corrected version

OUTER SUBURBAN/INTERFACE SERVICES AND DEVELOPMENT COMMITTEE

Inquiry into sustainable development of agribusiness in outer suburban Melbourne

Melbourne—19 May 2009

Members

MrG. Seitz / MrK. Smith
MrM. Guy / Ms C. Hartland
MrD. Nardella
MrD. Hodgett / MrD. Nardella
Chair: MrG. Seitz
Deputy Chair: MrK. Smith

Staff

Executive Officer: MrS. Coley
Research Officer: MrK. Delaney
Committee Administrative Officer: Ms N-M. Holmes

Witnesses

Mr John Wilkinson, Managing Director; and
Mr Rob Franklin, General Manager Sustainability,
Western Region Water Corporation (Western Water).
MrWilkinson was sworn in.
MrFranklin made an affirmation.


TheCHAIR—Our next presenters are John Wilkinson and Robert Franklin, Western Region Water Corporation. Thank you, gentlemen.

MrWILKINSON—My mailing address is 7 Williams Street, Colac, Victoria.

TheCHAIR—Thank you.

MrFRANKLIN—My mailing address is 17 Diamond Street, Eltham.

TheCHAIR—You are familiar by now of the procedure. If you would leave us some time at the end for questions.

MrWILKINSON—Thank you, MrChairman. It is our privilege to be here before this committee and talk a fair bit about the issues of drought, population growth and climate change in what we believe is a water scare region. Western Water is one of the 13 regional water businesses in Victoria. We are the second largest in terms of population and we are experiencing rapid population growth from a rather large base. We provide water and waste water services and recycled water services. In effect we have three arms of our business at the moment which are really quite strong and growing. In addition to that we also collect the waterways tariff for Melbourne Water as part of a recent decision by government.

Slides shown.

MrWILKINSON—Looking at growth in our region, these are the figures on average growth that Western Water is currently experiencing. It is very strong growth, as you can see. Our average growth is some 3.27percent annually with the major centre of Melton obviously being the focus of the growth, with growth around fivepercent per annum in that area. To emphasise the issues of drought in our region we will provide you with an overview of what is named Merrimu Reservoir which is at the back of Bacchus Marsh. This is currently at ninepercent capacity at the moment and it provides a water supply for Melton and Bacchus Marsh and also to the irrigation sectors of Bacchus Marsh and predominantly Werribee.

Western Water has an entitlement to 70percent of the inflows into this particular storage but it is an offstream storage and it requires significant rain events for the off-stream storage to activate the pipelines to transfer water into the Merrimu storage. I would point out that the last major activation of those particular tunnels to transfer water was back in February of 2005. By those diagrams alone you can get a picture of how Merrimu is operating. In addition to that we have other major storage—the likes of Rosslynne at twopercent, Rosslynne is at the back of Gisborne, and we also have an entitlement in Pykes Creek Reservoir which is also currently at around twopercent capacity at the moment. The key issues for Western Water are really about the extended drought, the climate pattern shift that has occurred in this particular region and population growth.

Dealing with the issue of drought, this is really the worst drought on record. We are now into our 13th year of below average rain the region. It has had an impact not only on the rural sector but also on a business like Western Water. Over the period of 2005-2008, we believe it cost our business some $10 million alone just in increased costs in managing the drought and reductions in revenue. In 2008-2009 alone, that cost to our business has been in the order of about $5 million. That is just through increasing levels of restriction that obviously has an impact upon our revenue. It has also impacted because we are connected heavily to the Melbourne system and we have to purchase additional water in. Not only do we have the costs of the local storages that we have to meet, but also the cost of increasing supply into the region to cater for the critical human needs in the region.

To give you an idea of where our region lies, this map here shows the area that Western Water is in. That is identified by that circle up there. That isohyetal map shows very much our region does lie in a rain shadow on the Great Dividing Range and that is a very graphic illustration of the impact of low rainfall, particularly in this region. At the same time obviously the growth that we are experiencing—this diagram, whilst it does not quite come out as well on the screen as one would like, shows the future residential growth from Melbourne is really moving towards the west. That is due predominantly to the constraints in the east. The map that is on display up there is the map that the investigations area, the growth area's authority, has put out for discussion at this point in time in respect to Melbourne at five million in population. I imagine a lot of you would have seen that, but in respect to Western Water's area, I point out that the areas that Western Water currently supplies is predominantly all this area around here which is identified for potential growth.

Whilst I have that map up there, there has been a reference already to Surbiton Park which is a major asset in the region for treatment of the waste stream that comes into our plant. We call them recycled water plants because we think it is a cultural issue of getting our people to focus very much on the fact that that water is not a waste water, it is very much a valuable resource and can be recycled.

That gives you an idea of the growth that is likely to occur in our region. Whilst the decisions on Melbourne at five million are yet to be made, it really will have a significant impact upon our business, particularly the area that Western Water services. In addition to that we also supply water to the Sunbury area, and the Sunbury growth area is also quite significant as far as the area is likely to be developed into the future as well.

MrNARDELLA—Do you want to explain the recycled water pipeline from Sunbury to Melton whilst you have it up.

MrWILKINSON—Yes, I actually have a map of that. It is always a great pleasure to put that map up when Don is around. He has been a great supporter of the recycled water in our region.

