TOWARD APPROPRIATE REGULATION OF
3-WATER SERVICES IN AUCKLAND REGION
Joel Cayford
Chair Works & Environment North Shore City
Council, Editor WaterMagazine
Watercare Services Ltd Shareholder Representative
Presented to NZWWA Conference 2003
Appropriate regulation of 3-waters across Greater Auckland is essential
to ensure the sustainability of the region’s economy, public health, and
environment. This needs to be top priority in Government’s investigation for
Auckland Specific legislation.
The Auckland Region Water Review recommended a cooperative approach to
the regional regulation of the three waters. These recommendations have not
been implemented. One council opposing regulation has indicated it prefers
vertical integration based on L.E.K. Consulting Ltd (LEK) advice predicting
economies of scale and savings. This narrow belief is not wholeheartedly
supported by recent Asia Development Bank advice and other experience. Vertical
integration cannot be permitted to proceed without appropriate regulation.
Per capita consumption of fresh water across the Auckland Region is
increasing. One reason for this is that the region’s supply management emphasis
is not balanced by an effective demand management strategy. The paper reports
on embryonic regional efforts to develop a water management plan by the
region’s councils and bulk water service provider. A critical commentary is
provided. Some form of regulator will be required to implement the plan.
Effects based planning tends to be the main regulatory driver for the
region’s waste water treatment plants. This is important to control the effects
of air and water discharges, but the Resource Management Act approach has
limitations. More stringent regulation is applied to control wastewater
operations in Sydney. These aim to: reduce the amount of trade wastes
discharged into the wastewater network; increase the reuse of treated
wastewater; increase the amount of
biosolids applied to land; and require that development levies pay regional wastewater
infrastructure costs. Sydney’s water regulation is aimed at long term
sustainability. It is not confined to the management of effects. Auckland can
learn from this.
Auckland, 3 waters, management, appropriate regulation, vertical integration, economics, wastewater, water supply, stormwater, development controls
An update and reminder on the Auckland Region Water, Wastewater & Stormwater Review (ARWWSR) is included by way of information. This first section also looks at vertical integration – an initiative currently being explored unilaterally between Manukau City Council (MCC) and Watercare Services Ltd (WSL).
The next two sections explore water demand management (which includes a critical assessment of the region’s Greater Auckland Water Services Management Plan - GAWSMP), and innovative performance controls imposed on Sydney Water’s wastewater operations by its regulator to drive specific performance improvements. The final section draws together the threads, and summarises the need for appropriate water industry regulation across Auckland.
The people of Greater Auckland expect that reticulation of water, and drainage of wastewater and stormwater, will be provided in a way that meets high standards for public health and the environment, is cost-efficient and reliable, and is sustainable over the long term. In 1999 the councils of the Auckland region began reviewing the region’s water, wastewater and stormwater services, to ensure good integration between service planning and regional population growth, to improve environmental standards and to keep costs as low as possible. The primary drivers for this review included the 1994 water shortage and concerns over the need for, and scale of WSL’s proposed capital works program. Auckland, Manukau, Waitakere, North Shore, Papakura and Rodney councils participated in the The Auckland Region Water, Wastewater & Stormwater Services Review (ARWWSR).
It was notable that councils decided at an early stage that the review needed to address the 3-waters in an integrated way. That stormwater management needed to be integrated with water and wastewater management. This was a significant step. In the past the region’s councils have tended to deal with each of the “waters” in its own administrative “silo”.
During the early stages of the review the councils (and operators) all agreed that key issues needed to be addressed. ARWWSR reports state:
· “…There is insufficient integration between councils’ regional growth strategies, and related infrastructure planning;
· Network performance needs to be better measured and monitored, and reporting to councils and the public needs improvement;
· Consumers in general are not meeting the costs they impose on the system due to cross subsidies arising from rates funding for wastewater (in some cases) and stormwater;
· Current charges and tariffs for water, wastewater and stormwater do not provide clear signals to consumers on the impact of their consumption decisions;
· Improved decision-making processes are needed for the development and application of regionally-consistent environmental standards for water and wastewater;
· Cultural change is required in parts of the industry, councils and regulatory agencies in order to fully recognise and provide for tangata whenua involvement…”
The introduction to the ARWWSR report dated 5th March 2002
produced by officers representing all of Auckland’s councils, and brought
before councils at the culmination of the review process stated:
“….A number of inter-related matters must be considered together when
taking decisions about water, wastewater and stormwater services. These include
governance, structure, pricing, demand management, regulation and
legislation…..”
