Ko te wai te ora ngā mea katoa. Water is the life giver of all things.
26.1. The Commission’s terms of reference invite it to investigate what ownership, governance, institutional arrangements, and funding responsibilities are required to ensure the effective, efficient, and sustainable provision of public infrastructure, services, and facilities.1
26.2. Services relating to the three waters (water, stormwater, and wastewater), and the management of the infrastructure that underpins those services, are of critical importance to the well-being of the Auckland region. The supply of adequate drinking water and the removal/treatment of wastewater and stormwater are some of the most fundamental needs of towns and cities. These services play a vital role in ensuring the health and safety of the community, a productive economy, and a healthy environment.
26.3. All of Auckland’s water supply and disposal infrastructure is publicly owned (including in Papakura where water service operations are contracted to a private company). It constitutes a significant proportion of the region’s assets. The assets of Watercare Services Limited (Watercare) alone are valued at around $2 billion.2 In 2006/07 the Auckland water services industry had revenue of around $600 million.
26.4. Access to water is a fundamental human right. New Zealand has ratified the International Covenant on Economic, Social and Cultural Rights and the General Comment on Water. This provides that
The human right to water entitles everyone to efficient, affordable, physically accessible, safe and acceptable water for personal and domestic uses.3
26.5. Some of the key issues the Commission addresses in this chapter are
26.6. One of the most important decisions is whether or not the industry should be integrated, with a single regional body providing all water services in the Auckland region. In making this decision, the Commission focused on whether integration would result in appropriate environmental management, better demand management, and cost savings so that prices can be restrained.
26.7. This chapter is structured as follows
Appendix 26.1 provides a historical background to the water industry in today’s Auckland region.
26.8. As is required by its terms of reference, the Commission’s recommendations relate to the Auckland region only. The Commission notes, however, that a recent report suggests that water services should be addressed on a national basis, and that there should be a national regulatory body.4 It recommends that the regulatory body should, amongst other things, develop and administer pricing controls on the provision of water and wastewater services to customers when these are billed on a volumetric basis, and should administer and allocate resources available in any central government funding programmes.5
26.9. The Auckland water services industry is not in a state of crisis, but neither is it working as well as it should.
26.10. The Auckland region is fortunate to have good sources of water. There are 10 large, water-storage lakes in the Waitakere and Hunua ranges. There are also a number of smaller, underground sources. Around 10% of the region’s water is drawn from the Waikato River, and this figure is likely to increase. The Waikato River is an important backstop source, although water drawn from there is more expensive because of the cost of pumping it to Auckland.
26.11. The quality of treated water in Auckland is high by both New Zealand and international standards, with a Ministry of Health “Aa” grading (see discussion at paragraphs 26.82–26.84).
26.12. The two wastewater treatment plants at Mangere and Rosedale are also of high quality, helping to minimise the environmental impact of treated wastewater entering our harbours.
26.13. Aucklanders are not profligate water users. By international standards, Auckland’s water use is fairly moderate and has remained relatively static in recent years (see paragraphs 26.114–26.115). Nonetheless, significant savings could be made if per capita demand for water were reduced. Hundreds of millions of dollars could be saved through deferred capital expenditure on water and wastewater infrastructure if water demand management were applied consistently throughout Auckland (see paragraph 26.125).
26.14. One obstacle to water conservation is the age and condition of the pipe network, which in some areas is plagued by leaks. For example, Metrowater has water-loss rates of around 18%,6 or more than 7 million cubic metres per year.7 This equates to more than $2.5 million worth of water,8 which must be paid for through higher water costs for the remaining water. Metrowater is working to address this issue.9
26.15. The total volume of treated potable water lost each year through leaks from the networks of Auckland’s water retailers is around 16 million cubic metres, representing 11% of the water volume processed by these organisations annually.10
26.16. Another obstacle to water conservation is the different priorities applied by each of the seven water retailers in Auckland. Some are much more committed to demand management than others. It is understandable that the water retailers, who are not directly responsible for the large capital expenditure involved in sourcing and treating water, and who make money from selling water, may not always emphasise demand management principles which could help defer expenditure.
26.17. One significant operational concern, which represents a major environmental threat, is in relation to stormwater. There is no detailed plan for stormwater management and funding in Auckland. Runoff, from roads in particular, is degrading and polluting Auckland’s waterways. In wet weather, a combination of groundwater and stormwater infiltrates the wastewater networks and causes overflows of sewage. Contaminant levels in some estuarine sediments and freshwater streams have reached, and often exceed, the recognised international sediment quality criteria for the protection of aquatic life.11
26.18. In terms of governance, the Auckland water services industry is beset by the same problems which the Commission has encountered in relation to many other areas. In particular, numerous plans and reports have been prepared but because of the fragmented nature of the industry they have resulted in little action (see paragraphs 26.62–26.81).
26.19. There is a different water retailer in each of the seven districts/cities in Auckland. In some areas, a council department is responsible for retail water supply. In other areas, retail water supply has been outsourced to an independent provider. In each area, different philosophies and priorities apply. For example, in Manukau City priority is placed on keeping water affordable, and in Waitakere City greater priority is placed on environmental concerns. The retail price of water varies markedly across the region (see paragraphs 26.58–26.61).
26.20. The fragmentation of the industry has also led to poor regional planning and decision making. The industry has acknowledged this issue and is attempting to address it. Recently, all industry participants agreed on a joint planning initiative called the Three Waters Project. This is a voluntary process in which industry participants develop an agreed strategy to manage regional water, wastewater, and stormwater issues (see paragraphs 26.75–26.81).
26.21. The Three Waters process has been helpful, but because it is a voluntary process it is not suitable for resolving difficult or contentious issues. Even if an agreement can be reached on a particular issue, that agreement is not binding. Issues can be revisited time and time again, and often are. For example, the Three Waters process has previously identified the Rosedale Wastewater Treatment Plant, owned by the North Shore City Council, as the most appropriate choice for a second regional wastewater treatment facility once the Mangere Wastewater Treatment Plant reaches capacity. The Rosedale plant can potentially service 1.5 million people and no other option is as cost-effective for the region. Nonetheless, the adoption of the Rosedale plant as a regional facility is in doubt, because there is no entity with the power to make it happen (see paragraphs 26.88–26.94).
26.22. Similarly, the Commission was advised that proposals to develop consistent infrastructure design standards, particularly for wastewater pipelines, have been rejected. As a result, under current arrangements there is no consistency in the type of pipes used in the network, with obvious cost implications.
26.23. Since 2003, members of the industry have also cooperated to produce an extremely useful and well-presented publication called the Auckland Water Industry Annual Performance Review, which compares the performance of industry participants across a range of key indicators. Under present arrangements, however, it is not clear what use is made of this report.
26.24. There is one wholesale supplier of bulk water in the Auckland region – Watercare. Watercare supplies bulk water to six of the seven territorial authorities. Franklin District Council has its own water supply scheme.
26.25. All of the seven territorial authorities provide retail water and wastewater services in their districts. Four (Rodney, North Shore, Waitakere, and Franklin) do so directly. Two others (Auckland and Manukau) provide these services through council-controlled organisations (“CCOs”), Metrowater and Manukau Water respectively. Papakura District Council provides these services under a franchise agreement with United Water, a privately-owned organisation.
26.26. Watercare provides wastewater treatment and disposal services to four of the six councils to which it supplies bulk water. North Shore City Council and Rodney District Council undertake their own wastewater treatment and disposal, and there are also a number of smaller plants across the region.
26.27. All local authorities are individually responsible for provision of stormwater services.
26.28. There is one environmental regulator for water quality and coastal water management for the whole region – the Auckland Regional Council (“ARC”). It is possible that some environmental issues will be regulated at a national level at some stage in the future (see paragraph 26.143)
26.29. All of the region’s water infrastructure is publicly owned. Some of the pipe network is regional, and is owned by Watercare. Other parts of the network are owned by the seven territorial authorities.
26.30. Watercare is a council-owned organisation (“CO”). A CO is an organisation in which a local authority (or authorities) holds or controls some voting rights or has the right to appoint one or more of the directors. In other words, a local authority has an interest in the organisation’s governance, but not necessarily a controlling interest. (This is a key difference between a CO and a CCO. CCOs are more closely controlled by their local authority owners, who hold at least 50% of the voting rights or have the right to appoint at least 50% of the directors.)
26.31. There are, however, a number of Watercare-specific provisions in the Local Government Act 1974 that make its governance structures closer to those of a CCO than a CO. For example, Watercare is required to have a statement of corporate intent, like a CCO.
26.32. The 1974 Act also requires Watercare to
manage its business efficiently with a view to maintaining prices for water and wastewater services at the minimum levels consistent with the effective conduct of that business and the maintenance of the long-term integrity of its assets.12
26.33. Watercare’s governance arrangements are complex and somewhat unusual.13 Watercare is owned by the six territorial authorities it supplies, and the number of shares of each of the six territorial authorities is based on the number of water connections in each area. Auckland City Council has the greatest shareholding in Watercare (41.6%), followed by Manukau City Council (25.1%).
26.34. The shareholders are represented by the Watercare Shareholders’ Representative Group, which comprises two representatives from each of the shareholding councils. Decisions of the Shareholders’ Representative Group are binding on all shareholders provided they are made by representatives who together hold at least 75% of all shares in Watercare. The Shareholders’ Representative Group is assisted by an Officers’ Working Group made up of employees from the shareholding councils.
26.35. Watercare also has a seven-member board of directors who are appointed by the Shareholders’ Representative Group to manage the organisation. The relationship between the board of directors and the Shareholders’ Representative Group is often a point of tension.
26.36. The objectives of Watercare are set out in an annual statement of corporate intent, which is a published document that contains both strategic directions and key initiatives and performance targets that have been agreed on by both the board and the Shareholders’ Representative Group. For example, Watercare’s current statement of corporate intent includes the following targets:14
26.37. Watercare has two standing consultative and advisory committees which provide input into company plans and projects:
26.38. Watercare draws water from 12 sources (10 water-storage lakes, one underground water source, and the Waikato River). It treats the water and supplies it to six local network operators, who on-sell it to more than 1.2 million customers in the Auckland region.
