South Canterbury councils differ on three waters delivery plans

Tuesday, 6 May 2025

The Waimate District Council has revealed it is in favour of keeping its three water services in-house as it begins consultation with the public.

The council confirmed its support of the in-house optionat a meeting on April 29 in which it evaluated five options to determine their Water Services Delivery Plan (WSDP) in order to comply with the Government’s Local Water Done Well (LWDW) reform.

The second option was a joint multi-council Water Services Council Controlled Organisation (CCO) with the Mackenzie and Timaru district councils.

The preferred option for Timaru, in a report to be discussed at a meeting on Tuesday, was a CCO operation with neighbouring councils.

The Mackenzie council’s options have not been revealed but it was also due to discuss options at a meeting in Fairlie on Tuesday.

The Waimate (WDC) and Timaru councils would begin public consultation on May 15.

Waimate had rejected the options of establishing a new company 100% owned by the council, a community trust-owned one, and a mixed council and consumer trust-owned organisation.

LWDW replaces the controversial Three Waters reform.

In his report tabled at a meeting on April 29, Waimate council chief executive, Stuart Duncan, said his council had engaged with the Timaru, Mackenzie and Waitaki councils about working together more closely regarding the delivery of water services.

“It is a significant hurdle for any council to effectively assess the merits of water service delivery options when there is only a moderate level of confidence in the data provided by potential partners,” he said.

“This situation creates a shaky foundation for decision-making and introduces considerable risks.

“Critical information like infrastructure condition, demand projections, capital investment, operational costs, and compliance history from potential partners, becomes incredibly difficult to accurately evaluate [in regard to] the viability and benefits of different collaboration models.

“How can you determine the true cost-effectiveness or efficiency gains of a shared service if you are unsure about the baseline data from your potential partner?”

Duncan said the councils had engaged consultancy firm MartinJenkins to prepare a series of reports to measure each model against the requirements of the LWDW legislation, namely, sufficiency of investment, funding and financing, affordability, and levels of service delivery.

“Establishing a multi-council Council-Controlled Organisation (CCO) for water services based on assumed efficiency gains and harmonised pricing presents a complex risk assessment for each participating council,” Duncan said.

“While the potential benefits are attractive, the underlying assumptions carry significant uncertainties that need scrutiny.”

MartinJenkins’ assessment found that both an in-house business unit and a joint Water Services Organisation (WSO) are viable options for Waimate.

“On the one hand, establishing a joint WSO would unlock greater financial capacity for WDC, and would help to reduce price increases for consumers compared to delivering water services in-house,” the report said.

“It would also provide access to specialist expertise for water services which would help to safeguard water quality and reliability, particularly in the face of changing regulatory standards and future resilience needs.”

However, the report said establishing a joint WSO may raise concerns about the degree of local control and influence over water services.

“In WDC's case, it raises particular questions about the implications for rural water supplies and how specialist expertise in rural water services can be retained within the district.

“If this option is chosen, WDC will need to be satisfied that it can put appropriate mechanisms in place to mitigate these risks and concerns.”

Duncan said the risks related to establishing a CCO based on assumed efficiency gains included rural New Zealand’s geographic and demographic diversity, loss of local control and responsiveness, increased bureaucracy and complexity, transition costs and disruptions and differing levels of existing infrastructure.

The risks related to multi-council harmonised (uniform) pricing included political and public backlash caused by significant price increases for some users, cross-subsidisation concerns, ignoring local cost drivers, impact on affordability and difficulty in future adjustments.

Duncan said each council, when making a decision on the merits of a multi-council CCO, must have faith that each dataset provided by all potential partners had come from a thorough due diligence process, going beyond “the headline assumptions of efficiency, investment, affordability and harmonisation”.

He added that while the concept of a multi-council CCO for water services held potential, each council must approach the assessment with a “critical and risk-aware mindset”.

“Relying solely on broad assumptions of efficiency and the perceived simplicity of harmonised pricing without a deep understanding of the local context and potential downsides, could lead to significant financial, political, and social risks for individual communities.

“It is essential that the council understands the impact of the decision before them and the broader impact on each choice.”