The Government has announced major changes to
New Zealand’s affordable water reforms by agreeing to
establish 10 new regionally led entities, which it says will still
deliver big cost savings to New Zealand households
during a cost of living crisis.
By extending the number of publicly owned water
entities to 10, every district council, and therefore every
community, will have a say and representation over
their local water services entities, the Government says.

This new approach incorporates feedback from
Local Government leaders and relevant stakeholders,

while ensuring New Zealand households will save
$2,770-$5,400 per year by 2054 compared to
the status quo.
Why?
The Government says it has asked local councils how it can
address its water services reform plan.

‘We’ve heard
concerns from councils that the four entity model
we had developed will result in a loss of local influence
and voice, says the Government.
‘Discussions with local authorities about the reforms
highlighted the need to ensure the entities are more
closely connected with the communities they serve.
‘This is so that all New Zealanders can have confidence
that the entities will listen and respond to their needs.

‘By establishing ten entities closely based around
existing regions we can make sure the new entities have
a closer relationship with the communities they serve
and still deliver big cost savings to New Zealanders.

This will strengthen local representation and influence
over the entities’ high-level decision making.
What will this mean for communities?
‘Greater representation as the link with local
communities is strengthened.

‘Having ten entities rather
than four means that every council, and therefore
every community, is represented on the entities’
regional representative groups.
When?
‘With more water services entities, it is necessary to
change the establishment date of the entities, and
when the new system is due to come into effect.
‘

To allow for this we have decided on a staggered
approach rather than all ten entities going live at once.
New entities will begin to be stood up from early 2025
and this process will be completed by 1 July 2026
at the latest.
What about costs for households?
The Government says: This new approach will still deliver greater savings
to households than continuing without reform.

‘Every community will be financially better off.
‘This new approach will avoid a rates blow out for New
Zealanders and still deliver savings to households
between $2,770-$5,400 per year by 2054.
‘For example without reform, Hamilton households
would be facing an average annual rates bill of
$5,400 in 2054. This is an unacceptable cost to pass
onto rate payers.
‘With reform, households in Hamilton in 2054 will
instead have an average household bill of $2,760 with
strong water infrastructure and access to safe
drinking water.
‘The reform programme makes sure we invest more
money in our water assets to maintain and improve
services. We also want to ensure that this increased
investment doesn’t make water charges unaffordable
for New Zealanders.
‘Our plan depends on setting up new water services
entities that are large enough to borrow much more
money over longer periods for this investment than
councils can. It also depends on these larger entities
being run more efficiently, by buying equipment and
services in larger quantities and at lower prices
for example.

‘We are also looking at ways to recoup some of the
scale economies that might otherwise be lost due to
there being smaller entities – through shared services,
for example.
Does this mean the reform programme is
too expensive?
‘No, says the Goverment,’ our analysis shows that future costs for households
will still be much more affordable, and will deliver
savings to households as a result of reform than
they would be under a continuation of the current
management of water services.

What about the smallest entities where
future costs are forecast to be higher?
‘ All households (based on the average in each district)
will enjoy savings relative to the status quo over the
long term. No community is left behind or misses out on
the benefits of reform. according to the Government.

Increasing the number of entities means the overall
cost of setting them up will be higher. This is because’
more entities means the task of setting them up is
more complex and will take more time to ensure a
smooth transition.
Is the Government doing anything else to
keep costs down?
‘Yes. To meet the extra costs of establishing ten entities
and make sure the new entities do not begin with high
levels of debt, the Government has decided not to go
ahead with the $1.5 billion second phase of ‘better off’
funding for councils, says the government.
T’he first phase of the better off package ($500M) will
continue as planned and this funding will be allocated
to Councils as per current funding agreements.
‘Because $1 billion of the second phase of better off
funding was to have been provided by water services
entities through borrowing, this will free up the same
amount for them to invest in their community drinking
water, wastewater and stormwater networks.
The $500 million ‘no worse off’ funding package for
councils will remain in place, which will help ensure that
no council is left worse off as a result of the costs and
financial impacts of the transition process.

What is the governance model of the new
water service entities?
‘Governance of each of the water services entities will
be provided by a professional board.
‘It will be a competency and skills based board
required to be made up of members appointed for
the appropriate knowledge, skills and experience, this
includes the sorts of skills that would be expected
of a utility operation with a specific focus on water.
‘Examples of these skills include storm water
management and flood prevention, engineering and
infrastructure design experience, commercial and
financial advisory skills, community governance
and engagement (including iwi Māori) and risk and
emergency management.

What about the regional
representative groups?
‘Having ten entities means that every council and
therefore every community is represented on the
regional representative groups.
‘C’;ommunities will continue to have influence over the
water services entities through regional representative
groups. ‘

The Regional Representative Groups (RRG’s)
are the partnership between council representatives
and iwi/Māori that will provide strategic oversight
and direction. T

he RRG has no role in the day to day
governance and operation of the locally owned entities.
The role of the regional representative group for each
entity is to appoint the professional board and to set
expectations of how the entity is run that reflect the
needs of communities. The regional representative
group will also monitor and hold the board to account
for meeting those expectations.
Under the 10-entity model, every territorial authority
owner will be represented on the entity’s regional
representative group. There would continue to be an
equal number of mana whenua representatives.
Under te Tiriti o Waitangi/the Treaty of Waitangi,
mana whenua have the right to participate in decisions
that relate to water services. Iwi/Māori also have
responsibilities as kaitiaki to protect Te Mana o te
Wai, the health and mauri of our water. Therefore
it is appropriate that the regional representative
group remains a partnership between iwi/Māori and
representatives of the councils who will own the new
entities and represent their wider communities.

Do the ‘stronger links’ with communities
under this new model affect balance
sheet separation?
It is possible that the greater levels of representation
under the new model further strengthen It.
The new model retains key features of the model that
credit ratings consider important in assessing whether
balance sheet separation from local authorities
would be achieved, including public? ownership, joint
oversight by local authorities and mana whenua,
operational and financial independence, economic
regulation and the Crown support arrangements.
Previous advice from ratings agency Standard & Poor’s
when they considered a similar regional water services
entity model was that balance sheet separation
would be achieved under this approach provided no
individual council had a very significant or controlling
interest. We are confident this will remain the case
with the proposed 10 entity model.
What has not changed?
The Government has been very clear for some time,
including during the recent reset discussions with
councils and iwi/Māori that it is not changing its water
services reform bottom lines.
They are:
• Water services entities will continue to be
publicly-owned;
• They will have operational and financial
independence (balance sheet separation) to allow
them to make much needed investment;
• They will have oversight from a regional partnership
between local authorities and mana whenua.
What does this mean for the water
services legislation?
• We will introduce and pass legislation to allow for
this new timeframe before this year’s general
election. This will give councils and their water
services staff certainty for planning and employment
purposes and to allow our work to set up the new
entities to continue.
• The Water Services Legislation Bill and
The Water Services Economic Efficiency and
Consumer Protection Bill which are both currently
before Parliament are largely unaffected by the
changes to the number and boundaries of entities
and their go live date. These bills will continue their
progress through Parliament.
• The Water Services Entities Act passed in late 2022
and the Select Committee that considered that bill
received over 10,000 submissions. The proposals we
are announcing respond to this feedback.