26.39. Watercare also operates a regional wastewater network. It receives wastewater from four local network operators (Auckland City, Waitakere City, Manukau Water, and United Water) and treats it at the Mangere Wastewater Treatment Plant. It also regulates trade waste discharges from businesses and has over 600 trade waste customers.16
26.40. Table 26.1 summarises Watercare’s ownership structure and the services it provides to each of the territorial authorities in the Auckland region.
26.41. Retail water and wastewater services in Manukau City are supplied by a CCO, Manukau Water Limited. Manukau Water is wholly owned by Manukau City Council, and has around 102,000 residential and commercial customers.
26.42. The ownership of retail water and wastewater assets, and the responsibility for providing these services to the community, was transferred from Manukau City Council to Manukau Water Limited on 3 July 2006.17 Manukau City Council still, however, approves the level and structure of charges for water and wastewater services. Manukau Water advised the Commission that the adoption of a CCO model has led to increased efficiencies.
Table 26.1 Watercare Services Limited’s ownership structure and services
| Watercare’s owners | Shareholding % | Customers | Bulk water | Wastewater collection and treatment |
| Auckland City Council | 41.6 | Metrowater (wholly owned by Auckland City Council) | ||
| Manukau City Council | 25.1 | Manukau Water (wholly owned by Manukau City Council) | ||
| Waitakere City Council | 16.7 | Waitakere City Council | ||
| North Shore City Council | 11.5 | North Shore City Council | – | |
| Papakura District Council | 3.7 | United Water (operates under a franchise agreement with Papakura District Council) | ||
| Rodney District Council | 1.4 | Rodney District Council) | – | |
| Franklin District Council | – | – | – | – |
Source: Adapted from Watercare Services Limited, Annual Report 2007.
26.43. Manukau Water purchases bulk water and wastewater supply, collection, and treatment services from Watercare. It manages some of its own wastewater treatment at a plant at Beachlands, and has an initiative under way for a wastewater system for the Kawakawa Bay community.
26.44. In the Papakura District, retail water and wastewater services are provided by a private company, United Water International Pty Limited (United Water). In April 1997, Papakura District Council entered into a 30-year franchise agreement (with a 20-year right of renewal) with United Water to provide water services to around 15,000 residential and commercial customers in Papakura. United Water is responsible for the setting of tariffs and customer billing, subject to certain contractual constraints. The most important of these constraints is a requirement that the prices charged are lower than the regional average.
26.45. Papakura District Council has retained ownership of the relevant assets, which include water and sewerage mains, one pumping station, and one header tank/reservoir. The franchise agreement requires that the assets be in better condition at the end of the franchise agreement period than they were at the beginning of this period.
26.46. The franchise agreement also requires United Water to extend, modify, replace, and repair, at its cost, the infrastructural assets as required in order to provide effective water services in Papakura District. All permanent improvements become the property of Papakura District Council.
26.47. The operation of the franchise agreement is monitored through independent reviews of United Water’s pricing structure each year, and five-yearly reviews of the condition of the assets. These reviews are carried out by Papakura District Council’s engineering consultants, who also carry out ongoing reviews of water quality in conjunction with the Department of Health and Watercare. The Commission was advised by Papakura District Council that the terms of the agreement can make it difficult to monitor the contract effectively.
26.48. Retail water and wastewater services in Auckland City are supplied by a CCO, Metrowater. Metrowater is wholly owned by Auckland City Council. It has a six-person board of directors, who are responsible to the council. Auckland City Council approves the level and structure of water charges.18
26.49. Metrowater supplies retail water services to around 167,000 residential and commercial customers. It also collects wastewater and transports it to Watercare’s wastewater mains for treatment at the Mangere Wastewater Treatment Plant.
26.50. The islands of the Hauraki Gulf, such as Waiheke, Great Barrier and Rakino Islands, are not connected to Auckland City’s water or wastewater networks. Island residents rely on water collected in rainwater tanks for drinking water and septic tanks for wastewater disposal. There is also a small-scale wastewater treatment plant on Waiheke, which is owned and operated by Metrowater. It services some commercial areas where on-site disposal systems had become unsatisfactory.
26.51. Retail water services in North Shore City are provided by the council directly, not via a CCO or third party. North Shore City Council purchases bulk potable water from Watercare and delivers it through the council’s pipe network to around 74,000 residential and commercial customers.
26.52. Wastewater is pumped to the Rosedale Wastewater Treatment Plant, which is also owned by North Shore City Council. After treatment, the effluent is discharged through an outfall pipe into the sea. The current outfall pipe is 600 m long – a $116 million project is under way to install a new outfall pipe which is over 2.5 km long and has a capacity six times greater than the current outfall pipe.19
26.53. Retail water services in Rodney District are provided by the council directly, not via a CCO or third party. Rodney District Council services around 18,000 residential and commercial customers. Being a rural area, large parts of Rodney District have neither water nor wastewater reticulation services.
26.54. Rodney District Council purchases bulk potable water from Watercare to service the Hibiscus Coast area, but otherwise relies on separate sources within Rodney District, such as bores and rivers, for the district’s water supply. Rodney District Council also provides all wastewater services within its area.
26.55. Water services in Waitakere City are provided by the council directly, not by a CCO or third party. Waitakere City Council purchases around 16 million cubic metres of bulk potable water from Watercare each year, which it distributes to around 61,000 residential and commercial customers. It also collects wastewater and transports it to Watercare’s wastewater mains for treatment at the Mangere Wastewater Treatment Plant.
26.56. Water services in the Franklin District are provided by the council directly, not via a CCO or third party. The council has around 13,000 residential and commercial customers.
26.57. Franklin is unique in that it is not connected to the rest of the Auckland region’s water, wastewater, or stormwater infrastructure. Franklin District Council owns, maintains, and develops its own 11 water and six wastewater treatment plants and associated reticulation systems.
26.58. Throughout the Auckland region, water is metered and charges reflect the actual amount of water used. This is quite unusual in New Zealand at present. The introduction of metering and volumetric charging for water has assisted in moderating demand (see paragraph 26.116).
26.59. The price charged for water varies throughout the Auckland region. For example, it is $1.28 per cubic metre in Manukau City, and $1.48 per cubic metre in Waitakere City. Direct pricing comparisons are complicated, however, as there are also variations in service fees (annual fees, connection fees, and so forth), and prompt payment discounts.
26.60. Most wastewater and stormwater services are funded through rates. However, Auckland City and Papakura District wastewater charges are based on water consumption as a proxy for a volumetric charge. Non-residential users in Manukau City also pay for wastewater on the basis of a notional volumetric charge.
26.61. In Auckland City, Metrowater’s residential wastewater charges are based on 75% of the total water supplied. For example, a customer using 1,000 litres of water would be charged for 750 litres of wastewater. (The other 25% is an allowance for water used in the garden, which does not enter the wastewater system.) In the Papakura District, United Water’s wastewater charges are based on 80% of the total water supplied.
26.62. Auckland’s water services industry has been the subject of numerous reviews, which were made available to the Commission.20 Many of these reviews identified the same issues, such as the benefits of regional decision making, but unfortunately have resulted in little action.
26.63. In November 1998, the Government announced a review of the delivery of water services in the Auckland region. As a result, in May 2000 an industry stakeholders’ forum was held. All the territorial authorities in the Auckland region (except Franklin District Council which has its own separate structure for water services) participated in this review.
26.64. The key conclusions included the following:
26.65. Many of these issues still face Auckland’s water services industry today.
26.66. In December 2000 and February 2001, the participating territorial authorities endorsed three possible options for reform, which were put to the public for consultation.21 These were described as follows:
26.67. All three options required
26.68. A possible fourth option (two vertically integrated entities consisting of “Northwest Water” serving Rodney, North Shore, and Waitakere, and “Southeast Water” serving Auckland, Manukau, and Papakura) was rejected.
26.69. A Cap Gemini Ernst & Young report dated 30 June 2000, which was prepared for the key industry participants, identified significant potential savings that could be achieved as a result of integration.23 It concluded that annual operating cost savings of 5% (excluding implementation costs and tax) would be possible if the industry were fully integrated (that is, if the “one provider” option were adopted).24 It noted that establishing a fully integrated entity would ensure effective decision making concerning investment. It also observed, however, that adopting a fully integrated model would require significant reliance upon governance and regulatory frameworks to place external checks on investment decisions.
26.70. In February–March 2001, consultation was undertaken with the general public. This process included public submissions and hearings. The “one provider” option was preferred by most of the respondents (68%).25
26.71. However, the industry reform and regulatory review process then stalled. In part this was because of a lack of consensus amongst industry stakeholders.
26.72. A number of other reviews have been carried out in relation to Auckland’s water services industry in recent years. The most recent of these, dated July 2006, was carried out by Saha International Limited and included a summary of 11 prior expert reports on the industry.26
26.73. The Saha report highlighted a number of concerns in relation to Auckland’s water services industry, including the following:
26.74. According to the Saha Report, investment planning needed to be better integrated, both across the “three waters” and across the region as a whole.
26.75. The Three Waters Project is a joint planning initiative between all territorial local authorities and local network operators in the region. It started in November 2004 and is being led and facilitated by Watercare. The ARC, as the regional regulator of water quality, is participating as an observer.
26.76. The Three Waters Project is a voluntary process in which industry participants agree on the best way in which to approach various regional issues. Its purpose is to develop an agreed strategy for the delivery of water services in the Auckland region to the year 2100.
26.77. In order for an issue to be considered as part of the Three Waters Project, the delivery of the outcome must require significant joint planning at a regional and local level. Generally, there is a minimum requirement of $10 million cost for an issue to qualify for inclusion in the process.
26.78. Stakeholder participation in the Three Waters Project has proved variable. Some of the organisations involved have participated actively, attended most meetings, and provided detailed responses to draft documents. They have a good understanding of the regional issues and have participated in robust, constructive debates on all key aspects. Other organisations have been less committed to the process.
