One water regulator to rule them all

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There was another warning yesterday that ratepayers around the country face huge bills to clean up their water supplies.

Prompted by the Havelock North poisoning last year the Government is cracking down on water quality.

And in the process it is likely there will be a dramatic restructuring of water services across the country which could go as far as to threaten the ongoing existence of some small local bodies.

There is a suggestion that water and sewerage and stormwater - the so-called three waters - now administered by a host of local bodies may end up being regulated by one industry-wide body like the gas industry.

Regardless, the cleanup bill is likely to be massive. 

Local Government Minister Nanaia Mahuta is expected to take proposals to Cabinet before the end of the year to clean up not only drinking water but also sewage and stormwater across New Zealand.

In part, those proposals are made more urgent by the proposed introduction of a new Freshwater National Policy standard which will be a further step towards the Government’s goal of making all rivers swimmable.

But speaking at the Water NZ conference in Hamilton yesterday, Local Government Minister Nanaia Mahuta said A Beca report commissioned by the Government’s Three Waters Review found the costs of upgrading infrastructure to meet key recommendations made by the Havelock North inquiry is in the region of $500 million, and thought to be more like double that by some industry leaders.

The review’s upper estimate was $573 million and over half of that would be accounted for by Canterbury and Otago.

But that is just to clean up drinking water.

“The draft report on wastewater infrastructure costs to meet NPS Freshwater criteria indicates upgrade costs may be up to $2 billion,” said Mahuta.

“This does not include discharge to marine and coastal environments, or replacement of ageing underground pipes, so that figure can safely be significantly extrapolated.

Mahuta has been on a study trip to Scotland and Ireland looking at how they manage their three waters.

What clearly drew her there was that both countries have a single water regulator.

In a report to Cabinet in April, Mahuta proposed setting up a study of how to regulate the three waters here.

She told Cabinet that the review would clarifying responsibility for policy oversight, “including, but not limited to, possible appointment of a lead government agency, and Ministerial accountability for the three waters system.”

The review would “identify and assess potential mechanisms for better regulation of three waters, such as through an independent industry regulator, environmental regulator, and or economic regulator.

She said these were common features of regulatory models overseas.

“The workstream will consider any downstream competition policy work required from the private provision models being explored by Treasury and Crown Infrastructure Partners."

The proposal would effectively strip the regulatory powers over water from the Ministry of health and local Government and have them reside in a specialist body.

Water NZ has enthusiastically backed the idea of a single regulatory body, and there were representatives from the water bodies of Scotland and Ireland at the conference yesterday.

But there is opposition.

A Christchurch-based group, Aotearoa Water Action opposes the idea of a single regulator and argues that any centralised model featuring universal charging of consumers would provide a ready-made framework for privatisation.

 But Mahuta has adamantly ruled out any privatisation, and it would be highly unlikely that this Government would agree even to consider it.

Christchurch Mayor, Lianne Dalziel, is also wary of a single regulator.

In August Christchurch she called for caution in the Government's review of the three waters, saying there should be a better understanding of the problems, risks and potential costs before ministers leap to a solution.

What the Government agrees to do about regulating water will impact into the price that consumers and ratepayers end up paying, not only to drink water but also to discharge their waste.

And Mahuta believes there is little time to waste.

“When we begin to look at stormwater and meeting the challenges of sewage overflows, the anecdotal feedback is that this raises costs onto another level altogether; when these are considered with future population growth and climate change impacts, they are likely to be prohibitive, if we do nothing,” Mahuta said yesterday.

“Given the interconnected nature of our water systems, it is difficult to see how we can meet future regulatory requirements and consumer expectations without also making changes to service delivery arrangements, including infrastructure provision.

“So while fixing the regulatory arrangements for water is a priority we also need to look at how we arrange water service delivery to be able to fund infrastructure.

“How do we manage this in the high-growth areas of Auckland, Hamilton, and Tauranga, for example?

“And, at the opposite end of the spectrum, how do we manage those areas with declining populations and growing service delivery and infrastructure challenges?”

She said that it was the Government’s firm view that the funding challenge could be addressed from within the public ownership model.

The review currently being conducted will quantify the size of the funding challenge facing local government and “explore options for equipping three waters infrastructure providers with a wide set of appropriate and flexible funding tools.

“Funding options will need to maintain clear accountability for three waters service provision and the ongoing maintenance of infrastructure," says the Cabinet paper.

“Options will also address multiple objectives and issues, and will differ depending on the challenges at hand.”

Mahuta said the decision on the regulator would be her first priority.

One model that has been floated is that of the Gas Industry Company which is essentially a Government body with strong industry involvement set up to regulate and oversee the gas industry.

Whatever the Government does decide to do it is highly likely that the country’s myriad of water and sewerage infrastructure bodies will start to become merged and folded into each other, once an industry regulator is appointed.

That, in turn, will raise questions about the viability of some smaller local bodies.

Of all the Government's restructuring proposals – this one is arguably the largest with the most widespread implications.

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