Central Park Water Operational Audit

Transcription

1 Central Water Operational Audit Independent Pricing and Regulatory Tribunal Water Industry Competition Act 2006 Network Operator's Licence Audit Report (Operational Audit) Licence No. 12_022: Central Water Factory Pty Ltd (also known as Central Water) Licence Holder: Central Water Factory Company Pty Ltd (ACN ) Final Report 31st July 2015 Water Futures. ABN Merrivale Rd, Pymble Cobbitty Consulting PO box 561, Bayswater, Vic 3153.

2 Table of Contents 1. EXECUTIVE SUMMARY INTRODUCTION OBJECTIVE LICENSEE S INFRASTRUCTURE, SYSTEMS AND PROCEDURES AUDIT METHOD... 5 Audit scope... 5 Audit standard... 5 Audit steps... 5 Audit team... 6 Acknowledgements... 6 Audit grades REGULATORY REGIME QUALITY ASSURANCE PROCESS AUDIT FINDINGS SITE AUDIT AGENDA FOR TUESDAY 9 TH JUNE AUDIT IF TRIGGERED OBLIGATIONS SUMMARY OF FINDINGS REVIEW OF ACTIONS OPPORTUNITIES FOR IMPROVEMENT GENERAL OBLIGATIONS SUMMARY OF FINDINGS REVIEW OF ACTIONS OPPORTUNITIES FOR IMPROVEMENT WATER SUPPLY INFRASTRUCTURE SUMMARY OF FINDINGS REVIEW OF ACTIONS OPPORTUNITIES FOR IMPROVEMENT NON- POTABLE WATER SUPPLY INFRASTRUCTURE SUMMARY OF FINDINGS REVIEW OF ACTIONS OPPORTUNITIES FOR IMPROVEMENT SEWERAGE INFRASTRUCTURE SUMMARY OF FINDINGS REVIEW OF ACTIONS OPPORTUNITIES FOR IMPROVEMENT SCHEDULE B TO THE NETWORK OPERATOR S LICENCE SUMMARY OF FINDINGS REVIEW OF ACTIONS OPPORTUNITIES FOR IMPROVEMENT APPENDICES Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 2 of 63

3 1. Executive Summary This report sets out the findings of an Operational Audit completed in respect of the Network Operator s Licence (Licence No. 12_022) for Central Water, NSW for the period 23 January 2014 to 30 April A Follow- up Licence Plan Audit, which is reported separately, was undertaken in conjunction with this audit. The auditors were provided with sufficient and appropriate evidence, as described in the IPART Audit Guideline for Greenfield Schemes, Water Industry Competition Act 2006 (NSW), July 2013 (the Audit Guideline), on which to base the conclusions reached during the audit. The auditors have observed the requirements of the Audit Guideline and the Audit Deed in conducting the audit, determining audit findings and preparing this report. The reported audit findings accurately reflect the professional opinion of the auditors. The findings have not been unduly influenced either by the Licensee or any of its associates and express the auditors opinions as to whether the Licensee has met the Licence conditions and regulatory requirements as specified in the scope. A summary of the audit findings is given in the following chapters and a detailed breakdown of the full audit findings against the audited criteria is given in the detailed Audit Tables in Appendices A to D. The audited infrastructure complied with the audited requirements of the Regulation and Licence conditions and was found to be operating safely. The Licensee, Central Water Pty Ltd (ACN ) (CPW) was found to be constructing, repairing, maintaining and operating the infrastructure without any Significant Non- compliances with the audited criteria. An additional five (5) clauses were reported as No requirement under the scope of the current audit. Those five (5) No requirement clauses need to be audited as part of the next audit. Three Insignificant non- compliances were identified and these are summarised as follows: WIC Reg Sched 1 cl.6(2)(a) Non- compliant Insignificant [relating to water supply infrastructure]: CPW demonstrated that it is fully implementing, and that its activities are being carried out in accordance with, the Infrastructure Operating Plan. Furthermore, it demonstrated that personnel involved in the overall management, operation and maintenance of the network are appropriately trained to do so. The Follow- up Licence Plan Audit undertaken in conjunction with this audit has, however, identified that some aspects of the Infrastructure Operating Plan requires update. Furthermore, whilst CPW was able to demonstrate that it has procedures in place to ensure that the Infrastructure Operating Plan is kept under regular review, the auditor is of the opinion that a 5 yearly review interval is insufficient to ensure that the Infrastructure Operating Plan remains fully appropriate to its purpose. WIC Reg Sched 1 cl.11 Non- compliant Insignificant A potable to recycled water cross connection integral to the network is still in place, albeit shut off by not one but two closed valves, but it is not physically broken by removal of a pipe section as recommended in good practice. WIC Reg Sched 1 cl.13(2)(a) Non- compliant Insignificant [relating to sewerage infrastructure]: CPW demonstrated that it is fully implementing, and that its activities are being carried out in accordance with, the Infrastructure Operating Plan. Furthermore, it demonstrated that personnel involved in the overall management, operation and maintenance of the network are appropriately trained to do so. The Follow- up Licence Plan Audit undertaken in conjunction with this audit has, however, identified that some aspects of the Infrastructure Operating Plan requires update. Furthermore, whilst CPW was able to demonstrate that it has procedures in place to ensure that the Infrastructure Operating Plan is kept under regular review, the auditor is of the opinion that a 5 yearly review interval is insufficient to ensure that the Infrastructure Operating Plan remains fully appropriate to its purpose. 7 opportunities for improvement were identified that may assist CPW in maintaining full compliance in the future and these are noted in the body of this report. In summary, the audited recycled water infrastructure complied with the audited requirements of the Regulation and Licence conditions, and was found to be capable of operating safely and in accordance with the Central Water Infrastructure Operating Plan, Water Quality Plan (drinking water), Water Quality Plan Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 3 of 63