The recommendations of the review covered each of the above matters.
Specifically there were several governance and regulation recommendations,
including:
The review traversed various structural change options including vertical integration and the modified status quo, and possible regulatory frameworks for each structure. The review recommended that some form of regional regulation was needed. The review also suggested significant regional savings would be possible through vertical integration. Despite this advice the review opposed vertical integration. However, now, Manukau City Council is independently considering possible vertical integration options between themselves and Watercare. The regional regulator initiative was not implemented because the review’s regulator recommendations were not accepted by MCC or Waitakere City Council. Waitakere City Council (WCC) has achieved a degree of independence through its agreement with Watercare that WCC will only be provided water sourced from the Waitakere Mountains. In achieving this, WCC has effectively insulated itself from the rest of the region. It has also recently conducted an in depth independent audit of its internal 3-water operations. These are among the reasons why WCC backed away from supporting the establishment of an informal regional water regulator.
The ARWWSR recognised that implementation of the vertical integration
option would mean that stormwater had to be separated out from integrated
management, and only water and wastewater would be managed together by an
enhanced regional entity. Stormwater would stay in a council silo.
In the past twelve months Watercare and Manukau City Council have sought changes to legislation which will permit a closer working relationship through enabling Watercare to engage in water retail operations thereby extending its existing bulk water business. Auckland City Council is also considering structural options.
I believe some form of regulatory oversight to provide independent monitoring and measurement and to ensure compliance, is critical to achieve the purposes of the ARWWSR as originally agreed. While this initiative may be on ice for the moment, the emerging Greater Auckland Water Services Management Plan needs independent oversight to ensure all parties effectively implement its recommendations. And clearly, the need for a regulator is only heightened by the prospect of an increase in monopoly power that would be consequent upon any structural vertical integration.
2.1 THE VERTICAL
INTEGRATION DEBATE
In 1992, the Local Government Act required the Auckland Regional Services Trust – ARST - (which was then in existence and owned WSL) to investigate the feasibility and desirability of an integration of bulk water supply and drainage with local reticulation of water and sanitary drainage, and to consult with parties holding an interest in such an integration. The Trust appointed LEK to conduct the study. In 1995 LEK derived a shortlist of options:
· Modified Status Quo
· Integration – (either full integration or separate water and wastewater businesses)
· Common Carrier Network (rather like the electricity industry reform)
LEK’s analysis at the time was that the vertical integration option (which would bring all of the water and wastewater functions of 6 Councils and Watercare into one LATE) would achieve estimated annual operational efficiencies of around $13 million after incurring one-off costs of around $4 million and new annual costs of about $1 million.
Council officers were concerned by the ARST’s recommendations which appeared to favour vertical integration. Auckland Councils designed a new option called the Local Ownership Model. This envisaged councils owning shares in WSL and governing it as shareholders, and council water and wastewater operations all being re-established as local LATEs.
Various reports were circulated to councils in 1995 to obtain support for the officers’ option. These reports were critical of the vertical integration option. Officers advised as follows:
“…Disadvantages of Vertical Integration
· Aggregation of monopoly position may lead to need for heavier form of regulation;
· Loss of tension between wholesaler and retailers;
· Removes the opportunity to undertake benchmark or comparative performance analysis of individual businesses within the industry;
· Provides opportunities to cross subsidise operations across activities;
· Possible loss of local community focus, given size and regional emphasis of businesses;
· Will require development of a mechanism to ensure regional planning and district planning are coordinated, and to ensure the business is accountable to customers (eg the current structure does this by way of the political cycle);
· Aggregation of industry raises prospects of privatisation, and political capture of the business by a relatively small group of individuals (eg such as has occurred with Mercury Energy)…”
After deciding not to support the recommendations of the ARWWSR in 2002, MCC resolved to investigate various vertical integration options directly with WSL. It commissioned LEK (again!) to look into the matter. LEK reported to MCC in March 2003. The report advises that vertical integration between WSL and MCC would deliver total annual savings in the vicinity of $2.1 million to $4.8 million (adding MCC’s and WSL’s projected savings).
