滋賀大学学術情報リポジトリ

I

The nation of Australia was established on 1 January, 1901 as a federation of colonial states. For this reason, aspects of Australian politics and authority are heavily vested in the six States (and two Territories) although as time goes on, the Commonwealth is assuming more power, authority and financial responsibility. Local government (councils) constitute the third lev-el of government. For the outsider, then, governance is sometimes seen as complex and confusing with tiers of government all seeming to have roles in particular domains and with different levels of power.

Water supply (and sewerage services) was historically the responsibility of local govern-ment until well into the twentieth Century -and still is in New South Wales; besides Syd-ney Water which supplies water to the metropolitan area, there are 105 rural and re-gional water utilities in the State. In the 1970s, 370 water trusts, sewerage authorities and local councils provided urban water and sewerage services in regional Victoria.(Heritage Victo-ria, 2007, p. 53). However, the small trusts and authorities in Victoria lacked the expertise, fi-nancial capability and overall capacity to effectively manage service provision and infra-structure development required by growing populations and modern compliance stan-d a r stan-d s , a n stan-d t h e S t a t e h a s s u b s u m e stan-d responsibility by merging authorities into larg-er entities with responsibilities to the State Minister for Water.

Overlying this is the Commonwealth’s re-sponsibilities, especially in terms of inter-state relationships and major river basin manage-ment. Dovers (2008) notes the emergence of

Water Governance

in Victoria, Australia

Robert Wallis

Office of the Deputy Vice-Chancellor (Research & Innovation),

Federation University Australia / Professor Articles

national policies such as COAG-agreed Na-tional Water Initiative (NWI) and the more Commonwealth-imposed National Plan for Water Security. (COAG is the Council of Aus-tralian Governments). While some of this shift to national influence was the ten year drought, he claims the major reason has been an ‘inexo-rable’ shift towards centralism observed between 1996 and 2007, fulfilling one of Feder-ation father’s (Alfred Deakin) predictions of the states being bound to the ‘chariot wheels of the Commonwealth’!

Thus, the management of water in Australia is a complex process, which differs in each state and territory. There are five levels of water management in Australia: 1. national 2. cross-border 3. state/territory 4. regional 5. local

Water management includes the following functions:

• water pricing and economic regulation • water planning and management • water markets

• water supply and services • water quality management

In this article I outline the governance and responsibility for water service provision in the State of Victoria.

II

in Victoria

The Water Act (1989) establishes the legisla-tive framework for water and sewerage management in Victoria. This Act is soon to be

repealed and replaced with a more up to date framework that attempts to reduce the com-plexity and appearance of many “add ons”, but in reality is likely to be just as large and cum-bersome as the former Act!

Victoria's State-owned water sector is made up of 19 water corporations that provide a range of water services to customers within their service areas comprising water supply, sewage and trade waste disposal and treatment, water delivery for irrigation and domestic and stock purposes, drainage, and salinity mitiga-tion services.

A number of them also manage bulk water storages and designated recreational areas and help the minister operate the Victorian Water Register; these aspects will be discussed later in this chapter. Sixteen water corporations pro-vide water supply and sewerage services to

urban customers throughout Victoria; three

are retailers that supply Melbourne and four of the water corporations provide rural water ser-vices, which comprise water supply, drainage, and salinity mitigation services for irrigation and domestic and stock purposes. Three of these also provide bulk water supply services to other water corporations in regional Victoria. An important role for some water corporations is the management of ground water resources. This includes mapping aquifers and monitor-ing extraction rates.

Melbourne Water provides bulk water and bulk sewerage services to water corporations in the Melbourne metropolitan area and manages rivers, creeks and major drainage systems in the Melbourne, Port Phillip and Westernport re-gions. It also supplies recycled water, through a number of retail water corporations, for irriga-tion and other purposes.

Fig. 1. The regional map displays all of the customer service zones within Wannon Water and the services provided to each particular zone.