The next slide we have shows you a little bit about how Western Water measures its performance. We are very proud to utilise what is called a balanced scorecard. We are one of only two companies in Australia that are members of the International Hall of Fame, that is the Kaplan and Norton School of Management, in regard to the use of a balanced scorecard in measuring how you achieve your vision; in other words, these are the actions, measures and initiatives that we put in place to achieve our vision. Two of them which are of particular interest I think to the members of this committee in this region are the consumption target of 155litres per person per day which is target 155 that we adhere to, the same as do all the customers in Melbourne.

Last week Melbourne recorded 135 litres per customer per day, well below the target, although it had experienced in the extreme hot conditions well in excess of the target of 155. In April, Western Water achieved 158 litres per customer per day and we are significantly impacted a bit different by that particular target because we are a very high residential customer base, as distinct from a number of units. We are usually the small quarter acre type block that people develop on, particularly in our region, as distinct from a number of high rise type units that Melbourne might have which can impact upon its particular figure.

Something that we are particularly proud of is the bottom chart which talks about our percentage of recycled water. Whilst I do not want to ever downplay a figure that Don quoted, 95percent of water that flowed into our recycled water plants were recycled in April. At this year we are at 90percent year to date and that graph there shows the particular percentage as to where we are at at the moment. As pointed out by Robert Dobrzynski, Western Water was named in the National Water Commission report of 18 months ago as the leading recycled water business in Australia, something that we are very proud of.

We have in place a water supply demand strategy that has a very strong focus on adapting to climate change and managing our water resources in periods of high growth. It is based very much on the central region's sustainable water strategy. It also delivers on Our Water, Our Future, The Next Stage, a government strategy, and uses three main rules about the way we go about our business. The first rule is conservation, and we do that through a lot of education programs, through pricing, through showerhead exchanges and the likes of that. The second one is maximising recycling and that is very much a focus that we have on potable substitution and I will talk briefly about that shortly. The third one which we really do need is this call on external water resources and connections to the Melbourne system.

Currently 95percent of the water that we use in our region is actually externally sourced because of the drought and the lack of security of supply in the region. We also focus on sustainable development and working with councils and Melbourne Water and we are very keen to have in our region the integrated water management models that can be developed, particularly for the growth that is likely to occur in this region. To show you how our system has developed over a period of time, you talk about pre-climate change—this is the map of Western Water's area. As you can see it runs from Lancefield in the north to Sunbury and Bulla in the south there, and similarly Rockbank, up to and including Myrniong in this area here, and as far north as Woodend.

The next one will show the various systems we have—the Bacchus Marsh Melton system predominantly draws from the Merrimu Reservoir, as I have pointed out there previously. That was the way it was set up. Merrimu was set up to provide supply for Melton and Bacchus Marsh. The second area is really what was to be supplied from the Rosslynne Reservoir to our region, particularly to supply Sunbury, Riddells Creek, the Macedon area and Gisborne area. The other area it sources is Woodend which was set up on the Campaspe River there to provide a storage to supply that region there, and Romsey had a storage at Kerrie Reservoir there to provide supply there. Lancefield had groundwater supply, supplemented by surface water supply at Gardiners Creek.

What has happened to our region, prior to March 2002, 100percent of our water came from our local sources. We have an entitlement in the region for some 18 gigalitres of water and our current demand is 12gigalitres of water, but at the moment we are having to buy 95percent of the water in because we cannot provide it locally. Moving on to show what has happened—this is the first upgrade of what has happened to our system, and they were the two connections in early 2000—the first connection from the Melbourne system went into the Sunbury area, and the second connection in 2004 occurred whereby we brought the Melbourne system in to supply Melton and Bacchus Marsh. It really does assist in the transfer of water in that regard. I would point out though in regard to that system too is it does enable us to do, as Robert Dobrzynski said, that we can use those pipelines to transfer water to the Bacchus Marsh irrigation system. In effect water from the Thomson is being transferred through various mechanisms to provide that water. Currently it is 500 megalitres of water in 2009 being negotiated to provide for the Bacchus Marsh irrigators. 500 megalitres was supplied in 2008, and I think the previous year there was just on 1,000 megalitres come into the region from that transfer pipeline. But due to capacity constraints if ever Western Water went off restrictions then we would not have the capacity to provide for the critical human needs, at the same time as providing that additional resource to the Bacchus Marsh irrigation.

What we have also done is have further levels of upgrades to our system. We have subsequently duplicated the pipeline into Sunbury to enable them to take water back up into this area here in Gisborne as well, so in effect we are taking Melbourne Water all the way up there. We also take it up to Mount Macedon and also to provide to Woodend and Romsey as well. Melbourne Water is providing water to all those areas there with the exception of Myrniong and Lancefield. We have future supply investigations under way at the moment which will be the next upgrade which will interconnect particularly through groundwater resources, the Lancefield and Romsey supply system as well. It is fairly significant, but I think the point of interest that everyone is interested in is probably the very next slide we have which shows our recycled water network. Whilst this is probably not a very good map I might spend a little bit of time pointing out how Western Water manages its recycled water network.

The signature project that Western Water undertook was what is referred to as the Sunbury Melton Scheme which was commissioned in 2003. That takes all the water from the Sunbury recycled water plant down along this pipeline route here and can connect into the Melbourne system. Technically we can transfer water from Sunbury down into the Surbiton Park Treatment Plant area which is south of Melton. That was predominantly set up to provide water for agribusiness. In particular a couple of signature users of agribusiness water are the wineries in that area, the Rockbank area there, particularly two wellknown ones, the Galli Winery and the Witchmount Winery. You might know the Witchmount Winery because of its award it received recently for the world's best Shiraz—something they were very proud of—grown with recycled water—they were very proud to say as well. We have an objective to achieve 100percent recycling of water.