These costs do not include implementation costs, and no mention is made of either a regulator or its costs. No mention is made of the likely costs of implementing the structural change. For example there will be a need for other WSL shareholder councils to engage with the implications of such a unilateral structural change and reach appropriate collective regional decisions. Under present legislation no change can occur unless there is a supporting 75% shareholder vote by WSL’s shareholder representatives. The disadvantages noted by councils in respect to vertical integration in 1995, are just as relevant today, and the debate as robust.
In addition there is more international experience of vertical integration. An Asia Development Bank (ADB) investigation has found that large water utilities do obtain economies of scale providing water to non-residential users, particularly when distances are short. However, in the case of dispersed residential consumers, ADB reports “there is evidence of substantial diseconomies of scale” and that these can outweigh the non-residential business. Non residential sales may sometimes be used to cross subsidise residential sales. The report goes on: “This analysis suggests that there is no prima facie case for allowing a single retail water utility to supply large areas such as a large city. Going further, the evidence from satisfied municipal governments in France, which have private water concessions for many quite small towns, suggests that the economies of scale are not a dominant consideration in determining arrangements for water supply….”
Many other issues will need to be discussed and understood by the region’s councils before deciding whether vertical integration between MCC and WSL is supported. These include:
· The ARWWSR appeared to be unanimous in its view that stormwater needed to be managed in an integrated way with water and wastewater. Stormwater is best managed at a local level, where rain falls, in order to control downstream effects. Vertical integration options being considered appear to be confined to water and wastewater services only – presumably because they are relatively straightforward network services. If the 3-waters are to be managed together, then horizontal integration would be more appropriate, though this has its own issues.
· Information asymmetry is already a significant problem among the region’s water service operators and WSL. WSL holds most information and treats it as confidential and commercially sensitive. This tends to create an uneven playing field in regional negotiations. Should vertical integration go ahead, then this unevenness will be intensified. The vertically integrated entity will be able to conduct transactions internally, to cross-subsidise, and to generally operate in ways which will not be transparent to other operators. This sort of asymmetry is typically resolved through strong regulation. But this comes at a price.
· Vertically integrated entities have a tendency to draw other services into the corporate tent. Services which could be contracted out. For example, WSL now owns a sophisticated water testing laboratory. In other major cities water testing must be independent. Again, a strongly intervening regulator will be required to ensure the vertically integrated entity does not expand into non-core activities, with all the attendant economic inefficiencies and distractions that can ensue.
· The region’s water operators are presently negotiating a bulk wastewater contract with WSL. This work has revealed that the ratio of bulk wastewater charges, between Auckland, Waitakere and Manukau Cities, is based on population data drawn from decade old census figures. MCC faces steep increases in bulk wastewater charges when it pays its way in proportion to its current population. Vertical integration may enable these increases to be absorbed in early efficiencies and through cross subsidies. However this objective will require the rest of the region to absorb significant regulatory costs associated with vertical integration.
WSL’s governance through the Shareholder Representative Group (SRG) is of the lowest common denominator type, where the smoke stack growth vision of MCC is pitted against the latte quality vision of WCC. SRG decisions are made by relatively uninformed council appointed representatives. It is an environment where conservative engineering solutions are favoured over smart city visions. No-one really wins in this sort of regulatory environment. In the event Watercare achieves its goal of vertical integration with MCC, then at the very least a fundamental review of Watercare’s governance and regulation will be essential. In my view it is needed anyway.
