Audit conclusion

Water Corporation’s network of water supply pipes has generally performed well to date. Although performance is variable in different parts of the state, the overall rate of leaks and bursts has been low. The Water Corporation has maintained the water pipe network by replacing pipes as they fail. Consequently, the cost of replacing water pipes has also been low, $9 million in 2009-10. The water pipe network is ageing and as a result, pipe replacement costs will rise significantly to an estimated $41.5 million per year from 2013-14 to 2018-19, with further increases from 2020.

To allow it to better manage the network as it ages, the Water Corporation has recently adopted a risk based approach to replacing pipes, targeting the ones most likely to fail. Replacing all pipes only when they fail would risk under investment and increasing levels of pipe failures. Alternatively, replacing all pipes when they reach the end of their standard economic life regardless of their condition or performance could result in over investment. Under a risk based approach, the estimated cost of pipe replacement over the next 10 years is $318 million compared to $421.5 million based purely on the standard economic life of pipes.

A risk based approach to pipe replacement is sensible, but the Water Corporation will need to ensure it is robust. The approach relies on accurate and complete asset, condition and performance information. Currently, there are gaps in the Water Corporation’s information that need to be addressed to ensure pipe replacement decisions are fully informed.

Water loss is a risk for the Water Corporation because it affects the sustainability of supply, reduces revenue, and can diminish its credibility as an advocate of water saving amongst its customers. Water loss in 2012-13 was around 10 billion litres above the Water Corporation’s benchmark for minimum loss, and included seven to eight billion litres of undetected leakage from pipes. The Water Corporation has a leak detection program which has prevented 3.4 billion litres of leakage in the last three years. However, it is not considering undetected leakage in prioritising pipe replacement. This is a gap in replacement planning, and resolving it would strengthen efforts to reduce water loss.

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