Virginia Irrigation Association

The Hon. J.S.L. DAWKINS (14:59): I seek leave to make a brief explanation before—

Members interjecting:

The Hon. J.S.L. DAWKINS: I can shout over the top of you. I seek leave to make a brief explanation before asking the Minister for Water and the River Murray a question regarding the Virginia Irrigation Association and the Adelaide Plains reclaimed water system.

Leave granted.

The Hon. J.S.L. DAWKINS: The Virginia Irrigation Association was formed in the mid-1990s by a group of local market gardeners from this major horticultural area. Its current membership is around 700. Seeking to implement a reliable water source for vegetable growing, the VIA received a $10 million grant under the then federal government's better cities scheme to implement and build a reclaimed water pipeline through the region. This pipeline had the effect of stopping water from flowing into Gulf St Vincent untreated, which, of course, was proving a major issue for SA Water and the EPA. However, several years into the construction of the pipeline, it emerged that additional funds were needed to complete the project.

At that time, SA Water took over ownership and responsibility with the understanding that the price for water should be less, going forward, as the infrastructure had been paid for. It was also acknowledged that the contract would need to be renewed in 2017. I understand that VIA and SA Water have had four meetings but are yet to reach agreement on the price of the water. Given this, my questions to the minister are:

1. Will the minister indicate the current status of the negotiations between SA Water and the Virginia Irrigation Association?

2. Will he also indicate the level to which SA Water acknowledges the need to set sustainable pricing for the irrigators?

3. Given that the population and urban footprint in the northern suburbs closely adjacent to the Virginia horticultural area continue to grow rapidly, do the minister and SA Water acknowledge the win-win aspect of the VIA being able to utilise this water as its quantity inevitably also grows rapidly?

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Climate Change) (15:01): I thank the honourable member for his very sensible question. Whenever I go out into the north of Adelaide, I hear from the people I talk to out there, particularly around water issues, that the only Liberal who ever pokes their head up in the north of Adelaide is the Hon. Mr Dawkins. He's the only one they see. They invariably say that he was out there the week before I was and saying nice things about me, so I thank him for that. Well, I might be embroidering the edges around that bit a little bit.

The Virginia Pipeline Scheme provides recycled water from the Bolivar Wastewater Treatment Plant for horticultural irrigation to around 360 customers, I am advised, in Virginia and the surrounding area. The scheme comprises a system of distribution pipelines, two pump stations and an uncovered storage lagoon at Bolivar. I understand the existing VPS contract started in 1997 is between SA Water and Water Reticulation Systems Virginia, a legal entity wholly owned by Trility. The contract expires on 31 December 2017. This whole exercise, this whole build, was in fact a build, own, operate and transfer (BOOT) contract, which enables SA Water to take ownership of the scheme at the end date of the contract.

I understand that SA Water will utilise this right on 1 January 2018, assuming ownership of the VPS and customer management. That has some benefits for everybody. By owning both the wastewater treatment facility and the pipeline scheme as one integrated unit, SA Water can offer some benefits to customers and directly manage the service they give to those customers, capitalise on systemwide efficiencies and directly invest in infrastructure upgrades, instead of doing it through the company.

SA Water has advised me they are currently considering the model for operating and maintaining the VPS upon its transition to SA Water. Under the existing contract, SA Water is required to offer a new customer contract to existing customers for a 15-year period on the same terms and conditions as the existing contract, with the exception of price. That's how it was laid out when we entered into this contractual process. That's for fairly obvious reasons because prices go up. I am advised that the current pricing of the VPS is partially subsidised by SA Water's wastewater customers.

I think it is important that we understand the distinction there: the provision of this water service to Virginia Pipeline customers is subsidised not by every SA Water customer, but by South Australia Water's wastewater customers (which will usually be a general water customer, but not in every case) as the pricing does not include all of the treatment operating costs incurred in producing recycled water for the VPS. With SA Water now regulated, the Essential Services Commission is encouraging SA Water to move towards direct cost recovery.

SA Water is contractually required to negotiate an agreed price with the Virginia Irrigation Association, which was involved in the development of the original VPS. SA Water has made considerable effort, I am advised, to understand the needs and interests of VPS customers. I think the Hon. Mr Dawkins said that they have had at least four meetings in recent times. I am advised that they have built relationships with many customers, both individually and through associations such as Hortex, the Vietnamese Farmers Association, AUSVEG SA and the Horticultural Coalition of SA.

SA Water has formally met with the board of the VIA on five separate occasions, I am advised, since March of this year to progress the negotiations, the most recent being on 13 June. I understand that SA Water representatives are currently undertaking negotiations with the board of the Virginia Irrigation Association to negotiate pricing under the new contract. SA Water has presented pricing proposals and described the real costs associated with owning, operating and maintaining the VPS and it is crucial that we also understand that, whilst in fact the infrastructure is in place—and, yes, paid for—there is an ongoing cost associated with operations and maintenance and the upgrading of infrastructure in any program such as this. These costs are not currently reflected, I am advised, in the current pricing structure.

I am aware that the Virginia Irrigation Association has also presented a counterproposal to SA Water—I might say a rather cheeky proposal—but I am advised that these negotiations will continue. The VPS provides benefits to both SA Water and its customers, obviously. I understand that SA Water is committed to an outcome which ensures that the VPS remains affordable to the irrigators but also, importantly, is sustainable into the future and, at the end of the contract period or at some stage through a negotiation process, we come to a cost recovery figure for the water that has been provided so that other customers of wastewater services—that is sewerage customers generally—aren't subsidising this service into the long-term future.

If an agreement is not arrived at by the mutual parties then I understand that the next step is arbitration to finalise a potential contract. We are not at that position yet, I am advised, but it might be if negotiations are not harmonious and come to a conclusion that is mutually satisfactory to the parties, and that might be the final course of action.