LWDW FAQ's

Under LWDW councils retain ownership of water infrastructure assets and services delivery.

While councils will be able to continue to deliver water services directly in-house within council, LWDW will enable the establishment of new, financially separate, “water service delivery entities”, which will be set up as limited liability companies.

There are five options for new water service delivery entities being:

• In-house business unit (our current delivery model)
• Single council-owned council-controlled organisation (CCO)
• A council-controlled organisation (CCO) owned by the council and one or more of our neighbours.
• Mixed council / consumer trust – a consumer trust established as the majority shareholder with one or more councils owning a minority of shares
• Consumer trust – council assets would transfer to a consumer-trust owned organisation.

Council has been working to understand if we can meet the new rules and the impact on service levels and costs to ratepayers if we continue to go it alone alongside working with our neighbouring councils on a potential regional CCO delivery model.

Key decision: We have to make a choice in principle before the end of the year about if we will submit a Water Services Delivery Plan (WSDP) independently or with our neighbours.

Water services providers will have protections against privatisation.

While Council goes through this process, we will continue to deliver water services (drinking, waste, storm) as we do currently while we explore the best service delivery model under the LWDW model.

Our focus is on ensuring our communities receive quality and value in water services delivery now and in the future.

Under the new rules however costs are expected to increase for end-users. In addition to general inflation government is introducing new quality standard for wastewater in mid-2025 and storm water and we expect there to be increased compliance costs with the rules we must meet for taking water and discharging wastewater.

Keep yourself informed on Council’s progress as we consider the various water services delivery options.

Iwi/hapū have been invited to workshops at a council and regional level so should be able to provide insight into LWDW and how it will affect them.

Most importantly ensure you have your say on the proposed Water Services Delivery Model options when Council consults on this in early 2025 (February-March).

LWDW requires Council to develop a 'one-off' Water Services Delivery Plan (WSDP) by 3 September 2025 outlining future water services delivery arrangements.

• WSDP must include detailed information about water services operations, assets, revenue, expenditure, pricing, future capital expenditure, and how we plan to finance and deliver our preferred delivery model.
• WSDP can be for drinking and wastewater only and can exclude storm water. If storm water is excluded from a joint-WSDP then the plan must set out how each council in the joint plan will deliver storm water. Whatever a council chooses, they will remain responsible for storm water. This includes setting the level of service and rating for storm water (whereas the responsibilities and obligations for drinking and wastewater would transfer to the entity delivering them).
• WSDP are for a minimum ten-year timeframe but can be up to 30-years. The first three-years must be in detail.
• WSDP must demonstrate how they will be financially sustainable by June 2028. Financial sustainability means water services revenue is sufficient to meet the costs of delivering water services.
• WSDP must be signed-off by the Chief Executive and accepted by the Minister.
• WSDP must provide a summary how our water services model can ensure water services will be delivered in a financially stable manner by 30 June 2028.

Council must provide an explanation of how it proposes ensure that the delivery of water services will be financially sustainable by June 2028.

Financial sustainability means water services revenue is sufficient to meet the costs of delivering water services. The costs of delivering water services include meeting all regulatory standards, and long-term investment in water services.

How councils’ approach achieving financial sustainability can be different depending on local circumstances and require councils to consider the balance between three key factors. These factors are:

• Revenue sufficiency – is there sufficient revenue to cover the costs (including servicing debt) of water services delivery?
• Investment sufficiency – is the projected level of investment sufficient to meet levels of financial sufficiency?
• Financing sufficiency – are funding and finance arrangements sufficient to meet investment requirements?

The Department of Internal Affairs (DIA) states that Local Water Done Well has been designed to enable water services to be delivered in a financially sustainable manner, while ensuring water charges are affordable for consumers i.e. financial sustainability includes affordability.

In their advice they state that the structural and financing options available under Local Water Done Well have been designed to enable councils to evaluate the impact of different service delivery models on the affordability of water charges for consumers.

When considering the three factors involved in achieving financial sustainability (revenue sufficiency, investment sufficiency and financing sufficiency), councils are advised to keep affordability of water charges front-of-mind.

The affordability of water charges will be a function of revenue requirements, which in turn will be determined by the projected operating costs of service and the proposed levels of investment and service. DIA states that the way these factors interact, and the choices councils’ make around delivery models and financing to deliver benefits for consumers, should be determined at a local level.

