Insight Three Waters Review (2)

Failures, flooding, and illness, are all consequences of a stressed Three Waters system.  The Three Waters Reform includes stormwater, drinking water, and wastewater, all which are essential to the health and functioning of modern societies.  However, in recent years New Zealand communities have experienced the effects of degrading infrastructure including stormwater overflows, drinking water contamination and sewage on the streets.  Such effects are expected to worsen as sea and groundwater levels rise due to climate change.  It is estimated that up to NZ$185b over a thirty year period is required to bring water systems up to the standard that will keep New Zealanders safe.  With the health and wellbeing of communities at risk, there is no doubt that action must be taken. 

Why we have a water issue in New Zealand

This problem is the result of a culmination of different factors.  Out of sight and out of mind, investment in underground water services has often not been prioritised.  Water services across the country now rely on ageing infrastructure, or infrastructure damaged from natural events.  Trends have also shown an overall decline in water quality, with contaminants affecting water sources.  These issues are compounded by population growth, higher consumer expectations, and increased costs.

The key conceptual methods for addressing the challenges are easy to identify.  Significant financial investment is needed, both now and in the future.  Ongoing investment is critical to avoid a reoccurrence of the same issues over time, and to meet the growing climate change challenges.  Forward planning goes hand in hand with investment.  Authorities must work through the long-term implications of decisions on water services to determine how best to meet the needs of New Zealanders.  A robust and intergenerational approach is vital to consider the many issues and ensure effective outcomes are achieved.

Other countries facing similar issues

New Zealand is not the only country confronted with water challenges.  Other nations have sought to address their water issues with the establishment of water entities.  Ireland is one such nation, with its two largest cities, Dublin and Cork, relying on 19th century infrastructure which is no longer adequate for meeting the cities' needs.  Outside the main centres, fragmented water networks are also failing.  In some locations, drinking water quality does not meet European and Irish standards, and almost half of the water is lost through leakage.  Many of Ireland's combined sewers overflow during periods of heavy rain, flooding properties and polluting waterways.  Despite the efforts of local authorities, Ireland has witnessed the consequences of a lack of planned asset management and underinvestment in water services.

In July 2013, the Irish Government incorporated 'Irish Water' as a company under the Water Services Act 2013 to be responsible for the operation of all public and wastewater services including management, maintenance, investment and planning, capital projects and customer care and billing - services previously management by 31 different local authorities.  The intention is to safeguard Ireland's water, improve water conservation, and ensure long term sustainable water services. 

Scotland has also established a national body to provide and manage water services under the Water Industry (Scotland) Act 2002.  'Scottish Water' was formed from a merger of the three previous water entities that had previously taken over control from the former Scottish Regional Councils.  Like Ireland, there had been a substantial lack of investment in water systems in Scotland.  Today, Scottish Water provides water and wastewater services to customers as well as wholesale licensed providers.  Scottish Water has an economic regulator responsible for setting fees and reporting on costs and performance, and is also regulated by the Drinking Water Quality Regulator and Environment Protection Agency.  Its vision is that Scotland's water sector will be admired for excellence and sustainability, enabling the economy to prosper while enhancing the natural environment. 

How the proposed reforms work

The New Zealand Government has drawn inspiration from the Irish and Scottish approaches.  The proposed Three Waters Reform involves the creation of four publicly owned geographically based Water Service Entities to be responsible for providing Three Waters across the country from 2024.  The reforms will shift control from 67 local authorities to the new entities that will be financially separate from councils and have a greater ability to source funds for long-term infrastructure.  A two-tier governance arrangement is proposed for each entity.  A regional representation group comprising mana whenua and local councils holding shares proportionate to the size of their communities (one share per 50,000 people) will provide joint oversight and governance.  Corporate governance would be provided by an independent, competency based, professional board. 

Where to next?

The reforms are currently in the policy refinement and legislative stage.  The New Zealand Government recently released an Exposure Draft for the Water Services Entities Bill containing the proposed ownership, governance and accountability arrangements for the four entities.

In late April, Local Government Minister Nanaia Mahuta announced she would be supporting most of the recommendations put forward by the Three Waters Governance Working Group, including strengthening community ownership and participation, protecting against privatisation, and improving public health and environmental outcomes through giving effect to Te Mana o te Wai. 

Many local authorities are opposed to the proposed reforms.  Concerns include increased compliance costs, complexity, loss in Crown funding, borrowing costs, and adverse impacts on local democracy and control.

A revised Bill is expected to be introduced imminently, with the public able to make submissions when referred to the Select Committee.

Concluding comments

The intent of the reforms is to improve the safety, quality, resilience, accessibility, and performance of the Three Waters in a way that is affordable now and in the future.  These issues are not unique to New Zealand, and similar reforms have been implemented elsewhere.  What is unique to New Zealand is the mana and kaitiaki role of Māori, and Te Mana o Te Wai is at the heart of the reforms.  This, and other parts of the proposed reforms, will ensure a uniquely New Zealand adaption of a water services model.  While it is not yet certain how the next steps will play out, it is certain that the present Three Waters problems need to be addressed.  We will be keeping a close eye on developments and will continue to provide updates addressing various aspects of the Water Service Entity reforms.

This article was co-authored by David Allen (partner), Cedric Carranceja (special counsel) and Elizabeth Everingham (solicitor).