The Government has said that in many parts of the country there has been a history of underinvestment in water services, which means we’re facing a big bill to bring things up to scratch. The Government also says there are number of challenges our water system is facing as a result of this underinvestment, and the proposed reforms are intended to respond to these.
Later this year, the Government will put forward legislation to shift New Zealand’s three water services to be managed by four new publicly-owned water entities, replacing the services currently managed by 67 councils.
Hutt City Council will become part of entity C, along with 20 other councils around the centre of the country (from Gisborne to Tasman).
Wellington Water will continue to provide all water services to Lower Hutt residents until at least June 2024.
According to the Government, these are the key features of the proposed new model:
- Public ownership: The entities will be collectively owned by councils.
- Protection from privatisation: There will be mechanisms in place to protect against privatisation; the details of how this will be managed are expected to be clarified in the draft legislation.
- Governance: The entities will be governed by boards with experience in delivering infrastructure and with an understanding of the Treaty of Waitangi, mātauranga Māori, tikanga Māori, and te ao Māori. They will also be required to deliver services that support council planning and community aspirations. Local government and mana whenua will have joint strategic influence and oversight of the entities and their operation.
- Balance sheet separation: The entities will be financially independent from local authorities, so both the entities and councils can invest more in growing community needs
- An integrated regulatory system: As well as the recently established water quality regulatory body, Taumata Arowai, the Government intends to introduce an economic regulator to ensure consumer protections and to hold the entities to account. Further consultation on these protections will be carried out by Government on these protections.
The Department of Internal Affairs estimates that across the country, approximately $185 billion is needed to fix, upgrade, and maintain our water services over the next 30 years.
In our recent 10-Year Plan, we planned for an ambitious capital investment programme. Sixty percent of our water infrastructure needs to be replaced over the next three decades, and we’ve committed $587 million over the years 2021-31 to bring our water services up to scratch. However, it’s likely to not be enough. Since we set our 10-Year Plan, the challenges of meeting water standards and responding to climate change have only increased, and we will also need to invest more in the water network to meet growth demands. We’ve acknowledged the challenges we’re facing, but we’re not the only council in this position.
Initially, there will likely be little impact. It’s possible that Council will collect water charges on behalf of the new water entity in the first year, just as we currently collect rates on behalf of Greater Wellington Regional Council. In future years, the new water entity will likely send the bill directly to customers.
Government modelling has shown that in the longer term your water charges will likely be lower than current forecasts as a result of reform. This means that the water infrastructure can be upgraded and maintained in a more cost-effective way. The new water entity will also be able to make greater use of borrowings to fund projects.
The Government estimates that without water reforms the average Lower Hutt household water costs could reach $2,380 by 2051; with reforms, this could be reduced to $1,260 by 2051. These estimates exclude any inflationary adjustment.
Our water assets and related debt will be transferred to the new water entity (which means assets will remain publicly-owned). Councils are limited in how much debt they can take on, and the new entity will not have the same level of restrictions.
Government will provide “no worse-off” funding to ensure we maintain our strong AA credit rating (which allows us to continue our ambitious capital investment programme) and “better-off” funding of $33 million to ensure we can invest in our community and progress projects to help our city thrive.
Our initial modelling has shown that the financial strategy in our 10-Year Plan will not be adversely impacted. Our key metrics of debt levels compared to revenue and achieving a balanced budget are projected to have a minor improvement in the long term.
The Government says there will be mechanisms in place to protect against privatisation, and we expect that the details of how this will work will be confirmed in the draft legislation.
The Working Group on Representation, Governance and Accountability of new Water Services Entities (the Governance Working Group) was made up of representatives from local government and iwi/Māori, and they were tasked with looking at how to strengthen the governance and accountability elements of the Government’s proposed model. Lower Hutt Mayor Campbell Barry was one of the members of the working group. More information on the working groups is available on the DIA website.
On 9 March, the working group released their recommendations in this report. Their key recommendations include:
- Community ownership of three waters assets through public shareholding, with councils holding shares on behalf of their communities
- The water entity board should be more accountable to the community via the Regional Representative Group (made up of council and iwi/hapū representatives), specifically:
- The RRG should approve the entity’s Statement of Intent
- The RRG should also set a Statement of Strategic and Performance Expectations, which the entity must adhere to
- The entity should report to the RRG on performance regularly
- Establishing regional advisory groups to the RRG to help ensure alignment with local priorities
- Establishing a Water Services Ombudsman
- Extending Te Mana o te Wai into all aspects of the reforms to ensure tikanga, mātauranga, and local experience and expertise underpin the governance of water services
The working group’s recommendations have been presented to the Minister of Local Government and are being considered by the Government. No decisions have been made on these recommendations yet.
The new water entity will make decisions about Lower Hutt’s water infrastructure. According to the Government, the entity boards will require experience in delivering infrastructure and an understanding of the Treaty of Waitangi, mātauranga Māori, tikanga Māori, and te ao Māori. They will also be required to deliver services that support council planning and community aspirations. In terms of Council influence over those decisions, this is one of the questions being considered by the Governance Working Group. They’ve made recommendations to the Minister, and their report and the executive summary was published on 9 March. The Government has not yet made any decisions on these recommendations.
Yes, this proposal includes the regional bulk water assets which Greater Wellington administer and we expect the functions and people of Wellington Water to largely transfer to the new entity.