4 (non potable water) and Sewage Management Plan. Furthermore, the Licence Holder audited (Central Water) was found to have the technical and organisational capacity to carry out the activities authorised by the Licence. In the opinion of the auditors, the Licence Holder can continue commercial operation for the safe and reliable supply of recycled water. The auditors support IPART in continuing approval of the commercial operation of the assets operated under this WICA licence. Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 4 of 63

5 2. Introduction 2.1 Objective This report presents the findings of an audit undertaken for the Independent Pricing and Regulatory Tribunal (IPART) under the Water Industry Competition Act The audit comprised of an Operational Audit as required in respect of the Network Operator's Licence (Licence No. 09_002) for Central Water. The Licensee is Central Water Pty Ltd (ACN ) (CPW). A Follow- up Licence Plan Audit was undertaken in conjunction with this audit and is reported separately. 2.2 Licensee s infrastructure, systems and procedures The Licence Holder s infrastructure, systems and procedures audited were those related to Central Water (the Scheme) (refer The Licence Holder, CPW, is responsible for the operation and maintenance of parts of the Central sewerage network, drinking water network, a water recycling plant that treats raw sewage and produces recycled (non- potable) water and pipelines for the distribution/reticulation of non- potable water back into parts of Central. Flow Systems Pty Limited [Water Factory Company Pty Limited] (ACN ) and Permeate Partners Pty Ltd (ACN ) are Authorised Persons named under this Licence. 2.3 Audit method Audit scope This audit covers the operation and maintenance of the licenced infrastructure and addresses the scope specified by IPART relating to an Operational Audit in respect of the audit period 23 January 2014 to 30 April Audit standard The audit broadly followed the generic principles of auditing given in ISO 19011: Guidelines for auditing management systems. The principal document used to guide the audit was the IPART Audit Guideline for Greenfield Schemes, Water Industry Competition Act 2006 (NSW), July 2013 (the Audit Guideline). Audits are by necessity limited to sampling processes. It is not practicable, nor necessary, to inspect 100 percent of items within an audit scope. Auditing forms part of the broader risk management process, providing an independent check on the veracity of the processes and procedures in place to manage risk. Finding a balance between audit effort and practicality requires the exercise of experienced professional judgement. The amount of effort allocated to this audit has been kept to a reasonable minimum level. The audit was undertaken and reported in accordance with the Audit Guideline and its associated Appendices. The audit templates given in the Guideline provided the reporting format for the audit as well as the detailed audit criteria. Audit steps An Audit Plan was submitted to both IPART and the Licensee prior to the audit taking place. Documentation was supplied by the Licensee to both the auditor and IPART. Desktop auditing took place both prior and subsequent to the site audit. A site audit took place on Thursday, 9 th July 2015; this comprised of on- site asset inspections during the morning followed by an office based desktop audit during the remainder of the day. Some evidence was followed up after the audit with the report being prepared and submitted to the Licensee as draft, then a final, before submission to IPART. Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 5 of 63

6 The audit process involved seeking objective evidence that the Licensee met the Licence obligations identified for audit by IPART. The auditors collected evidence through interview, document review and site inspection. The auditors randomly sampled examples sufficient to verify claims made by the Licensee. Audit team The audit was conducted in an integrated manner by two auditors who collectively addressed the various components of the audit scope; this report sets out the audit criteria that were applied. The two- member team that conducted the audit consisted of Dr Dan Deere and Mr Jim Sly, both of whom hold Lead Auditor Accreditation in respect of Licence Regulations and Compliance under IPART s Technical Services and Water Licensing Audit Panel. Acknowledgements The audit team notes, and greatly appreciates, the presence of IPART staff members Alfredo Careaga and Jamie Luke as a valuable observers and commentators during the audit. The audit team notes, and greatly appreciates, the work and effort put in by those audited, including: Andrew Horton, Executive Manager Utility Operations; and Laura Dixon, Rick and Compliance Manager. Audit grades Audit grades were awarded in accordance with the definitions given in the Audit Guideline. Compliance of operation of the infrastructure with the relevant legal and formal requirements was assessed. More generally the infrastructure was assessed for its capability to operate safely. Grades were allocated as follows: No Requirement (NR) Compliant (C) Non- compliant Insignificant (NCI) Non- compliant Significant (NCS) 2.4 Regulatory regime The scheme operates under the Water Industry Competition Act 2006 (WICA) which in turn references the following requirements: Water Industry Competition (General) Regulation (2008) (WIC Regulation). Conditions of Network Operator's Licence No. 09_002. IPART Audit Guideline for Greenfield Schemes, Water Industry Competition Act 2006 (NSW), July Relevant aspects of the national Australian Guidelines for Water Recycling: Managing Health and Environmental Risks (Phase 1) Relevant water industry and environmental NSW and national codes of practice and regulations, as applicable. 2.5 Quality assurance process Quality was assured using a professional review process. Each auditor s work was reviewed and approved by the other auditor. Both auditors are longstanding members of the IPART audit panel. Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 6 of 63

