Economic regulation policy for water services

About Local Water Done Well

Local Water Done Well is the Government's plan to address New Zealand's long-standing water infrastructure challenges. It aims to restore council ownership and control of water services, with strict requirements for water quality and ongoing investment.

Local Water Done Well is being implemented in three stages:

1. Water Services Acts Repeal Act 2024 – This Act repealed the previous Government’s Water Services Entities Act 2022, Water Services Legislation Act 2023, and Water Services Economic Efficiency and Consumer Protection Act 2023.
2. Local Government (Water Services Preliminary Arrangements) Bill – This Bill will establish the preliminary arrangements for the new water services system, including transitional economic regulation.
3. Local Government Water Services Bill – This Bill will establish the enduring settings for the new water services system, including complete economic regulation. 

MBIE is leading policy development for the economic regulation regime, which will be implemented by the Commerce Commission. The Department of Internal Affairs is leading broader Local Water Done Well policy development. 

Water Services Policy and Legislation(external link)  — Department of Internal Affairs

Transitional economic regulation

The Local Government (Water Services Preliminary Arrangements) Bill will require councils to develop Water Services Delivery Plans setting out baseline information, including capital and operating expenditure, financial projections, and asset information. This information will be shared with the Commerce Commission as it works towards implementing the complete economic regulation regime.

The Bill also enables some councils to be subject to an early form of information disclosure by the Commission, prior to the complete regime. This will build on the information collected through the Water Services Delivery Plans, and is intended for councils who have more advanced practices, or who move early to establish new organisations and are ready for a faster track to more detailed oversight.

While additional information disclosure is unlikely to apply to all local government providers, the Commission will have the ability to consult broadly under the transitional regime to help inform disclosure requirements set under the complete regime.

Overview of key aspects of the Bill [PDF 322KB](external link) — Department of Internal Affairs

Complete economic regulation

The Local Government Water Services Bill will provide for a complete economic regulation regime to promote sufficient revenue recovery, and efficient investment and maintenance so that water services are delivered at a quality that communities expect. The regime will initially apply to drinking water and wastewater services, with flexibility to include stormwater services at a later date, if necessary.

Information disclosure is at the core of the new regime. All regulated providers will be required to disclose information to inform the need for any further regulatory intervention and promote transparency about their performance. In addition, the Commission will be able to monitor and enforce the requirement that water services revenue is spent on water services alone, and set revenue thresholds so that providers have a clear understanding about the level of revenue they need to collect and invest in water infrastructure.

The Bill will also include a regulation-making power that enables the Minister of Commerce and Consumer Affairs to give the Commission quality-only or price-quality regulation as additional tools, if needed for specific providers. 

New information disclosure requirements will allow the Commission to collect and analyse information relating to consumer protections, such as service quality and customer engagement. The Bill will provide ways to address any issues that are identified, including enabling regulations to be set relating to complaints processes and for the Commission to develop a service quality code, if needed.

The Commission will oversee the economic regulation and consumer protection regime because it has a strong track record of implementing similar regimes in other utility sectors. The regime will be funded via levies on regulated providers on behalf of consumers.

The regime will complement the wider Local Water Done Well reform programme by promoting consumer interests and ensuring the new system is efficient. It will give communities across New Zealand confidence that water services are being invested in, maintained, and delivered at the quality that they expect.

Overview of economic regulation and consumer protection [PDF 256KB](external link) — Department of Internal Affairs

Cabinet decisions and related papers

You can read the Government’s decisions on water services regulation on the Department of Internal Affairs website.

Proactive releases(external link) — Department of Internal Affairs

Consultation

The Finance and Expenditure Committee considered public submissions during its consideration of the Local Government (Water Services Preliminary Arrangements) Bill. The Committee reported back to Parliament on 18 July 2024. You can read the submissions, advice and reports by visiting the Parliament website.

Local Government (Water Services Preliminary Arrangements) Bill(external link) — New Zealand Parliament Pāremata Aotearoa

Further information

In December 2023, the Government announced Local Water Done Well, a new direction for water services and policy. More information is available on the Department of Internal Affairs website.

Water Services Policy and Legislation(external link) — Department of Internal Affairs

Previous water services policy and content

Information about the previous Government’s water services policy and legislation is accessible here:

Archived Water Services Reform Programme information(external link)  — Department of Internal Affairs

Archived Water Services Economic Efficiency and Consumer Protection Act 2023