shares 74,639ML

Total delivery shares 1,423ML/day

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2.2 Service measures

The table below details our service measures for the Macalister Irrigation District. It includes the achievement of water savings issued as water shares for SRW to allocate and are validated by DELWP. Savings will support our customers to enhance productivity in the district.

2020-21 Measure Performance Target

Channel performance (pool height consistency) 81%

Delivery reliability 99%

Delivery efficiency 85%

Customers with access to Demand Management 60% System Release of water savings 800ML

2.3 Pricing

Overview

We set prices annually to reflect our operating and capital budgets, within the constraints of our total revenue requirement.

Our prices for 2020-21 are consistent with the pricing principles and constraints proposed in our 2018 Price Submission.

Specific prices

The table below lists the major prices for the Macalister Irrigation District. Our full tariff schedule is detailed in the Appendices.

Tariff 2019-20 2020-21 High reliability water share (per ML) $13.10 $13.60 Low reliability water share (per ML) $6.55 $6.80 Delivery share (per ML/day) $5,335.00 $5,450.00 Standard usage $9.95 $9.95 Service point - metered outlet (each) $212.00 $216.00 Service point - metered pump (each) $111.00 $113.00 Salinity mitigation $0.55 $0.60

We also collect application fees on behalf of the Victorian Water Register for transactions relating to water shares and allocations.

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Bill impacts

The table below provides indicative bill impacts for small, medium and large customers in the district.

Bill 2019-20 2021-21 change qty charge charge % Small customer High reliability water share (ML) 5.0 $65.50 $68.00 Low reliability water share (ML) 2.5 $16.38 $17.00 Delivery share (ML/day) 0.0575 $306.76 $313.38 Service point - metered outlet (each) 1 $212.00 $216.00 Usage (ML) 5.0 $49.75 $49.75 Salinity mitigation (ML) 5.0 $2.75 $3.00 $653.14 $667.13 2.1%

Medium customer High reliability water share (ML) 50.0 $655.00 $680.00 Low reliability water share (ML) 25.0 $163.75 $170.00 Delivery share (ML/day) 0.575 $3,067.63 $3,133.75 Service point - metered outlet (each) 1 $212.00 $216.00 Usage (ML) 50.0 $497.50 $497.50 Salinity mitigation (ML) 50.0 $27.50 $30.00 $4,623.38 $4,727.25 2.2%

Large customer High reliability water share (ML) 250.0 $3,275.00 $3,400.00 Low reliability water share (ML) 125.0 $818.75 $850.00 Delivery share (ML/day) 2.875 $15,338.13 $15,668.75 Service point - metered outlet (each) 3 $636.00 $648.00 Usage (ML) 250.0 $2,487.50 $2,487.50 Salinity mitigation (ML) 250.0 $137.50 $150.00 $22,692.88 $23,204.25 2.3%

Medium river water customer High reliability water share (ML) 50.0 $655.00 $680.00 Low reliability water share (ML) 25.0 $163.75 $170.00 Service point - metered pump (each) 1 $111.00 $113.00 Usage (ML) 50.0 $497.50 $497.50 Salinity mitigation (ML) 50.0 $27.50 $30.00 $1,454.75 $1,490.50 2.5%

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Werribee Irrigation District

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3.1 Overview

The Werribee Irrigation District (WID) is one of Victoria’s prime horticulture regions, located on Melbourne’s doorstep at Werribee South.

Water supply to the WID consists of river Total area of the district 2,981ha water, groundwater and Class A recycled water sourced from Melbourne Water’s Total length of channels 19km Western Treatment Plant. We also have the Total length of pipes 40km ability to supply additional water which was purchased in 2016 from the Thomson Total length of drains 64km drought reserve. No of delivery outlets 267

River water for the WID is harvested in dams No of customers 244 on tributaries to the Werribee River and on the Werribee River itself. These dams also Total high reliability water shares 11,088ML hold entitlements for the Bacchus Marsh Total low reliability water shares 5,227ML Irrigation District and for Western Water. Total delivery shares 156ML/day The WID specialises in the production of Total recycled water customer green leafy vegetables - most notably 7,864ML contracted volume broccoli, lettuce and cauliflowers - with a farm gate value in excess of $187m per year. The WID employs approximately 660 people.

The costs of managing the dams are shared in accordance with Bulk Entitlements, and for the WID the shares are:

▪ 70.4% of Pykes Creek ▪ 71.3% of Melton ▪ 14.3% of Merrimu ▪ 7.13% of Lerderderg diversion.

More information on our storage operation function for the Werribee and Maribyrnong systems is included in Section 7 of this Plan.

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3.2 Service measures

The table below details our service measures and targets for the Werribee Irrigation District. It includes the achievement of water savings that are issued as water shares for SRW to allocate and are validated by DELWP. Savings will support our customers to enhance productivity in the district.