7 2.6 Audit findings Audit findings are summarised in the above Executive Summary; they are presented in more detail in the next section of this report and in full detail in the Appendices that follow. 2.7 Site audit agenda for Tuesday 9 th June 2015 Time Item and audit questions Location Lead 9:00 Opening meeting and site induction Central Dan Deere 9:10 Asset inspection Which infrastructure is currently in commercial operation? Has any new infrastructure been introduced into commercial operation? If so has it been appropriately approved [WIC Reg Sched 1 cl. 2(1),(2(a,b))]? Is there evidence that the system is being operated in a safe and reliable manner and maintained in a proper condition [WIC Reg Sched 1 cl. 3(c)]? Is there alignment between the IOP, SMP, WQP (npw) and WQP (dw) on the one hand and the observed assets on the other [WIC Reg Sched 1 cl. 6(2)(a), 7(4)(a), WIC Reg Sch 1 cl. 13(2)(a) and WIC Reg Sched 1 cl. 14(3)(a)]? What evidence is present on site relating to the management of risk from cross- connections from network assets [WIC Reg Sched 1 cl. 7(4)(a) and WIC Reg Sch 1 cl. 10(a)]? Is there alignment between the critical limits and requirements between the WQP, daily operator's recording worksheet and SCADA system [WIC Reg Sched 1 cl. 7(4)(a)]? Is there evidence on site that the customer s installations comply with the Plumbing and Drainage Act 2011(NSW) [WIC Reg Sched 1 cl. 8(1) and cl. 11]? What evidence is present on site relating to the management of risk from cross- connections from customer assets [WIC Reg Sched 1 cl. 11 and WIC Reg Sch 1 cl. 10(a)]? Central Dan Deere Audit if triggered obligations General conditions 11:00 Significant change to IOP WIC Reg Sch 1 cl. 6(3)(a) If any significant change is made to its infrastructure operating plan (or the Minister or IPART demands it), the network operator must provide a copy of the amended plan to IPART and an approved auditor, and provide the Minister or IPART with a report, prepared by the approved auditor, regarding the adequacy of the plan and the condition of its infrastructure having regard to the purposes for which it was licensed. Audit question: Has this clause been triggered and if so what evidence can CPW provide of compliance? 11:10 Significant change to WQP WIC Reg Sch 1 cl. 7(5)(a) If any significant change is made to its water quality plan (or the Minister or IPART demands it), the network operator must provide IPART with an amended copy of the plan and provide the Minister or IPART with a report, prepared by an approved auditor, regarding the adequacy of the plan Audit question: Has this clause been triggered and if so what evidence can CPW provide of compliance? Central Central Jim Sly Dan Deere Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 7 of 63

8 Time Item and audit questions Location Lead Drinking water 11:20 Compliance with PHA WIC Reg Sch 1 cl. 9(c) A network operator of water infrastructure to supply drinking water must ensure the water supplied complies with any requirements under the Public Health Act 2010 (NSW) and the Public Health Regulation 2012 (NSW) in relation to the supply of safe drinking water. Audit question: Has this clause been triggered and if so what evidence can CPW provide of compliance? Central Dan Deere Sewerage infrastructure 11:25 Significant change to IOP WIC Reg Sch 1 cl. 13(3)(a) If any significant change is made to its infrastructure operating plan (or the Minister or IPART demands it), the network operator must provide a copy of the amended plan to IPART and an approved auditor, and provide the Minister or IPART with a report, prepared by the approved auditor, regarding the adequacy of the plan and the condition of its infrastructure having regard to the purposes for which it was licensed. Audit question: Has this clause been triggered and if so what evidence can CPW provide of compliance? Central Jim Sly Operating Licence 11:30 Refined water Network Operator Licence cl. B4 The Licensee must carry out the activities authorised by this Licence in compliance with any requirements of NSW Health that: (i) IPART has agreed to; and (ii) are notified from time to time to the Licensee by IPART in writing. IPART: Licensee is required to refrain from the use of the term "refined water" in IPART's letter dated 7 April References to "refined water" in licensee's website should be removed from its website asap. The term "refined water" should also be removed from any marketing materials and signage by 30 June Auditor to assess progress. As part of this audit, please review the Incident and Emergency Management Plans. Audit question: What evidence can CPW provide of compliance? Central Dan Deere General obligations for a network operator Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 8 of 63

