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House of Assembly - Fifty-Second Parliament, First Session (52-1)
2011-02-23 Daily Xml
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PUBLIC WORKS COMMITTEE: NORTH SOUTH INTERCONNECTION SYSTEM PROJECT

Mrs VLAHOS (Taylor) (11:35): I move:

That the 389th report of the committee, entitled North South Interconnection System Project, be noted.

The South Australian Water Corporation proposes an upgrade to the existing metropolitan Adelaide water supply system infrastructure through the provision of interconnectivity between the northern and southern water supply systems at an estimated capital expenditure of up to $402.73 million, excluding GST. Construction on this project is scheduled to begin in February 2011, with completion due in June 2013 and operational handover on 31 December 2013.

This proposal is referred to as the north-south interconnection system project (or NSISP). The project will deliver significant water security benefits to the Adelaide metropolitan area by allowing bulk water transfers between the southern and northern water networks, and it is necessary to enable maximum utilisation of a climate-independent source of water to supplement Adelaide's water supply. At present, the system can transfer between 30 to 40 megalitres a day under winter supply conditions, and the NSISP will increase this to 179 megalitres per day across many supply scenarios; this transfer will include the northern network from the southern zone. At a high level, the NSISP delivers many things:

physical infrastructure works, comprising pipeline works, including six specific pipeline systems, three pumping stations, pressure-reducing valves, pressure-sustaining valves, and ancillary works such as installing network flow meters;

operations management and control works relating to the integration of monitoring and control capability into the physical infrastructure; and

decision support tools to manage the complexity of the operational environment once the system is operational and to maximise opportunities relating to system interconnectivity for the future.

SA Water has conducted extensive consultation with residents, businesses, community groups and local representatives, including members of parliament, and it will continue to do so.

The committee has been told that these consultations indicated more work was necessary, and the consultation program has been extended. The committee has further been told that the communities likely to be affected will be targeted with communication programs that will detail the proposed works and measures to mitigate community risks. For elements of the project where communities can influence design outcomes, more thorough engagement is taking place or is scheduled.

The project case requires capital expenditure of $402.739 million to be incurred from 2008-09 to 2012-13, including sunk costs of $13.328 million incurred in prior financial years. The project case will incur average annual operating costs of approximately $10.5 million (real) per annum, from 2012-13 over 25 years, largely due to increased electrical consumption and control costs. Annual operating costs range between $8.4 million in the first full year of operation to $14.9 million in 2035-36. The committee has been told that the cost of the project will be recovered within the price path already announced by the state government.

Based on a procurement strategy options analysis undertaken by SA Water and Ernst & Young, a flexible and adaptable procurement strategy was selected to account for the complexities and uncertainties inherent in this project, especially those relating to the integration of the existing distribution network.

Given the above, and pursuant to section 12C of the Parliamentary Committees Act 1991, the Public Works Committee reports to parliament that it recommends the proposed public work.

Mr PENGILLY (Finniss) (11:39): This was a project that caused the opposition members some concern. Although we support it, my view, and the view of my colleague the member for Waite, was that a bit of argy-bargy went on about this whole thing. For a project of the value of $402.793 million, the lack of consultation was alarming. Indeed, the member for Bragg came into our committee and spoke for a significant amount of time on the matter, and it is most concerning that she is not even mentioned in the report.

She raised some very serious matters that were of concern to her and her constituents. I know that some time ago in the committee, before some of the current members were on it, this was raised as part of the desalination project. Once again, we got some argy-bargy answers at the time, and eventually this project did indeed come in front of the Public Works Committee.

I am looking forward to seeing how this progresses to the completion of the project. It is absolutely critical that we can move water from the north side to the south side and vice versa, although I would suggest that in the future it will be more from the south to the north. I was rather staggered to learn, early in the piece, that we as a state and the city of Adelaide just did not have that capacity; there was on a smaller scale, but really any large-scale capacity was lacking.

However, the member for Bragg will be speaking in a moment, and I am sure she will raise some of the issues and put on the record what she thinks of the whole process. The opposition did support the project but with some reservations.

Ms CHAPMAN (Bragg) (11:41): I speak on the Public Works Committee's 389th report on the north-south interconnection system project. Can I say that the issue of the public announcement of this project in the middle of last year, after the state election, was one which raised considerable concern in my electorate.

Essentially, this is a project which is to add pumping stations and pipelines between certain parts of the eastern suburbs and North Adelaide, out from Gilberton to the north-east, to be able to move water from the south to the north, on the basis that South Australia, under its SA Water infrastructure, is on two separate systems and more infrastructure needs to be included to facilitate the transfer of this water at a greater volume and more quickly. The principal reason that is necessary, unquestionably, after a lot of digging on this issue, is the government's decision to double the desal plant in the south to provide for the production of water for 100 gigalitres per annum instead of 50.

The second reason it is necessary to add infrastructure to facilitate the transfer of this water is that the government has signed a desalination plant contract for the production of water during the period, particularly in the summer, that requires the absorption of that water at a rate necessary to avoid wasting it after we are going to pay a fortune for it, which will either flush down to the ocean or have to be moved.