Demand Management is difficult. Taken at face value it can be regarded
simply as a process to cut water consumption/capita. This threatens to reduce
water revenues, which threatens budgets, which threatens institutions. It is
therefore understandable that
institutions may seek to avoid such initiatives. However they are
increasingly a very important policy plank in water industries in Britain,
Australia, Canada and many European, Middle-Eastern and Asian countries. These
countries’ demand management initiatives address a much broader range of issues
than just water consumption/capita.
It has been evident to me for some time that the bulk wholesaler /
retailer split in Greater Auckland’s water and wastewater industry has made it
difficult to progress demand management initiatives in the region. Over the
years I have been advised separately by senior staff at WSL and NSCC, that
successful demand management planning could only be achieved through a joint
working relationship and through joint planning. That is why it has been
essential to have an inclusive process with WSL and all LNOs as participants.
A Greater Auckland Water Services Management Plan must be developed by
Watercare to meet its obligations under its Statement of Corporate Intent. Objective En2 – “Efficient Use of Water
Resources”, requires Watercare:
“to lead the development of, with
participation from the LNOs, a Greater Auckland Water Services Management
Plan. The plan to address:
·
Improved information
·
Improved system efficiency
·
Improved price signals to promote efficient water use
·
Promoting consumer awareness of efficient water use
·
Involving related industry
·
Investigating water reuse and use of non-potable supplies
·
Operator specific initiatives under each area”
Watercare has worked with Auckland’s Local Network Operators (Metrowater, Manukau Water, Ecowater, North Shore City Council, United Water and Rodney District Council) to gather data and define the Plan’s content. A first draft was completed in April 2003 and has been circulated to Councils and LNOs for comment.
3.1 GREATER AUCKLAND WATER SERVICES MANAGEMENT
PLAN
Drafts of this 50 page document are available from WSL. The scope of
the present draft is set out at section 1.5 of the GAWSMP. It states that the
plan is only concerned with reticulated water from WSL’s water sources.
In my opinion this proposed narrow scope not only conflicts with the LGA, but will not permit the development of an integrated plan. It is a truism that all water interconnects, and so do all of the region’s waters, at some time and at some point. The water activities of WSL and the LNOs form a major part of Greater Auckland’s hydrologic cycle. Water, wastewater, recycled water and stormwater each form a part of this cycle. Because they are inter-related, one feeding into the other, increasing one reducing another and so on, it is essential to consider them together. All of these waters need to be considered in the GAWSMP.
By way of illustration, I set out here some examples which show the
benefits in planning for the region’s waters in an integrated way:
Example 1. Two large water cooled
gas fired power stations have located in South Auckland. They burn natural
gas and their smoke stacks are cleaned by freshwater provided by Metrowater
sourced from WSL. I am advised these
two power stations account for between 5% and 10% of the region’s water
consumption. I am further advised that though these power stations are
reasonably close to the Mangere WWTP, it appears they could not use its high
quality recycled water because it is too saline. It is saline because WSL’s
trunk sewer mains and other feeder sewer mains from LNOs are below sea
level. They infiltrate saltwater.
Presumably, if those mains were repaired, the power stations could use recycled
water. The more effluent that can be reused and recycled, the less wastewater
needs to be discharged. Including wastewater in the GAWSMP would enable these
policy interconnections to be made. It seems clear that if Mangere’s treated
effluent is saline, then its potential use for irrigation – eg of SH1 road
verges – would not be possible either. This particular example raises the
further question as to whether there needs to be a Regional Development Levy.
Such a levy was a recommendation of the ARWWSR. This sort of substitution between potable and non-potable use
needs to be part of GSWSMP scope.
Example 2. NSCC has embarked
on a program of retrofitting rainwater tanks on residential sites
because of ARC regulatory pressures to reduce stormwater discharge effects in
stream and marine environments. These will be plumbed into domestic supply for
toilets and laundry, substituting around 40% of potable supply during most
months of the year. Their use is driven by stormwater quality outcomes as they
attenuate offsite stormwater flows, but their effect will also be on potable
water consumption. This effect and its potential will not be assessable in the
GAWSMP unless management of the three waters is part of its scope. It is
recognised that WSL does not manage stormwater itself – except perhaps where it
enters WSL’s wastewater network. However the LNO’s do, and LNO stormwater can
exacerbate WSL’s wastewater operation due to infiltration into wastewater
networks, and due to substitution for freshwater when rainwater is harvested
and used for town supply.