Wannon Water

A water corporation I will use to exemplify governance is Wannon Water (http://www. wannonwater.com.au/). I am currently the Deputy Chairman of the Board.

Wannon Water is described as a regional ur-ban water corporation that is owned by the State of Victoria. Its service area is over 23500 sq km in the south west of the State and it pro-vides reticulated water and sewerage services to more than 82000 residents. It has around A$600m in assets. The purpose of the Corpo-ration is the collection, storage, treatment and delivery of water, the collection and treatment of sewage and trade waste and water recycling. Ancillary roles include biodiversity conserva-tion (on its land), educaconserva-tion and waterway protection. Its water comes from many sources – surface water catchments and aquifers.

Typically Boards report to the Minister for Water (but also to the Treasurer for financial matters) and have these kinds of responsibili-ties:

• strategic planning

• appointing, monitoring, overseeing condi-tions of appointment, succession planning of managing director

• financial oversight • risk oversight • compliance oversight

A question that could be asked is what are the benefits in having separate corporations in-stead of one single government department? The answer lies in creating efficiencies as each corporation is run as a separate business enter-prise. Best practice planning, management and controls are used to maximise income genera-tion whilst satisfying local customer demand

and priorities. It is possible in the future that water corporations could compete for custom-er scustom-ervice provision not only with othcustom-er corporations, but with third parties.

Another crucial success of boards is their be-ing regionally relevant and satisfybe-ing local needs more appropriately than a single, re-motely governed government department. Thus at Wannon Water, we have deliberately embarked on innovative schemes that solve lo-cal challenges. This includes establishing harvesting infrastructure to gather water from roof tops in new estates and feeding the water to a holding reservoir where it can be treated for consumption. Another successful scheme is breeding goldfish to reduce sludge build up in sewage treatment lagoons. Such a scheme could not have occurred without the staff expertise and facilities of the Warrnambool Campus of Deakin University and a hatchery Wannon Water leases from a private landholder.

The Board has a charter that guides its opera-tions. The Board has established committees to allow more efficient decision making processes at Board level – currently these are:

• Audit and risk management • Strategic issues

• People, culture and safety • Executive remuneration • Customer engagement

Each committee has its own charter. All wa-ter corporations must have an audit and an executive remuneration committee. Readers are referred to the Corporation’s Annual Re-port for further details ( http ://www. wannonwater.com.au/index.php?option=com _content&task=view&id=286&Itemid=314)

As a government owned enterprise, there are certain protections for directors that might not exist in the private sector. Thus all borrowings must be through the government owned body (Treasury Finance Corporation) and the Min-ister for Water rigorously oversees finance ratios via an annual performance report. The Victorian Auditor General appoints agents for each corporation as the External Auditor; as well, each corporation has its own internal au-dit function (usually outsourced to specialist firms). Water corporations produce a five year Water Plan describing financial projections, planned capital works and operations as well as an annual Corporate Plan.

Thus water corporations have their own identity and governance procedures. Their boards set the direction and priorities by estab-lishing strategic statements and plans. These are outlined in Table 1 for Wannon Water.

III

From the mid 1990s Australia experienced one of its most prolonged and severe droughts on record. For example, the total average inflow into Melbourne dams from 1913 to 1996 was 615 GL per year, whilst average inflow 1997–2009, during the most severe drought ever recorded in Victoria, was 376 GL per year. Rapid popula-tion growth also put pressure on reserves. Reserves in the state's water storage dams de-creased from 1998 to 2007 to around a third of maximum capacity. Consequently, the water restrictions had been imposed for several years.

The then Labor Government decided on constructing a large desalination plant, using reverse osmosis to treat sea water, near Wont-haggi. In hindsight, the size of the plant – built

to ensure there would always be sufficient water for Melbourne, was an over reaction. It cost over A$4 b to construct and operating costs over a 25-30 year period A$1.5 b pa. The facility was built as a ‘private-public’ partnership and the AquaSure group that won the tender was made up of Degremont, Thiess and Macquarie Capital.

