A key feature of Local Water Done Well is economic regulation. The intention is to ensure consumers pay efficient, cost-reflective prices for water services, that those services are delivered to an acceptable quality, and that water services providers are investing sufficiently in their infrastructure. The Minister of Commerce and Consumer Affairs is leading development of an economic regulation system for water services.
Economic regulation ensures water services are delivered efficiently and transparently. The Commerce Commission will check that water organisations are charging a fair price for water services.
Taumata Arowai is New Zealand’s water quality regulator. It ensures communities have access to safe and reliable drinking water, and works to protect the environment from negative impacts of stormwater and wastewater.
In Napier, Taumata Arowai’s regulations have significant implications. Our current water supply network in Napier is deemed non-compliant by Taumata Arowai and does not meet current standards. This has led to investments in new bores, treatment plants and storage reservoirs to provide compliant water for now and into the future. The new standards have also seen the installation of UV treatment within Napier’s water supply network.
Council’s capital investments are typically funded from debt. This is limited by the level of debt it can take on through the Local Government Funding Agency (LGFA). The LGFA has said it will provide special financing to support water services CCOs, in both single-council and multi-council organisations. This means new water organisations will be able to access a higher level of financing to invest in water infrastructure, at a relatively low cost, ensuring investment is spread across the life span of the asset. If we can access cost-effective finance to invest in water services delivery, we can pass cost savings on to our community, meaning smaller increases in water charges than would otherwise be required. Councils that opt for in-house delivery will be restricted to their existing foundational debt covenants with LGFA. Further, LGFA is not able to provide funding for consumer trust or mixed consumer trust/council water delivery models.
If Council was to shift responsibility for delivering water services to a new CCO, this organisation would be governed by a professional ‘board of competence’. Council, as a shareholder, would provide strategic direction to the organisation through a Statement of Expectations that the board must give effect to. The board would then report back to the shareholding council on the organisation’s performance through an annual report. Shareholders (councils) will also be able to set direction of the CCO by approving, providing recommendations, and ultimately amending water services strategies that the CCO must develop. These strategies provide financial projections over a ten-year horizon. The first three years are provided in detail with the following seven as an overview, much like the way councils produce a Long Term Plan.
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