Example 3. Project West was
identified by WSL as the next wastewater treatment plant for Greater
Auckland. WSL approached NSCC and other councils with some urgency in respect
of designation and other planning uses regarding potential sites for this next
WWTP. WSL reports indicated the need for Project West was based on the need to
accommodate the growth needs of the region. WSL’s view on this matter has since
changed, and the present GAWSMP draft indicates that wastewater flows are not
constrained by existing capacity at Mangere WWTP. We are advised the constraint
is stormwater infiltration, and presumably seawater infiltration. However when
these infiltrated flows are managed downward following planned leak-proofing of
the sewer network, then Mangere’s capacity will be determined by true
wastewater flows. These will then largely be determined by domestic and
commercial water use. It would be a short-term oversight to exclude the
consideration of wastewater infrastructure demand from the GAWSMP.
Example 4. Watercare’s SCI
contains a number of environmental performance targets which are linked
to RMA resource consents and permits. It is important to recognise that these
do not necessarily ensure sustainability . The RMA is about sustainable
management and compliance with permits to pollute up to specific levels. The
LGA is concerned with sustainability. There is significant difference in these
two approaches. By way of example Sydney Water is subject to a sustainability
target of reducing marine discharges of treated effluent to zero by the year
2025. No such target presently applies to WSL.
Example 5. Pricing of bulk
wastewater services is an appropriate demand management measure to
apply to LNOs as an incentive to encourage efficient investment. For example if
bulk wastewater charging emphasises the impact of the peak flows which result
from running a leaky collection network, then such charges will motivate the
LNO to repair the network. Such repairs will benefit the region by reducing
overflows and by extending the life of the Mangere WWTP. Such pricing
approaches could be part of an integrated GAWSMP. However this matter may be
more appropriately addressed by the sort of joint regional planning and
cooperation identified by the ARWWSR. This would address the infiltration
issues mentioned here by comparing incremental local solutions – such as
overflow storage tanks within each LNO’s control, with WSL’s proposed central
solution – a huge underground sewage storage tunnel.
Example 6. Melbourne Water has
reduced the amount of chlorine in its drinking water reticulation to meet
demand for reduced chlorine odour and taste.
Following public consultation it did this against the safest water
recommendations of its health regulator. Its decision was partly based on the
quality of the raw water sources used. Other methods of disinfection such as
ozone further reduce chlorine effects. In the US, several standards of
non-potable water exist. These directions all point to the need to manage the
demand for different waters which meet different demands. Aucklanders appear
keen to drink the best water. Sales of water filters and bottled water have
surged. It is appropriate for the GAWSMP to address such issues.
Example 7. Sydney Water’s
major use of demand management is to identify water services capacity, by area,
throughout the Sydney area. This allows the authorities to select areas of the
city which can readily accept more growth, and those which cannot. It also
allows Sydney Water to assess the value of its regional development levy for
water services. New developments pay these levies. I am advised these levies are set high for remote and over
capacity areas. Levies are used as a growth control instrument. It would be
very limiting for the GAWSMP to ignore this need.
Example 8. Energy use. The water industry
uses a lot of electricity for pumping, treatment and wastewater treatment. The
more water that is used, the more energy and electricity that is required. The
more hot water residential homes use (eg in high flow showers), the more
electricity is required to heat that water. Attention to sustainability
requires consideration of associated environmental effects which are embodied
in wasteful uses of water resources.
3.2 GAWSMP – WAY FORWARD – MY RECOMMENDATIONS
There is a huge body of international work on demand management which appears to have completely by-passed those working on this first draft of the GAWSMP. However what is most disturbing is that the provisions of the new Local Government Act 2002 have been ignored, as have the regionally agreed recommendations of the Auckland Region Water and Wastewater Services Review.
3.2.1 GAWSMP – WAY FORWARD – REGIONAL WATER
REVIEW
The ARWWSR demand management recommendations included:
Of note also the review recommended changes to legislation supporting
“the ability to levy developer contributions for regional infrastructure”.