2020-21 Measure Performance Target

Delivery volume accuracy 98%

Delivery reliability 99%

Delivery efficiency 80%

Recycled water salinity <1800EC

Release of water savings 533ML

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3.3 Pricing

Overview

We set prices annually to reflect our operating and capital budgets, within our total revenue requirement.

Our prices for 2020-21 are consistent with the pricing principles and constraints proposed in our 2018 Price Submission.

Specific prices

The table below lists the major prices for the Werribee Irrigation District. Our full tariff schedule is detailed in the Appendices.

Tariff 2019-20 2020-21 High reliability water share (per ML) $129.00 $130.00 Low reliability water share (per ML) $64.50 $65.00 Delivery share (per ML/day) $15,410.00 $15,720.00 Service point - metered outlet (each) $237.00 $242.00 Service point - metered pump (each) $118.75 $121.25 Recycled water contracted volume (ML) $354.00 $361.00

We also collect application fees on behalf of the Victorian Water Register for transactions relating to water shares and allocations.

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Bill impacts

The table below provides indicative bill impacts for small, medium and large customers in the Werribee Irrigation District, as well as a large recycled water customer.

Bill 2019-20 2021-21 change qty charge charge % Small customer High reliability water share (ML) 5.0 $645.00 $650.00 Low reliability water share (ML) 2.5 $161.25 $162.50 Delivery share (ML/day) 0.0775 $1,194.28 $1,218.30 Service point - metered outlet (each) 1 $237.00 $242.00 $2,237.53 $2,272.80 1.6%

Medium customer High reliability water share (ML) 50.0 $6,450.00 $6,500.00 Low reliability water share (ML) 25.0 $1,612.50 $1,625.00 Delivery share (ML/day) 0.775 $11,942.75 $12,183.00 Service point - metered outlet (each) 1 $237.00 $242.00 $20,242.25 $20,550.00 1.5%

Large customer High reliability water share (ML) 100.0 $12,900.00 $13,000.00 Low reliability water share (ML) 50.0 $3,225.00 $3,250.00 Delivery share (ML/day) 1.55 $23,885.50 $24,366.00 Service point - metered outlet (each) 2 $474.00 $484.00 $40,484.50 $41,100.00 1.5%

Large recycled water customer High reliability water share (ML) 100.0 $12,900.00 $13,000.00 Low reliability water share (ML) 50.0 $3,225.00 $3,250.00 Delivery share (ML/day) 1.55 $23,885.50 $24,366.00 Service point - metered outlet (each) 2 $474.00 $484.00 Recycled water 100.0 $35,400.00 $36,100.00 $75,884.50 $77,200.00 1.7%

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Bacchus Marsh Irrigation District

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4.1 Overview

The Bacchus Marsh Irrigation District (BMID) is located north-west of Melbourne, on a Total area of the district 1,368ha fertile flood plain of the Werribee and Total length of channels 12km Lerderderg Rivers. Total length of pipes 32km The district is dominated by several large- scale enterprises producing a significant No of delivery outlets 165 proportion of the total output. Vegetable No of customers 130 growing and orchards are the primary businesses. Total high reliability water shares 4,276ML

We also provide water for sand-washing to Total low reliability water shares 2,013ML several major quarries supplying the construction industry. Total delivery shares 71ML/day

Current estimates indicate that around $50m of economic activity is generated per year. The BMID supports approximately 430 full time jobs.

There is a small volume of licensed groundwater, and river water is supplied from Pykes Creek Reservoir. An important priority is to secure a viable alternative water supply.

The first stage of modernisation works has changed the way water is supplied to customers. Approximately two-thirds of the district is now supplied via a pump station on the Werribee River at the Maddingley Weir. This has improved the responsiveness of the supply system to changes in customer demand, raising overall service levels.

Storage operator costs

In addition to the operating and capital costs of running the irrigation district, BMID prices must also contribute to costs of operating storages to harvest and release water.

The costs are shared in accordance with bulk entitlements, and for the BMID the shares are:

▪ 28.3% of Pykes Creek ▪ 28.7% of Melton ▪ 5.7% of Merrimu ▪ 2.9% of Lerderderg diversion.

More information on our storage operation function for the Werribee and Maribyrnong systems is included in Section 7 of this Plan.

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4.2 Service measures

The table below details our service measures and targets for the Bacchus Marsh Irrigation District. It includes the achievement of water savings that are issued as water shares for SRW to allocate and are validated by DELWP. Savings will support our customers to enhance productivity in the district.

2020-21 Measure Performance Target

Delivery volume accuracy 98%

Delivery reliability 99%

Delivery efficiency 80%

Release of water savings 167ML

4.3 Pricing

Overview

We set prices annually to reflect our operating and capital budgets, within our total revenue requirement.