9 Time Item and audit questions Location Lead 11:35 Incidents WIC Reg Sched 1 cl. 1(2)(a,b,c,d,e) a) A network operator must immediately notify IPART of any incident in the conduct of its activities that threatens, or could threaten, water quality, public health or safety. b) A network operator must immediately notify the Minister administering the Public Health Act 2010 (NSW) and the Public Health Regulation 2012 (NSW) of any incident in the conduct of its activities that threatens, or could threaten, water quality, public health or safety. c) A network operator must immediately notify the Minister administering Part 2 of the Water Industry Competition Act 2006 (NSW) of any incident in the conduct of its activities that threatens, or could threaten, water quality, public health or safety. d) A network operator must immediately notify any licensed retail supplier that supplies water or provides sewerage services by means of the licensed network operator's infrastructure of any incident in the conduct of its activities that threatens, or could threaten, water quality, public health or safety. e) A network operator must immediately notify any licensed network operator or public water utility whose infrastructure is connected to the licensed network operator s infrastructure of any incident in the conduct of its activities that threatens, or could threaten, water quality, public health or safety. IPART: The auditor should review whether this clause was triggered or not. A sample of incident records and/or water monitoring data should be reviewed. lf no notification was required in the audit period, no further audit is necessary. A NR audit grade should be awarded to the clause. Audit question: What evidence can CPW provide (e.g. incident records, water quality monitoring and SCADA results) to show whether or not any incidents occurred during the audit period that threatened water quality, public health or safety? Central Dan Deere 11:45 New infrastructure WIC Reg Sched 1 cl. 2(1),(2(a,b)) A network operator must not bring any new water or sewerage infrastructure into commercial operation without the written approval of the Minister. a) The network operator must provide to the Minister a report, prepared by an approved auditor that indicates that the infrastructure complies with the requirements of the Regulation and any licence conditions. b) The network operator must provide to the Minister a report, prepared by an approved auditor that indicates that the infrastructure is capable of operating safely and in accordance with its infrastructure operating plan and its water quality or sewage management plan, as the case requires. IPART: Check infrastructure against licence. Yes/No Check. Currently a technical breach arising as a result of a 'regulatory gap' where the pipes downstream of a customer connection point are not included in water industry infrastructure and therefore not regulated under WICA. Only audit [clauses a and b] if new infrastructure brought into commercial operation. If no new infrastructure an 'NR' audit grade should be awarded to the clause. Triggered by WIC Reg Sch 1 d. 2(1). Audit question: Which infrastructure is currently in commercial operation? What evidence can CPW provide to demonstrate that no new infrastructure has been introduced into commercial operation and, if so, that the new infrastructure has been appropriately approved? Central Jim Sly Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 9 of 63

10 Time Item and audit questions Location Lead 11:50 Codes and standards. 12:00 Lunch WIC Reg Sched 1 cl. 3(c) The water or sewerage infrastructure is properly designed and constructed, operated in a safe and reliable manner and maintained in a proper condition, having regard to any publicly available standards or codes relating to its design, construction, operation and maintenance. IPART: As part of this audit, please review any procedures in place for identifying changes to publicly available standards or codes, and ensuring it remains up to date with such standards and codes. Licensee have acknowledged the need and have an Implementation Plan. Full compliance requires the following: Documentation of procedures for identifying changes to publicly available standards or codes, and ensuring that Central Water remains up to date with such standards and codes. Audit question: What evidence can CPW provide to demonstrate its use of publicly available standards or codes relating to the operation and maintenance of the infrastructure? Central - Jim Sly - Water supply infrastructure 1:00 IOP implementation and currency WIC Reg Sched 1 cl.6(2)(a) The network operator must ensure that the infrastructure operating plan is fully implemented and kept under regular review and all of the network operator s activities are carried out in accordance with that plan. IPART: As part of this audit, please review whether there is a procedure in place to ensure that the Plan is kept under regular review. Audit question: What evidence can CPW provide to demonstrate that the infrastructure operating plan is fully implemented, that the network operator s activities are carried out in accordance with that plan and that the plan is it kept under regular review? 1:05 WQP implementation and currency WIC Reg Sched 1 cl.7(4)(a) The network operator must ensure that its water quality plan is fully implemented and kept under regular review and the network operator s activities are carried out in accordance with that plan. IPART: As part of this audit, please review any potential cross- connections between drinking and recycled water pipes, and recommendations of Auditor's reports in 2014 are included in updated plans. Audit question: What evidence can CPW provide to demonstrate that the water quality plan is fully implemented, that the network operator s activities are carried out in accordance with that plan and that the plan is it kept under regular review? Central Central Jim Sly Dan Deere Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 10 of 63

