Water Services Reform

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Council-owned mixed-use rural supplies

Operators of qualifying Council-owned mixed-use rural water schemes can apply to transfer these schemes to user community ownership separate to the new Water Services Entities.

One of the outcomes of water services reform will be to shift the delivery of council owned mixed-use rural water supplies to 10 new Water Services Entities from 1 July 2024.

In some rural areas, water schemes are council-owned but mixed-use – providing water for both farming purposes (stock, agriculture, horticulture and irrigation), as well as drinking water for domestic consumption. There are approximately 90 such schemes across the country. It does not impact smaller privately owned rural schemes.

While council-owned mixed-use rural water schemes are due to transfer to the new Water Services Entities in July 2024, the Government has agreed to a recommendation from the Rural Supplies Technical Working Group that users of qualifying schemes may seek to take user community ownership and operation of them separate to the new Water Services Entities. This option is provided for in the Water Services Legislation Bill introduced in December 2022.

To qualify, 85% or more of the total volume of water supplied by the mixed-use rural water scheme must be for agricultural or horticultural purposes, and 1,000 or fewer dwellings (not being dwellings on farmland) rely on the service for drinking water supply and other domestic household purposes.

The Government agreed that users can seek ownership of a mixed-use scheme on the basis of independent cost, benefit and risk assessments, together with a 75% majority agreement amongst users of a scheme. The decision recognises that these supplies are critical to agriculture or horticulture and often have unique community governance, operating and/or funding arrangements, with a strong sense of community ‘ownership’ that has been in place for many years.

The Department of Internal Affairs has been working with the farmers of the Clutha District’s mixed-use rural water supplies and the Clutha District Council to consider the various benefits, issues and risks of the two ownership and operation models: Water Services Entity D, or direct community ownership and operation by the users of the schemes. The Clutha District was selected for this work because of the large number of mixed-use rural schemes in the area, and interest from the farmers and council to assess potential options for ownership and operation.

Independent management consulting firm Morrison Low was commissioned to undertake the assessment, overseen by a steering committee made up of Clutha farmers, council members, and Department of Internal Affairs representatives.

The report of the assessment is now available. 

Clutha Rural Water - Summary Report - January 2023
Clutha Mixed Use Rural Water Schemes – Assessment Report – January 2023

The summary below provides a snapshot of key issues, risks and benefits of the two ownership and operation options.

  • Under Community Ownership, there is greater local knowledge and control by users, however costs would significantly increase, individual liability is high, and operational challenges will be difficult to meet at this smaller scale.


  • Under Water Services Entity ownership, the scale allows for greater operational capability and capacity, greater ability to access sufficient capital to meet future investment needs, and economic regulation and consumer protection. However, under the current proposed governance arrangements of the water services entities, there is a loss of influence from those currently involved in running these schemes, and uncertainty around future pricing and service levels until funding and pricing plans are produced.


Whist the report does not make recommendations on a preferred ownership and operation model, it is intended to help support decision making by users of such schemes.

It is anticipated that later in 2023 further information will be available regarding how the mixed-use rural water schemes will be managed by the Water Services Entities, enabling a comparison between the two approaches to be undertaken by the qualifying schemes to determine whether they wish to opt out of the WSE, or remain.

The report findings will also inform Government regarding changes to details in the legislative mechanisms for the transfer of small mixed-use rural water services, and the governance and operation arrangements of the Water Service Entities.

  • Mixed-use rural water schemes provide drinking water as well as water for farming-related purposes, such as stock water, irrigation or horticulture. Across the country there are approximately 90 such schemes owned by local councils and generally managed by the users of the schemes.

    These mixed-use scheme supplies often have unique community governance, operating and/or funding arrangements. While owned by councils, their operation and management often involve the local expertise, support and contributions of the farming communities who receive the supply.

    These mixed-use rural water schemes were mostly established as stock water schemes in the 1970s and 1980s with support from Government funding. Each scheme is represented by a rural water scheme committee that makes recommendations to Council on the operations/governance and management of their scheme. Over time, the schemes have expanded to provide drinking water to households, townships, and community facilities, including halls, schools and churches.

  • The decision recognises that the water supplies of mixed-use rural water schemes are critical to agriculture or horticulture, and often have unique community governance, operating and/or funding arrangements, with a strong sense of community ‘ownership’ that has been in place for many years.

    The Rural Supplies Technical Working Group heard from users of these schemes that some would be reluctant to have them transfer to the new Water Services Entities due to concerns about perceived loss of community voice and local involvement, future water supplies for farming purposes, and general uncertainty about the future management of the schemes, including pricing and charging.

    Whilst the Rural Supplies Technical Working Group recommended that all council owned mixed-use rural supplies should transfer to the water services entities, they also recommended an ability, in specific and limited circumstances, for some mixed-use rural water supplies to transfer into user ownership rather to a water services entity.

  • Regardless of the future ownership and operation model of the schemes (user community or Water Services Entity), all schemes will have to comply with Taumata Arowai requirements to demonstrate compliance with drinking water standards.

    Taumata Arowai is developing acceptable solutions for these schemes. More information can be found on their website:


  • Privately-owned water supplies are not covered within the scope of the three waters reform, and the transfer arrangements would only cover rural supplies/schemes that are owned by local government. In some cases, ownership is ambiguous, and would need to be worked through with the respective schemes.

  • Draft funding and pricing plans for the water services entities are under preparation and expected to be completed and available for local council review and consultation in July 2023.