Our prices for 2020-21 are consistent with the pricing principles and constraints proposed in our 2018 Price Submission.

Small price increases during the current regulatory period provide a customer contribution to modernisation of the irrigation district. As Bacchus Marsh customers received a price decrease in the 2013-18 period, these small increases will mean that over the 10-year period from 2013-2023 prices will change by CPI only.

Specific prices

The table below lists the major prices for the Bacchus Marsh Irrigation District. Our full tariff schedule is detailed in the Appendices.

Tariff 2019-20 2020-21 High reliability water share (per ML) $129.00 $130.00 Low reliability water share (per ML) $64.50 $65.00 Delivery share (per ML/day) $11,350.00 $11,920.00 Service point - metered outlet (each) $213.00 $224.00 Service point - metered pump (each) $106.75 $112.00

We also collect application fees on behalf of the Victorian Water Register for transactions relating to water shares and allocations.

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Bill impacts

The table below provides indicative bill impacts for small, medium and large customers in the Bacchus Marsh Irrigation District:

Bill 2019-20 2021-21 change qty charge charge % Small customer High reliability water share (ML) 5.0 $645.00 $650.00 Low reliability water share (ML) 2.5 $161.25 $162.50 Delivery share (ML/day) 0.0925 $1,049.88 $1,102.60 Service point - metered outlet (each) 1 $213.00 $224.00 $2,069.13 $2,139.10 3.4%

Medium customer High reliability water share (ML) 25.0 $3,225.00 $3,250.00 Low reliability water share (ML) 12.5 $806.25 $812.50 Delivery share (ML/day) 0.4625 $5,249.38 $5,513.00 Service point - metered outlet (each) 1 $213.00 $224.00 $9,493.63 $9,799.50 3.2%

Large customer High reliability water share (ML) 100.0 $12,900.00 $13,000.00 Low reliability water share (ML) 50.0 $3,225.00 $3,250.00 Delivery share (ML/day) 1.85 $20,997.50 $22,052.00 Service point - metered outlet (each) 2 $426.00 $448.00 $37,548.50 $38,750.00 3.2%

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Groundwater and Rivers

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5.1 Overview

Our Groundwater and Rivers business licenses and monitors the use of water from unregulated rivers and groundwater aquifers in southern Victoria. It is also responsible for licensing the construction of bores and farm dams. Each year around 1,600 bore construction licences are issued, mostly for stock and domestic use – with higher numbers of applications in dry years.

Groundwater and Rivers staff engage with customers on a regular basis to assist with accessing groundwater and surface water via trades, or new entitlement. Field staff undertake site inspections, meter maintenance and Number of surface water take and use 4,191 installation and compliance activities. licences

Groundwater and Rivers staff also Volume of surface water take and use 163,226ML monitor river flow conditions and entitlements manage irrigation rosters and Number of groundwater take and use restrictions during dry periods. 4,296 licences Licence holders on the Latrobe and Volume of groundwater take and use Maribyrnong systems contribute to costs 393,979ML entitlements of operating storages to harvest and release water – Blue Rock Lake on the Number of surfacewater registration 3,141 Latrobe River, and Rosslynne Reservoir (dam) licences on the Maribyrnong River. Volume of surfacewater registration 82,034ML The costs are shared in accordance with (dam) licences bulk entitlements, and in the case of Blue Rock Lake, also includes a pro-rata apportionment of the drought reserve.

The shares are:

▪ 2.59% of Blue Rock for the Latrobe system ▪ 4.5% of Rosslynne for the Maribyrnong system.

More information on our storage operation functions for the Latrobe system is included in Section 6, and in Section 7 for the Maribyrnong system.

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5.2 Service measures

The table below details our service measures and targets for processing applications and for promoting trade in unregulated systems:

2020-21 Measure Performance Target Applications processed within target timeframes 90%

Customer contacts to promote water trade 1,000

The following targets are applied to the various application types:

Application type Target (days)

Allocation trade 3

Bore construction licence 3

Divide a water share 3

Information statement 7

Licence transfer 7

Water share transfer 7

Subdivision 10

Farm dam licence 30

Take and use licence 30

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5.3 Pricing

Overview

We set prices annually to reflect our operating and capital budgets, within the constraints of our total revenue requirement.

Our prices for 2020-21 are consistent with the pricing principles and constraints proposed in our 2018 Price Submission. This means no change to prices.

In March 2017, Hazelwood Power Station ceased operating. The owner, Engie, holds a groundwater licence for dewatering the mine. We have assumed continued payment of associated licence fees over the period of this Corporate Plan.

Specific prices

The table below lists the major prices for our Groundwater and Rivers customers. Our full tariff schedule is detailed in the Appendices.

