Frequently Asked Questions

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Three Waters Reform
Water Services Entities Bill

Three Waters Reform

What has been decided about the Three Waters Reform?

The Government has put forward legislation for New Zealand’s three water services – drinking water, wastewater and stormwater – to be managed by four new publicly owned water entities, replacing the services currently managed by 67 councils.

Why is this needed?

This reform is needed to ensure all New Zealanders can enjoy safe, affordable and sustainable drinking water, wastewater and stormwater services – now and in the future.

The signs of a system at breaking point are all around us: regular or permanent boil-water notices,  broken pipes, outdated sewage plants, environmental harm, and poor resilience to climate change. Addressing these issues is essential for the health and well-being of our communities and our environment.

We cannot risk potential repeats of the Havelock North campylobacter outbreak that made more than 5,000 residents sick and is thought to have killed four people from drinking public water supplies. An estimated 34,000 New Zealanders get sick from drinking water annually.

What will this cost to fix?

The investment needed to fix our failing systems and to build and maintain the required infrastructure in the future has been estimated at between $120 billion and $185 billion over the next 30 years. This will be beyond the reach of many communities.

How long have we known about these challenges?

For more than 20 years, successive governments have talked about New Zealand’s water infrastructure problems without fixing them, including conversations with local government. Reports from several sources in the intervening years have pointed to the need for urgent reform.

What has led to this situation?

Historical underinvestment by councils in water infrastructure, increasing public expectations, stricter water safety and environmental regulations, the need to account for growth, and building resilience to climate change and seismic events have all contributed towards these very steep affordability challenges.

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Why will these new water providers be better than the current system?

These new water providers will have the significant advantages of:

• superior long-term financing arrangements through balance-sheet separation from debt-constrained councils;
• spreading costs across larger areas over time;
• operational efficiencies;
• the ability to plan, fund and deliver more resilient and reliable water infrastructure across regions and communities;  
• developing and maintaining workforce capability and capacity through more sustainable career pathways in the water industry into the future.

How is the Government supporting communities through these reforms?

Around  $3 billion is being provided to the local government sector to continue investing in three waters infrastructure and to support the move to these new entities. This funding includes:

• a three waters infrastructure investment for councils of $523 million, announced in July 2020;
• an investment of $2 billion into the future for local government and community wellbeing, consistent with the priorities of both central and local government, announced in July 2021; and
• an allocation of up to around $500 million to ensure that no local authority is in a materially worse position financially to provide services to its community as a direct result of the reform.

In addition, a $296 million contingency package to support transition and establishment of the new water services providers was announced in Budget 2021.

This will ensure we continue to finance critical services during transition, allow local authorities to invest in their communities, and guarantees all councils will be better off as a result.

What will these reforms mean for communities?

All communities in New Zealand will benefit by receiving better quality water services while all paying less than they would without reform.

Rather than piecemeal solutions, comprehensive, system-wide reform is needed to achieve lasting and sustainable benefits for the local government sector, our communities including iwi/Māori, and the environment.

What will be the costs to households / ratepayers?

The analysis shows that without reform the cost per household could be between $1,900 and $9,000 per year over the next 30 years, depending on location. With reform, costs are projected to range between $800 and $1,640. This represents a much lower average cost per household.

Will communities still own the water infrastructure?

The Government is not confiscating, buying or selling assets, just proposing to introduce a better, safer, more cost-effective way of ensuring that our communities have good-quality water services for generations to come.

The communities that have paid for existing assets will continue to receive these services. The underground pipes are staying where they are.

Councils will collectively own the water services entities providing services for their district, on behalf of their communities.

Communities will therefore retain an influence on three waters assets and services through their council and through other consumer and community interest forums.

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How can communities be sure these assets will not be privatised?

Continued public ownership of these water services is a bottom line for the Government. Safeguards against future privatisation will be written into legislation to maintain ongoing ownership of the new entities by local authorities elected by communities. Beyond that, the Government will make communities the ultimate guardians of public ownership through a public referendum with any future proposal for privatisation requiring 75 per cent of votes in favour to carry it.

Additionally, any surpluses would have to be reinvested in water services to address significant infrastructure deficits, making the entities an unattractive proposition for investors. The involvement of iwi/Māori, with councils, in the strategic oversight and direction of the entities will enhance these protections.

The new water authorities will exist to ensure safe, affordable, resilient and environmentally responsible supplies of water services for their communities rather than to turn a profit.

Will communities be able to input into the new entities?

The water entities will have to directly consult with their customers, businesses, and residents on their strategic direction, investment priorities, their prices and charges to a level that will likely exceed the current requirements on local government.

How can communities be sure they will get a fair deal?

A water watchdog in the form of an economic regulation regime will ensure that appropriate investment in these services is maintained and that water users pay fair and reasonable prices for them.

What will these reforms mean for iwi/Māori?