11 Time Item and audit questions Location Lead 1:10 Water metering WIC Reg Sched 1 cl 8(1,2(a,b,c)) Any water meter that is connected to a network operator's water main must comply with the requirements of the Plumbing Code of Australia. While water is being supplied to premises in respect of which a water meter has been installed, a network operator must ensure that the water meter is properly maintained and periodically tested. While water is being supplied to premises in respect of which a water meter has been installed, a network operator must ensure that the water meter is read at intervals of no more than 4 months. While water is being supplied to premises in respect of which a water meter has been installed, a network operator must ensure that written notice of each meter reading is sent to the relevant licensed retail supplier. IPART: Central Water has demonstrated that water meters connected to its water mains comply with the Plumbing Code of Australia. Whilst residential customer meters are not typically maintained or tested other than in response to a customer complaint, it is appropriate that the approach to water meter maintenance, testing and renewal is documented in an Asset Management Plan; this is yet to be developed by Central Water. As part of this audit, please review that Central Water has an Implementation Plan to further develop its documentation. Audit question: What evidence can CPW provide to demonstrate that its meters comply with the Plumbing Code of Australia, that the meters are maintained, periodically tested, read at least every four months and written notice of each meter reading is issued to the relevant retail supplier? 1:20 Customer plumbing WIC Reg Sched 1 cl. 11 The licensee must not allow a customer's installation to be connected to a licensee's water main unless the installation complies with the Plumbing and Drainage Act 2011 (NSW). IPART: Check for cross- connections. Audit question: What evidence can CPW provide to demonstrate that customer s installations comply with the Plumbing and Drainage Act 2011(NSW)? Central Central Jim Sly Dan Deere Non- potable water supply infrastructure 1:30 Fitness for purpose WIC Reg Sched 1 cl, 10(a) The network operator under a licence for water infrastructure to supply non- potable water for a particular purpose must ensure that the water supplied is fit for that purpose. IPART: Specifically to address cross- connections between drinking and recycled water pipes. Audit question: What evidence can CPW provide (e.g. water quality monitoring and SCADA results as well as controls on water usage including cross- connection controls) to demonstrate that the water supplied is fit for purpose? Central Dan Deere Sewerage infrastructure Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 11 of 63

12 Time Item and audit questions Location Lead 1:40 IOP implementation and currency WIC Reg Sch 1 cl. 13(2)(a) The infrastructure operating plan is fully implemented and kept under regular review and all of the network operator's activities are carried out in accordance with that plan. IPART: As part of this audit, please review whether there is a procedure in place to ensure that the Plan is kept under regular review. Audit question: What evidence can CPW provide to demonstrate that the infrastructure operating plan is fully implemented, that the network operator s activities are carried out in accordance with that plan and that the plan is it kept under regular review? 1:50 SMP implementation and currency WIC Reg Sched 1 cl. 14(3)(a) The network operator must ensure that its sewage management plan is fully implemented and kept under regular review and all of the network operator s activities are carried out in accordance with that plan. Audit question: What evidence can CPW provide to demonstrate that the sewage management plan is fully implemented, that the network operator s activities are carried out in accordance with that plan and that the plan is it kept under regular review? Central Central Jim Sly Dan Deere Schedule B to the network operator's licence 2:00 Technical, financial and organisational capacity. Network Operators Licence cl. B1 The Licensee must have the technical, capacity to carry out the activities authorised by this Licence. If the Licence Holder ceases to have this capacity, it must report this to IPART immediately. The Licensee must have the organisational capacity to carry out the activities authorised by this Licence. If the Licence Holder ceases to have this capacity, it must report this to IPART immediately. IPART Auditors to review position descriptions, CV's, training programs (including training needs analysis and proposed delivery program). Central Water does not have in place procedures for identifying, and reporting to IPART, if it ceases to have the technical, financial and organisational capacity required to carry out the activities authorised by the Licence. Central Water does not have procedures in place for identifying, and reporting to IPART, if it ceases to have the technical, financial and organisational capacity required to carry out the activities authorised by the Licence. Full compliance requires documentation of procedures for identifying, and reporting to IPART if Central Water ceases to have the technical, financial and organisational capacity to carry out the activities authorised by the Licence. Auditors to review licensee's procedures or contractual arrangements to carry out the licenced activity by staff, contractors or third parties. Review resource plans and levels of staffing. Demonstrate the risk of business continuity is under control and risk managed satisfactorily. Audit question: What evidence can CPW provide that it has the technical and organisational capacity to carry out the activities authorised by this Licence? Central Jim Sly Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 12 of 63

13 Time Item and audit questions Location Lead 2:05 Insurance Network Operators Licence cl. B3.(1,2,3) The Licensee must maintain appropriate insurance sufficient for the size and nature of the activities authorised under this Iicence. The Licensee must provide a copy of each certificate of currency of the insurance maintained by the Licensee to IPART in accordance with the Reporting Manual. Whenever there is a change in the type, or Ievel of insurance held by the Licensee in relation to the activities authorised under this Licence the Licensee must provide a copy of the certificate of currency to IPART within 10 days of the change being made. Audit question: What evidence can CPW provide that it has appropriate insurance and that IPART has been kept suitably informed? 2:10 Reporting Network Operator Licence cl. B5 The Licence Holder must prepare and submit reports in accordance with the Reporting Manual. Audit question: What evidence can CPW provide that it has submitted reports in accordance with the Reporting Manual? 2:15 Verification Network Operator Licence cl. B8.(1,2,3) The Licensee must undertake any monitoring that is required for the purposes of this Licence, any Plan, the Act or the Regulation in accordance with this clause. The Licensee must keep the following records of any samples taken for monitoring purposes specified in the Water Quality Plan: (a) the date on which the sample was taken, (b) the time at which the sample was collected, (c) the point or location at which the sample was taken, and (d) the chain of custody of the sample (if applicable. The Licensee must ensure that analyses of all samples taken for the purposes of Verification Monitoring are carried out by a laboratory accredited for the specified tests by an independent body that is acceptable to NSW Health, such as the National Association of Testing Authorities or an equivalent body. Audit question: What evidence can CPW provide that the appropriate water quality verification monitoring has been undertaken in compliance with the WQP? What evidence can CPW provide of date, time, location, name of sampler (e.g. chain of custody) and NATA accreditation for that monitoring? Central Central Central Dan Deere Dan Deere Dan Deere Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 13 of 63