Tariff 2019-20 2020-21 Licence change (per licence) $365.00 $365.00 Licensed volume charge - surface water (per ML) $11.70 $11.70 Licensed volume charge - groundwater (per ML) $4.00 $4.00

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Bill impacts

The table below provides indicative bill impacts for small, medium and large licence holders.

Surface water

Bill 2019-20 2021-21 change qty charge charge % Small customer Licence charge (each) 1.0 $365.00 $365.00 Volumetric charge (ML) 5.0 $58.50 $58.50 $423.50 $423.50 0.0%

Medium customer Licence charge (each) 1.0 $365.00 $365.00 Volumetric charge (ML) 50.0 $585.00 $585.00 $950.00 $950.00 0.0%

Large customer Licence charge (each) 1.0 $365.00 $365.00 Volumetric charge (ML) 200.0 $2,340.00 $2,340.00 $2,705.00 $2,705.00 0.0%

Groundwater

Bill 2019-20 2021-21 change qty charge charge % Small customer Licence charge (each) 1.0 $365.00 $365.00 Volumetric charge (ML) 5.0 $20.00 $20.00 $385.00 $385.00 0.0%

Medium customer Licence charge (each) 1.0 $365.00 $365.00 Volumetric charge (ML) 150.0 $600.00 $600.00 $965.00 $965.00 0.0%

Large customer Licence charge (each) 1.0 $365.00 $365.00 Volumetric charge (ML) 300.0 $1,200.00 $1,200.00 $1,565.00 $1,565.00 0.0%

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Application fees

We charge application fees for a range of different transactions in relation to water licences and works licences (bores and dams).

Overall, our application fees will not increase more than CPI.

The table below lists the most common fees that we receive. Our full tariff schedule is detailed in the Appendices.

Tariff 2019-20 2020-21 Construct, alter or decommission class A or B bore $455.00 $464.00 Transfer of licence (repeat temporary transfer or sale of property) $124.00 $126.00 Information statement $113.50 $116.00

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Latrobe Bulk Entitlements

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6.1 Overview

SRW is the appointed storage manager for the Latrobe River basin. Our role is to harvest, store and release water on behalf of entitlement holders. This involves managing large and complex infrastructure including dam walls, embankments, spillways, and associated mechanical and electrical equipment.

We manage Blue Rock Lake, Lake Narracan and Yallourn Weir on behalf of Gippsland Water and the Latrobe Valley power companies. A small share of entitlement from Blue Rock Lake is held by SRW for downstream licence holders, and the Department of Treasury and Finance (DTF) is custodian for water entitlements issued to the former State Electricity Commission of Victoria (SECV). Blue Rock Lake also holds an environmental entitlement and a drought reserve.

The table below shows the entitlement shares on the Latrobe system:

Entitlements Blue Rock Narracan and Yallourn

Gippsland Water 17.08%

Yallourn power station (held by Energy Australia) 15.72% 29.94%

Loy Yang A power station (held by AGL Loy Yang 17.22% 32.80% Partnership)

Loy Yang B power station (licensed by SRW) 8.61% 16.4%

Loy Yang 3/4 Bench (held by Minister for Water) 10.95% 20.86%

Irrigation (licensed by SRW) 2.10%

Environmental entitlement 9.45%

Drought reserve 18.87%

6.2 Service measures

Maximising the accuracy of water release helps us to minimise water losses. We measure performance as the percentage of time the released flow is within defined limits of the ordered flow. Our target is 95% of ordered releases being within 10% of the ordered flow.

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6.3 Charges

Charges for the Latrobe storage operation are based on the pricing principle of cost recovery, and act to fully reimburse our costs of managing these systems. Costs are shared in proportion to the entitlements held in the systems (excluding the Blue Rock drought reserve).

Costs associated with renewal and upgrade works at Yallourn and Narracan are treated as recoverable works and charged to the power generators as incurred.

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Werribee and Maribyrnong Bulk Entitlements

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7.1 Overview

SRW is the appointed storage manager for dams on the Werribee and Maribyrnong river systems. Our role is to harvest, store and release water on behalf of entitlement holders. This involves managing large and sophisticated infrastructure including dam walls, embankments, spillways, and associated mechanical and electrical equipment.

We manage the Pykes Creek, Melton and Merrimu reservoirs on the Werribee system, which also includes diversion weirs and tunnels to divert water from the Werribee River into Pykes Creek Reservoir and from the Lerderderg River into Merrimu Reservoir via Goodmans Creek. This system provides water for Western Water and for our Werribee and Bacchus Marsh Irrigation Districts. There is also an environmental entitlement to the flows into Merrimu Reservoir.

On the Maribyrnong River, we manage Rosslynne Reservoir, which holds entitlements for Western Water, Melbourne Water and for SRW on behalf of downstream licence holders.