26.79. A draft Three Waters Strategic Plan was published in April 2008.27 It proposed a number of key strategic directions,28 including
26.80. Industry stakeholders have recently provided submissions on the draft. The responses demonstrate a mixed level of support for the sort of regional initiatives outlined above. It is clearly difficult to obtain a regional consensus on strategic issues, particularly as many of the stakeholders involved are under statutory obligations to operate in the interests of their particular area.
26.81. Another difficulty is that industry stakeholders who may have supported a particular strategy at the time the draft plan was prepared, subsequently took a different view. One reason for this is the electoral cycle – the constant influx of newly elected representatives makes voluntary, long-term cooperation difficult. Naturally enough, local body members are reluctant to be bound by the comments and views expressed by their predecessors, but this causes problems with long-term planning. The Three Waters Final 2008 Strategic Plan, which also includes the three key strategic directions referred to above, was published in December 2008.32
26.82. The quality of the Auckland region’s water supply is generally of a high standard, with a Ministry of Health “Aa” grading. Recent upgrades have been undertaken to collection and treatment assets in the region.
26.83. Until very recently, New Zealand had been unusual among developed nations in relying almost entirely on voluntary mechanisms to safeguard the treatment and distribution of drinking water. However, the Health (Drinking Water) Amendment Act was enacted in 2007, requiring suppliers to take all reasonably practicable steps to comply with the New Zealand Drinking Water Standards. These standards have existed since 1984 but compliance with them was not mandatory.
26.84. The introduction of this Act will increase compliance costs in relation to the water services industry nationally, but the Commission understands that most of Auckland’s water supply already complies with the new Act
26.85. Wastewater is water disposed of from homes, offices, and industry. It comes from toilets, sinks, showers, washing machines, and industrial processes.
26.86. Around 133 million cubic metres of wastewater is treated in the region annually.33 Most of this (104 million cubic metres) is treated by Watercare at its Mangere Wastewater Treatment Plant.34 A further 21 million cubic metres is treated by North Shore City Council at its Rosedale Wastewater Treatment Plant.35 There are also a number of smaller, local treatment plants.
26.87. The wastewater treatment plants at Mangere and Rosedale are both state-of-the-art and provide a high level of treatment. However, the wastewater reticulation network in older parts of the Auckland region is inadequate. Particularly in Auckland City, some of the pipes are too small and some are old and damaged, allowing infiltration from stormwater and groundwater.
26.88. One of the most important challenges facing the Auckland water industry at present is identifying a second regional wastewater treatment facility. The average daily flow limits of the existing resource consents at the Mangere plant will be reached by about 2027. Even if the resource consents were extended, allowing for increased discharges, the Mangere Wastewater Treatment Plant is expected to reach its full capacity between 2050 and 2070.36
26.89. One possibility for a second regional facility would be extending the Rosedale Wastewater Treatment Plant at Albany, which is owned by the North Shore City Council. It was recently upgraded to service around 225,000 people. If it were extended further, it could potentially service around 1.5 million people.37
25.90. There are two other possible options (a western plant or a central plant), but these are both unproven possibilities and would be much more expensive even if they proved to be feasible. It has not yet been confirmed whether the site identified for the western plant is suitable for wastewater treatment, and no specific disposal site has been identified. In the case of the central plant option, no site for wastewater treatment has been found and no specific disposal site has been identified. There would also be major resource consent issues with both of these options.
25.91. Indicative costs for a Rosedale expansion and the two other potential options are38
25.92. The Commission understands that while there would also be resource consent issues involved in extending the Rosedale plant, upgrading could be undertaken within current consent loads for nitrogen (the key constraint).
25.93. The Three Waters Final Strategic Plan concluded, after comprehensive investigation, that
In a fully regional context … there do not appear to be any compelling reasons for not using Rosedale as a second regional facility, provided appropriate controls are put in place.40
25.94. Nonetheless, the Commission understands that North Shore City Council is still requesting that further investigations be carried out to try and identify another site.
26.95. Stormwater is rain that runs off roofs, roads, and other impermeable surfaces. The Resource Management Act 1991 recognises stormwater as both a natural resource to be protected and a hazard to be managed carefully.41 Captured as drinking water, it is a valuable resource.
26.96. Generally, stormwater is channelled through the stormwater drainage system to outfalls in streams and on beaches – or, in areas with volcanic soils, to soak holes in the underlying rock.
26.97. Stormwater is not usually treated before it runs into the environment. Toxic pollutants from cars, as well as animal wastes, oils, and sediments, are mixed with the stormwater runoff. These substances pollute fresh and marine water environments and pose a public health risk. It is estimated that approximately 50% of stormwater contaminants are contributed by transport systems such as roads.42
26.98. Population growth in the Auckland region has increased the total area of impervious surfaces. Impervious surfaces generate greater volumes and peak flows of stormwater. Where there is natural ground cover, only 10% of rainfall runs off the surface. In an urbanised environment, runoff volume can increase to as much as 95%.43 Excessive stormwater flows result in
26.99. Each of the seven territorial authorities owns and operates its own stormwater assets, and each imposes different rules about issues such as the location of stormwater soak holes and permitted levels of impermeable surfaces.
26.100. Stormwater management and infrastructure is typically funded from rates income. This funding source has proved to be inadequate44 and stormwater is still causing serious environmental problems across the region – stormwater runoff is often highly polluted, contaminating waterways. A 2004 report on Auckland’s stormwater observed,
Auckland’s stormwater problems have now reached a critical point. Contamination of the region’s harbours has been building over time, and has therefore escaped the attention of the Auckland community. However, the effects are difficult to reverse, and even maintaining current quality levels requires a significant increase in stormwater investment. Action needs to be taken now, to limit the levels of further degradation.45
26.101. In 1992, the Auckland Regional Services Trust was established to manage regional assets such as the Ports of Auckland.46 In 1998, it was replaced by Infrastructure Auckland, which was created with the objective of using funds from its investments to address Auckland’s problems in relation to transport and stormwater47. It made available a $150 million notional allocation for stormwater capital works, targeted at improving stormwater quality.48 Territorial authorities were able to apply to Infrastructure Auckland for funding, and by May 2004, it had approved $40 million in grants for stormwater management projects.49
26.102. In February 2004, a PriceWaterhouseCoopers report highlighted the inadequacy of the remaining Infrastructure Auckland funds to address stormwater issues.50 It recommended that Infrastructure Auckland should retain its holding of funds to leverage a larger capital fund. It also recommended implementing a charge on impervious surfaces, supplemented by an allocation of road user charges.51
26.103. In March 2004, Infrastructure Auckland engaged Boston Consulting Group to work with the ARC and the territorial authorities to develop a more effective way to use the remaining stormwater funds to address regional water quality issues.52 The report concluded that there would be insufficient funds to address these issues over the next 20 years, and placed a strong emphasis on the need for regional planning and leadership in this area.53 It also recommended the implementation of targeted rates for stormwater, and suggested that the region should pursue additional funding sources for capital works. It suggested petrol taxes, emissions charges, or roading charges, because of the link between road runoff and stormwater contamination.54
26.104. Currently, issues relating to stormwater funding are still largely unresolved, and the Commission understands that at least some of the Infrastructure Auckland funds earmarked for stormwater issues were not used for that purpose. In some areas, such as Auckland City, major investment is required.
26.105. Stormwater is also an area in which close cooperation is needed between industry participants. For example, Metrowater is currently separating many of the combined wastewater/stormwater pipes in Auckland City into dedicated stormwater and wastewater systems. Keeping stormwater out of the wastewater system will reduce the number of wastewater overflows.
26.106. However, because all the pipes form part of one interconnected network such changes need to be managed carefully. Watercare needs, and has planned for, a certain amount of stormwater to dilute the wastewater it receives at the Mangere Wastewater Treatment Plant. (Also, the high level of toxic pollutants in some stormwater – particularly runoff from major roads – means that it is inappropriate for it to be flushed into natural waterways and out to sea without being treated first.)
26.107. In some cases, a more cost-effective solution to the problem of wastewater overflows is not separation of the wastewater and stormwater networks, but increasing the overall holding capacity of the system so that it does not overflow during high rainfall events. Investing in off-site holding facilities for wastewater and stormwater would enable more efficient use of the Mangere Wastewater Treatment Plant by giving greater control over its throughput at any given time. It would even out the peaks and troughs, but increase the overall average. This illustrates the importance of managing the system as a regional network.
26.108. One facility that will contribute to the holding capacity of the network is already under construction at Hobson Bay. During the design of this project, Watercare concluded that a 3.4 m diameter tunnel would be sufficient to meet regional overflow guidelines. However, through joint planning with Metrowater it was identified that building a larger, 3.7 m diameter tunnel would provide cost savings to the region of approximately $35 million, because the additional cost of the larger tunnel would be more than offset by reductions in expenditure required by Metrowater/Auckland City in relation to sewer separation.55 This is an example of successful voluntary industry cooperation.
26.109. Another, larger project for the construction of a “central interceptor” holding facility with significant capacity has been agreed to, in principle, by all industry participants. The more difficult issue of its funding (which will exceed $1 billion) is unresolved, however, highlighting the limitations of voluntary cooperation as a means of decision making.
26.110. The governance of stormwater systems is fairly complex. On the one hand, stormwater forms part of the overall water cycle and needs to be considered together with drinking water and wastewater. (In some cases, stormwater and wastewater even flow through the same pipes, mixed together.)
26.111. On the other hand, in many cases stormwater issues such as flooding and erosion are highly localised, and stormwater management is linked closely with open space management and land use. The submission from Rodney District Council said,
Stormwater has different characteristics from those of water supply and wastewater. Typically it is closely connected to land use and development, is handled through a mixture of piped networks and open channels and there is greater public interface. Spending and capital projects tend to be discretionary also. Because of the link to land use and development, meaning that stormwater problems can be improved or worsened by land use decisions, and because flooding issues are mostly highly localized, we consider that stormwater should continue to be the responsibility of territorial authorities.56
26.112. Most of the costs of water supply and disposal are tied up in infrastructure networks. Building new pipes, dams, and treatment plants may meet demand, but this can also have lasting negative effects on the environment. It also involves significant cost.