14 Time Item and audit questions Location Lead 2:45 Code of Conduct Network Operator Licence cl. B10.(1,2,3,4,5) 1. If a code of conduct has not been established under reg 25 of the Regulation, the Licensee must (by a date specified by IPART) establish a code of conduct (Licensee's Code of Conduct) in accordance with this clause B The Licensee's Code of Conduct must set out the respective responsibilities of a) the Licensee; and b) each licensed network operator, licensed retail supplier and/or public water utility that supplies water, provides sewerage services or constructs, maintains or operates any other water industry infrastructure in the Specified Area of Operations, by, at a minimum, providing for: a) if the Specified Water Industry Infrastructure is connected to any other water industry infrastructure, who is responsible for repairing, replacing or maintaining any pipes, pumps, valves, storages or other infrastructure connecting the Specified Water Industry Infrastructure to the other water industry infrastructure; b) who is responsible for water quality; c) who is liable in the event of the unavailability of water; d) who is liable in the event of failure of the Specified Water Industry Infrastructure; e) the fees and charges payable in respect of the use of the Specified Water Industry Infrastructure; and f) who is responsible for handling customer complaints 3. (a) Before the Licensee brings the Specified Water lndustry Infrastructure into commercial operation or by a later date specified by IPART (if any), the Licensee's Code of Conduct must be agreed in writing between the Licensee and the other licensed network operators, licensed retail suppliers and/or public water utilities referred to in clause The Licensee must not contravene the Licensee's Code of Conduct to the extent that it makes the Licensee responsible or liable for the matters set out in it. IPART: As part of this audit, please review the Utility Services agreement. It was incomplete and should be completed and finalised addressing all of the relevant criteria identified in the Licence. (May not have a Code of Conduct in place) Audit question: What evidence can CPW provide that the code of conduct has been agreed with all other connected water industry infrastructure network operators or public utilities and supplied to IPART and that the relevant document is current? Central Jim Sly Licence Plan Follow up audit items Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 14 of 63

15 Time Item and audit questions Location Lead 3:00 IOP adequacy potable water and sewerage WIC Reg Sch 1 cl. 6(1)(a) and d. 13(1)(a) 6 and 13. Infrastructure operating plans. (1) Before commencing to operate water infrastructure commercially, the licensed network operator for the infrastructure must prepare, and forward to IPART, an infrastructure operating plan that indicates the arrangements that the licensee has made, or proposes to make, in relation to: a) the design, construction, operation and maintenance of the infrastructure, including particulars as to the life- span of the infrastructure, the system redundancy built into the infrastructure and the arrangements for the renewal of the infrastructure. Previous non- compliance: Whilst the Infrastructure Operating Plan addresses most of the aspects required, it requires further development; outstanding activities are identified in the Implementation Plan (included in the Infrastructure Operating Plan). Furthermore, the fully developed Plan is dependent upon development of an Asset Management Plan. Accordingly, Central Water is not considered to have demonstrated full compliance with this requirement. However, given the state of development of the Plan, the non- compliance is not deemed to be significant. IPART: Full compliance requires the following: finalise development of the IOP; development of an Asset Management Plan and supporting procedural documentation; finalisation of (i.e. fully populate) the Asset Register; demonstrated implementation of the documented infrastructure management practices; and demonstration that activities identified in the Implementation Plan are completed as scheduled. Audit question: What evidence can CPW provide that it was progressed to full development and implementation of the IOP and has addressed this inadequacy? 3:15 IOP adequacy potable water and sewerage WIC Reg Sch 1 cl. 6(1)(b) and d. 13(1)(b) 6 and 13. Infrastructure operating plans. (1) Before commencing to operate water infrastructure commercially, the licensed network operator for the infrastructure must prepare, and forward to IPART, an infrastructure operating plan that indicates the arrangements that the licensee has made, or proposes to make, in relation to: b) the continued safe and reliable performance of the infrastructure. Previous non- compliance: Although Central Water has demonstrated that it is able effectively manage the continued safe and reliable performance of the infrastructure, full compliance with this requirement requires preparation of the Asset Management Plan and supporting procedural documentation. The non- compliance is not, however, deemed to be significant given that activities are currently in hand to ensure that operational monitoring and maintenance activities are effectively managed and the demonstrated knowledge of Central Water operational personnel. IPART: Full compliance requires the following: development of an Asset Management Plan and supporting procedural documentation; demonstrated implementation of the documented infrastructure management practices; and demonstrate that maintenance activities are being effectively implemented and records maintained. Audit question: What evidence can CPW provide that it was progressed to full development and implementation of the IOP and has addressed this inadequacy? Central Central Jim Sly Jim Sly Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 15 of 63