The facility became operational in 2012, but by this time the Government had changed and the Liberal-National coalition chose not to use water from newly constructed assets – the de-salination plant and a North-South pipeline that drew water from a river north of Mel-bourne. Fortunately for the new Government, the drought broke and water storage levels are now over 70%. However, Victorians are still re-quired to pay the construction company A$1.8 m a day for the next 27 years!

The Coalition Government’s plan instead is to focus on integrated water supply, using wa-ter savings and recycled wawa-ter. Indeed, this seems to be working as Melbourne residents have dramatically reduced their water con-sumption – and this has held despite the drought having broken. A new body, the Office of Living Victoria (http://www.livingvictoria. vic.gov.au/) was set up to oversee this new poli-cy initiative.

An initiative of the OLV has been the Fairer Water Bills in which water corporations have been required to deliver savings to consumers.

The OLV was set up in a hasty manner that resulted in the Ombudsman delivering a scath-ing report on employment malpractice, refusal to follow correct government procedure and some have even suggested corrupt behaviour. The OLV was an entirely independent authori-ty reporting directly to the Minister; not

surprisingly, it has now been subsumed into the Department of Primary Industries and Envi-ronment and is subj e cte d to norma l governmental oversight.

There is no doubt, however, that the Fairer Water Bills initiative and Government direc-tive forced water corporations to closely

address their costs and expenses in an effort to drive down residents’ water tariffs. Thus resi-dents in Melbourne and its suburbs – covered by the three water retailer companies Yarra Val-ley Water, City West Water and South East Water, will deliver a $100 pa savings for the next four years. The water corporation respon-Vision To be recognised for excellence in integrated water services

Mission To provide secure, safe, reliable and innovative integrated water services to communities in south-west Victoria

Strategic

objectives • Integrated water management• Deliver customer value • Maximise business efficiency • Robust decision making • Maintain financial viability • Grow organisational capability Values Think It!

• Be creative and innovative • Embrace change and new ideas • Show initiative

• Rise to the challenge Work It!

• Act today for tomorrow • Deliver and add value • Get on board and have fun • Listen, learn, share and grow Own it!

• Follow through • Take responsibility • Walk the talk • Celebrate our success Risk appetite

statement Wannon Water will accept and embrace commercial, technological and other innovation opportunities that may arise consistent with fulfilling its vision, mission and Statement of Corporate intent. Wannon Water will work within a framework of acceptable commercial, reputational, legal and other risks that may arise as a consequence of conducting its business as a water corporation in South West Victoria. However, the degree to which such risks are deemed acceptable will be highly influenced by economic, financial, health and environmental regulation of the Victorian water industry, government policy and robust internal controls.

For the ongoing health and wellbeing of our employers, contractors and customers Wannon Water will be risk averse in relation to occupational health and safety and compliance with public health related water quality regulations.

High Level

Plans 5 year Water PlanAnnual Corporate Plan

5 year Water Supply Demand Strategy

sible for my residence, Wannon Water, will deliver effectively the same savings, but in the form of $70 pa savings and $30 pa towards debt reduction. (Some 33% of the State of Vic-toria’s debt is owned by water corporations. The Victorian Government is keen to maintain a AAA credit rating from ratings agencies and have encouraged water corporations to address debt reduction as well as reduced tariffs for consumers. One water corporation, Grampians Wimmera Mallee Water, is devoting its entire savings to debt reduction).

How have these savings been achieved? While Fig. 2 outlines some initiatives, it is fair to say most savings have been through capital expenditure deferrals and outsourcing of oper-ational functions to the private sector.

On reflection it is easy to damn the decision to construct a huge and costly desalination plant. But what people forget easily, is the envi-ronment in which such decisions had to be urgently made. Dovers (2008, p. 81) describes the history of water use well: “On any interna-tional comparison Australians use water rather profligately: in rural irrigation systems, in in-dustrial processes, at tourist resorts, on sporting fields and golf courses, and in houses and gar-dens. Against increasing scarcity, there is a reasonable expectation that there are ripe, low-hanging fruit in efficiency gains. Australians, at least urban ones, have never really been told to be frugal (the odd mild water restriction aside) but, rather, have been encouraged to splash it about in all sorts of ways.”

