Three waters reform: Services could be amalgamated into 1-4 entities

A new report has found creating one to four providers is the most efficient way to overhaul management of New Zealand’s three waters network.

The affordability challenge of tackling decades of underinvestment is eye-watering.

Up to $185b will be needed for pipes across the country over the next 30 years, which will result in ballooning household water bills without reform.

Documents consisting of more than 600 pages have been proactively released this afternoon outlining expert advice for the Government’s massive water overhaul.

Water in New Zealand is currently managed by 67 territorial authorities, Watercare, and Wellington Water.

The Government is in the middle of reforming local government’s three waters services into a small number of multi-regional entities.

The Water Industry Commission for Scotland has completed a report that considered 30 scenarios for amalgamation, which ranged from 13 entities across the country to just one.

For example, under a model of three entities, two could look after the North Island and one could serve the Wellington region and South Island. Or two entities could serve one island each.

International evidence suggests entities which supply less than 800,000 citizens would typically struggle to realise full efficiencies.

So analysis showed models ranging from one to four entities provided the greatest opportunity for scale efficiencies and related benefits like improved levels of service and more affordable household bills.

The documents released today only present evidence, it is up to the Government to make the call on how many entities there will be.

This will include consideration of other factors like alignment with regulatory catchments and rohe/takiwa.

Modelling also showed up to $185b will be needed to fix three waters infrastructure across the country over the next 30 years.

Councils are facing the consequences of significant underinvestment in water pipes, most notably exemplified in Wellington.

Authorities have responded to this crisis by almost doubling the average national spend on water in their recent long term plans to $2.7b annually.

That’s a significant lift in investment, $81b over 30 years, but it’s nowhere near enough.

Local Government Minister Nanaia Mahuta said it was clear the affordability challenges facing water infrastructure were too great for councils alone.

“Together, the reports confirm the need for major reform to upgrade and maintain our water infrastructure, protect our environment, and avoid unaffordable increases to household bills.”

For example, without reform average household bills in 2051 are forecast to range from $1900 to $13,900.

Under reform proposals with five providers those figures range from $800 to $1800. With three providers the range is $800 to $1600.

“Our plan means the required upgrade of infrastructure for our most precious natural resource will be much more affordable for New Zealanders than continuing on the current path”, Mahuta said.

Another report, by Deloitte, showed the three waters reform is forecast to impact every corner of the economy.

It’s estimated to increase GDP by $14.4 billion over the next 30 years.

Up to 9,300 extra jobs would also be created.

Provincial and rural regions would experience the highest economic impact relative to their current regional GDP, with metropolitan areas getting the smallest relative gains.

It’s acknowledged there will be labour market challenges in the short term, particularly finding skilled labour with the borders shut due to Covid-19.

Mahuta said she expected to announce Cabinet decisions on the way forward for the reforms in coming months.

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