The review was unequivocal in its view that the three waters needed to
be considered together, in an integrated way. In my opinion this fact is of
relevance in determining the scope of the GAWSMP.
Finally, the ARWWSR report recommended that if there was to be no
significant structural change in the industry, then as a minimum all parties
must work more closely together. Specifically it recommended that all parties
need to…
“…Agree to greater regional coordination, including for stormwater…”
3.2.2
GAWSMP – WAY FORWARD – LOCAL GOVERNMENT
ACT 2002
This new Act explicitly integrates water, wastewater and stormwater
issues in new “Water Assessment” provisions. It does not confine its general
sustainability and demand management requirements to potable water only. It
sets out the information required in assessing water services. The LGA 2002
describes “water services” as including potable water, wastewater and
stormwater. This legislation applies to Greater Auckland’s LNOs now. The Act
states that this work must be completed by 2005.
The Act has considerable overlap with the purpose of the GAWSMP. It is
appropriate to assume that the information requirements for water assessments
on WSL anticipated in future regulatory legislation will be at least as onerous
as those set out in the LGA 2002. It is reasonable to apply these provisions to
WSL now.
Further, in my view, to address the requirements of the LGA and to
avoid the need to duplicate similar workstreams, the scope of the GAWSMP should
be widened so that its process and outputs will enable LNOs to fulfil certain
of their LGA water assessment requirements. Some LNO’s – such as North Shore
City Council have their own wastewater networks and Waste Water Treatment Plant
(WWTP) to report on. However other LNO’s are connected to WSL’s WWTP at Mangere
and it is appropriate to integrate their relevant water assessment reports in
respect to waste water services into the GAWSMP.
Finally, I believe an effective GAWSMP will require some form of regulatory oversight to provide independent monitoring and measurement, and to require compliance.
4. WASTEWATER TREATMENT PLANT REGULATION – SYDNEY EG.
The regulatory environment in which Greater Auckland’s wastewater treatment plants operate is very much behind international best practice. Put simply, the Local Government Act permits Auckland councils to charge users for the waste waters they produce and reticulate it to large centralised plants, while the Resource Management Act issues waste water treatment plant operators permits to pollute. This is a completely different regulatory approach to that which applies to the Sydney Water Corporation.
Interestingly, Sydney Water is vertically integrated and provides water and wastewater services, while stormwater services are provided by borough councils. The following information is drawn from Sydney Water’s Annual Report for the year ended 2001.
4.1 OPERATING REVENUE COMPARISONS
|
|
Watercare 2001 – 2002 |
Sydney Water 2000 - 2001 |
|
Water & Wastewater revenue |
$143 million |
$1,215 million |
|
Developer levies & charges |
$0 |
$134 million |
|
Trade Waste Charges |
$10 million (6% of revenue) |
$15 million (1% of revenue) |
|
Total operating revenue |
$160 million (includes other items) |
$1,453 million (includes other items) |
Of particular note is the fact that
10% of Sydney Water’s revenue is from Developer levies & charges. Any new
development within Sydney Water's area of operations must contribute to the
cost of infrastructure needed to provide water and sewage services to the
development. Developer charges are specific to a particular locality and signal
the environmental and other cost consequences of developing in that area. They
also ensure that the servicing of new development is not subsidised by other
Sydney Water customers.
Sydney Water has a related performance target:
Percentage of new developments paying a developer charge = 100%
4.2 TRADE WASTE COMPARISONS
Also of interest is the relatively low
trade waste revenue for Sydney Water. However the total number of trade waste
agreements and permits in existence between Sydney Water and trade waste
customers is 960 industrial, and 14,700 commercial. (Watercare has 600 trade
waste permits in total). Sydney Water uses education programs to increase
customer awareness and reduce the discharge of targeted substances to sewer.
This is particularly important for some substances, including chemicals
specified in Schedule 10 of the Sydney Water Act 1994. For these 'Schedule 10'
chemicals the EPA has set pollution reduction targets which Sydney Water is
required to meet. Chemical discharges can be reduced through mechanisms such as
grease traps, chemical collections or pre-treatment. Education campaigns and
strategies such as incentive pricing can also encourage changes in the way
particular chemicals are used, which in turn can result in cleaner wastewater.