Note:

• Despite the statements made by DIA on affordability Council has questions on how water investment needs will be balanced against the ability of our ratepayers to pay given our high areas of deprivation.
• New regulations will increase costs for end-users, regardless of whether Ruapehu goes it alone or partners with others.
• In the DIA briefings Council asked: How will small councils help their poorer populations with the greater costs from LWDW? DIA offered to talk directly with Council on this which is still to occur.

The LWDW model allows for iwi participation in governance but does not mandate co-governance of water entities, as was the case in the previous government's Affordable Waters model.

The influence of iwi/hapū needs to be discussed by Council and our iwi/hapū partners and agreed with any CCO partners.

A number of workshops have been organised with Council and regionally for iwi/hapū to contribute to the discussions. For more details on these dates contact the Council's Governance Officer or on 07 895 8188.

Government is proposing changes that aim to lower the cost and burden of delivering water infrastructure. These include:

• Adjustments to the regulatory regime to reduce compliance costs, especially for small, low-risk drinking water suppliers.
• Introduction of mandatory national engineering design standards for water services infrastructure to streamline processes.
• A new stormwater management framework offering flexibility in how stormwater services are managed.
• Councils can contract or transfer services, such as maintenance, operations, and technical advice, to new water services organisations to leverage their capacity.
• The Water Services Authority - Taumata Arowai will set new rules for wastewater and storm water in-line with drinking water standards. This is likely to mean higher compliance costs. There is expected to be increasing importance placed on compliance.

The boards of water organisations will need to be comprised of independent and professional directors. Where consumer trusts are involved, the water consumers will elect trustees to the consumer trust (similar to local body elections) who in turn play a role in appointing the board of the water organisation and monitoring performance.

Council’s influence over future delivery and charges for water services and the involvement of iwi/hapū needs to be discussed by Council and agreed with any partner organisations.

A new economic regulator as part of the Commerce Commission is being established. The focus of the economic regulator is on investment and pricing (similar to regulation of the electricity market).

• The Commerce Commission will oversee the economic regulation of water entities. The Commission will have a range of regulatory tools to promote efficient practices and protections for consumers.
• The economic regulation regime will apply to drinking water and wastewater services and will provide flexibility to include storm water services later if necessary.
• The economic regulator will monitor water services providers so that water services are invested in, maintained, and delivered at a quality that communities expect. This includes setting rules for investment and pricing with costs to meet reporting and auditing requirements passed on.
• The Minister will be able to appoint a Crown facilitator – water services, and/or Water Services Commissioners, if problems (or potential problems) arise in councils or water organisations.
• Water services providers will be subject to a new planning and accountability framework, including a requirement for a water services strategy and annual reporting, and be required to have a statement of expectations.

Water CCOs will be able to utilise debt from the Local Government Funding Agency (LGFA), if they are financially supported by their parent council or councils. Under the new plan, water CCOs will be able to leverage up to a level equivalent to 500 per cent of operating revenues subject to meeting prudent credit criteria.

• The LGFA is the lowest cost provider of financing to local government and is already utilised by Council. Note: While the LWDW model opens-up borrowing capacity Council is still concerned over affordability issues with our ratepayer base.
• Mixed council/consumer trust owned water organisations and wholly consumer trust owned water organisations will be financially independent from councils. This means borrowing will be independent of local authorities (for example from banks or capital markets) and subject to the water organisation achieving sufficient credit quality and track record.
• Water organisations will be able to assess, set and collect water services charges from consumers and will be able to use the development contributions regime in the Local Government Act 2002 to charge developers where additional demand or growth is created.
• The LWDW legislation does not specifically embed price harmonisation e.g. where every water user within a regional CCO would pay the same to ensure affordability.

A key feature of the previous Labour government's 'Affordable Water' model was that all council water debt would transfer to the large regional entity that the council was to be part of. The intention was to remove this debt from the council's books and create financial headroom.

Under the new LWDW model the decision on existing water debt will be a decision for councils to take as they consider their options. Legislation provides a range of models and options to consider for WSDPs. DIA emphasiszed that councils must understand their financial position before deciding on a joint plan.

If a council decides to maintain the status-quo (go it alone) their existing water debt will remain on the council's books. In any other scenario the debt will transfer to the new water services entity. Under all options water users continue to underwrite the debt.

Note: Council's current water debt as per the Long Term Plan is $35m.

Neither the previous Labour government's 'Affordable Water' model or the current government's LWDW has enshrined price harmonisation in their model.

The Department of Internal Affairs (DIA) suggests price harmonisation could happen over time with a staged implementation to mitigate some of the (political) risk.

