The replacement for Three Waters

Andreas Heuser of Castilia writes:

Contrary to some sector opinions, balance-sheet separation is not a prerequisite for high-quality, resilient and customer-responsive water services at least cost. Once Local Water Done Well’s framework is established, financing will become more straightforward. The model mirrors the global standard for utilities including:

• Creating separate corporatised water service provider (WSPs) owned by individual councils or groups of councils, or under long-term contracts.
• WSPs maintaining independent accounts, separate from their council owners.
• Regulation by the Commerce Commission to improve the quality and quantity of expenditure.

This will improve access to finance.

WSPs will not be able to submit unconstrained wish lists of investments (such as Wellington Water’s $1b per annum list) but will be focused on the least-cost approach to meet water-quality bottom lines set by Taumata Arowai (the regulator and Crown entity with a ministerial-appointed board,).

This in turn ensures water rates remain reasonable.

This method is not just theoretical. It is a globally tested and effective approach for regulated utility service providers in the water and energy sectors. It was successful in the 1990s electricity distribution business reforms.

There is very little public discussion of unaffordable electricity infrastructure nowadays.

The model implemented by Labour had entities that were unsackable and would not have faced any pressure to keep costs down. The model that will now be implemented is a typical utility model.