Sydney Water has a related performance target:
Revenue derived from trade waste charges: no more than $15.2m
This indicator was chosen to ensure that
Sydney Water continues to encourage its customers to reduce discharges of toxic
chemicals and other harmful substances into the sewerage system, rather than
adopting a simple polluter pays system. The objective is clearly aimed at
reducing contamination of biosolids, rather than simply extracting revenue from
polluters and allowing the biosolids to be contaminated up to a permitted
limit. By contrast, WSL is able to use its trade waste business as a revenue
stream which can cross-subsidise other activities.
4.3 SYDNEY WATER’S ECOLOGICALLY
SUSTAINABLE POLICY
In November 2000, the Board of Sydney Water adopted a new ESD
(Ecologically Sustainable Development) Policy. This policy recognises that to
successfully implement ESD, Sydney Water needs to ensure that sustainability is
integrated into all its decisions and actions, from strategy and planning through
to day-to-day operations.
Towards Sustainability reports on Sydney Water's (SW) environmental
performance and its progress towards providing ecologically sustainable water
services. In line with this, SW is
responding to the global challenge of ecologically sustainable development
(ESD) and how SW can convert the global ESD agenda into tangible directions and
actions in Sydney.
The 'ecological footprint' is a recently developed method that helps pull
together the results for several indicators. The footprint is useful for
grasping trends and changes across a number of different aspects of
environmental performance, and assists understanding of progress towards
sustainability. The footprint is not by itself a decision making or planning
tool, but rather a decision support tool that points to impacts that need to be
looked at more carefully. Sydney Water is exploring how it can improve its use
of the ecological footprint by including more indicators in the calculations it
makes and possibly improving the method itself.
An ecological footprint is derived by estimating the total area of productive
land and water required on a continuous basis to produce all the resources
consumed by a population, and to assimilate all the wastes they produce.
Previous calculations have estimated that the average Australian has an
ecological footprint of somewhere between six and eight hectares.
Sydney
Water's pilot project calculated our total footprint for 2000/01 as 74,300
hectares, which equates to about 184 square metres per Sydney Water customer or
545 square metres per household. This is equivalent to an area
stretching from Parramatta in the west to the Heads in the east, and from
Hornsby in the north, to Kogarah in the south. It represents the amount of land
that would need to be dedicated solely to providing Sydney Water's customers
with water services. It also underestimates SW’s total footprint as the method
is not capable of fully accounting for 'downstream impacts', such as impacts on
water quality.
The footprint calculations indicate that energy use is a major issue for
further consideration. Around 74 per cent of SW’s footprint is due to the
potential impact of greenhouse gas emissions. 42 per cent of this greenhouse
impact is due to electricity supplied to Sydney Water. Emissions from the water
treatment process, onsite fuel use and emissions caused during the production
of the goods and services used by SW account for the remainder.
Importantly, the footprint does not consider the 'downstream' impacts of SW’s
activities, such as direct impacts on oceans and rivers. Nor does it deal with
social impacts. This may mean SW needs to make decisions that increase its
footprint in order to provide appropriate levels of ecosystem protection or to
meet community standards. For example, SW may need to increase its energy
consumption in order to improve wastewater treatment or continue to meet
community standards for safe and reliable drinking water.
Sydney Water has identified a few dozen Ecological Sustainability
performance targets, some of which have been reported above.
4.4 SYDNEY WATER’S DEMAND MANAGEMENT
PROGRAM
Performance Target: Reduction of the quantity of water drawn
from all sources to 364 litres per capita per day by 2004/2005 (total system
releases divided by population). This represents a reduction of 142 litres per
capita per day or 28 per cent from the 1990/91 baselines. This indicator (water
consumption/capita) was chosen to ensure that Sydney Water constantly monitors
progress towards this goal. Sydney Water provides water for agriculture,
irrigation, as well as typical city industrial and residential uses.