16 Time Item and audit questions Location Lead 3:30 WQP (dw) adequacy ADWG Element One WIC Reg Sched 1 cl. 7(1)(a) 7. Water quality plans (dw). (1) Before commencing to operate water infrastructure commercially, the licensed network operator for the infrastructure must prepare, and forward to IPART, a water quality plan, in relation to the water supplied from the infrastructure, that specifies: b) if the water so supplied is drinking, how the 12 elements of the framework for the management of drinking water quality, as detailed in the Australian Drinking Water Guidelines, have been addressed and will be implemented. Previous non- compliance: Whilst the WQP addresses most of the aspects required, the stakeholder contact information is some years out of date. Accordingly, Central Water is not considered to have demonstrated full compliance with this requirement. However, given the state of development of the WQP and the minimal extent of passive infrastructure currently in service, the non- compliance is not deemed to be significant. IPART: Update the stakeholder contact list. Audit question: What evidence can CPW provide that its WQP complies with the ADWG and has addressed this inadequacy? 3:35 WQP (dw) adequacy ADWG Element Two WIC Reg Sched 1 cl. 7(1)(a) (as above) Previous non- compliance: Whilst the WQP addresses most of the aspects required, the risk assessment did not include an uncertainty analysis. Accordingly, Central Water is not considered to have demonstrated full compliance with this requirement. However, given the state of development of the WQP and the minimal extent of passive infrastructure currently in service, the non- compliance is not deemed to be significant IPART: Augment the risk assessment to include the major sources of uncertainty associated with each hazard and hazardous event and outline the actions considered to reduce uncertainty. Audit question: What evidence can CPW provide that its WQP complies with the ADWG and has addressed this inadequacy? 3:40 WQP (dw) adequacy ADWG Element Six WIC Reg Sched 1 cl. 7(1)(a) (as above) Previous non- compliance: Central Water has yet to complete a coherent incident and emergency management plan for this scheme and has out dated contact details for key stakeholders. However, given the demonstrated competence of Flow Systems in managing incidents and emergencies under a WICA regime along with the fact that Flow Systems are currently remedying this gap, and noting the minimal and passive nature of this infrastructure, this non- compliance is considered insignificant. IPART: Complete the incident and emergency management plan and update the stakeholder contact list. Audit question: What evidence can CPW provide that its WQP complies with the ADWG and has addressed this inadequacy? Central Central Central Dan Deere Dan Deere Dan Deere Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 16 of 63

17 Time Item and audit questions Location Lead 3:45 SMP adequacy WIC Reg Sched 1 cl. 14(1)(a) and (b) 14. Sewage management plans. (1) Before commencing to operate sewerage infrastructure commercially, the licensed network operator for the infrastructure must prepare, and forward to IPART, a sewage management plan, in relation to the conveyance, treatment and disposal of sewage by means of the infrastructure, that indicates: a) the manner in which health and ecological assessments will be undertaken and any concerns arising from any such assessment addressed, and b) the arrangements for the disposal of waste from the infrastructure. Previous non- compliance: Central Water has yet to complete a coherent incident and emergency management plan for this scheme and has out dated contact details for key stakeholders. However, given the demonstrated competence of Flow Systems in managing incidents and emergencies under a WICA regime along with the fact that Flow Systems are currently remedying this gap, and noting the minimal and passive nature of this infrastructure, this non- compliance is considered insignificant. IPART: Complete the incident and emergency management plan and update the stakeholder contact list. Audit question: What evidence can CPW provide that it was progressed to full development and implementation of the SMP and has addressed this inadequacy? 3:50 IOP adequacy recycled water WIC Reg Sch 1 cl. 6(1)(a) 6. Infrastructure operating plans. (1) Before commencing to operate water infrastructure commercially, the licensed network operator for the infrastructure must prepare, and forward to IPART, an infrastructure operating plan that indicates the arrangements that the licensee has made, or proposes to make, in relation to: a) the design, construction, operation and maintenance of the infrastructure, including particulars as to the life- span of the infrastructure, the system redundancy built into the infrastructure and the arrangements for the renewal of the infrastructure. Previous non- compliance: Whilst the Infrastructure Operating Plan addresses most of the aspects required, it requires further development; outstanding activities are identified in the Implementation Plan (included in the Infrastructure Operating Plan). Furthermore, the fully developed Plan is dependent upon development of an Asset Management Plan. Accordingly, Central Water is not considered to have demonstrated full compliance with this requirement. However, given the state of development of the Plan, the non- compliance is not deemed to be significant. IPART: Full development of the Infrastructure Operating Plan, including development of an Asset Management Plan and demonstrated implementation of the infrastructure management practices documented therein. Audit question: What evidence can CPW provide that it was progressed to full development and implementation of the IOP and has addressed this inadequacy? Central Central Dan Deere Jim Sly Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 17 of 63