26.113. International priorities in water management planning are shifting from managing supply to managing demand and catchment management planning. The change in approach recognises that existing resources need to be better managed, with more efficient use of resources and less waste.
26.114. In New Zealand’s climate, we need a mere two litres of drinking water each day to keep us alive and healthy.57 In Auckland we have water networks that deliver, on average, over 300 litres per person per day of potable water (see Figure 26.1). This usage is fairly moderate by international standards,58 but there is room for further reduction.
26.115. In the late 1980s and early 1990s, per capita water consumption dropped. This occurred as a result of drought, the relocation of high water users such as meat works and other manufacturing industry outside the Auckland region, and the introduction of universal metering/volumetric charging. Since that time, overall water consumption per person has been relatively stable.
26.116. In the Auckland region water is metered, and the charges customers pay for reticulated water are based on the amount of water actually consumed. This is one way of encouraging consumers to be mindful of the amount of water they use. According to a report of the Parliamentary Commissioner for the Environment, “there is substantial evidence that metering leads to a marked and sustained reduction in both peak demand and annual usage. Typically in New Zealand, reductions in annual use following the introduction of metering are at least 15% as demonstrated by Auckland City Council and Tasman District Council.”59 Where metering and volumetric charges have been introduced both within New Zealand and elsewhere, peak demand has been reduced consistently by between 20% and 40%.60
26.117. Besides metering and flow-based charging, there are a number of other methods of managing demand including water audits for large users
26.118. International trends favour more stringent building regulations to help reduce water demand in the home. For example in Australia, Victoria was the first state to implement a national efficiency standard (the 5 Star Standard) in its building regulations.61 Since July 2005, all new houses and apartments in Victoria have had to meet the 5 Star Standard energy efficiency and water management requirements. The 5 Star Standard requires
26.119. From 1 May 2008, the 5 Star Standard was extended to apply to all relocated homes and alterations to existing homes.63 (Only partial compliance is required for some smaller-scale renovations.)
26.120. According to the Victorian Building Commission, residents who install a rainwater tank use 20% less reticulated drinking water.64 The use of rainwater tanks also reduces the volume of stormwater runoff from roofs.
26.121. The 2004 Auckland Water Management Plan “From the Sky to the Sea”, (a joint initiative by Watercare, the ARC and the six local network operators), set out an agreed approach to water efficiency for the region.65 This is not proving successful. The objective was to reduce per capita water demand by 5% over 20 years. A review of the Plan was carried out in late 2006, and showed that per capita consumption had increased slightly, not decreased.66
26.122. Watercare’s strategic performance objectives, set out in its statement of intent, require it to promote conservation of the region’s water resources.67
26.123. As discussed in paragraphs 26.79–26.81, the Three Waters Final Strategic Plan, published in December 2008, proposes
26.124. Regional priorities for demand management include the completion of a household study on residential water use, continued leakage reduction, initiatives for industrial water efficiency, formulation of pricing strategies that would reduce waste, and promotion of water-efficient appliances and systems.68
26.125. One of the largest potential efficiency gains to be realised in the Auckland water services industry is through demand reduction, leading to a slower rate of investment in new major capital expenditure. If the Auckland region were able to achieve 15% reduction in water demand and 10% beneficial use of stormwater and treated wastewater by 2025 as proposed in the Three Waters plan, the next major upgrade of the Waikato River source (requiring full duplication of the existing system including a new intake and raw water main, a new treatment plant, and a new treated water pumping station and pipeline into Auckland costing about $300 million) could be postponed from 2026 to around 2046. (See Figure 26.2.)
26.126. A crucial issue for the Commission to determine is whether it would be easier to monitor and regulate demand if water services planning and delivery were undertaken by a single entity (this is discussed further under the heading “Integration”).
26.127. There are differing views on this. For example, the Commission received a well-researched submission from Waitakere City Council opposing vertical integration of the water industry on the basis that (amongst other things) it would work against demand management.69 The submission identified two paradigms of water management that are prevalent worldwide:
26.128. The Commission needs to ensure the governance structures for Auckland’s water services industry reinforce and support the paradigm shift away from “predict and provide” to “sustainable use”.
26.129. Some people consider that it would be easier for a single, regional body to manage the water cycle sustainably, treating it as one interconnected network and promoting demand management consistently across the region. The Commission agrees with this view.
26.130. Water and wastewater affordability for households is an indicator which is increasingly being examined internationally.71 In the Auckland region, the average annual residential water and wastewater bill of $670 represents 0.8% of the total average household income before tax.
26.131. In real terms, water and wastewater charges have remained fairly constant in recent times. In fact, from 1999 to 2006/07 there was an effective (real) price decrease of 8% across the region. The Consumers Price Index increase from 1999 to 2006/07 was 18.7% and the cost increase in the weighted average standard residential water and wastewater bill was 10.7% over the same period.72 (See Figure 26.3.)
26.132. Water prices are now increasing in real terms, however, as a result of ongoing increases in the cost of planned maintenance, chemicals, energy, capital expenditure, and the cost of providing for growth in the Auckland region. Future water and wastewater costs are expected to exceed the rate of inflation.73
26.133. Water is an essential service, which must be made available to all residents in the Auckland region regardless of income. Water affordability will need to be monitored closely no matter what sort of governance structures are implemented.74
26.134. Māori have always valued water for practical purposes such as drinking, mahinga kai,75 transportation, and irrigation.76 Water is also a tāonga77 and is central in ritual and healing processes.78
26.135. Māori distinguish between seven different categories of water. In the context of claims before the Waitangi Tribunal, and other environmental management cases, the mixing together of different types of water has been a major concern. Practices such as diverting and combining waters from different sources or catchments, or discharging water that contains or has contained human, animal, toxic or industrial wastes into another body of water, both degrade and damage the mauri79 of the water, and are offensive to Māori.80 Māori believe that waters containing wastes and pollutants should be discharged onto the land for proper purification by Papatūānuku.81
Figure 26.3 Weighted average costs for standard residential users of water and wastewater
Source: Auckland Water Industry Annual Performance Review 2006/2007
(prepared by North Shore City Council).
26.136. As noted above, Watercare has a Māori Advisory Group, which was established to provide independent advice to Watercare’s management on activities that affect mana whenua. The Māori Advisory Group consists of individuals who meet the following criteria:
26.137. Currently, the Māori Advisory Group comprises representatives from Ngāti Whātua, Ngāti Pāoa, and Tainui.
26.138. The Commission received at least one comment expressing the view that while it is positive that this advisory group has been established, it needs to be strengthened to ensure Māori concerns are given appropriate consideration. The Commission agrees with this view, as discussed in paragraphs 26.208–26.210.
26.139. Some of Auckland’s most valuable assets are its beautiful harbours, beaches, rivers, and streams. Aucklanders value being able to swim, play, fish, and collect food in and around our waterways. Clearly, it is incumbent on the citizens and leaders of the region to maintain and enhance its environmental integrity for the future.
26.140. Discharges and overflows from wastewater systems, and polluted stormwater entering waterways, all have adverse environmental effects on Auckland’s water system.
26.141. Climate change may worsen the situation. High rainfall events put pressure on stormwater systems, causing flooding and erosion.84 They also cause stormwater and groundwater to infiltrate wastewater systems, resulting in overflows. Drought has obvious negative impacts. In addition, there is a strong relationship between air temperature and demand for water.85
26.142. The ARC controls the discharge of contaminants into water through the issue of resource consents. It also undertakes investigations and monitoring of the impact of stormwater quality in the Auckland region, and undertakes a programme of monitoring coastal receiving waters in Auckland urban areas. As discussed in paragraph 26.100, the effects of contamination of the region’s harbours are now difficult to reverse, and even maintaining current quality levels will require a significant increase in stormwater investment.
26.143. The Commission understands that the Government is proposing to expand the existing Environmental Risk Management Authority into an environmental protection agency with increased responsibilities, including developing national policy statements and national environmental standards.
26.144. The Commission received a number of submissions suggesting that all water services in the Auckland region should be delivered by one, fully integrated regional entity. The reasons given included gaining operating cost savings through efficiency and economies of scale, better decision making, consistency of standards for design and construction (for example, a single software application to model all networks), and ability to focus on the bigger issues such as demand management.
26.145. In the Commission’s view, the industry should be integrated if that would lead to appropriate environmental management, better demand management, and cost savings. These three considerations were the main focus of the Commission’s inquiry.
26.146. As noted above, the Cap Gemini Ernst & Young report “Reducing Costs by Amalgamation” (2000) concluded that integration would lead to annual cost savings of around $9.9 million.86
26.147. Some of these cost savings would be in relation to operating expenditure, for example reducing duplication in areas such as billing, geographical information systems, call centres, and management structures.
26.148. However, the most significant cost savings would be likely to arise in relation to capital expenditure, not operating expenditure. If a single entity controlled the entire network, it could plan much of its capital expenditure more effectively. For example, if the bulk water supplier were also responsible for the relationship with customers and had direct control over the various factors which impact on water demand, it would be in a better position to plan and predict future water requirements and the capital expenditure required.87
26.149. The most obvious disadvantage of integration is that it would concentrate monopoly power.
26.150. Of course, even under the current regime, most users do not have the option of switching between water service providers – each local network operator has an effective monopoly within the particular part of the Auckland region it services. Although it is possible (to some extent) to compare and contrast the performance of the different local network operators, it is unlikely their effective monopoly status affects pricing.
26.151. The Commission received a detailed submission from Waitakere City Council, which suggested a number of other potential disadvantages arising from vertical integration.88 These included
26.152. The Commission does not accept the view of the Waitakere City Council for reasons set out in other parts of this chapter. The Commission has given particular consideration to the assertion that integration would hinder the adoption of IWRM, which is regarded internationally as representing best practice for the industry, particularly from an environmental perspective. There are suggestions in the literature that IWRM requires a decentralised approach:
IWRM … also seeks to introduce an element of decentralised democracy into how water is managed, with its emphasis on stakeholder participation and decision making at the lowest appropriate level.89
26.153. However, there is no specific IWRM blueprint or model – rather, it is a system to be tailored to particular circumstances. It could be implemented at a regional level, and there may be benefits in doing so. A regional body with responsibilities across all the three waters is well placed to take a broader, holistic view of the “water cycle” as an interconnected system.
