By Brendon Harre*
“Water is the driving force of all nature.” — Leonardo da Vinci
Local Government Minister Nanaia Mahuta has announced in December the Government will legislate to create four new water entities that will take on the water assets currently owned by councils. Controversially the government has decided that local government cannot opt out of this process. Something that the opposition National Party disagrees with, because they believe in keeping the “local” in local government.
From my Christchurch’s resident perspective, I don’t reject two of the three waters being reformed — drinking and sewer — as long as accessing clean unchlorinated artesian water under the city is possible — a privilege that five generations of my family have safely enjoyed since the 1870s.
Given this 150-year history of good water service (thank you Christchurch local government) I personally don’t see the urgency for the government’s water reforms. I struggle to understand where the promoted cost savings are coming from, especially as the savings are projected so far into the future they seem impossible to verify.
If the new water entities do become reality, which seems likely, I am prepared to pay through volumetric charging for my consumption of clean water and for my sewer waste to be processed safely. These are basic human needs that are universal in nature — so standardised delivery and pricing arrangements should be possible. I believe volumetric charges and connection fees could reasonably reflect the cost of providing these two water services, providing there is good economic regulation of the monopoly risk. Well managed water reform should create a fair price for fresh and sewer water services.
Credit rating agencies have indicated the four water entities will have an independent and higher borrowing capacity than local government if there is credible separation of governance control — this factor is called balance sheet separation. This will allow the water entities to better maintain and invest in the needed pipes, bores, dams, treatment plants, and so on, that is lacking in some areas.
In summary, the water reform process may have advantages for parts of New Zealand experiencing water infrastructure deficits, so I do not oppose these reforms.
I qualify that opinion with my belief that where the water reforms are likely to get messy is the third water — stormwater.
Christchurch City Council is of the opinion that the Crown thinks stormwater is managed in pipes, whereas the reality is that flood risk (which is what stormwater is really about) is managed in an integrated way, through wetlands, floodplains and natural landscapes.
As a consumer I don’t want the cost of flood protection to come out of my fresh and sewer water volumetric charges because it would mean the price of drinking and sewer water is disconnected from the cost of providing the service. If costs and charges are not connected then regulation of monopoly risk becomes problematic.
Yet I also don’t have confidence that the four water entities should have the redistribution power of taxation and spending. For instance the water entity being able to impose a water rate to fund a particular package of flood protection schemes that benefits some but not others. In my mind the power of taxation and spending should be held by democratically elected governance bodies — which the proposed water entities cannot be (because of the balance sheet separation issue).
The southern water entity covers a geographic area twice the size of Scotland (whose water entity system New Zealand seems to be copying, yet Scottish Water is not responsible for stormwater). There are numerous water catchments in the South Island — each with bespoke concerns (such as the unique braided river systems) — so a universal standardised stormwater service is not possible.
Putting a technocratic water entity whose organisational structure has primarily been designed for two-water management in charge of flood protection in my opinion is a flawed recipe. It could lead to the gold-plating of some schemes (especially if capital value is used to regulate pricing and revenue) and/or the neglect of other schemes — perhaps the majority of smaller projects. It could also easily devolve into favouritism, as different interests behind closed doors jostle to get their needs met at the expense of others — farming vs urban, small towns vs cities, north vs south, east vs west…
If the water reform agenda does not separate out the flood protection issue, then there is a risk this will devalue the whole water reform process, meaning it may not last.
Climate change will raise the importance of managing future floods as extreme weather events become more common and sea level rises. This issue needs its own well thought-out management system — rather than being added to a water reform system that is primarily about providing clean drinking water and the safe discharge of sewer water.
45% of the South Island live within commuting distance of Christchurch — these households risk becoming the reluctant subsidiser of flood protection schemes the length of the South Island if the three-water reforms proceed.
There could be dozens of Greymouth’s where the locals have been unwilling to pay for their own flood protection but if someone else is paying, they will agitate relentlessly for this to occur. Cross-subsidisation seems to be a baked-in design feature of the three-water reforms — especially for stormwater.
Canterbury has already experienced that when its contributes to a common pot— specifically the National Land Transport Fund — it can get back much less than it contributes. Nanaia Mahuta indicated in a recent interview (after 5:15 min) that the National Land Transport Fund model was considered for water but was not favoured by local government — probably for good reason. These sort of poorly designed infrastructure funding arrangements reinforces the narrative that New Zealand is a country where “better things aren’t possible”. As a country we should have the energy and will-power to create fairer and better systems for funding the infrastructure we need.
Favouritism in the stormwater space could mean rivers become straighter, more confined, and more stopped banked in a way that favours some rural areas land values and profits, yet others pay for it — not just financially, paradoxically excessive civil engineering can raise the risk of flooding further downstream.
In the past, central government replaced the democratically elected Ecan with a commissioner run entity to sort out water management issues. The appointed commissioners favoured the rural supporters of the government of the day (by limiting fresh water pollution restrictions). This sort of favouritism is more likely if the process is unaccountable i.e. behind closed doors.
There is a good description of the current legal responsibility for flood protection in this Stuff article. It is a complex issue with management practices that have evolved over generations. The water reforms will almost certainly open up this complex can of worms. Unintended consequences are definitely possible.
An underlying factor of the water issue is the concern that no one should own water. That the provision of essential water services should not be sold off for profit. And that natural resources like water which are communally owned should go through a complex legal process reflecting British and Maori lore if there is a transfer to private ownership.
Government policy makers may have thought that adding stormwater in with fresh and sewer water has the benefit that the proposed water entities are less attractive for sale. If that is the thinking, then it is quite confused. It would be better to tackle the issue directly.
Such as, legislating that if the water entities are sold then the sale recipients would be the original asset owners — which is local government and iwi. That a majority of councils by both number and population would need to agree to the sale of the water entities to the private sector. And further, that local iwi because of Treaty of Waitangi obligations would also need to agree. This triple lock should protect the practice that no one owns water in New Zealand.
This is a repost of an article here. It is here with permission.