Thus, while Spearritt (2008, p. 32) claims “re-sorting to desalination plants constitutes one of the great public policy failures of our times”, there are some who believe that droughts will only occur more frequently as climate change impacts develop. Already, nervous meteorolo-gists try to predict the likelihood of an El Nino

event for the summer of 2014/15 which results in dry conditions across the continent. Anoth-er prolonged drought such as we saw in recent times is almost certainly going to mean reliance on Victoria’s desalination plant.

IV

All water corporations are heavily regulated, especially those that supply drinking (potable) water for human consumption.

Economic

Each year the Victorian Government’s Audi-tor General signs off on the corporations’ Fig. 2. Office of Living Victoria flyer on Fairer Water Bills,

annual financial statements. Such statements include performance in financial ratios, such as ‘cash interest cover’, ‘gearing ratio’, ‘current ra-tio’, return on assets’, ‘return on equity’ and EBITDA margin’.

As well, the Department of Treasury and Fi-nance is required to:

• Set guidelines to ensure that Public Sector Agencies are effectively managing their treasury functions and that the associated risks are being monitored and reported • Ensure that the Financial Management

Compliance Framework is adhered to and that public entities have implemented the appropriate systems for the effective, effi-c i e n t a n d r e s p o n s i b l e f i n a n effi-c i a l management of public resources.

Thus, the Department regulates a corpora-tion’s ‘borrowings maturity profile’ in which there is a spread of borrowings maturity peri-ods. Inter-generational equity is important here; if a water corporation borrows say $50m to undertake construction of an asset with an expected life of 75 years, it is unfair if the loan is paid off in say 25 years as this places a much heavier burden on present customers (and those for the next 25 years) while those in the 25-75 year period get the asset ‘for free’.

Environmental

The Environment Protection Agency regu-lates among other things, discharges from water reclamation plants into the ocean and in-to rivers. Corporations manag e their operations to support the objectives of the State Environmental Protection Policy (Waters of Victoria).

There is also legislation and government pol-icy in relation to biodiversity and natural asset management with which corporations must comply. External certification of environmental performance is common in the water industry – for example, Wannon Water’s Environmental Management System is certified to ISO stan-dards by an outside body.

Social

Water corporations must report to govern-ment on their meeting customer satisfaction targets. Strict OHS standards must be attained – again, external certification of policies and practices is common in the industry. Water quality management systems are also certified – in the case of many it is the HACCP system used.

V

in Victoria

Fig. 3 nicely summarises how water is allocat-ed by the State in order to maximise its value.

The rights to surface water in Victoria are held by the State which then allocates water ac-cording to efficient use by users and the environment. Bulk entitlements are essentially rights to source and deliver water and with a few exceptions, are granted to water corpora-tions and to the Victorian Environmental Water Holder. This latter body is granted water for the purpose of maintaining an environmen-t a l w a environmen-t e r r e s e r v e o r i m p r o v i n g environmen-t h e environmental values and health of the water ecosystems and other users that depend on en-vironmental condition. Thus river and wetland health is maintained by such environmental flows.

“A bulk entitlement is a right to an amount of water that can be taken or stored under spe-cific conditions/spespe-cifications up to a maximum volume. Bulk entitlements may set out:

• rules about when water can be taken and in what volume;

• the reliability associated with the entitle-ment;

• a policy for restricting the entitlement when the water resource is limited

• obligations to release flows for environ-mental uses;

• obligations to release flows for primary en-titlement holders;

• obligations to contribute to the payment of operation and maintenance costs; and • metering , accounting and reporting

obligations.”(Department of Environment and Primary Industries, 2014)

VI

A Victorian water market was officially insti-gated in 1991 although Kondo (2013) notes an illegal market existed during the drought of 1940. Trading involves the transfer of money in exchange for water from entitlement holders. A water market is a part of the wider trading initiative and governments are now leaning to-wards it as a means to generate efficiencies in use of a valuable resource.