The Mayoral Forum agreed the following appraisal criteria for any regional approach which were considered as part of the project:

• Be compliant with new legislative requirements that arises from Local Water Done Well policy
• Retain local voice and enable the differences in the requirements between coastal and inland communities in how they must manage wastewater, stormwater and coastal erosion to be balanced
• Be financially sustainable – can generate enough revenue (through charges and borrowing) to pay for itself;, i.e., Not dependent on additional funding from parent councils
• Be able to gain acceptance from Taumata Arowai and Horizons in terms of compliance priorities for the region
• Provide meaningful opportunities to understand Iwi perspectives
• Be affordable for rate payers / users
• Genuinely change how services are delivered for the better

Councils will retain legal responsibility and control of storm water services but will have flexibility to choose the arrangements that best suit their circumstances. WSDP can be for drinking and wastewater only and can exclude storm water.

Each council is currently appraising how it would like to deal with storm water (inside or outside any joint arrangements) and this will feed back into the development of any Joint WSDP and Implementation Plan. Two important things to consider are:

• The technical waters expertise that would have to remain internal to council to continue delivering it in-house and how this would be separated out from the rest of the waters expertise, and,
• How this might undermine the benefits that come from a whole-of-catchment approach which are a key strategic benefit to amalgamating. (Particularly important in relation to the increased ability to meet Te Awa Tupua obligations in relation to the Whanganui awa, and Te Waiū-o-Te-Ika obligations in relation to the Whangaehu awa, but also applies to other catchments.

Any Joint WSDP must explain how all the councils are going to deal with storm water. If storm water is excluded from a joint-WSDP then the plan must set out how each council in the joint plan will deliver storm water.

Whatever a council chooses, they will remain responsible for storm water. This includes setting the level of service and rating for storm water (whereas the responsibilities and obligations for drinking and wastewater would transfer to the entity delivering them). The intention of this approach is to ensure that the storm water needs of other council departments such as roading and parks can be supported.

The Government is committed to upholding Treaty of Waitangi settlements. Regardless of the future water service delivery arrangements councils choose to use, existing responsibilities, commitments and obligations between iwi/Māori and the Crown under the Local Government Act 2002, and under Treaty settlement legislation will continue to apply.

This includes existing requirements for iwi/Māori to fully participate in local government decision-making processes. The Department of Internal Affairs will engage with relevant iwi where their Treaty settlement legislation may be affected by the Government’s legislation proposals.

Regardless of the future water service delivery arrangements councils choose to use, existing responsibilities, commitments and obligations between iwi/Māori and the Crown under the Local Government Act 2002 (LGA02), and under Treaty settlement legislation will continue to apply.

The Minister has the power to appoint a Crown Facilitator and/or Water Services Specialist if a council or group of councils, are failing in delivering or implementation of a WSDP. A council can also request the appintment of a Crown Facilitator and/or Water Services Specialist.

• The Crown facilitator would oversee the development of a WSDP including assuring compliance with the relevant legislation.
• The Water Services Specialist ensures a WSDP is compliant with water quality standards.
• Costs for a Crown Facilitator and Water Services Specialist are recovered from the respective council(s).

The Government is proposing changes relating to the wastewater environmental performance standards that are being developed by the Water Services Authority – Taumata Arowai.

The legislation will be amended so there will be a single standard, rather than a minimum or maximum. It will remove the requirement for the Water Services Authority – Taumata Arowai to give effect to Te Mana o te Wai.

Interim amendments to the Water Services Act will mean the Te Mana o te Wai hierarchy of obligations in the National Policy Statement for Freshwater Management (NPS-FM) will not apply when the Water Services Authority – Taumata Arowai sets wastewater standards.

These amendments would be designed to ensure regional councils implement a single standard approach in resource consents and cannot exceed the standard in consenting conditions apart from on an ‘exceptions’ basis.

The government's intention is to replace the NPS-FM to rebalance Te Mana o te Wai, to better reflect the interests of all water users. This does not mean that the environmental requirements for discharges to freshwater or coastal water will be lower – but it will enable a consistent approach for consenting the discharge of wastewater from treatment plants.

The Commerce Commission will oversee the economic regulation of these water services and will have a range of regulatory tools, including mandatory information disclosure, to promote value for money for New Zealanders and ensure investments are made where they are needed most.

The Local Government (Water Services) Bill amends the Commerce Act 1986 to provide for regulation of water services by the Commerce Commission (the Commission).