The table below shows the entitlement shares on the Werribee and Maribyrnong systems:

Pykes Merrimu Entitlements Melton Rosslynne Creek Capacity Inflows Western Water 1.24% 80% 80% 86%

Melbourne Water 9.5% SRW 98.76% 100% 20% 10% 4.5% Environmental entitlement 10%

7.2 Service measures

To maximise seasonal allocations for customers, it is important water harvest is maximised in our off-stream storages at Pykes Creek and Merrimu Reservoirs (other major storages are on-stream so harvest performance does not apply). Our target is water is harvested at the maximum possible rate >95% of time available (when dam capacity is available).

For all storages, maximising the accuracy of water release helps us to minimise water losses. We measure performance as the percentage of time the released flow is within defined limits of the ordered flow. Our targets are:

▪ Werribee system: 95% of time within 10% or 5ML ▪ Maribyrnong system: 95% of time within 10% or 1ML.

The different levels of precision in the definition for each system reflect the different equipment for measuring and making releases at the different storages, as well as the differing customers and volumes.

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7.3 Charges

Charges for the Werribee and Maribyrnong storage operations are based on the pricing principle of cost recovery, and act to fully reimburse our costs of managing these systems. Costs are shared in proportion to the entitlements held in the systems.

The Werribee environmental entitlement is not a chargeable entitlement under the terms by which is was created, and so the costs for securing inflows to Merrimu are shared by Western Water and Southern Rural Water in proportion to their respective shares,

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Financial Statements

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8.1 Preface

Overview

Our forecast financial statements comprise:

▪ Operating Statement ▪ Balance Sheet ▪ Statement of Cash Flow ▪ Financial Performance Indicators ▪ Quarterly Operating Statement ▪ Quarterly Balance Sheet ▪ Quarterly Financial Performance Indicators.

Our Operating Statement shows significant losses after interest and depreciation charges – between $7m and $9m per annum across the planning period. This must be interpreted within the context of our designation as a ‘not for profit’ entity subject to state government sanctioned price regulation, and the implications of this for our asset values and depreciation charges.

We have infrastructure assets valued at over $1.4b most of which are not included in our regulatory asset base for pricing. This generates around $17m per annum of depreciation charges, of which $12m is not recoverable through our regulated pricing framework.

Financial assumptions

Quantities

The quantities on which our revenue is forecast are generally stable across the planning period, with only moderate adjustments to reflect our proposed sale of properties and water entitlements.

This stability reflects the entitlement-based nature of our services, including:

▪ Eastern Irrigation – delivery volumes consistent with our Water Plan of 147GL per annum, being approximately the same as the last 10-year average. ▪ Groundwater and Rivers Application Fees – applications for new groundwater and surface water licences are subject to ongoing volatility (influenced by factors such as seasonal conditions and government policy). For 2020-21 we have projected a similar workload as 2019-20, which is $200k less than that budgeted within the 2019-20 Corporate Plan. ▪ Werribee Irrigation and Bacchus Marsh Irrigation – delivery of river water entitlements consistent with business as usual. It is anticipated there will be sufficient carryover to meet customer needs in 2020-21. No delivery of metro water or other emergency supply water is planned for 2020-21.

Staffing

Our staffing levels are expected to remain consistent in 2020-21.

Inflation

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Our financial plans have been prepared in nominal dollars of the day, which are calculated with 2020-21 inflation at 1.6% and 2.3% inflation applied thereafter.

Cost of debt

Our Balance Sheet records an ongoing debt position for the corporation. As has been our approach in the past, we plan our interest costs as the weighted average of existing fixed interest obligations and the spot interest rate applicable at the time of completing the Corporate Plan. Accordingly, we have assumed an interest charge of 3.3% for 2019-20 – increasing to 4.3% the following year and then 5.3% across the balance of the planning period. The increase to 5.3% takes a prudent view that interest rates may increase in future periods and is consistent with the rate used by the Essential Services Commission to determine current prices.

Rate of return

A 4.13% real rate of return has been incorporated within our calculation of revenue requirement. This rate is consistent with that used by the Essential Services Commission for the draft 2018-23 Price Determination.

Construction costs

Our future capital budgets assume infrastructure construction costs will increase at CPI.

Labour rates

We have assumed an increase in labour rates above CPI as a result of the enterprise agreement concluded in 2018.

Electricity costs

As most of our water supply is gravity-fed, our electricity costs are mostly for office use and accordingly represent a minor expense for the corporation. We expect to manage electricity price movements within our general basket of external costs.

Fuel prices

While we have an extensive fleet of 130 vehicles, we have not adjusted budgets for any real change to fuel prices. As with other speculative price changes, we expect to manage any cost change within our general basket of external costs.

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Sensitivity analysis

Overview

This section summarises the financial impacts of alternative water supply and demand scenarios.