So, two government stuff-ups are followed by a $403 million project which, even if it were a desirable project for the future for infrastructure and water security in metropolitan Adelaide, could never be justified in 2010-11 when the rest of the state has been perishing under drought and when people in the Riverland, for example, are still under water restrictions. It is completely unacceptable that a project of this size should be proceeding here in 2011 when half of the state is deprived of access to water and a missive has gone out to put as many people as possible under prescription and restriction; it is totally unconscionable

The other thing that is concerning about this project is that the preliminary works were signed during the state election period. That is an issue which has been raised. The Auditor-General said, 'Well, there should have been some disclosure on this'—essentially these are his words—'but it doesn't require the convention in respect of signing any documents during an election campaign because it was an existing project.' That is the let-out for the government to avoid the scrutiny.

However, the truth is that it was not until the Monday after the election in March last year that the successful contractor to do the preliminary works for this project made an announcement. How curious—because it was not until June and July that people from SA Water went to my district (as it turned out) and to the residents in Wattle Park who were told, 'This is going to be happening to you. We're having a new pumping station.' They said, 'We don't know anything about that.' They were told, 'You can have a look at this paper but we can't leave it with you.' They then went to a meeting about it and were told, 'We can tell you more about this and we can show you material, but you have to sign a confidentiality agreement that you're not going to tell anybody about it.'

This was a secret project and the then member for Adelaide (Jane Lomax-Smith) did not tell one detail of it to her electorate. People in the eastern area were told nothing. The member for Waite was told nothing of the major redevelopment of the Clapham pump in his area and, at that stage, a proposed upgrade of the Springfield pump—none of us were told. This was an entirely secret project. This is about secrecy and if it was not for the courage of the people in Wattle Park who came forward to raise it with me as their local member, and for me to then raise it here in parliament, that we would know a scrap about it.

Not only had the government signed up preliminary contracts, not only had it had meetings with the stakeholders about proposed work opportunities that people in the industry would have to do on this project, but the very people whose road was going to be dug up in front of them, whose infrastructure was going to be torn down, whose trees were going to be at risk, whose business viability was going to be at risk, were told one jot about it. That is what is unacceptable about the government's conduct on this.

The second aspect which members should be aware of and of which the new chair of the Public Works Committee, I think, needs to take on notice to ensure that it does not happen again, is that when you get a project of this value—and we are talking about $403 million—do not be fooled by the crap that you get from, in this case, SA Water, which said that this was an existing project; this was something announced by the Premier and then minister Maywald two years before, because that is not what they announced. What they announced was not a $403 million interconnector pipeline; they announced a $304 million pipeline between two reservoirs—a totally different project. So, do not be fooled when they come to you to suggest that something has been going along for years and everybody has known about it—what absolute rot! During this process that was exposed.

Sure, the committee did, ultimately, approve this project but do not be fooled by what you are told in that regard. We went from a $304 million project to a $403 million project. So what I am going to ask the committee to do, having approved this project (which is obviously going to go ahead), is to: scrutinise SA Water and call people back to give an upgrade on a number of things, including whether they have secured a site for the Gilberton upgrade and the pipeline that is to go from the north-east, because they have not even secured the site as yet; when that has been done, to ask if there are any additional costs necessary; and that the committee should monitor this project as best it can by regularly calling for updates in relation to the finance of this project.

Let me give you the principal reason why: SA Water abandoned the first project—that is, the $304 million project of connection between two reservoirs—because when it did its figures more carefully, it realised that it was actually going to cost more than $1 billion. So SA Water abandoned that project and brought in this one because some preliminary work had been done over a number of years and they thought it was better to just dig up the middle of the road and put an extra pipe down rather than a reservoir-to-reservoir pipeline and to just upgrade an existing structure. When it was brought in you were given an estimate of $403 million. If they could get it so wrong on a $304 million project—which is suddenly over $1 billion, which justifies its abandonment—then you need to watch this project very carefully.

SA Water has done a number of things in recent times: sometimes it does good things, but there are a number of things that it has done. One, it has refitted its own new headquarters in Victoria Square; over $45 million to put in new carpets and computers in a building that the government does not even own. But that is fine. It has done all of that for its little hierarchy. It has given 1,500 of its employees tax deductibility as a result of being able to claim their water rates, which the rest of the state does not have.

It has supervised a contract with United Water, of which part 1, as announced in the press last week, has cost us $13.8 million, at least, which is going to be recovered. It had 40 people, I think it was, supervising that contract. The former treasurer has come into the parliament and told us that he is going to get back tens of millions of dollars of that dodgy arrangement. They have gone to court over it—years late, in my view—and got some of that money back. It cost taxpayers a huge amount of money. Some of it is going to be recovered, at least $13.8 million, if the press is right.

It is very important that the new members of the Public Works Committee understand that they have the responsibility to approve projects over $4 million, which are projects that the taxpayers are paying for. At times when the smallest projects are axed all over the place, they need to get it right on the big projects. That is the job of the Public Works Committee. I would urge the Public Works Committee not to let this scandalous situation be repeated and, at least for this project, please give some comfort to the people in the eastern and southern areas, who are about to have their roads dug up, that this project will be worth it, that it will not blow out and that the taxpayers' funding will not be wasted.

Motion carried.

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