Under the new economic regulation regime for water services, the Commission will have a range of regulatory options, including:

• information disclosure regulation;
• revenue threshold regulation;
• quality regulation;
• performance requirement regulation;
• price-quality regulation.

This is intended to provide regulatory oversight to ensure water charges are fair and cost reflective, and revenue is sufficient to meet investment requirements.

As part of this role, the Commission will enforce a new “ring-fencing” rule, under which regulated providers will be required to spend the revenue they receive from providing water services on providing those services (see clause 3 of new Schedule 7). Pecuniary penalties will be available if the rule is breached.

The economic regulation regime will ensure that revenue collected by local government water services providers, through rates or water charges, is spent on water infrastructure.

It will ensure water revenues are ring fenced for water services and aren’t siphoned off for other council priorities or pet projects, with little transparency for the ratepayer.

Alongside the economic regulation regime, the Local Government (Water Services) Bill sets up a consumer protection regime that will enable the Commerce Commission to collect and analyse information relating to consumer protections, such as service quality and customer engagement.

If information gathered reveals that issues exist, the Bill contains a range of tools to allow consumer protections to be strengthened.

Planning and accountability for water services will be achieved via three core documents established by the Local Government (Water Services) Bill.

1. Statement of Expectations

A Statement of Expectations for service delivery arrangements (prepared by shareholders) - will set out the expectations, priorities, and strategic direction for the water organisation. It will inform and guide the decisions and actions of the organisation’s board. Water organisations must give effect to these statements.

2. Water Services Strategy

A Water Services Strategy will be prepared by water service providers every 3-years and supported by an annual budget in other years - This document will set out – in a single, comprehensive, water focused document – how the provider is proposing to perform, respond to local expectations and priorities, and meet statutory objectives and regulatory requirements.

It will include financial forecasting information over 10 years, and infrastructure and investment information over 30+ years. Strategies prepared by water organisations will respond to matters in the statement of expectations.

Prices and charges will be set in accordance with the proposals in the strategy. An annual budget will also be prepared for each financial year that is not the first financial year of the strategy – consistent with the provider’s intended approach to funding, revenue, and pricing for the relevant year of the strategy.

Strategy oversight:

Water services strategies will not be subject to a mandatory review by auditors. Instead, the Bill requires that a water service provider must arrange for its strategy to be reviewed by the Auditor-General if required to do so by the Secretary for Local Government or the Commerce Commission.

Where councils are water service providers, they will be required to consult communities in relation to the proposed water services strategy. Water organisations will be required to consult shareholders (who are elected by and represent communities).

The Bill requires that shareholders of the water organisation must determine the nature of their involvement in preparing and finalising the water services strategy, including whether the shareholders will be able to, as necessary:

• provide comments on the draft strategy; require the water organisation to amend the draft strategy; and approve the final strategy; or
• provide comments on the draft water services strategy, but will not have the power to require changes or approve the final strategy.

3. Water Services Annual Report

A Water Services Annual Report (prepared by water service providers) - will report on the provider’s actual performance against the expectations and proposals in the above documents. It will include financial reporting.

Together, these documents form the framework within which each water service provider’s strategic and investment priorities, and performance settings, will be developed, explained and reported.

The water services provider must:

• Spend the revenue it receives from providing water services on providing water services; and
• Ensure the revenue it applies to the provision of water services is sufficient to sustain the long-term investment in the provision of water services;

Transparency and accountability relating to water charges and expenditure

Each water service provider must act in accordance with the following financial principles:

• the provider must spend the revenue it receives from providing water services on providing water services (including on maintenance, improvements, and providing for growth);
• the provider must ensure that the revenue it applies to the provision of water services is sufficient to sustain the provider’s long-term investment in the provision of water services;
• the provider’s revenue (including from charges) and expenses must be transparent to the public;
• the provider must be accountable for its revenue and expenses: if it is a territorial authority, to its communities; or if it is a water organisation, to its shareholders.

In addition, water service providers will be required to include financial statements on each water service they provide, in the water services strategy and water services annual report.

These will contain:

• a statement of comprehensive revenue and expenses:
• a statement of cash flow:
• a statement of financial position.

Water service providers will also be subject to an economic regulation regime implemented by the Commerce Commission. This will provide regulatory oversight to ensure water charges are fair and cost reflective, and revenue is sufficient to meet investment requirements.

As part of this role, the Commission will enforce a new “ring-fencing” rule, under which regulated providers will be required to spend the revenue they receive from providing water services on providing those services (see clause 3 of new Schedule 7). Pecuniary penalties will be available if the rule is breached.