Local Government Magazine
3 Waters

The future of water – The debate continues

Alan Titchall reports from the two-day Water Summit 2018, attended by local government delegates, industry experts and central government officials, who will be implementing regulatory water change in the future.

As LGNZ president Dave Cull pointed out in his opening address, a summit on delivering future three waters solutions couldn’t be more timely. We now have the results of the second Havelock North Drinking Water Inquiry; the Three Waters Review, led by the Department of Internal Affairs; a government readying to bring in new standards; and the release of the association’s own discussion paper – Water 2050: Quality. Review of the framework for water quality.

“Things simply have to change,” he iterated, and issues of fresh water quality, funding, financing are all connected.

“Change is on the way and we ask it be done collaboratively.”

The summit was hosted by LGNZ in conjunction with Water New Zealand and IPWEA, with the local government association taking most of the stage and pushing its recently-published Water 2050 discussion paper and supplementary ‘cost and funding’ analysis, which builds on work it started five years ago.

This paper calls for an “integrated water policy framework”, with five areas: allocation, water quality, infrastructure, governance, and cost / funding.

It is also upfront on the issue of complexity and cost to councils as it becomes “increasingly difficult for councils to balance competing priorities and expenditure pressures”.

“The key finding from our review is that the regulatory framework for fresh water and drinking water does not take into account adequately the costs for communities to meet these standards,” says the LGNZ president.

Among key opportunities for change, LGNZ calls for a “co-regulatory partnership” between central and local government to set priorities together and take a “collaborative approach” to costs and new funding methods. The process for issuing non-regulatory guidance needs attention, it says.

Dave also called for recognising different regional challenges and outcome- based solutions, and time schedules around new standards.

Other summit speakers were Nanaia Mahuta, Minister of Local Government; Lyn Stevens, chair of the Havelock North Drinking Water Inquiry; Marcus Rink, the UK’s chief inspector for water supplies with the Department of Environment, Food and Rural Affairs – Water Regulation; Mike Brewster, chief executive of TasWater (Tasmania, Australia) – Tasmanian water model; and Jim Graham, an advisor on water quality to Water New Zealand, and who led a very lively discussion on why treatment and chlorination is a very good idea, even when you think your water quality and testing is up to scratch.

The minister plays her cards close

Minister Nanaia Mahuta didn’t give the government’s water intentions away, other than to concur that it “is a conversation we need to have together”, and neither central nor local government can achieve results alone.

The week before the summit, the minister had attended the Stormwater Conference dinner in Queenstown and made a deep impression of her dedication to her role and eagerness to work co-operatively with the sector.

However, in Wellington the minster didn’t tell us anything that we didn’t know already in terms of ‘why’ the water industry must change but repeated encouraging notes about government and industry conversations as she leads up to reporting to cabinet in October.

Meantime, the second stage of the Government’s Havelock North Drinking Water Inquiry (which came out on December 6, 2017) made 51 recommendations on improving public drinking supply. One of these is for government to undertake a “decisive and definitive assessment” on taking responsibility for water supplies away from local councils altogether, and create a new aggregated and dedicated water supplier for the purpose.

This leaves many council representatives asking what motivation they now have to invest in water infrastructure if they could lose the assets to this new entity.

Jim Graham, an environmental scientist, agrees but stresses there’s a long way to go before any recommendations become policy, and there has to be a public submission process.

There are different models of ownership that could be considered from ownership of assets transferring to the newly-created supplier, he says, such as councils retaining ownership of their assets and leasing them to the supplier. Compensation could also be possible.

The minister didn’t comment on this issue, but a response from the government on all 51 recommendations is expected by about August.

The minster has publicly warmed to at least one recommendation already and which has been widely picked up by the press – the idea of increased aggregation of regional water services through an unspecified number of water providers that would be publicly-owned (privatisation under her government is off the table), or even a small number of cross-regional suppliers, with the infrastructure and operational costs, presumably, spread over regions both urban and rural.

The minister referred to this model as a “very real prospect”, and common overseas.

“The key finding from our review is that the regulatory framework for fresh water and drinking water does not take into account adequately the costs for communities to meet these standards.”

The Havelock North wakeup

The campylobacter contamination of two of Havelock North’s water bores was a ‘Pike River Mine’ like wakeup call exposing the vulnerability of untreated bore water supplies.

Lyn Stevens, chair of the Havelock North Drinking Water Inquiry, painted a sobering picture of the continued risk of aquifer contamination throughout the country through the likes of landfill seepage and severe weather events.

He also noted that Havelock North was not an isolated incident, with around 35 other waterborne outbreaks recorded here over the past 45 years.

Our compliance levels are well below international standards, especially among small suppliers, he added.

It’s hard to believe, but the Havelock North water supply system at the time of the contamination was actually compliant with Kiwi regulations and the current Health Act 1956.

Scale of the cost of change

Malcolm Alexander, LGNZ chief executive, spoke of the size of the funding pressure looming over three waters’ infrastructure made up of 569 council-owned systems and another 225 operated by communities.

Figures provided place the new drinking water capital cost alone at between $305 and $567 million, and operating costs at between $11 million and $21 million. Work has been commissioned on the costs of new wastewater and stormwater systems and is due out soon.

There’s a range of funding options, mostly already in use, that include targeted rates at local level, regional council rates, fixed and variable user charges and central government tax-payer contributions.

The Water 2050 paper notes there is no single optimal funding method and multiple options are often used.