At the outset we note that, as a rural water corporation, we do not operate in a conventional utility regime – where the utility supplies water to meet the demand of its customers. Rather, our customers own their entitlements and our role is to deliver the water available to them under those entitlements when they order it, or in the case of Groundwater and Rivers customers, to ensure that the entitlements are exercised in accordance with conditions imposed to protect the environment and other users.

Consequently, most of our revenue is derived from charges for water entitlements and is not dependent on how much water is available to, or used by, the holders of those entitlements.

Macalister Irrigation District

In the MID, water usage is charged at $9.95 per megalitre, and accounts for approximately 12% of our revenue. This Plan assumes ‘average’ water allocations and water deliveries based on recent years, that is, 147,500ML of water deliveries. A repeat of 2006-07, the worst year on record, would see usage limited to 50% of high reliability water entitlement – around 72,000ML.

This would decrease our revenue by $720k, which we would need to recover through future tariff increases.

Werribee Irrigation District

Our pricing for the Werribee Irrigation District does not include a variable usage charge for river water supplied against water shares. This recognises the highly variable nature of the Werribee catchment.

Long-term recycled water contracts have been established for Werribee customers and these contracts include a 50% ‘take or pay’ obligation. However, on average, we expect to deliver to customers 65% of contracted volume, and water pricing has been established on this basis. Should conditions be wetter than average, it is likely that our revenue will be limited to the 50% take or pay obligation, and pricing will fail to recover our costs by approximately $200k. In a dry year, we will recoup this deficit as deliveries will exceed 65%.

This Plan is based on 65% recycled water usage, which generates a break-even result.

Bacchus Marsh Irrigation District

As with Werribee, our pricing for the Bacchus Marsh Irrigation District does not include a variable usage charge for river water supplied against water shares.

This recognises the highly variable nature of the Werribee catchment. As with Werribee, we recently consulted with the customer committee on the possibility of reintroducing a usage charge, and this option was rejected.

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Groundwater and Rivers: Applications

Applications for new groundwater and surface water licences are subject to ongoing volatility (influenced by factors such as seasonal conditions). We believe the level of revenue at risk from the budgeted $1.0m is $250k.

Groundwater and Rivers: Field Compliance

Our annual tariffs for groundwater and surface water licences comprise a fixed charge per licence and an entitlement component (per ML). This does not expose us to any revenue risk from seasonal conditions.

Latrobe, Werribee and Maribyrnong Bulk Entitlements

Our Headworks business operates storages on behalf of bulk entitlement holders. Our charges are based on the actual costs of operating and maintaining those storages – and so do not expose us to any revenue risk from seasonal conditions.

Specific issues

Modernisation works

Our financial projections are based on significant modernisation works occurring in the Macalister, Werribee and Bacchus Marsh irrigation districts. Since 2013, programs of just over $160m have been supported by the Victorian Government, the Australian Government and our irrigation customers. Macalister works are fully funded to the end of Phase 2, and two-thirds of Werribee and Bacchus Marsh funding has been secured.

As the final third contribution towards Werribee and Bacchus Marsh ($15m) has not been secured, we have not included this part of the modernisation works within the Corporate Plan.

Asset valuations

Our Operating Statement and Balance Sheet are prepared in accordance with accounting standards and financial reporting directions, under which our infrastructure assets are carried at their depreciated replacement value.

In accordance with state government requirements, our infrastructure and land assets are subject to revaluation every five years and were last restated at 30 June 2016.

Our prices have been determined in accordance with the pricing principles established in the Water Industry Regulatory Order 2003 (WIRO), and revenue has been subject to determination by the Essential Services Commission. This determination has reflected the White Paper position with regard to past investments and established our regulatory asset value to be zero as at 1 July 2004. Under the WIRO pricing principles we are therefore unable to generate any return on assets constructed or acquired prior to 1 July 2004.

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Financial scenarios planning – COVID-19

Given the current response to COVID-19 and potential impacts to our financial position, SRW has undertaken scenario analysis with a particular focus on potential impacts on revenue over the medium term.

The modelled scenario sees a 30% drop in revenue over a period of 12 months. SRW gives no indication as to the likelihood of this event or its origins, however, it is considered prudent to assess the impacts of a sustained reduction in revenue which could occur due to:

• Short term (next 6 months) – Capacity of farm sector to pay water bills is diminished due to:

• Loss of production through reduced workforce availability resulting from either widespread illness or lack of access to contingent workers (i.e. impacts of travel bans, carers responsibilities).

• Reduced demand for produce resulting from shut down of key parts of the economy (restaurant and catering sector)

• Loss of supplemental “off farm” revenue as other parts of the economy remain shut down.