26.154. The Parliamentary Commissioner for the Environment has commented that one of the specific environmental issues that needs to be addressed in relation to New Zealand’s urban water systems is
the lack of integrated management of catchments, wastewater and stormwater, eg total water cycle planning and integrated water supply, wastewater and stormwater.90
26.155. He went on to say,
Successful long-term management of the urban water system will require integrated management of water services … Solutions are needed to support more efficient resource use and to recognise the important linkages between the different water service components of water supply, treatment, use, and disposal of wastewater and stormwater. The water service supply and disposal components cannot be considered as separate entities and split like the electricity and gas generation, distribution and retail networks if the services are to be ecologically and economically robust and socially just.91
26.156. Some submitters suggested that in order to ensure the greatest possible accountability, the regional tier of council (that is, as proposed, the elected Auckland Council) should take direct responsibility for supplying water services in the Auckland region rather than employing a CO or CCO structure.
26.157. On the other hand, some submitters suggested that a CO or CCO structure would lead to better decision making in a “long-term” industry such as the water services industry, especially in relation to decisions about investment in infrastructure. It was suggested that these decisions need to be taken at some distance from the political whims of the day; the short electoral term means that there is a fairly constant “churn” of elected representatives.
26.158. One option would be for Watercare to expand its operations, and to provide retail water services as well as bulk water and wastewater services across the region. A number of submitters indicated that they thought Watercare was functioning well.
26.159. However, if Watercare were to provide retail water services as well as its current services this would involve a major “scaling up” of its operations. At the moment, it supplies bulk water to six customers and has around 600 trade waste customers. There would be significant organisational changes required for Watercare to provide retail water and wastewater services to hundreds of thousands of customers across the Auckland region.
26.160. Some industry reports have suggested that if the water services industry were to be integrated, an independent regulatory body should also be established to offset the concentration of monopoly power.94
26.161. It has been suggested that regulation would be truly effective only if an informed regulatory body had price-setting or price-capping powers, rather than merely advisory powers. 95
26.162. One disadvantage of a price-based system of regulation, however, is that it can sometimes remove the incentive for suppliers to invest in maintaining and improving infrastructure. Suppliers may try to keep costs as low possible by cutting corners in areas such as customer service and maintenance. Another disadvantage is that if a price cap is imposed, actual pricing can often tend to match or closely approach that cap, regardless of other market factors. It would also be very difficult for the independent regulator to set or adjust prices appropriately in the absence of any direct comparators.
26.163. Another possible form of regulation is a rate-of-return model, in which the prices charged are based on the actual costs incurred, plus a certain profit margin or rate of return.
26.164. The advantage of this model is that it does not encourage suppliers to skimp on areas such as the quality of service provided or investment in infrastructure. On the other hand, it may encourage suppliers to move too far in the other direction, as it does not reward efforts to improve efficiency. Infrastructure managers are more likely to face adverse consequences from service failure than from substantial cost overruns (the causes of which are less apparent). This can result in utilities “gold-plating” their systems.96
26.165. A third possible model is a “light-handed” approach based on, for example,
26.166. There are also international benchmarking models which can help assess performance. Watercare has adopted an annual benchmarking framework developed by the Water Services Association of Australia, which compares four aspects of the business (civil maintenance, mechanical and electrical maintenance, customer service, and asset management processes) on a four-yearly rotation. Watercare’s statement of corporate intent requires it to achieve upper quartile ranking against its peers through this benchmarking process, which it has achieved.
26.167. In 2008, the Water Services Association of Australia combined with the International Water Association in benchmarking water companies not just in Australia and New Zealand, but also the United States, Singapore, Hong Kong, and the Middle East. The Commission was advised that interim results demonstrate that Watercare’s performance place it in the top 10% of companies benchmarked for its approach to the forward planning, acquisition, operation, maintenance and replacement, and rehabilitation of assets.
26.168. One example of a highly regulated water industry is in Britain, where the water market is fully privatised. The regulatory body, the Office of Water Services, compares and contrasts the results of different water companies, and requires poorly performing suppliers to do better. In addition, large water customers (users of more than 50 million litres per year) have the option of choosing their water supplier from a range of companies.
26.169. The Commission considers that it is essential to have an integrated approach to planning and investment in infrastructure at the regional level. Accordingly, it considers that the Auckland Council should have overall responsibility for setting policy relating to the three waters. The Auckland Council will be well placed to take an overview of how land use, transport, and other interventions impact on the three waters.
26.170. The Commission considers that (subject to certain limited exceptions97) all water and wastewater services in the region should be provided by a single council-controlled organisation owned by the Auckland Council.
26.171. The Commission believes that these arrangements will lead to better demand management, better environmental management, and cost savings.
26.172. The Parliamentary Commissioner for the Environment has identified the current fragmentation of the industry as an impediment to demand management:
Where there is a wholesaler/retailer split in water services as in Auckland, the absence of a requirement to undertake demand management at both regional and territorial level means that demand management can be given a lower priority except in times of drought. This represents a lost opportunity to increase the overall efficiency of the water system.98
26.173. Certainly, demand management initiatives are not proving to be successful under the current fragmented industry structure. Leaving demand management in the hands of retailers, be they independent commercial entities (such as United Water), CCOs (such as Metrowater), or local authorities themselves – all of which benefit from the profits of water supply – creates conflict between the application of demand management tools and the desire to maximise profits.
26.174. The Commission believes that if a single entity were responsible for the supply of both bulk and retail water and wastewater services, demand management targets are much more likely to be achieved. One reason for this is that capital works relating to water supply and disposal will be funded by the same entity that sells the water and disposes of it, so there will be financial incentives to keep demand within steady, planned parameters.
26.175. In light of the importance of demand management, and the financial and environmental implications it has for the region, the Commission recommends that the region’s water services provider should be required by legislation to promote demand management.
26.176. Better demand management will, in itself, have positive environmental effects. These include a reduced water take, reduced use of electricity for pumping water, reduced use of chemicals for treating water, less construction of capital works such as dams, and less wastewater to be treated and discharged into the environment.
26.177. In making Watercare a part of the Auckland Council, it is necessary to ensure that environmental concerns are properly addressed. There will be a separate committee and cost centre to deal with regulatory issues. It will be important, as well, that there be a code of conduct advising councillors on the appropriate limits of interference with the regulatory role of the Auckland Council. Additionally, in this instance there will be separation between Watercare as a CCO and the environmental regulatory functions of the Auckland Council.
26.178. The Commission considers that Watercare’s Environmental Advisory Group should remain in place.
26.179. The Commission also expects that integration will give rise to efficiencies. Better demand management will lead to opportunities to defer investment in infrastructure, and integrated planning in relation to infrastructure investment will result in available capital being applied in the most effective manner.
26.180. Duplication in management structures, billing, asset management and network control systems, call centres, and information and communication technologies systems will also be eliminated. Operating efficiencies will be gained through integrated master planning, and shared services (with Auckland Council) and purchasing.99
26.181. The Commission considers that the Auckland Council should decide whether the more rural areas of Franklin and Rodney should be included in the regional arrangements – that is, whether, or to what extent, homes and businesses in those areas should have their water and wastewater services provided by Watercare.
26.182. The Commission considers that the region’s water and wastewater service provider should be operated as a CCO, with expert directors. The Auckland Council should make decisions on policy objectives and provide strategic direction.
26.183. The water industry involves long-term planning and investment decisions. These decisions should be made by Watercare’s board within the overall policy and financial framework adopted by the Auckland Council.
26.184. The Commission considers that Watercare is the obvious choice as a vehicle to provide water and wastewater services to the Auckland region. Watercare already has regional functions and appears to be operating well under current arrangements.
26.185. The Commission recommends that Watercare should continue to control the regional dams, weirs, bulk water and wastewater reticulation and treatment systems. Subject to any exceptions determined by the Auckland Council, Watercare should have new statutory rights to control all water assets and operations,100 wastewater assets and operations,101 and retail assets and functions within the Auckland region.102 Inevitably, it will also have some responsibility for stormwater given that many of the wastewater pipes in Auckland City also carry stormwater.
26.186. In common with all other asset transfers, no question of payment will arise (see Chapter 20, “Funding and Financial Management Arrangements”).
26.187. In order for Watercare to take over the supply of retail water services in addition to its current operations, significant changes will be required. At present, it has only a few, large customers (the six water retailers and some trade waste customers). Under the proposed arrangements this would increase to hundreds of thousands of customers across the region with the related complexity of managing customer enquiries, metering, billing, collections, and communication.
26.188. The requisite scaling up will be a complex task, which is likely to involve a transition period of at least 12 months. This is an area that will require close attention by the Establishment Board (see Chapter 33, “Managing the Transition”). The Commission envisages that the Establishment Board will take an oversight role in relation to the integration of retail water suppliers into Watercare, providing such assistance as necessary to the Watercare Board and chief executive through the Transition Management Group (see Chapter 33, paragraph 33.55).
26.189. The Commission received a submission from Papakura District Council noting that any transition to an integrated provider would require careful negotiation with existing suppliers. Naturally, this issue is of particular importance in Papakura because in 1997 the Papakura District Council entered into a 30-year contract with a private water company, United Water. This contract includes a 20-year right of renewal.
26.190. The Commission expects that, for the time being at least, the long-term contractual arrangements entered into between United Water and Papakura District Council will remain in place. It will be a matter of commercial negotiation between Watercare and United Water whether Watercare will take over retail water services in Papakura District before the end of United Water’s contractual term.
26.191. Currently, Watercare is owned by six territorial authorities in various shares. As noted above, the Commission recommends that in future it should be owned by the Auckland Council and operated as a CCO.
26.192. At present, Watercare is a CO, but there are a number of Watercare-specific provisions in the Local Government Act 1974 that require it to operate in a way that gives it greater similarities to a CCO than a CO.103 For the sake of consistency and simplicity, the Commission recommends that, under the new arrangements, Watercare operate as a CCO.
