Proactive work on a Three Waters replacement

The Taxpayers Union and a Technical Advisory Group have been working on drafting instructions for a bill to replace the Three Waters legislation. A great example of being proactive, not just oppositional.

They have a Q+A on the work.

The Local Water Infrastructure Bill will instead restore the local authority ownership of water service infrastructure. But it does not leave the status quo. Costs and responsibility are to be clarified by transferring water service assets and operations into Council Controlled Organisations (CCOs) with their own boards of directors and separate accounting.

CCOs are a tried and true mechanism. The council owned water utilities will draw on the familiar board procedures and directors duties of the Companies Act to insulate management from ordinary political pressure, and to oblige them to focus on efficient management of their water service businesses. Councils will retain the power to sack and replace boards over the long term, but with certain protections against routine interference in the water businesses.

Local authorities will continue to have oversight of water asset management, but their water utilities will keep water operations at arms-length from other council activities, making it easier to see whether money is being spent effectively and making infrastructure investment decision-making easier to regulate for reliability and long term adequacy.

So a CCO model for water, but one that retains democratic accountability.

The Bill enables (but does not require) water utilities to merge. It is for local communities to decide whether bigger is better, not central government ministries. However, it is expected that many local water services will find it more economical to combine with neighbouring services, to attain the required new standards and to access scale efficiencies.

The Bill provides a default scheme whereby shareholding councils can negotiate and seek community input on any decision to merge water utilities. No one-size-fits-all approach is mandated.

To overcome ‘patch protection’ and other loyalty impediments to sensible rationalisation, particularly within single watersheds or catchment areas, the Bill establishes an arbitration scheme to give binding rulings on the complex asset valuation issues that can arise when merging large entities. The arbitrators will be experts in engineering, water infrastructure and asset management who will be able to provide quick and authoritative rulings.

I suspect many Councils will merge their water CCOs to get better economies of scale – but they will get to make that decision.