• Medium term (next 12 months) - Capacity of farm sector to pay water bills is diminished due to a combination of the above with:

• Suppressed international commodity prices resulting from reduced global demand due to widespread recessions; and/or

• Suppressed local farm produce demand resulting from local recession (i.e. switch away from high value vegetable, meat and dairy products).

• This assumes both electricity and urban water sectors remain capable of meeting their obligations

Our critical assumption is any additional customer debt that accrues during this time remains secured against land and is recoverable in the long run (mitigating risk to long term financial sustainability).

Should a 30% decline in revenue collections from our customers occur over the course of 2020- 21, our projected debt at June 2021 will increase by a further $9m and the corporation will require further working capital from government to support short term financial viability.

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8.2 Operating statement

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8.3 Balance sheet

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8.4 Statement of cash flow

8.5 Financial performance indicators

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8.6 Quarterly financial statements

Quarterly operating statement

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Quarterly balance sheet

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Quarterly statement of cash flow

Quarterly financial performance indicators

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Appendices

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Detailed tariff schedule

Tariff and Price Component Notes Price ($) Indicative price ($)* 19-20 20-21 21-22 22-23 23-24 ANNUAL CHARGES Irrigation / Regulated Systems Macalister Irrigation / Macalister and Thomson Regulated Systems Macalister/Thomson Water Share - High Reliability 13.10 13.60 13.70 14.00 14.30 Macalister/Thomson Water Share - Low Reliability 6.55 6.80 6.85 7.00 7.15 MID Delivery Share 5,335.00 5,450.00 5,565.00 5,695.00 5,825.00 MID Service Point - Metered Outlet 1 212.00 216.00 221.00 226.00 231.50 Macalister/Thomson/MID Service Point - Metered Pump 1 111.00 113.00 116.00 118.50 121.00 Macalister/Thomson/MID Service Point - Unmetered 1 49.50 50.50 51.75 53.00 54.00 Macalister/Thomson/MID Usage 9.95 9.95 9.95 9.95 9.95 MID Casual Use 54.70 55.80 57.10 58.40 59.70 MID Drainage Diversion Entitlement & Sales 2 19.65 20.00 20.50 20.95 21.45 Salinity mitigation 3 0.55 0.60 0.55 0.60 0.60

Werribee and Bacchus Marsh Irrigation / Werribee Regulated System Werribee System Water Share - High Reliability 129.00 130.00 134.50 138.00 141.00 Werribee System Water Share - Low Reliability 64.50 65.00 67.25 69.00 70.50 WID Delivery Share 15,410.00 15,720.00 16,080.00 16,450.00 16,830.00 BMID Delivery Share 11,350.00 11,920.00 12,540.00 13,210.00 13,900.00 WID Service Point - Metered Outlet 1 237.00 242.00 248.00 253.00 259.00 Werribee System/WID Service Point - Metered Pump 1 118.75 121.25 124.00 126.75 129.75 Werribee System/WID Service Point - Unmetered 1 59.25 60.50 62.00 63.25 64.75 BMID Service Point - Metered Outlet 1 213.00 224.00 235.00 248.00 261.00 BMID Service Point - Metered Pump 1 106.75 112.00 117.75 124.00 130.75 BMID Service Point - Unmetered 1 54.75 57.25 60.50 63.50 67.00 WID Casual Use 243.00 247.00 253.00 259.00 265.00 BMID Casual Use 268.00 281.00 296.00 312.00 328.00 WID Drainage Diversion Entitlement & Sales 2 113.50 116.00 118.50 121.00 124.00 WID recycled water contracted volume 354.00 361.00 370.00 378.00 387.00 WID recycled water sales 2 283.00 289.00 295.00 302.00 309.00 WID recycled water uncontracted use 655.00 670.00 685.00 700.00 715.00

Unregulated surface and groundwater Licence Charges Take and Use Licence 365.00 365.00 363.50 363.50 363.50 Operating Licence - Decontamination Bore & Hazardous Dam 236.50 236.50 236.00 235.50 235.50

Licensed Volume Charges Surface Water Licensed Volume & Sales - Standard 2 11.70 11.70 11.70 11.65 11.65 Surface Water Licensed Volume - Offstream Winterfill 8.19 8.19 8.19 8.16 8.16 Aquaculture Diversion Rate 77.50 77.50 77.25 77.25 77.25 Groundwater Licensed Volume 4.00 4.00 4.00 4.00 4.00

System Management Charges Surface Water - Thorpdale 4, 5 9.40 9.40 9.35 9.35 9.35 Surface Water - Latrobe System 4, 6 11.35 11.35 11.30 11.30 11.25 Surface Water - Maribyrnong 4,7 50.50 50.50 50.50 50.50 50.25 Groundwater - Deutgam 4 26.90 26.90 26.80 26.80 26.80 Salinity mitigation 4, 8 0.55 0.60 0.55 0.60 0.60 Groundwater control pump usage 25.75 26.25 26.75 27.50 28.00

