The shape of three waters: DIA’s phase 2 report

3/06/2021·2 mins to read

The shape of three waters: DIA’s phase 2 report

This week the Department of Internal Affairs (DIA), with oversight by the Joint Central/Local Government Steering Committee, released a phase 2 report on the Three Waters Reform Programme (Programme).

Background

In December 2020, DIA released a report conducted by the Water Industry Commission for Scotland (WICS), commissioned as part of the Programme.

The report provided an early indicative view on the size of Aotearoa New Zealand’s three waters infrastructure deficit and the potential benefits of reform. Local government representatives expressed concerns over the validity of parts of this analysis, which led to a Request for Information from councils on their three waters assets and services in late 2020/early 2021.

Key findings from the phase 2 report

The report builds on the findings of the earlier report to provide a more up-to-date analysis. The key findings are in three parts:

The report’s modelling indicates that a future investment of $120 billion to $185 billion will be necessary at a national level, for NZ to meet current levels of compliance that water utilities in the UK achieve with EU standards, over the next 30 years. (These standards were assessed by WICS to be broadly comparable with equivalent New Zealand standards).
NZ’s Three Waters sector is in a broadly similar position to Scotland in 2002, in terms of relative operating efficiency and levels of service. In just under two decades, Scottish Water lowered its unit costs by 45% and closed the levels of service gap on the best-performing water companies in the UK. WICS considers that NZ can achieve similar outcomes to Scottish Water over a longer period (30 years).
The WICS analysis shows that aggregation scenarios ranging from one to four entities provide the greatest opportunities for scale efficiencies and related benefits in terms of improved levels of service and more affordable household bills (when compared against the likely outcomes ‘without reform’).

Next steps

This latest report is just one part of a series of information DIA will release regarding the potential impacts and opportunities of reform at a national and local level. Further details as to what the reform proposals will mean for individual local authorities / areas will become available in the coming months. Local authorities will need to carefully evaluate what is the best outcome for their communities as the information on the shape of the reforms become available. A bespoke decision-making framework to facilitate that evaluation is expected to be introduced later this year by way of a tailored amendment to the Local Government Act 2002. In the meantime, the findings of the Phase 2 report appear to bolster the case for reform, at least at a national level.

Get in touch / read Transforming Three Waters

Our recent report, Transforming Three Waters describes the key issues in the Three Waters Reform Programme for local government.

Please get in touch with any of our contacts (below) to discuss the Transforming Three Waters report , the reform programme and/or how it may affect your organisation.