Why New Zealand’s approach to water management must change

21 Aug 2018

By David Walker

In mid‐August, members of GHD’s specialist water sector team contributed to New Zealand’s 2018 Building Nations conference. Hosted by Infrastructure NZ, this annual event sees key players in local infrastructure development come together to discuss challenges and opportunities for the sector.

One of the pressing issues on the 2018 conference agenda was New Zealand’s approach to water management. David Walker, GHD’s Market Leader – Advisory in New Zealand was called on to take part in the panel discussion about water sector reform. The following is his assessment of the sector’s current state and what is needed to transform it.

This year, with the Havelock North water contamination crisis still fresh in many people’s minds, it seems New Zealand is on the cusp of a watershed moment.

Globally, we are well known for our relatively unspoiled natural environment and it is widely assumed that New Zealanders enjoy unrestricted access to pristine natural resources – especially water.

In 2016, the contamination of Havelock North’s drinking water supply resulted in more than 5,000 people falling ill with gastroenteritis. In addition to an unprecedented level of sickness in the community and impact on the local economy, the crisis also contributed to three avoidable deaths. In a first world country such as New Zealand, an event of this magnitude is unacceptable. When it comes to water quality, there is clearly a disconnect between the ideal and the reality that needs to be addressed.

At this year’s Building Nations conference, the Honourable Nanaia Mahuta, Minister for Māori Development and Local Government said she believes we have taken our water supply for granted for too long and, with one serious crisis situation behind us, it is now time to act. The Minister was clear that the current review by the Government has sensibly been widened to include stormwater and wastewater as part of their Three Waters review.

In my view, with the varied local capability (highlighted by recent work undertaken by the Minister’s officials) posing a risk to water quality and the impacts of climate change looming, water sector reform can’t come soon enough.

The Government’s appetite for change – evident in the Minister’s address, as well as in the proposed Local Government (Community Well‐Being) Amendment Bill – is very encouraging. However, if the sector is to undergo a successful transformation, there are significant challenges to be addressed – namely the regulatory environment and the service delivery model.

The case for improving water sector regulation

This October the Department of Internal Affairs (DIA), which has been charged with reviewing New Zealand’s current approach to water management, will present the Government with a report that outlines options for water sector reform.

With the existing decentralised and disaggregated regulatory model overseeing the 67 local water delivery providers in regions around the country, centralisation of regulation is likely to be the DIA’s core focus. By consolidating water oversight, there will undoubtedly be a number of benefits – not least the opportunity to ensure closer regulation and tighter compliance with standards necessary for high quality water provision.

Internationally, experience has shown that in nations where water management and regulation is de‐centralised, there is significant non‐compliance with regulations governing the quality of drinking water and wastewater discharge.

In tightening up the regulatory environment, the Government will be able to move the industry towards a more closely monitored state where quality and certainty of supply are tracked and measured in a way similar to the electricity sector.

Getting the service delivery model right

With 67 separate water providers for a population of just 4.7 million people, it is inevitable that there are significant efficiencies to be gained from some consolidation of the delivery model. These providers also generally manage wastewater and stormwater services for their communities and a key question being considered by the Government is how all three waters will be managed. Adding complexity, stormwater management is intrinsically linked to climate change and will be considered by the Climate Change Commission.

As well as maximising the opportunity for every region in New Zealand to deliver water of a consistently high standard, a consolidated model would also enable greater capacity and capability to deliver necessary infrastructure upgrades in parts of the country that are currently unable to fund this themselves.

Internationally, many nations are moving towards consolidated management of water infrastructure and the evidence from a number of studies shows that this ensures the best outcomes for consumers. In Scotland, the migration to a single entity charged with asset management – Scottish Water – has proven highly successful and this approach is now considered to be best practice.

However, although international experience has shown that efficiencies that come through consolidation are able to stretch the funding dollar, this of itself is unlikely to be a panacea for all circumstances.

A prime example is the town of Punakaiki, on the South Island’s West Coast. Currently, its population of less than 100 is struggling with the funding of drinking water, public toilets and associated wastewater treatment services for both the community and the half a million tourists that visit each year.

Other considerations

Centralising and consolidating New Zealand’s water regulation and delivery model will go a long way to improving both certainty and quality of supply, however additional investment is likely to be needed at a central Government level. Studies recently commissioned by the DIA on drinking water and wastewater treatment indicate there is a significant backlog of infrastructure upgrades to be processed, and it is imperative that the Government consider how this work is funded as part of the wider improvement programme.

Managing the change process across New Zealand’s regions will also be a significant requirement. With the majority of local water supplies overseen by Local Government, any consolidation of service delivery will result in a major impact on the structure of Councils, particularly the smaller districts. To achieve a successful transformation, there needs to be buy‐in and this requires a compelling story for why change is needed – how communities can benefit and how the country as a whole can become a better place to live.

The good news is that, in addition to international examples of successful consolidation, New Zealand already has a local success story to draw upon. Since Watercare took charge of all of Auckland’s water supply in 2010, outlying districts such as Rodney and Franklin have seen half a billion dollars’ worth of investment committed in water infrastructure – investment that simply would not have been afforded by ongoing reliance on localised ratepayer funding and management.

In summary, it is clear that the status quo is not sustainable and has to change. What will ultimately impact the success of any long‐term strategy is how any proposed change to regulation and service delivery are executed and managed.

It is only by addressing these two core elements together that New Zealand will ultimately achieve a robust water management system that guarantees future generations can treat high quality drinking water as a given.

About David Walker

David is GHD’s Market Leader – Advisory in New Zealand. He has extensive water industry experience, including leading restructuring and transformational change. As a commercial advisor at PwC, David was Project Director for the development of the Watercare Services Limited integration plan in 2008/2009. In 2013/2014, he assisted PwC Ireland in their role as advisor to the establishment of Irish Water, a single utility established to provide water and sewerage services to the whole country. In his role at GHD, he is continuing to provide sector leadership and advice.