Water Services - Getting to the Nuts and Bolts
Water Services - Getting to the Nuts and Bolts
Wednesday 18 December, 2024
It has been a merciless year for those of us trying to navigate the twists and turns of government policy imposed on local government. Years end brings no abatement of that onslaught.
What is it?
In June last year we reported on the Bill that would become the Local Government (Water Services Preliminary Arrangements) Act 2024 (Preliminary Arrangements Act) – read here. Now we have the next step in the form of the Local Government (Water Services) Bill (Water Services Bill).
In a not inconsiderable 432 clauses and 12 schedules, the Bill sets up a new regulatory framework for water services delivery that includes an economic and consumer protection regime for water services, and changes to the water regulatory framework. Just a little light vacation reading.
The Bill contains significant amendments to the Commerce Act 1986, the Local Government Act 2002, the Taumata Arowai – the Water Services Regulator Act 2020, and the Water Services Act 2021. Before enactment it will be divided into two – the Local Government (Waters Services) Bill and the Local Government (Water Services Repeals and Amendments) Bill.
What does it do?
The Preliminary Arrangements Act requires territorial authorities to prepare water services delivery plans by 3 September 2025. The Water Services Bill will make territorial authorities responsible for ensuring water services (Water supply, stormwater, and wastewater) are supplied in their districts, but allows responsibility for the provision of those services to be transferred to a water organisation. A water organisation may be an existing council-controlled organisation or an entity established under the statute for the purpose of transferring to it responsibility for providing water services in the authority’s district.
A territorial authority can ensure water services are supplied in their district by one or more of the following means:
- Providing water services itself directly
- Transferring responsibility for providing water services to a water organisation through a transfer agreement
- Contracting with another party to provide water services on its behalf
- Entering into a joint water service provider arrangement
- Entering into another type of arrangement (but not a franchise or concession agreement).
Although exemptions may be sought, there are rules as to the ownership, operation, and form of a water organisation. A water organisation may be owned by:
- one or more local authorities (including a regional council);
- by one or more local authorities and the trustees of one or more consumer trusts; or
- by the trustees of one or more consumer trusts.
The role of a water organisation is limited to providing water services and undertaking related activities. It must be a company incorporated under the Companies Act 1993. Territorial authorities may establish a consumer trust for the purpose of the trustees owning a water organisation in whole or in part.
A water service provider is a territorial authority that supplies water services directly or a water organisation. Water service providers are subject to requirements around objectives (services must be provided in a cost-effective and financially sustainable manner), financial compliance, planning and reporting frameworks, and restrictions against privatisation.
Water organisations will have powers that might otherwise apply only to local authorities. These include the power to charge for water services delivery, require development contributions for capital expenditure, propose water services bylaws, and authority to access land for work on water services infrastructure.
Controls
The Water Services Bill details the overview communities and shareholders (local authorities and consumer trusts) have of water service providers and water organisations.
A water service provider must make and issue certain documents:
- A drinking water catchment plan
- A trade waste plan
- A stormwater network risk management plan.
Certain core provisions in Part 5 of the Local Government Act 2002 (LGA) do not apply to a CCO that is a water organisation and are replaced by provisions in the new legislation tailored to water services. A new planning and accountability framework for water services is set out in three core documents.
- The shareholders in a water organisation must prepare a statement of expectations, which may also include directions for the operation of and priorities for the water organisation. A water organisation must give effect to a statement of expectations.
- A water services provider must prepare a 10-year water services strategy every three years that:
- Covers its planned activities;
- Provides transparency about costs and investments associated with the provision of services;
- Provides for accountability to the community or shareholders; and
- Provides transparency for charging, service levels, financial forecasting, and infrastructure investment.
- For each financial year a water organisation must prepare an annual report on its operations and detailed financial statements for its shareholders.
The provisions in the LGA for Ministerial intervention are extended to apply to water services providers and their shareholders, including consumer trusts, and by the addition of two new ministerial bodies. A Crown facilitator-water services may be appointed to assist, advise, and monitor the body to which it is appointed, with the power to direct the body to take particular action and to recommend to the Minister further actions. The Minister will also have power to appoint two or more Crown Commissioners – water services to work with the body to which they have been appointed, direct it to take particular action, and to oversee and make recommendations to the Minister. The powers of Crown Commissioners – water services extend to include the functions, duties and powers of the body to which they have been appointed.
Other changes
The Bill introduces an economic regulation regime for water supply and wastewater services, with the potential to include stormwater later. It applies to local government water service suppliers, excluding community suppliers, private schemes, Crown providers, and private contractors initially. The Commerce Commission will have various regulatory tools, primarily focusing on information disclosure, but also including revenue and quality regulations. Additionally, the Bill establishes a consumer protection regime to monitor and enhance service quality and customer engagement.
There is a requirement for the preparation of stormwater risk management plans, which is a responsibility of territorial authorities that can be transferred to a water organisation through a transfer agreement. Consistent with recent government policy, the name of the water services regulator will be changed to the “Water Services Authority – Taumata Arowai”, putting the English name first. Of more significance are changes to the Water Services Act 2021 that reduce the regulatory burden under the drinking water quality regime and remove the requirement for persons acting under that Act to give effect to the Te Mana o te Wai concept and principles.