26.193. The Auckland Council, with advice from an independent Appointments Advisory Panel104 would be responsible for appointing the board of directors and setting Watercare’s statement of corporate intent. The Shareholders’ Representative Group would no longer be required.
26.194. The Commission envisages that the policy decisions to be made by the Auckland Council and agreed with Watercare’s board for inclusion in the statement of corporate intent, will include matters such as
26.195. The Commission believes that it is important that all assets relating to Auckland’s water services remain in public ownership. Section 130(3)(a)–(c) of the Local Government Act 2002 provides that a local government organisation must not
26.196. These provisions should continue to apply.
26.197. Stormwater services are complex and involve different considerations from those of water and wastewater. At present, the region is lacking a definitive, detailed plan for stormwater management.
26.198. The Commission agrees with the conclusion reached by the Boston Consulting Group that regional leadership and coordination, along with local implementation, are integral to successful stormwater management.106
26.199. The Commission recommends, therefore, that the Auckland Council should be responsible for stormwater policy and setting regional priorities, and determining the extent to which responsibilities for the delivery of stormwater services should be shared between local councils and Watercare.107 Watercare will need to be involved with both planning and service delivery, especially in relation to Auckland City, where much of the stormwater system comprises combined stormwater and wastewater pipes. As discussed further in Chapter 8, “Environment, Urban Design, and Heritage”, the Commission recommends that Watercare should be required to prepare a stormwater action plan.
26.200. The Commission notes that a report prepared by PriceWaterhouseCoopers in 2004 recommended that stormwater services should be funded by implementing a charge on impervious surfaces, supplemented by an allocation of road user charges. It is outside the Commission’s terms of reference to make any recommendations on this issue.
26.201. Watercare has a statutory obligation to maintain its prices at a minimum level, subject to obligations to be an effective business and to maintain its assets in the long term (see paragraph 26.32).
26.202. As mentioned at the beginning of this chapter, New Zealand has ratified the International Covenant on Economic Social and Cultural Rights and the General Comment on Water, which entitles everyone to affordable water for personal and domestic uses. Given New Zealand’s ratification of this covenant, coupled with concerns about the negative social impact of unduly high water prices, the Commission considers that Watercare’s current pricing obligations are an appropriate mechanism for the future.
26.203. Demand management (which should be achievable notwithstanding restrictions on price increases) and the resulting impact on restraining capital expenditure should assist in holding tariffs.
26.204. In the Commission’s view, both water and wastewater charges should be calculated on a volumetric basis108 in accordance with the total amount of water consumed. This will assist with demand management.
26.205. In the interests of demand management, Watercare should continue to have the flexibility to use “block tariffs” in its pricing structures109. This would mean that the first “block” of water is charged at a fairly low price, but any water used over and above that amount is charged at a higher rate. The purpose of block tariffs is to ensure that everyone has access to enough water for basic necessities at a reasonable rate, but this cheaper rate does not apply to additional, more discretionary use. This system already applies in Franklin, where the first 200 cubic metres per six months costs $1.93 per cubic metre, and every cubic metre above that costs $2.44 per cubic metre.
26.206. The Commission has given careful consideration to the issue of whether there should be uniform charges for water services across the region despite
26.207. The Commission considers that it would be unworkable for different tariffs to apply, and that one of the main benefits of an integrated structure is consistency across the region. It recommends, therefore, that there should be uniform charges for water and wastewater across the region.
26.208. The management of water is an important kaitiaki110 issue and mana whenua engagement is essential.
26.209. The Commission considers that the approach taken by Watercare to date is sensible, and it recommends that the role and functions of the Māori Advisory Group should continue.
26.210. As discussed in Chapter 22, “Māori”, the Commission considers that representatives to the Māori Advisory Group should in future be appointed by the Mana Whenua Forum, using the existing criteria set out in paragraph 26.136. It recommends that these arrangements be safeguarded in legislation (see Chapter 22).
26.211. The Commission notes that Māori interests in the provision of water services throughout the region will also be safeguarded as a result of having guaranteed mana whenua representation on the Auckland Council.
26.212. The Commission considers that the Auckland Council will be well positioned to establish, monitor, and enforce appropriate environmental standards.
26.213. It will have a strong focus on policy and direction rather than service delivery, which will be carried out by the CCO, Watercare. Its broader, regional focus will give it greater options. It could, for example, investigate initiatives similar to those in Australia that require all new houses to install rainwater tanks, low-flow taps and shower fittings, and water-efficient toilets.
26.214. The Commission does not recommend the establishment of an Auckland Regional Environmental Protection Agency at this stage. It is possible that this type of body may be established at a national level at some point. (The Commission notes that the Government is proposing a national environmental protection agency.)
26.215. As noted above, the Commission recommends that Watercare should be under a statutory obligation to promote demand management. This will have significant environmental benefits.
26.216. The Commission believes that it is highly desirable that the principles of IWRM be translated into Watercare’s statement of intent to the greatest extent possible.
26.217. The Commission recognises that Watercare will have increased monopoly power under the new structure. Without appropriate checks and balances, this could lead to
26.218. The Commission considers, therefore, that some form of regulation will be necessary. It recommends a relatively light-handed regulatory approach at the outset (see below), with the potential for stronger regulation if required over time. The effectiveness of this initial light-handed approach should be reviewed within 5 years of the establishment of the Auckland Council.
26.219. Heavy-handed regulatory regimes (such as that of the Office of Water Services in Britain) involve significant cost and, in the absence of real concern about the way in which an industry is operating, may be of questionable value. The Commission notes that the need for regulation is greater in a privatised industry, such as the water industry in Britain.
26.220. Watercare’s monopoly power can be tempered in part by continuing the “public good” design principles entrenched in Watercare’s current governance model. The Commission recommends that the following features be retained:
26.221. In addition, the Commission recommends that an Auckland Services Performance Auditor should be appointed. This person would have oversight not only of Auckland’s water services industry, but all Auckland Council activities to provide assurance to the elected council and the public that the Auckland Council is providing high-quality services in a cost-effective way. This would be a very senior role, which would need to be undertaken by a person who enjoys the trust and confidence of the Auckland public. The role of the Auckland Services Performance Auditor is discussed in more detail in Chapters 21, “Council Organisations and Council-Controlled Organisations”, and 32, “Achieving a High-Performance Auckland Council”.
26.222. Legislative amendments will be required in order to
26.223. Existing statutes that will need to be amended or repealed include the Local Government Act 1974, the Resource Management Act 1991, the Auckland Metropolitan Drainage Act 1960, and the North Shore Drainage Act 1963.
26.224. In due course, the overall legislative regime for the three waters will require a complete overhaul, but at this stage the Commission is recommending only those changes necessary to give effect to the proposals in this report (see Chapter 31, “Statutory Reform”).
26.225. The transitional arrangements to be put in place in respect of the three waters are discussed in Chapter 33, paragraphs 33.30 and 33.55.
26.226. These arrangements will include asset and staff transfers from the existing territorial authorities to Watercare (such as retail water and wastewater assets) and to the Auckland Council (such as stormwater assets).
26.227. Engineers, planners, and scientists are crucial to Auckland’s infrastructure plans, and it is critical that robust retention arrangements are made to secure these skills during the transition period.
26A The Auckland Council should have overall responsibility for setting policy in relation to the three waters.
26B Subject to Recommendations 26C and 26D, Watercare Services Limited should assume statutory responsibility for all water and wastewater services within the Auckland Council area. The water and wastewater operations (including assets and relevant staff) of all abolished local authorities should be transferred to Watercare Services Limited on the establishment date. This includes the water and wastewater operations of Rodney District Council, North Shore City Council, Waitakere City Council, Papakura District Council, Franklin District Council, Metrowater, and Manukau Water Limited.
26C In urban areas, all drinking water and wastewater services should be supplied by one council-controlled organisation (Watercare Services Limited) owned by the Auckland Council. (This is subject to existing contractual arrangements in Papakura.)
26D The Auckland Council should determine whether and/or the extent to which Watercare Services Limited will supply retail water and wastewater services in rural areas such as Franklin and Rodney.
26E No compensation should be payable for the transfer of water-related assets from the existing territorial authorities to the Auckland Council.
26F The Auckland Council should determine the extent to which responsibilities for the delivery of stormwater services are shared between local councils and Watercare Services Limited.
26H The current obligation on Watercare Services Limited to maintain prices for water and wastewater services at minimum levels (subject to obligations to be an effective business and maintain its assets in the long term) should continue. So too should the prohibition on paying a dividend.
26I Watercare Services Limited should be required by legislation to promote demand management.
26J Both water and wastewater charges should be calculated on a volumetric (or notionally volumetric) basis.
26K Uniform charges for water and wastewater should apply across the region.
26L The “public good” protections in Watercare Services Limited’s current governance model should continue. These protections relate, amongst other things, to efficient management of the business, pricing, and maintaining asset integrity.112
26M Watercare Services Limited should be required to prepare a stormwater action plan.
Transition
26N The Establishment Board will have an oversight role in relation to the integration of local water network operations into Watercare Services Limited. This integration will be undertaken by Watercare Services Limited. Watercare Services Limited should consult with the Establishment Board on the development of a draft statement of intent and agree on appropriate efficiency targets for the integration.
Appendix 26.1: Historical background
Auckland constructed its first significant water reticulation system sourced from the Auckland Domain in 1866. In 1877, the water reticulation system was supplemented by the construction of a storage lake at Western Springs supported by a pump station and two city reservoirs. In the early 1900s, Auckland City Council started work on the construction of a series of dams and storage lakes in the Waitakere Ranges designed to use gravity to supply Auckland’s growing needs. The Waitakere sources were stretched by the post-war economic boom of the 1950s. With the urbanisation of Auckland, further water storage capacity was created with the construction of a number of dams forming lakes in the Hunua Ranges and a new water treatment plant at Ardmore.
From 1880, sewer systems were developed in a number of Auckland’s original suburbs. In 1914, construction was completed of Auckland’s first reticulated sewerage network including the Hobson Bay pipeline, the storage tanks at Okahu Bay (now Kelly Tarltons) and the main outfall works at Ōrākei. Oversight of the work was provided by a new municipal authority comprising representatives from Auckland City Council and the suburban boroughs. The authority was called the Auckland and Suburban Drainage Board.
