Auckland mayor Phil Goff says Watercare decision to double water bills in a decade too drastic from some families

Auckland mayor Phil Goff says Watercare should have gradually increased water prices rather than the drastic changes that could see the average household paying $1200 a year more in less than a decade.

The Watercare board has approved price increases over the next 10 years that will see the average household annual water fee more than double from $1069 to $2261.

This involves a 7 per cent hike over the next two years from July 1, followed by 9.5 per cent over the following six years and 3.5 per cent in the remaining two years of the 10-year Long Term Plan.

The proposal follows a mere 2.5 per cent price rise this year, and a decade of meagre increases since Watercare took over the city's water services in 2011/2012 rising from $1.30 to $1.59.

That ability to keep water prices low had been praised by many politicians - particularly those in favour of small government, and the independent review noted Watercare had delivered savings to customers of $100m per year compared to legacy council forecasts.

But the proposed price increases would see a huge reversal in that trend, with the cost per 1000 litres increasing to $1.706 next year and more than doubling over the next decade to $3.37.

Goff stopped short of criticising the independent council-controlled organisation - "they make their own decisions" - but told the Herald when he heard rumours the board was considering an even larger double digit percentage increase he phoned chair Margaret Devlin to tell her it would "not be acceptable".

The board opted for the lower increase.

"While I understood the need for a step change in investment, I said a double digit [percentage] increase would not be acceptable to some Auckland families, and they should look at the lower rate.

"I also made the point Watercare, a decade ago, needed to gradually increase prices, rather than keep them low and increase at a step change now."

But Goff said he recognised the need for major new investments, and that Watercare was adhering to council requirements to keep its debt-to-revenue ratio down.

"[Their ratio] is at 340 per cent, while our max across council is 290 per cent. So if they need to borrow more money, they need to increase revenue so it does not put push that ratio any higher."

The price of water in Auckland. Image / Watercare

Goff said they would be looking to central government for some form of assistance, potentially even acting as a guarantor for Watercare so it could take on more debt to spread the costs intergenerationally.

The recommendations, like the council's proposed one-off 5 per cent rate increase, will be included in the draft 2022-2031 Long Term Plan consultation document, and thus were not yet a certainty.

But board chairwoman Margaret Devlin told the Herald it had already been a "long process", and indicated that without other methods to raise funds to pay for "major infrastructure investment" they would likely stick.

"It is a balance of the need for investment versus affordability."

The board also approved increasing infrastructure growth charges - fees for servicing new properties - by 12 per cent from July 1, followed by an 8 per cent price rise annually.

This would all help fund a capital programme of $8.1 billion over the 10-year period.

Devlin said it had been formulated over a long period of time and reflected the big investment programme needed to service a growing region.

Watercare board chair Margaret Devlin said the major price increases reflect a range of factors, including major infrastructure growth but also limits on its ability to borrow money. Photo / File

Watercare supplied water and wastewater services to 1.7 million people - expected to increase to 1.93 million by 2031 and 2.33 million by 2051.

The increases also reflected a request from Auckland Council to reduce its debt-to-revenue ratio in view of the effects of the Covid-19 pandemic.

The drought response had seen Watercare spend an additional $209m, affecting the additional debt it could take on for the following year.

To maintain spending levels required this left the only option to increase water prices, Devlin said.

The decision also followed an independent review of Watercare by the Water Industry Commission for Scotland, which recommended an additional $1.7b of spending over the next decade.

These factors were all combined with increasing costs around needing to continually improve wastewater, stormwater and drinking water systems; and the fact many assets were also reaching their end of life.

The peak in investment would be needed from 2022 to 2025, reflecting concurrent major projects such as the Central Interceptor - a $1.2b wastewater tunnel that will significantly reduce overflows into waterways and beaches - and the Huia Water Treatment Plant.

Some of these projects were part-funded by the Auckland Council through its water-quality targeted rate, which would raise $450m over a decade and which Goff previously said was to address "years of underinvestment in our environment".

Asked about why Aucklanders were then being asked to fork out more by Watercare, Goff told the Herald the targeted rate was separate and allowed these projects to be achieved 20 years earlier than forecast.

Auckland councillor and planning committee chair Chris Darby said the price increases would be "hard to bear" for the public, particularly for lower-income families and those suffering from the economic impacts of Covid-19.

Auckland councillor and planning committee chair Chris Darby said the price increases would be "hard to bear" for the public. Photo / File

Watercare had been too focused on keeping the price of water low, but in doing so had underinvested and consequently costs had risen, Darby said.

"But we have to recognise this is the product of probably not just a decade of Watercare, but even before, years of underinvestment, and it has caught up on us," Darby said.

"The Covid cloak cannot conceal this."

Darby was not convinced yet that the proposed increases were the way forward.

"The big question is really how much can Aucklanders pay?"

There were "easy wins" in demand management - including rolling out smart metering, and improving education around water use, which would all reduce costs for Watercare.

Darby also wanted to see 100 per cent of the infrastructure growth charge recovered from developers, as had been recommended by the Productivity Commission.

During consultation on the Long Term Plan Darby said councillors needed to take a "hard look" at council assets, including potentially cashing out a portion of its $2.1b stake in Auckland Airport.

"We need to make sure we do not place the burden on ratepayers that compound the already-precarious situation."

The price increase proposal comes as Auckland continues to experience a severe water shortage, with storage dams at 67.1 per cent, well below the average for this time of year of 87.7 per cent.

And things are not expected to improve any time soon, with Niwa's latest seasonal outlook painting warmer-than-average temperatures over the next three months, potentially driving high water usage.