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Tariff and Price Component Notes Price ($) Indicative prices ($) 19-20 20-21 21-22 22-23 22-23 APPLICATION FEES Irrigation District Application to amend district boundary 1,190.00 1,215.00 1,245.00 1,275.00 1,300.00 Applications relating to Delivery Shares, Water Use Licences and 242.50 245.00 252.50 257.50 265.00 Registrations, and Drainage Diversion Agreements

Issue of Take and Use or Underground Disposal Licence Fixed component - Domestic & Stock 765.00 780.00 797.50 815.00 835.00 Fixed component - volume up to 20ML 1,670.00 1,700.00 1,740.00 1,780.00 1,820.00 Fixed component - medium impact 2,100.00 2,145.00 2,195.00 2,245.00 2,295.00 Fixed component - high impact 3,385.00 3,455.00 3,535.00 3,615.00 3,695.00 Volumetric component 20.60 21.00 21.50 22.00 22.50 Water availability assessment 113.75 116.00 118.50 121.25 124.25

Amendment/Amalgamation of Licence Licence amendment - significant 562.50 575.00 587.50 600.00 615.00 Licence amendment - minor 124.00 126.00 129.50 132.50 135.50

Transfer of Licence Simple transfer (repeat temporary transfer or sale of property) 124.00 126.00 129.50 132.50 135.50 Low impact transfer (up to 20ML or amalgamation) 382.50 387.50 397.50 407.50 417.50 Medium impact transfer 815.00 830.00 850.00 870.00 890.00 High impact transfer 2,095.00 2,140.00 2,190.00 2,240.00 2,290.00

Construction Licences - New Contruct Farm Dam - not potentially hazardous and no engineering 980.00 1,000.00 1,025.00 1,045.00 1,070.00 Construct Farm Dam - potentially hazardous and no peer review 2,670.00 2,720.00 2,790.00 2,850.00 2,920.00 Construct Farm Dam - potentially hazardous, peer review or on- 5,525.00 5,635.00 5,765.00 5,900.00 6,035.00 stream dam requiring a s.51 licence Construct, alter or decommission class A or B bore 455.00 464.00 474.00 485.00 497.00 Construct, alter or decommission class C bore 1,300.00 1,325.00 1,360.00 1,390.00 1,420.00 Construct, alter or decommission class D bore 1,715.00 1,750.00 1,790.00 1,830.00 1,875.00 Construct additional investigation bore 103.00 105.00 107.00 110.00 112.00

Construction Licences - Existing Hazardous dam - Operating licence 1,340.00 1,365.00 1,400.00 1,435.00 1,465.00 Farm Dam - alter or decommission 760.00 770.00 790.00 810.00 830.00 Amend, renew or transfer works licence 124.00 126.50 129.50 132.50 135.50 Bore construction licence renewal 124.00 126.50 129.50 132.50 135.50

Private Works Private works - domestic & stock pipe permit 325.00 330.00 340.00 347.50 355.00 Private works - other 630.00 640.00 655.00 670.00 685.00 Transfer licence to use works 242.50 245.00 252.50 257.50 265.00

General Applications - additional assessment 134.00 136.50 140.00 143.50 146.50 Information Statement 113.50 116.00 118.50 121.00 124.00 Information report - mail out or standard 402.50 410.00 420.00 430.00 440.00 Information report - short 113.50 116.00 118.50 121.00 124.00 Information report - complex 1,250.00 1,270.00 1,305.00 1,335.00 1,365.00 Special meter reading 113.50 116.00 118.50 121.00 124.00 Diversion works on Crown lands 335.00 340.00 350.00 357.50 365.00

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Notes to tariff schedule

NOTES * These charges are subject to a revenue cap. The proposed annual price path is only indicative and actual annual price changes will be subject to constraints specified in the annual price adjustment formula.

** A number of application fees have been restructured, and so more than one fee may have previously been applicable for these transactions.

1 Shared service points charged at 80% of the full rate.

2 "Sales" charges apply to usage in excess of annual entitlement volume.

3 Salinity mitigation charged on usage recorded for the prior season.

4 Charge per ML of entitlement, in addition to standard or winterfill licenced volume charge.

5 Applies to licences on the Narracan, Ten Mile and Wilderness Creeks and their tributaries.

6 Applies to licences downstream of Blue Rock Lake.

7 Applies to licences downstream of Rosslynne Reservoir.

8 Applies to extraction from rivers, streams and deep bores in the following parishes: Bundalaguah, Coongulla, Dension, Glenmaggie, Maffra, Nuntin, Sale, Tinamba, Wa De Lock, Toongabbie North, Toongabbie South, Winnindoo, Wooundellah, Wurruk Wurruk.

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