The reform provides a step change for iwi/Māori to participate in the delivery of three water services.  These include a range of new legislative protections, joint oversight arrangements and mechanisms to enable local expression of Te Mana o Te Wai.

What are the new opportunities for iwi/Māori?

There are several new areas of opportunity for iwi/Māori:

• Oversight – Mana whenua will participate in the joint oversight of the new entities.  Representative interests will need to be determined by Māori for Māori through a Kaupapa Māori process. In some entity areas these processes have begun. More detail on this will be available over the coming months.
• New entity operation – The proposed water services entities will be required to have significant cultural and local expertise. This will provide local opportunities for Māori to participate in the new delivery arrangements.
• Te Mana o Te Wai – the reform will provide for local expression of Te Mana o Te Wai that will enable development of Mauri frameworks, application of mātauranga Māori measurement or any other expression that iwi decide is relevant to them.
• Local opportunities – Economic analysis projects that the reforms will create 6,000 to 9,000 jobs over the next 30 years and that reforms will grow GDP by $14 billion to $23 billion over the next 30 years.  Iwi/Māori will have the ability to participate in delivery of this investment in local infrastructure.

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How will the reforms impact on Treaty settlements?

The core principle is that redress set out in Treaty settlement legislation will continue to apply and, where relevant, be explicitly provided for in the new regime.

It is expected that protection for current Treaty settlements will be within the suite of establishing legislation.

What will it mean for council water workers?

Council employees that primarily work on water services will be guaranteed a role with the new water service entities that retain key features of their current role, salary, location, leave and hours/days of work.

Economic analysis projects that the reforms will create 6,000 to 9,000 jobs over the next 30 years.

Are there other advantages to these reforms?

The analysis indicates that the reforms will grow GDP by $14 billion to $23 billion over the next 30 years.

When will public consultation on the reforms occur?

The Government has taken a decision to progress the reforms nationally. It is therefore appropriate that public consultation on these reforms occurs nationally rather than via local government.

There will be several opportunities for public consultation over the coming years as the reforms are expected to involve multiple pieces of legislation to implement. Progression of this legislation will include the opportunity for public submissions via the select committee process. We anticipate the first of these pieces of legislation to be introduced to Parliament this year.

The Ministry of Business, Innovation and Employment is also expected to release a discussion document on the economic regulatory regime and consumer protections in October 2021.

This public consultation is in addition to the Government’s ongoing work with councils, iwi and industry to refine the design features of the reforms and work through transition to, and establishment of, the new entities. 

What alternative reform options has the Government considered?

The issues facing New Zealand’s three waters system have been known about and avoided for more than two decades. Funding historical infrastructure deficits, meeting future costs associated with rising safety and environmental standards, supporting growth and building resilience to natural hazards and climate change has left councils facing urgent challenges in the provision of these services that can no longer be deferred or ignored.

The Government has been investigating potential options for addressing these for four years using the best of international and local expertise – and has robustly tested the options with oversight and guidance of the joint Central/Local Government steering committee.

This includes assessing options such as central government funding for the status quo, sector-led shared service delivery and regional models, introducing a national centralised fund similar to the NZTA-type model, and regulatory reform alone. The Water Industry Commission for Scotland also assessed 30 different aggregation scenarios ranging from two to 16 entities.

The Government have not been presented with any alternative proposals that would deliver the range of objectives and ambitions we are seeking to achieve for all New Zealanders or do so in a way that could be applied across the country without resulting in large geographic differences in service delivery outcomes and cost.

For many of parts of the country, alternatives would likely be unsustainable and unaffordable. Experiences in overseas jurisdictions also demonstrate that political compromises regarding the number of entities can lead to subsequent, costly rounds of further reform.

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What has changed as a result of council feedback (out of the eight-week period)?

The constructive feedback from councils through the 8-week engagement period has helped identify areas for refinement of the new entities – such as in the area of representation and accountability.

The Government continues to work in good faith with local government to refine the outstanding details of the reforms design, particularly when it comes to local government  and community influence and interaction with the new entities. 

Cabinet has agreed to establish three technical reference groups, similar to the Stormwater Technical Working Group, that will include, iwi and local government experts. These groups will help refine the reform proposals with regard to oversight and accountability; rural supplies; and the resource management interface.

This further work will be conducted within the government’s reform bottom lines of good governance, partnership with mana whenua, public ownership and operational and financial autonomy.

Will there be a loss of (local) control/influence over water assets/services?

Water services will remain in the ownership of the community they are serving. Continued public ownership of three waters water services and infrastructure is a bottom line for the Government.

Several protections have been built into the recommended approach to safeguard against any possible future ownership changes. These increase the protections over current arrangements. Oversight will be shared through a local Representative Group made up of local councils and mana whenua – which will set expectations for the entity and select an independent panel to appoint an entity board.

Each entity will be required to engage with communities in a meaningful and effective manner on all key documents and report on how consumer and community feedback was incorporated into decision-making.

