Changes to water services reforms
The Minister of Local Government, Hon Kieran McAnulty, has announced changes to water services reforms.
13 April 2023
The changes are designed to strengthen the connection between local communities and their water services provider while ensuring affordability of services for households.
Moving to 10 water services entities
The water services that are currently run by 67 councils across New Zealand will be combined into 10 publicly owned, specialised water service entities, rather than the four entities originally proposed.
The entities will be closely based around existing regions, enabling them to be better connected to the communities they serve.
The entities will be owned by local councils on behalf of the public, but will be operationally and financially independent from them.
This enables the entities to fund the significant long-term investment required in water services infrastructure.
For consumers, this means an improved quality of service and improved affordability of water services, compared with the increase in water charges likely under a continuation of the current water service delivery model.
Governance and local voice
Each water services entity will be governed by a professional board, with members appointed for their competencies and skills.
Local voice will be enhanced through the regional representative group for each entity, which provides strategic oversight and direction to the entity boards.
Under the 10-entity model, every territorial authority owner – and therefore every community – will be represented on their respective entity’s regional representative group.
There will continue to be an equal number of mana whenua and council representatives on the entity’s regional representative group.
Under te Tiriti o Waitangi/the Treaty of Waitangi, mana whenua have the right to participate in decisions that relate to water services. Iwi/Māori also have responsibilities as kaitiaki to protect Te Mana o te Wai, the health and mauri of our water.
Staged start date for water services entities from 2025
With more water services entities it will take more time to set them up.
Therefore, the 10 new entities will ‘go live’ in a staged approach, from early 2025 to 1 July 2026, rather than the original start date of 1 July 2024 for all entities.
Change to ‘better off’ funding for councils
The first $500 million of Crown-funded ‘better off’ funding for councils is unaffected by the decision and will continue as planned.
The Government has decided not to move ahead with the $1.5 billion second phase/tranche of better off funding for councils to ensure the water services entities are able to operate sustainability.
There have been mixed views on the proposed better off funding package, including strong views from some local authorities that this funding should be made available for investment into water infrastructure rather than for council investment more generally.
With smaller entities, it is important to ensure their balance sheets are not over-burdened by avoiding placing any more debt on them than is necessary.
Increasing the number of entities will have increased establishment costs for the entities. If water services entities are required to bear these increased costs, they will find it more challenging to raise borrowing to increase rates of investment in water infrastructure.
Given the above, the second $1.5 billion tranche of ‘better off’ funding can no longer be justified.
The $500 million ‘no worse off’ funding package for councils will remain in place, which will ensure that no council is left worse off as a result of the costs and financial impacts of the transition process.
Implementing the changes
Legislation will be required to give effect to the Government’s changes to water services reforms.
The Government intends to introduce and pass legislation to allow for these changes before this year’s election. This will be subject to the Parliamentary timetable and processes, and include the opportunity for public feedback.
The changes do not have any significant impacts on the water services legislation that is currently before Parliament.
The Water Services Legislation Bill and the Water Services Economic Efficiency and Consumer Protection Bill will continue on their current timetable.
Feedback provided on these Bills is being considered by the Finance and Expenditure Committee and any changes in response to feedback will be progressed through the select committee process.
The Finance and Expenditure Committee is due to report back on 8 June 2023.
Find out more:
Map illustrating new entities and boundary areas
Public factsheet: Reforming our water services
This factsheet covers information about water services, why reform is needed, the Government’s reform plan and what’s changing, and the benefits the reform will deliver for New Zealanders.