Australia is one of the driest continents on earth and the Sydney region is
subject to extended periods of drought. In order to avoid the need to build new
dams and to ensure the provision of fresh water for Sydney's growing
population, Sydney Water has a suite of strategies to promote more efficient
water use and increase the use of recycled water. A draft Water Strategy has
been developed as part of WaterPlan 21, Sydney Water's vision for sustainable
water and wastewater management for the Sydney, Illawarra and Blue Mountains
regions. The Water Strategy includes demand management and water recycling
initiatives.
4.5 SYDNEY WATER’S BIOSOLID REUSE
PROGRAM
Sydney Water's biosolids program
meets world best practice. A total of 41,164 dry tonnes of biosolids were
dispatched from Sydney Water's treatment plants in 2000/2001; of this 40,703
dry tonnes or 98.9 per cent were recycled, mostly in agriculture as a
fertiliser and soil conditioner. 461 dry tonnes (1.1 per cent) of biosolids
were delivered to landfill. Biosolids are the nutrient-rich organic material
resulting from the treatment of wastewater. They can be used as a soil
conditioner and as fertiliser in industries such as agriculture, horticulture
and land rehabilitation. By using biosolids as an organic fertiliser valuable
nutrients are returned to the soil. This indicator (that more than 98% of
biosolids be reused) was chosen to show the extent to which recovery and
recycling opportunities are being taken by Sydney Water.
4.5
GENERAL
When Sydney Water was established over a decade ago, the Sydney Water Incorporation Act required Sydney Water to meet stringent demand reduction, and effluent marine discharge targets. Since inception the regulatory environment has imposed tighter targets on the company. No reliance has been placed on shareholders to debate and decide performance targets – as is the case with Watercare.
5. SUMMARY – NEED FOR WATER REGULATION IN AUCKLAND
Auckland’s water industry regulatory regime needs improvement. Auckland specific legislation is almost certainly needed to achieve this, because the region’s councils have not agreed to a cooperative mechanism.
Outstanding problems and challenges include the following:
· There is insufficient integration between councils’ regional growth strategies, and related infrastructure planning (Project West – Watercare’s proposed new wastewater treatment plant is a good example. This project appears to have been deferred after regional debate during the ARWWSR process);
· There is no planning process to balance local network improvements against regional network improvements. For example, wastewater infiltration into the sewer network might be better addressed with small storage tanks operated by LNOs (eg the storage devices under development and in place on the North Shore), rather than the very large “end of pipe” tunnel project proposed by Watercare;
· Structural change proposals such as vertical or horizontal integration cannot be considered and assessed independently. Councils “outside the tent” are reliant upon those “inside the tent” for information. This undermines trust and does not lead to effective engagement in these proposals by all parties affected;
· Should some form of integration go ahead, there is no body to counter-balance the increase in monopoly power that change would trigger;
· Effective benchmarking between LNOs is not presently possible, without incurring huge consultancy costs. This process requires independent scrutiny of LNO asset management plans, and operating performance;
· Sustainability issues such as excess use of energy; reuse of treated wastewater; reuse of biosolids; and trade waste clean-up are largely outside the Resource Management Act and can only be properly addressed by a Government agency or a properly empowered regulator;
· Finally, the GAWSMP is a positive demand management initiative, but unless it stipulates measurable performance targets, and unless those targets (and associated penalties) are enforced independently, it will not be effective.
The above are some of the water industry issues facing the Auckland region which seem to me to require regulatory oversight. The Watercare SRG has in the past sought to act as the regulator of Watercare, but that role has always been contentious.
Now is the time for an independent “fit for purpose” entity. Its effective operation will depend upon full information disclosure from all parties in the industry. Its consideration of issues will be subject to much lobbying and pressure – as is the case with all regulators. It may have the power to require action, or it may have the power to recommend action. It will need to be established, funded and housed. These are all matters for debate. In my view it is appropriate to start “light handed” and aim to achieve regulatory effectiveness by cooperation with all parties. Government would no doubt show a keen interest and be ready to harden the entity’s regulatory powers if necessary.
ENDS