Capacity for the system was reached in the 1930s with Ōrākei becoming polluted with the volume of raw sewage being pumped into the sea. In 1944 the board (now known as the Auckland Metropolitan Drainage Board) resolved to replace the Ōrākei outfall with a controversial plan to build tanks and treat the sewage with sludge drying beds on Browns (or Motukorea) Island in the inner Hauraki Gulf and dispose of the residue into the sea. After a number of petitions, inquiries, and reports the Browns Island option was abandoned in favour of a treatment plant at Mangere. The Mangere Wastewater Treatment Plant was opened in 1960. Subsequently, the Mangere plant has undergone a significant upgrade which has included the decommissioning of the oxidation ponds and the restoration of the Manukau Harbour foreshore.
In 1962, the North Shore Drainage Board authority comprising representatives of a number of North Shore boroughs, built and commissioned the North Shore’s first treatment plant at Rosedale with its associated trunk sewers to serve the growing north-harbour suburbs. Rosedale and its associated infrastructure has since undergone significant and ongoing upgrades to meet demand and environmental requirements.
In 1965, the bulk water supply assets of the Auckland City Council (which comprised the majority of the region’s bulk water supply assets, including the city-wide reticulation system) were vested in the then recently formed Auckland Regional Authority. Since then, councils have managed distribution of water supply from the bulk metering points to households and premises within council boundaries.
In the late 1980s, the local government regime underwent nationwide reorganisation. The Auckland Regional Authority was dissolved, together with numerous “borough” and “city” councils, and was replaced with the ARC and seven territorial local authorities. The ARC was made responsible for the bulk water and wastewater functions of the Auckland region and all the related assets were transferred to the ARC.
In 1992, ARC’s bulk water and wastewater assets were transferred to a new organisation, Auckland Regional Services Trust. In 1992, the trust formed Watercare Services Limited as a local authority trading enterprise to manage the provision of regional bulk water and wastewater services across Auckland. In 1998, ownership of Watercare was transfered from Auckland Regional Services Trust to the Auckland, Manukau, North Shore, Papakura, Rodney, and Waitakere councils.
In the past eight years Watercare has constructed significant new regional bulk water and wastewater infrastructure. Since 2002, the Waikato Water Treatment Plant and pipeline have been commissioned and the plant’s capacity incrementally developed. The Mangere water treatment plant has been upgraded and the replacement of the Ōrākei main sewer with the construction of a tunnel is under way.
In 1997, a CCO (Metrowater) was established by the Auckland City Council to provide retail water services in Auckland City. In the same year, United Water was awarded a 30-year contract (with a 20-year right of renewal) by Papakura District Council to provide retail water services in that area. In 2006, Manukau City set up a CCO (Manukau Water) to provide retail water services to Manukau City. Water remains a council-managed service in the other territorial local authorities.
1 See Appendix A: Terms of Reference.
2 Watercare Services Limited, Annual Report 2008, Auckland, p. 2 (available at www.watercare.co.nz, accessed February 2009).
3 United Nations International Covenant on Economic, Social and Cultural Rights, General Comment No. 15 (2002) on Articles 11 and 12 – The right to water (available at www.converge.org.nz/pma/water.htm, accessed March 2009).
4 National Water Industry 2008 Report Card and Road Map, report for the New Zealand Council for Infrastructure Development by GHD Limited and PriceWaterhouseCoopers, Auckland, September 2008, p. v, (available at www.nzcid.org.nz accessed February 2009).
5 Ibid., p. vi.
6 Auckland Water Group, Auckland Water Industry Annual Performance Review 2006/07, p. 30 (available at www.aucklandcity.govt.nz/council/documents/awireview, accessed February 2009).
7 Ibid., p. 30.
8 This is the wholesale cost only, i.e. the amount Metrowater pays to Watercare.
9 Auckland Water Group, Auckland Water Industry Annual Performance Review 2006/07, p. 3. In 2006/07 Metrowater repaired more than 600 leaks, saving more than 1.5 billion litres per year, or about 3% of its annual purchase volume from Watercare.
10 Ibid., p. 30.
11 Gardiner, Laurie and Armstrong, Bill, “Identifying Sensitive Receiving Environments at Risk from Road Runoff”, Land Transport New Zealand Research Report 315, Wellington, 2007, Appendix B, p. 39 (available at www.landtransport.govt.nz/research/reports, accessed February 2009).
12 Local Government Act 1974, Part 44C, section 707ZZZS.
13 Watercare’s governance framework is explained, including the obligations of its shareholders, by the Office of the Auditor-General in its 2001 report entitled Good Governance – Local Authority Governance of Subsidiary Entities, Part 3: Watercare Services Limited (available at www.oag.govt.nz/2001, accessed February 2009).
14 Watercare Services Limited, Statement of Corporate Intent for the three year period commencing 1 July 2008, Auckland, 2008, pp. 4–7 (available at www.watercare.co.nz, accessed February 2009).
15 Mana whenua – local Māori with ancestral ties to the land.
16 Trade waste control is managed by Watercare under the Auckland Regional Council’s trade waste by-law 1991 and the Auckland Metropolitan Drainage Act 1960, pursuant to the Local Government Act 1974, Part 44C, section 707ZZZS(1)(f).
17 Manukau City Council’s rights and role in Manukau Water Limited are set out in the company’s Statement of Intent July 2008 to June 2011, at p. 7 (available at www.manukauwater.co.nz, accessed March 2009).
18 The company’s targets are set out in its annual statement of intent available at www.metrowater.co.nz (accessed February 2009).
19 Wayne Thompson, “Shore’s new pipeline inching way out to sea”, New Zealand Herald, 29 January 2009. Trade waste control is managed by the council under the North Shore City Bylaw 2000, Part 9, Trade Waste. The council regulates trade waste discharge from businesses and has over 730 trade waste customers.
20 - LEK Partnership & Northington Partners, A Watertight Future, 1995 - Credit Suisse First Boston, Reform of the Water Industry, 1995 - Parliamentary Commissioner for the Environment, Ageing Pipes and Murky Waters: Urban water system issues for the 21st Century, 2000 - Parliamentary Commissioner for the Environment, Beyond Ageing Pipes: Urban Water Systems for the 21st Century, 2001 - Worley Consultants, The Quality and Reliability of Auckland’s Water and Wastewater Services, 2000 - Cap Gemini Ernst & Young, Providing incentives for efficiency and price-minimisation, 2000 - Cap Gemini Ernst & Young, Reducing costs by amalgamation, 2000 - Cap Gemini Ernst & Young, Increasing Competition in Potentially Contestable Parts of the Industry, 2000 - Marsden Jacob Associates, Appropriate Methodology for the Pricing of Water and Wastewater Services, 2001 - LEK Consulting, Commentary on report by Marsden Jacob Associates entitled “Appropriate Methodology for the Pricing of Water and Wastewater Services 12 November 2001”, 2002 - National Economic Research Associates, Rationalisation Options Study – A Report for Auckland City and Metrowater, 2003 - PriceWaterhouseCoopers et al., Funding Auckland Regional Stormwater – An Options Analysis, 2004 - Saha International, Review of the Auckland Water Services Industry – Current state analysis, 2006.
21 Auckland Region Water, Stormwater & Wastewater Review – Progress Report on the General Consultation Process and Iwi Consultation, Auckland Water Steering Group, Auckland, 12 June 2001, p. 5.
22 North Shore City did not support this option.
23 Cap Gemini Ernst & Young, Reducing costs by amalgamation, report for Auckland Water Steering Group, 9 June 2000, p. 5.
24 Ibid., pp. 24 and 67. Also the report done for the Commission in February 2009 by Taylor Duignan Barry (Financial Analysis: Re-organisation of the Councils in the Auckland Region), adopts a range of efficiencies in water and wastewater capital expenditure of $10 million to $13 million per annum, based on an assumed 5% saving in capital expenditure from unified planning. (See Appendix B, p. .)
25 Auckland Region Water, Stormwater & Wastewater Review – Progress Report on the General Consultation Process and Iwi Consultation, Auckland Water Steering Group, p. 7. The report noted that 2,307 written submissions were received from the public – a summary of the submissions analysis is set out in Appendix A of the report.
26 Saha International, Review of the Auckland Water Services Industry – Current state analysis, Auckland, 27 July 2006, p. 104.
27 Three Waters Draft Strategic Plan Discussion Version, Watercare Services Limited, Auckland, April 2008.
28 The Commission notes that the matters dealt with by the Three Waters plan are the types of policy issues that should be approved by the Auckland Council (see paragraph 26.194 concerning the statement of corporate intent).
29 Three Waters Draft Strategic Plan Discussion Version, Watercare Services Limited, p. 57.
30 Ibid., p. 57.
31 Ibid., pp. 38, 44, and 50.
32 Three Waters Final 2008 Strategic Plan, Watercare Services Limited, Auckland, December 2008 (available at www.watercare.co.nz, accessed March 2009).
33 Auckland Water Group, Auckland Water Industry Annual Performance Review 2006/07, p. 9.
34 Ibid., p. 9.
35 Ibid., p. 9.
36 Three Waters Final 2008 Strategic Plan, Watercare Services Limited, p. 43.
37 Watercare Services Limited, Information provided to the Royal Commission on Auckland’s Governance, 11 April 2008, p. 12.
38 Watercare Services Limited supplied these figures in response to a request from the Commission. The data relate to an initial treatment capacity for an extra 100,000 people at each of the plants – the costs are not directly comparable above that level.
39 This is a conservative estimate which assumes very favourable resource consent conditions.
40 Three Waters Final 2008 Strategic Plan, Watercare Services Limited, p. 48.
41 Resource Management Act 1991, section 30.
42 PriceWaterhouseCoopers, Infrastructure Auckland, and the Auckland Region’s Territorial Authorities, Funding Auckland Regional Stormwater: An Options Analysis, Auckland, February 2004, pp. 7–8.