“The challenge is to determine which combination of options works best across different council areas, different infrastructure types, and different customer types,” it says.

As for any new national regulatory standards that are likely to saddle councils with more costs – they should be “quantified and fair allocation based on local and national outcomes determined”.

A new regulatory body

The idea of a new independent regulator came out of the second Havelock North Drinking Water Inquiry.

The Department of Internal Affairs’ three waters review picked it up and recommends the ‘urgent’ setup of such a new water regulator that is independent from the Ministry of Health and district health boards. It also recommends the compulsory treatment of all public water supplies, including secure bore water supplies.

The sector has accepted that a new water regulator is on the cards and it’s just a matter of what shape it will take.

Water New Zealand chief executive John Pfahlert says his association supports the idea of a regulator.

“The issue the Havelock North Inquiry recommendation has raised is whether it makes sense to establish a drinking water regulator alone, or whether regulation should be extended to cover wastewater and stormwater as well.

“There seems to be an emerging view that at least wastewater should be included in the ambit of any new regulator.

“There are, however, a wide variety of views on stormwater, not least of which is that there are no accepted national standards against which to regulate stormwater quality discharges,” he says.

“In our view it is critical that the regulator is also independent and staffed with people with the appropriate technical expertise to oversee the performance of the sector. They need to be people who will show leadership.”

As Malcolm Alexander pointed out during his presentation at the summit, we already have successful regulatory models in this country.

The gas market regulator is one such model, he says, and there are also the telecommunications and the electricity regulators that have been in operation for some time.

There are also many regulatory water models used overseas, but it’s a matter of finding the right water model and context for this country, says Malcolm.

Marcus Rink, the chief inspector for water in UK, and a guest speaker at the summit, provided a big-picture of various models used in Europe (which operate with varying compliancy success).

England and Wales have a single authority (with privately-owned water suppliers) that was set up in 1989 and has achieved a very high standard of compliance. Scotland also has a single authority (but publicly owned) and with just one water
delivery service.

The Netherlands has consolidated its once-numerous suppliers to 10 regional companies under a national and independent regulator and now boasts 100 percent when it comes to compliance standards (the best in Europe).

Marcus also told us that when it comes to policing water standards and regulations in the UK, he is armed with a large staff contingent and powers to seize equipment, test and prosecute. Although he talked of 99.9 percent compliancy of water standards in the UK, the size of fines he mentioned handed out for non-compliance were eye-watering.

On the subject of modeling on a local authority level Colin Crampton, CE of Wellington Water, and Raveen Jaduram, CE of Watercare in Auckland, presented two different views.

Wellington Water is answerable to five councils with a member from each on its board.

Watercare (drinking and wastewater) is an independent council controlled organisation and, asset-wise, is the second largest company in the country next to Fonterra.

Wellington (typical of most councils) charges its water services through rates; Watercare through metering (although Auckland’s stormwater is rate-funded).

Colin favours keeping the three waters departments in one room. He says interrelated three waters works better than ‘two-waters’ from a catchment level in terms of long-term investment. Plus, for small and medium size councils it is better not to separate the staff skills, he says.

“There seems to be an emerging view that at least wastewater should be included in the ambit of any new regulator.”

Community engagement

Guest speaker Mike Brewster, chief of TasWater in Tasmania, had a very clear message. Don’t try and implement new standards and regulations without buy-in from the customer – co-operation is the best, most cost effective, method of compliance.

Reform came to the Aussie island state after a Federal Government water audit in 2005 where it ranked lowest in complying with the country’s regulatory water framework. The state, at the time, had 32 bodies managing water and 23 areas with permanent ‘boil tap water’ notices.

As a council-owned corporation, TasWater was set up in 2013 as a single three waters body and some A$1 billion has been invested in the state’s water industry since then.

Unfortunately, says Mike, they forgot to “sell the message to the public who generally disagreed with the reasons and value behind the reforms”.

“I can’t stress this enough”, he warned. “The costs of this mistake have plagued us for years, after new regulations were brought in. Make sure the customer is on the journey with you.”

Nor was there sufficient alignment between councils and the state government, he adds. Next year, the state is taking a 10 percent interest in TasWater.

Another message from Mike was to visit other countries and look at their models.

“I took a five-week trip to Europe to check out water systems. That proved very valuable. While there is no perfect model, and only one that suits you, take the best from others and avoid their mistakes.”

The grey areas

Areas that were raised briefly at the summit, but not discussed in detail, included those residents who, through no choice of their own, have to rely on septic tanks and accessing their own drinking water supplies.

At the moment this area of three waters, in terms of quality, comes under council control.

Also noted in Water 2050, not discussed at the summit, is the Treaty of Waitangi Act 1975 (and its ‘contentious’ 1985 amendment) and Treaty Settlement Acts.

They contain many elements regarding the likes of land use, ownership and management for specific areas and waterways, and resource management that affect the way local authorities are expected to conduct their services, says the discussion paper.

As many councils and regulatory bodies have already experienced, the Treaty of Waitangi Act involves ‘principles’, ‘spirit’, ‘interpretation’ and obligatory consultation that often involve unexpected cost.

And such acts remain one of many indistinct areas in terms of improving water quality in this country, along with funding, standards and climate adaption, on which an overall regulator could provide clarity, guidance and instruction.

That’s the hope.

This article was first published in the July 2018 issue of NZ Local Government Magazine.

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