Opinion: Rethinking Three Waters in New Zealand 

The following is an opinion editorial by Infracom Chief Executive Jon Grayson.

In New Zealand, we expect our drinking water to be healthy and safe, and our wastewater to be treated and discharged back to the environment in as clean and pure a state as possibleWe prefer not to think too hard about how this happens – we just want it all to work well. Unfortunately, recent events show that this isn’t always the reality. The spate of sewage spilling into Wellington Harbour, Lake Taupō and others and the contamination of drinking water in Havelock North in 2016, which resulted in the death of three people and numerous serious illnesses, are just the tip of a not-so-pure iceberg.

New Zealand’s water infrastructure is well overdue for investment as pipes reach the end of their useful lives.  Environmental expectations are increasing and the consequences of climate changeincluding more frequent and more intense droughts such as the one currently being endured by Aucklandersrequire urgent attentionOn top of that, over a third of wastewater treatment plants will require re-consenting within the next ten years, and almost a quarter are operating on expired consents. 

All of this adds up to big costs for councils and ratepayers. Conservative estimates are that the cost of upgrades and renewals will be measured in billions of dollars. In the case of small rural councils, this could add thousands of dollars to annual rates bills. 

These are all issues the Government’s Three Waters review is bringing to the fore. The review is considering how to improve New Zealand’s three waters service delivery and funding arrangements. It has been examining whether local councils, which largely own and deliver three waters assets and services, are best placed to manage this.  

Bold, decisive actions are required to achieve better long-term outcomes, and soon. In January 2020, the Government confirmed its commitment to partnering with local government to consider options for transitioning to new service delivery arrangements, allowing for safer, more affordable and reliable three waters services across the country.  

Infracom supports the Government’s reform agenda. We would like to see the water sector brought together into just a few entities necessary to capture scale benefits.We also support strong regulatory oversight, including an economic regulator to ensure that the benefits of scale are translated into lower long run costs and better services for consumers. At the end othe day, reform must be about sustainably better outcomes for consumers. 

Retaining the status quo is no longer an option and further delay will compound existing problems.  Reform of the waters sector make sense now. It will enable economies of scale, which will take significant financial pressure off local authorities. A detailed study in the Waikato region found that a collaboration between Hamilton City, Waikato District and Waipa District would save those councils an average of $16.7 million per annum. The same study also identified a range of non-financial benefits, including more resilient supplies, greater consumer protection and better environmental outcomes. 

Not only that, it would free up councils to do the job they do best – focussing on the wellbeing of their local communities. From a global perspective, the mix of services provided by New Zealand councils is unusually weighted towards providing infrastructure and strangely disconnected from considering the overall wellbeing of their communities. There is a strong argument, put forward by organisations as diverse as Local Government NZ, the Society of Local Government Managers, the New Zealand Initiative and Infrastructure NZ, that New Zealand would benefit if local communities were able to determine and implement their own, unique approaches to local wellbeing. 

Re-focussing local government on community wellbeing, and away from the provision of utility services would also unshackle elected members from areas that require technical and specialist commercial experience. After all, individuals who decide to stand for election are normally motivated by a desire to improve their community’s social, environmental, cultural and/or economic wellbeing. Communities, in turn, look to councils to achieve these outcomes.   

Waters reforms would mean big changes for councils and change is often viewed as a threat. However, in a post-COVID environment, with increased demand for Councils to invest in their communities, while at the same time holding rates at pre-COVID levels, it becomes an ever more practical solution. Stepping back from directly supplying waters services, leaving that to expert entities which have a greater capacity to serve consumers, will generate financial and non-financial advantages for everyone. And ultimately providing a better service for less cost should, and normally always is, a key objective for most councils.