While water markets have these benefits, some authors have noted their drawbacks. Troy (2008), for instance, believes the conflict be-tween private rights (to economic gain) and the public good have not been settled. He thus argues there is a social justice element that has largely been ignored.

The Victorian water market enables people to buy and sell entitlements and allocations. Prices and volumes of water traded are publicly available on the website of the Victorian Water Register (http://waterregister.vic.gov.au/).

Kondo (2013) believes Australia has the larg-est operating water market in the world. His book is the seminal authority on water markets in Australia and the interested reader is urged to use this work as a valuable resource.

VII

Victoria has a system of governance of water management that recognises regional priorities, the scarcity and value of water as a natural re-source, provides water for urban, rural communities and industry as well as the envi-ronment. The State has an effective system of water trading that yields efficiencies in water use.

Fig. 3. Allocation of water in Victoria. (Department of En-vironment and Primary Industries, 2014)

【Acknowledgement】

I thank Steve Bird, former Chief Executive Officer of VicWater, for his valuable comments on the article.

REFERENCES

⦿Department of Environment and Primary Industries (2014). Water entitlements and trade. http://www.depi. vic.gov.au/water/governing-water-resources/water-entitlements-and-trade (accessed 21/9/14)

⦿Dovers, S. (2008) Urban water: policy, institutions and governance. Pp 81-98 in Troy, P. (ed) Troubled Waters. Confronting the Water Crisis in Australian Cities.

(ANU Press: Canberra)

⦿Heritage Victoria (2007) Victoria Water Supply Heritage Study. Volume 1 Thematic Environmental History. http://www.dpcd.vic.gov.au/__data/assets/ pdf_file/0004/133879/Vic_Water_Supply _study _ Vol1_partB.pdf (accessed 22/9/14)

⦿Kondo, M. (2013). Australia’s Water Markets. (Sid Harta

Publishers: Glen Waverley, Australia)

⦿Spearritt, P. (2008). The water crisis in Southeast Queensland: how desalination turned the region into carbon emission heaven. Pp 19-36 in Troy, P. (ed)

Troubled Waters. Confronting the Water Crisis in Australian Cities. (ANU Press: Canberra)

⦿Troy, P. (2008). Introduction: the water ser vices problem. Pp 1-6 in Troubled Waters. Confronting the Water Crisis in Australian Cities. (A NU Press:

Water Governance in Victoria, Australia

Robert Wallis

Water in the State of Victoria, Australia, is a government owned and managed resource. Governance is complicated by the Common-wealth having national oversight of inter-basin management and national policies and strate-gies and local government with its historical management responsibilities.

Water for human use is managed by State-owned water corporations that serve regions in the State. Each of the 19 water corporations has a board of directors appointed by the Gover-nor-in-Council on the recommendation of the Minister for Water. The system is an effective one that caters for local and regional priorities within the overall State-wide framework. Boards report to the Minister and have broad strategic, compliance, risk awareness and finan-cial responsibilities, as well as for the task of appointing the Managing Director (who is a member of the Board).

16 corporations provide water and sewerage services to urban customers throughout Victo-ria; three are retailers that supply Melbourne and four of the water corporations provide ru-ral water services, which comprise water supply, drainage, and salinity mitigation services for ir-rigation and domestic and stock purposes. Water allocations are made to water corpora-tions, the environment (via the Environmental Water Holder) and other purposes by the

Gov-The system today differs from that in the 1970s when there were hundreds of water trusts with these responsibilities. The trusts were largely tied to local government.

The decade before 2011 saw one of the most prolonged and severe droughts in Victoria on record. A large desalination plant was con-structed and is now managed by Melbourne Water but due to improved local rainfall has not yet been used to supply Melbourne with water.

Australia has one of the oldest and most suc-cessful water trading schemes in place and it can lead to efficient use of a valuable resource in the limited cases in which it is used.