Three Waters: New mechanism for local control in reforms deemed diluted

Reform of the Three Waters policy has come under fire. Photo / Stephen Parker

The Government has introduced a new mechanism for local people to direct Water Services Entities in the reformed provision of water services.

However, the new “Community Priority Statements” fall well short of the powers provided to local Māori through Te Mana o te Wai statements.

Dave Heatley, an independent economist who recently wrote on the subject in Asymmetric Information, the online publication of the New Zealand Association of Economists, said the newly-introduced Water Services Entities Amendments Bill makes it clear that Community Priority Statements “come pretty far down the list of priorities”.

Speaking to journalists about the “reset” in April, Prime Minister Chris Hipkins said Te Mana o te Wai Statements were one way of providing for Māori input into running water services, and he said the Government would also “introduce an equivalent for other significant interested parties in water use to also have a say in that.”

The legislation says the Regional Representative Groups, which will appoint the boards of the new Water Services Entities (WSE) and provide strategic and performance expectations, “may consider” the Community Priority Statements as part of “any comments it makes” on the WSE’s planning and reporting documents. Equally, they “may consider” the statements in issuing their WSE with a statement of expectations.

The group must also forward the statements to a consumer forum established by the WSE.

In contrast, WSEs must respond directly to Te Mana o te Wai statements and they “must include a plan that sets out how the water services entity intends... to give effect to Te Mana o te Wai, to the extent that it applies to the entity’s duties, functions, and powers”, earlier legislation stipulates.

In April, the Government announced a suite of changes to its unpopular Three Waters reform programme, including the rebranded moniker Affordable Water Reforms. The Amendments Bill will change and update earlier water reform bills and other related legislation.

Most significantly, it will transfer the control of the stormwater, tap water, and wastewater assets of some of the 67 local councils to 10 WSEs. The previous plan called for just four such entities.

The move to 10 water entities over four will provide for greater local input, though it is expected to diminish some of the efficiencies, gained through scale, that officials anticipated in the original reform scenario.

The bill’s changes also allow the entities to band together and share services (including to raise debt and for procurement), either voluntarily or under compulsion by the Government.

The Government says modelling, which is predicated on work done by WICS, the Scottish water regulator, continues to show considerable price benefits to its reforms over the status quo. This is, in part, because of the shared services.

The changes also allow for an extension of the establishment period for most WSEs of up to two years to July 1 2026.

Official papers released alongside the legislation say that any additional cost to the Crown for the extended phase-in period is not yet known.

Other changes are the inclusion of a representative of all territorial authority owners (councils) on the Regional Representative Group of their WSE.

These groups will continue to be comprised, in equal measure, of representatives of councils and iwi Māori, a measure that has been contentious and widely viewed as co-governance - though Prime Minister Chris Hipkins and Local Government Minister Kieran McAnulty now reject that description.

Te Mana o te Wai statements (already set out in an earlier bill) can be submitted by all iwi and hapū in the area covered by each of the WSEs.

They are expected to have wide scope and to apply beyond the management and care of water bodies. Cabinet papers suggest they may even cover matters including employment and investment.

They have been controversial for a variety of reasons, including that they are novel measures and may complicate the governance and control of WSEs, which are expected to carry very high, capital market-raised debt loads. Both ratepayers (through the cost of water services) and taxpayers (through a central government liquidity facility and its ability to act in a distress situation) are exposed if costs blow out.

Heatley said the new provision for Community Priority Statements appears to be too weak to further complicate the governance structure of the WSEs.

But he noted that provision for Te Mana o te Wai statements is unchanged. And there remains no clarity for how WSEs should make sense of so many possible directives, with wide scope for conflict both between each other and with the other priorities of the WSEs.

“It’s hard to see where the interests of water consumers score in all of this... [in these amendments] the Te Mana o te Wai statements lose none of their directive power, and it’s not difficult to see how they might conflict with the principles of efficiency or affordability for example,” Heatley said.

The plan for water reform is aimed at improving the efficiency and affordability of the country’s water services, which most observers agree have suffered significant underinvestment, at least in some regions.

The National and Act parties have promised to scrap and replace the reforms if they win the election in October.