Is the Government selling council / local assets?

The Government is not confiscating, buying or selling assets, just proposing to introduce a better, safer, more cost-effective way of ensuring that our communities have good-quality water services for generations to come.

Water Services Entities Bill

What does this Bill do?

The Water Services Entities Bill provides the legislative basis to establish the four new publicly-owned water services entities which will be responsible for providing safe, reliable and efficient drinking water, wastewater, and stormwater services to New Zealanders from July 2024 onward.

The Bill sets out the ownership, governance, accountability arrangements relating to these entities and includes essential provisions for ongoing public ownership and engagement, and safeguards against future privatisation.

The Bill also provides for transitional arrangements relating to the establishment and governance of the new entities; strategic direction, planning and reporting; employment; and the oversight powers of the Department of Internal Affairs during establishment.

This legislation does not transfer assets and liabilities from local authorities to water services entities, or establish powers and functions for the entities in relation to managing the provision of water services. These matters are intended to be addressed in a second bill, which will also integrate the entities into other regulatory systems, such as the resource management and economic regulatory regimes. This future legislation is anticipated in 2022.

Why is this legislation needed?

New Zealand is facing system-wide problems across its three waters services – drinking water, wastewater and stormwater – like persistent boil-water or do-not-drink notices, burst wastewater and stormwater pipes, and raw sewage spilling onto beaches and into rivers.

This has led to around 34,000 people getting sick each year, and in 2016 four people died from contaminated water.

The investment needed over the next 30 to 40 years to maintain and upgrade New Zealand’s three waters infrastructure to a standard required to address these problems will run to an amount that is beyond the reach of most communities under the current arrangements where the three waters are managed by 67 local authorities.

By providing for the establishment of four water services delivery entities, this Bill paves the way for improved, effective and efficient management of three waters service delivery and infrastructure so that all New Zealanders will have continued and ongoing access to safe, reliable and affordable drinking water, and wastewater and stormwater services that meet our environmental and cultural expectations.

Improving the three waters is essential for public health and wellbeing, environmental outcomes, economic growth and job creation, supporting housing and urban development, mitigating the impacts of climate change, building resilience to natural hazards, and recognising and upholding iwi/Māori rights and interests relating to water services.

What opportunity does the public get to have their say on the reforms?

As a national reform it is appropriate that public consultation on these reforms is undertaken nationally, as part of a select committee process.

Members of the public, iwi, industry and local government are encouraged to read the Bill and have their say through this select committee process. Some councils may also wish to consult their communities in making their submissions to the select committee.

What is the anticipated timeline for the Bill?

The Bill will receive its First Reading and be referred to select committee before Parliament rises at the end of 2021. Submissions on the Bill will be open until March 2022.

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How does this Bill uphold iwi/Maori interests?

This Bill contains robust mechanisms to provide for, and promote, iwi/Māori rights and interests. The board of an entity must have expertise in the Treaty of Waitangi and te ao Māori, and must ensure that the entity has the capability and capacity to give effect to the principles of the Treaty of Waitangi.

Entities are also required to give effect to Te Mana o te Wai, and mana whenua whose rohe or takiwā is in the entity’s area can make a Te Mana o te Wai statement setting out how, in their view, an entity should do this.

The Bill also provides strong protections for Treaty settlements to ensure they are enduring. The Bill provides that, where there is any inconsistency with a Treaty settlement obligation, the Treaty settlement prevails. Alongside that, entities have an operating principle that they must give effect to Treaty settlements.

Councils and mana whenua have also entered into detailed arrangements relating to three waters services, and engagement is underway to identify these arrangements and ensure they are safeguarded. These arrangements will be carried forward in a second Bill to be introduced next year.

What protections against future privatisation are provided by this legislation?

Continued public ownership of these water services is a bottom line for the Government.

Safeguards against future privatisation are written into this legislation to maintain ongoing public ownership of the new entities. This includes making communities the ultimate guardians of public ownership through a provision for a public referendum with any future proposal for privatisation requiring 75 per cent of votes in favour to carry it.

The new water authorities will exist to ensure safe, affordable, resilient and environmentally responsible supplies of water services for their communities rather than to turn a profit.

How has this Bill been informed by feedback from the local government sector during the recent engagement through August and September 2021?

In response to concerns raised by local government the Bill incorporates improvements to governance and accountability of the new water services entities, including:

• greater flexibility for each regional representative group to determine its own governance arrangements
• the board appointment panel to be a committee of the regional representative group
• direct accountability of the entity board to the regional representative group
• the board to give effect to strategic and performance expectations of the regional representative group.

These improvements to the Bill do not pre-empt further changes that may be suggested by the Working Group on Representation, Governance and Accountability, which will be considered later in the legislative process. The Working Group’s report will be available to the Government and the select committee and considered before the legislation is reported back to the House.