Government releases plans to repeal, replace Three Waters - including new advisory group

The Government is planning to introduce legislation this month repealing Labour's Three Waters scheme and set up an advisory group to get advice on its own programme. 

As part of its 100-day plan, the Coalition promised to repeal the Water Services Entities Act 2022, which created 10 new water entities as part of the Labour Government's Three Waters initiative (later called the Affordable Water Reforms). 

This placed responsibility for the water services run by councils into the hands of new entities, which allowed them access to greater funding. However, it was criticised as an "asset grab" by National, which said it took control of water services off local communities. 

Local Government Minister Simeon Brown announced on Monday that the Coalition would pass a Bill repealing Labour's scheme by February 23. 

The Government will then start implementing its own programme through two further Bills based on National's 'local water done well' election policy. 

This included repealing Labour's legislation, having greater central Government oversight over what councils do, requirements for councils to ringfence funding for water infrastructure, and strict rules for water quality. 

Brown said on Monday that a Technical Advisory Group (TAG) would be established to contribute expert advice to himself and the Department of Internal Affairs as the policy and legislation is developed and implemented.  

"Leading experts in finance, infrastructure and local government will take on key roles as members of the TAG, marking an important step in the implementation of Local Water Done Well," said Brown. 

"The TAG will be focussed on providing advice and assurance on policy and legislative settings that will enable local councils to appropriately recover costs and access the long-term debt needed to fund the required investment in water infrastructure." 

The TAG members are Andreas Heuser, the managing director of Castalia, Raveen Jaduram, the director of the New Zealand Infrastructure Commission, Wendy Walker, the chief executive of the Porirua City Council, Mark Reese, a partner at Chapman Tripp, and Simon Weston, the chief executive of Whangārei District Council. 

The National policy said that within a year of repealing Labour's legislation, "councils will need to deliver a plan for how they will transition their water services to a new model that meets water quality and infrastructure investment rules, while being financially sustainable in the long-term". 

This plan would then need to be signed off by the Local Government Minister. There would be a regulatory backstop, allowing the Government to step in if a council was unable to deliver on its plan. 

Neighbouring councils could also choose to form a Regional Council Controlled Organisation that would be a standalone entity with the ability to access long-term borrowing without it impacting council balance sheets. 

The new water quality regulator Taumata Arowai would be kept and supported by an independent water infrastructure regulator within the Commerce Commission. These would monitor council investment, ensure water pricing remains fair, and set standards for water infrastructure. 

Brown on Monday said the first of the planned Bills will be passed by mid-2024 and focused on "council service deliver plans and transitional economic regulation". This would also include providing requirements for establishing Council Controlled Organisations. 

The second Bill will be introduced in December and passed by mid-2025, Brown said.  

"This will set out provisions relating to long-term requirements for financial sustainability, provide for a complete economic regulation regime, and a new range of structural and financing tools, including a new type of financially independent council-controlled organisation. 

"The second Bill will also establish regulatory backstop powers, to be used when required to ensure effective delivery of financially sustainable or safe water services. In addition, it will also make necessary amendments to the water regulator's legislation to ensure the regulatory framework is fit for purpose and workable for drinking water suppliers." 

He said this policy recognised the importance of local decision-making and flexibility for communities and councils.