43 The Boston Consulting Group,Infrastructure Auckland, and Auckland Regional Council, Auckland Regional Stormwater Project: An Action Plan to Deliver Improved Stormwater Outcomes, Auckland, May 2004, p. 9.
44 Ibid., p. 42.
45 PriceWaterhouseCoopers, Infrastructure Auckland and the Auckland Region’s Territorial Authorities, Funding Auckland Regional Stormwater: An Options Analysis, p. 52.
46 Infrastructure Auckland was created on 1 October 1998. It performed two distinct functions: first, it managed the region’s investments in Ports of Auckland Ltd, America’s Cup Village Limited, Northern Disposal Systems Ltd and its Treasury Fund; and second, it funded infrastructure projects in the region by way of grants generated through its revenue and capital base – although it was required to use income in preference to capital.
47 PriceWaterhouseCoopers, Infrastructure Auckland and the Auckland Region’s Territorial Authorities, Funding Auckland Regional Stormwater: An Options Analysis, p. 18.
48 Ibid., p. 46.
49 The Boston Consulting Group,Infrastructure Auckland and Auckland Regional Council, Auckland Regional Stormwater Project: An Action Plan to Deliver Improved Stormwater Outcomes, p. 7.
50 PriceWaterhouseCoopers, Infrastructure Auckland and the Auckland Region’s Territorial Authorities, Funding Auckland Regional Stormwater: An Options Analysis, pp. 49–50.
51 Ibid., p. 49.
52 The Boston Consulting Group,Infrastructure Auckland and Auckland Regional Council, Auckland Regional Stormwater Project: An Action Plan to Deliver Improved Stormwater Outcomes, Auckland, May 2004.
53 Ibid., Executive Summary pp. 3–6.
54 Ibid., p. 41.
55 The capital investment required would be reduced in respect of sewer separation works, inflow and infiltration reduction works, local wastewater storage facilities, and stormwater infrastructure upgrades.
56 Submission to the Royal Commission on Auckland Governance from Rodney District Council, p. 19. (All submissions are available at www.royalcommission.govt.nz.)
57 Office of the Parliamentary Commissioner for the Environment, Ageing Pipes and Murky Waters: Urban water system issues for the 21st century, Wellington, June 2000, p. iii (summary available at www.pce.govt.nz ).
58 Three Waters Final 2008 Strategic Plan, Watercare Services Limited, p. 50.
59 Office of the Parliamentary Commissioner for the Environment, Ageing Pipes and Murky Waters: Urban water system issues for the 21st century, p. 25.
60 New Zealand Water & Wastes Association, “Managing domestic water demand – the case for metering and volumetric charging”, media release, 22 December 2008, p. 1 (available at www.nzwwa.org.nz/comment_and_submissions.html#mediareleases, accessed March 2009).
61 What you need to know about – 5 Star for new houses, home renovations and relocations, Building Commission, Victoria, Australia, March 2008, p. 2 (available at www.buildingcommission.com.au, accessed March 2009).
62 Ibid., p. 3.
63 Ibid., p. 3.
64 Ibid., p. 3.
65 From the Sky to the Sea, Auckland Water Management Plan by the region’s water authorities, Auckland, 2004, p. 12 (available at www.watercare.co.nz, accessed March 2009).
66 Three Waters Final 2008 Strategic Plan, Watercare Services Limited, p. 55.
67 Watercare Services Limited, Statement of Corporate Intent for the three year period commencing 1 July 2008, Auckland, 2008, p. 4, (available at www.watercare.co.nz, accessed February 2009).
68 The agreed regional priorities are set out in Watercare’s December 2008 Asset Management Plan, p. 25 (available at www.watercare.co.nz, accessed March 2009).
69 Submission to the Royal Commission on Auckland Governance from Waitakere City Council, p. 29. This submission is discussed further in paragraphs 26.151–26.155.
70 Integrated water resource management was adopted as best practice in 1992 by the United Nations Conference on the Environment in Rio de Janeiro and has been re-endorsed by every international UN conference on water since then (information supplied to the Royal Commission by Waitakere City Council).
71 Water affordability is used as a key indicator for sustainable development in the United Kingdom.
72 Auckland Water Group, Auckland Water Industry Annual Performance Review 2006/07, p. 37 (available at www.aucklandcity.govt.nz/council/documents/awireview, accessed February 2009).
73 Watercare Services Limited, Annual Report 2008, p. 55 (available from www.watercare.co.nz, accessed February 2009).
74 In its statement of intent July 2008 to June 2011 at p. 5, Metrowater has an annually monitored target that a household water bill remains less than 2% of average household income (see www.metrowater.co.nz).
75 Mahinga kai – places where food and other resources are traditionally gathered.
76 Office of the Parliamentary Commissioner for the Environment, Ageing Pipes and Murky Waters: Urban water system issues for the 21st century, p. 11.
77 Tāonga – valued resources, assets, prized possessions both material and non-material.
78 Office of the Parliamentary Commissioner for the Environment, Ageing Pipes and Murky Waters: Urban water system issues for the 21st century, p. 11.
79 Mauri – essential life force, the spiritual power and distinctiveness of each person and object.
80 Office of the Parliamentary Commissioner for the Environment, Ageing Pipes and Murky Waters: Urban water system issues for the 21st century, p. 11.
81 Papatūānuku – the ancestral elemental Mother, the earth, the land.
82 Iwi – tribal grouping.
83 Tikanga Māori – customary correct way of doing things, traditions.
84 Three Waters Draft Strategic Plan Discussion Version, Watercare Services Limited, p. 21. Work undertaken by North Shore City Council suggests a wet weather wastewater overflow occurring once a year at present could occur twice as often in the future.
85 Ibid., p. 21.
86 Cap Gemini Ernst & Young, Reducing costs by amalgamation, report for Auckland Water Steering Group, p. 5.
87 Ibid., p. 67. The Cap Gemini Ernst Young report reinforced the benefits of unified asset and investment planning to optimise savings on capital expenditure.
88 “Vertical Integration: Three Waters and Sustainable Catchment Management”, information supplied to the Royal Commission on Auckland Governance by Waitakere City Council, April 2008, pp. 4–5.
89 See Integrated Water Resource Management website at www.archive.cap-net.org (accessed March 2009).
90 Office of the Parliamentary Commissioner for the Environment, Ageing Pipes and Murky Waters: Urban water system issues for the 21st century, p. 18.
91 Ibid., p. 31.
92 Submission to the Royal Commission on Auckland Governance from the Property Council New Zealand, p. 56.
93 Submission to the Royal Commission on Auckland Governance from the Employers and Manufacturers Association (Northern), Appendix 5.
94 The “Final Report of the review by LEK Partnership and Northington Partners Report on the Structure of the Auckland Water Industry” (1995) recommended regulation should be based on a “light handed” approach with implementation through a review by the Ministry of Commerce involving an “expert auditor” to assess performance and fair customer contracts to cover service standards and delivery. The CS First Boston Report (1995) recommended any market power problems caused by monopolisation should be regulated through a light-handed regulatory regime relying on the Commerce Act and information disclosure requirements.
95 The options for regulation are set out in the findings and recommendations to councils arising from the Auckland Region Water, Wastewater and Stormwater Review, March 2002, p. 29.
96 National Economic Research Associates, Rationalisation Options Study: A Report for Auckland City and Metrowater, Sydney, December 2003, p. 9.
97 The Auckland Council will decide whether the CCO will service rural areas such as the Franklin and Rodney Districts (see paragraph 26.181). Also, Papakura District Council has entered into a long-term contract with a private water services company (United Water) and that agreement will remain in place (see paragraphs 26.44–26.47 and 26.189–26.190).
98 Office of the Parliamentary Commissioner for the Environment, Ageing Pipes and Murky Waters: Urban water system issues for the 21st century, p. 32.
99 The potential efficiencies are set out in Chapter 32, “Achieving a High-Performance Council”, and the Taylor Duignan Barry financial report, Financial Analysis: Re-organisation of the Councils in the Auckland Region (appended as Appendix B, pp. –).
100 Including pump stations, reservoirs, transmission mains, and “small bore” distribution network, telemetry systems and meters.
101 Including collection and storage assets, reticulation systems, trade waste regulation and management, and wastewater treatment plants at Rosedale, Army Bay, and Kawakawa Bay.
102 Including appropriate information and communications technology systems, billing systems, metering systems, and call centres.
103 Local Government Act 1974, Part 44C, sections 707ZZZR–707ZZZS.
104 See further discussion in Chapter 21, “Council Organisations and Council-Controlled Organisations”.
105 CPI-x is an incentive-based form of price/revenue control. Changes in price or revenues of controlled goods or services are limited to the increase in a general price index, such as the Consumers Price Index (“CPI”), minus a factor (x) determined by either the board of a public good company or a regulatory authority (such as the Commerce Commission), in order to reflect anticipated efficiency gains or productivity growth which will lower the cost of producing the regulated goods and services. For six years from 1 July 2001, Watercare implemented a voluntary CPI-x price regulation. This initiative was proposed by Watercare’s management and endorsed by its board. A CPI-x pricing regulation system also applies in the United Kingdom, although it is imposed by a regulator rather than being implemented voluntarily. The regulatory authority, Office of Water Services, sets the efficiency factor “x”.
106 The Boston Consulting Group, Infrastructure Auckland and Auckland Regional Council, Auckland Regional Stormwater Project: An Action Plan to Deliver Improved Stormwater Outcomes, Auckland, May 2004, p. 17.
107 This is supported by recommendations in the Government-initiated Auckland Region Water, Wastewater and Stormwater Review (1999–2002), which found that stormwater catchments and infrastructure need to be planned in an integrated way but stormwater should not be amalgamated with water and wastewater without a technical review.
108 As wastewater is not metered, this would be a notional volumetric assessment based on water consumed.
109 Watercare introduced a block tariff on 1 July 2008, but Auckland’s water retailers have not introduced the tariff at the retail level. For block tariffs to be effective in terms of demand management they need to operate at the retail level.
110 Kaitiaki – guardianship.
111 Local Government Act 1974, Part 44C, section 707ZZZ(1)(a).
112 See discussion at paragraph 26.220 of this volume.
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