18 Time Item and audit questions Location Lead 4:00 IOP adequacy recycled water WIC Reg Sch 1 cl. 6(1)(b) 6. Infrastructure operating plans. (1) Before commencing to operate water infrastructure commercially, the licensed network operator for the infrastructure must prepare, and forward to IPART, an infrastructure operating plan that indicates the arrangements that the licensee has made, or proposes to make, in relation to: b) the continued safe and reliable performance of the infrastructure. Previous non- compliance: Although Central Water has demonstrated that it is able effectively manage the continued safe and reliable performance of the infrastructure, full compliance with this requirement requires preparation of the Asset Management Plan and supporting procedural documentation. The non- compliance is not, however, deemed to be significant given that activities are currently in hand to ensure that operational monitoring and maintenance activities are effectively managed and the demonstrated knowledge of Central Water operational personnel. IPART: Preparation of an Asset Management Plan and supporting procedural documentation and demonstrated implementation of appropriate infrastructure management practices. Audit question: What evidence can CPW provide that it was progressed to full development and implementation of the IOP and has addressed this inadequacy? 4:15 WQP (npw) adequacy AGWR Element One WIC Reg Sched 1 cl. 7(1)(b) 7. Water quality plans (npw). (1) Before commencing to operate water infrastructure commercially, the licensed network operator for the infrastructure must prepare, and forward to IPART, a water quality plan, in relation to the water supplied from the infrastructure, that specifies: b) if the water so supplied is non- potable water, how the 12 elements of the framework for the management of recycled water quality and use, as detailed in the Australian Guidelines for Water Recycling, have been addressed and will be implemented and, having regard to those guidelines, the purposes for which the water may be used and the purposes for which the water may not be used. Previous non- compliance: Central Water has demonstrated that it currently holds the technical and organisational capacity to carry out the activities authorised by the Licence. Central Water does not, however, have in place procedures for identifying, and reporting to IP ART, if it ceases to have the technical and organisational capacity required to carry out the activities authorised by the Licence. Central Water is still making reference to out- dated documents. This represents a systematic failure somewhere in the processes that Flow Systems uses to keep up to date with codes and standards that are directly relevant to water quality management and needs to be resolved by the licence holder to mitigate the low risk of out- dated standards being used. The lack of up to date and explicit contact details for Central Water stakeholders presents a small operational risk for this scheme and is something that is currently being. IPART: To be fully compliant, the following needs to be demonstrated: Documentation of procedures for identifying, and reporting to IP ART, if Central Water ceases to have the technical and organisational capacity to carry out the activities authorised by the Licence. Documentation of procedures for identifying changes to publicly available standards or codes to ensure that Central Water remains up to date with such standards and codes; and Documentation of updated Business Contacts List and associated contact details (this recommendation is also relevant to Element Six). Audit question: What evidence can CPW provide that its WQP complies with the AGWR and has addressed this inadequacy? Central Central Jim Sly Dan Deere Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 18 of 63

19 Time Item and audit questions Location Lead 4:20 WQP (npw) adequacy AGWR Element Four WIC Reg Sched 1 cl. 7(1)(b) (as above) Previous non- compliance: There is a low risk that small volumes of non- compliant recycled water might be supplied in the event of factors such as: a critical limit exceedance of unspecified maximum duration for chlorination; inadequate specification of a number of supporting limits (flow rate and measures of biomass integrity) for the MBR; ph drift after chlorine dose; and UV system warm up after UV power up. In addition, the potable to recycled water cross- connection is still in place and there is a risk that it may not be removed. IPART: To be fully compliant, the following needs to be demonstrated: maximum exceedance periods for the chlorine critical limits; supporting limits, such as flow rate and measures of biomass integrity, for the MBR; verification of no significant ph drift after chlorine dose; a process to avoid supply of water whilst the UV system warms up; credible verification of removal of the potable to recycled water cross- connection when the infrastructure is brought into operation; and credible verification of the existence of a differential pressure between the potable and recycled water systems when the infrastructure is brought into operation. These latter two items are relevant to the lop as well, but are only noted here for brevity. Audit question: What evidence can CPW provide that its WQP complies with the AGWR and has addressed this inadequacy? 4:40 WQP (npw) adequacy AGWR Element Five WIC Reg Sched 1 cl. 7(1)(b) (as above) Previous non- compliance: Verification of drinking water quality There is a small risk that Central Water will fail to use a laboratory accredited for the specified tests by an independent body acceptable to NSW Health for verification testing in the longer term. IPART: To be fully compliant, the following needs to be demonstrated: a formalised, documented requirement to use a suitable laboratory for verification testing. Audit question: What evidence can CPW provide that its WQP complies with the AGWR and has addressed this inadequacy? 4:50 WQP (npw) adequacy AGWR Element Ten WIC Reg Sched 1 cl. 7(1)(b) (as above) Previous non- compliance: Documentation and reporting A number of key documents are not explicitly referenced in the Recycled Water Quality Plan. As a result, there is a small but increasing risk that Central Water will lose sight of key detailed documents that are essential for the proper documentation and operation of the scheme. IPART: To be fully compliant, the following needs to be demonstrated: Make detailed and explicit cross- references to the key supporting documents that form an essential component of an adequate WQP (npw) under WICA. Audit question: What evidence can CPW provide that its WQP complies with the AGWR and has addressed this inadequacy? Central Dan Deere 5:00 Audit close Central Dan Deere Report on the Operational Audit of Network Operator s Licence No. 12_022 (Central Water) under WICA. Page 19 of 63