From memory, the water level controller acts like a ballcock found in toilet cisterns.
The steel cylinder seen at the bottom of the controller floats on the surface of the canal. By a series of chains and levers it opens and closes the outlet gate from tunnel 6 to the canal leading to Lloyd Mandeno Power Station's forebay.
The water in the canal attains a reasonably constant level and thus the power station has a constant operating head.
I am not sure which tunnel outlet this is into Lake Mangaonui.