Economic regulation policy for water services
We are working with the Department of Internal Affairs to advance the new direction for water services and policy based on Local Water Done Well.
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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 3 stages:
- Water Services Acts Repeal Act 2024 – This Act repealed the previous Government’s Water Services Entities Act 2022, Water Services Legislation Act 2023, and Water Services Economic Efficiency and Consumer Protection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.
- Local Government (Water Services Preliminary Arrangements) Act 2024 – This Act establishes the preliminary arrangements for the new water services system, including transitional economic regulation.
- Local Government (Water Services) Bill – This Bill will establish the enduring settings for the new water services system, including full economic regulation.
The Ministry of Business, Innovation and Employment 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. Further information about Local Water Done Well, including guidance and information for councils is available on the DIA website.
Water Services Policy and Legislation(external link) — Department of Internal Affairs
Consultation on Commerce Commission levy for the economic regulation of water services
We are consulting on a proposed levy to recover the cost of the Commerce Commission’s new functions to regulate water services from 1 July 2025 onwards.
The Commerce Commission will oversee and implement the new economic regulation and consumer protection regime for New Zealand’s water services and will have a range of regulatory tools, including mandatory information disclosure, to promote transparency and ensure investments are made where they are needed most.
The proposed levy has been designed to recover the cost of the regime, excluding litigation and Crown Monitor costs for Watercare. It is expected that the Local Government Water Services Bill will enable the levy making power in the Commerce Act to be applied to regulated water services suppliers. This would require regulated water services suppliers to pay the levy determined in accordance with regulations. The Ministry of Business, Innovation and Employment would administer the levy on behalf of the Minister of Commerce and Consumer Affairs.
Following consultation, the Government will make decisions on a levy design, with the aim of levy regulations coming into effect soon after the Local Government (Water Services) Bill passes.
To read the discussion document and provide feedback, please visit our consultation page.
At the same time, the Water Services Authority – Taumata Arowai is seeking feedback on a proposed levy to fund its work regulating drinking water suppliers for safety and quality and overseeing the environmental performance of stormwater and wastewater networks. This consultation is available on the Authority’s website.
Consultation on Water Services Authority – Taumata Arowai levy for 2025 – 2028(external link) — Taumata Arowai
Transitional economic regulation
The Local Government (Water Services Preliminary Arrangements) Act 2024 requires 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 enduring economic regulation regime.
The Act also enables some councils and council-controlled organisations to be subject to an early form of information disclosure by the Commerce Commission, prior to the enduring 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 suppliers, the Commerce Commission will have the ability to consult broadly under the transitional regime to help inform disclosure requirements set under the enduring regime.
Overview of key aspects of the Bill [PDF 322KB](external link) — Department of Internal Affairs
Enduring economic regulation
The Local Government (Water Services) Bill provides for a full 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 suppliers will be required to disclose information to promote transparency about their performance and inform the need for any further regulatory intervention. In addition, the Commerce Commission will be able to monitor and enforce the requirement that revenue from regulated water services (drinking water and wastewater) is spent solely on those services, and set revenue thresholds so that suppliers have a clear understanding about the level of revenue they need to collect and invest in water infrastructure.
The Bill also includes a regulation-making power that enables the Minister of Commerce and Consumer Affairs to give the Commerce Commission quality regulation, performance requirement regulation and price-quality regulation as additional tools, if needed for specific suppliers.
New information disclosure requirements will allow the Commerce Commission to collect and analyse information relating to consumer protections, such as service quality and customer engagement. The Bill provides a range of tools to address any issues that are identified, including enabling regulations to be set relating to complaints processes and for the Commerce Commission to develop a service quality code, if needed.
The Commerce 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 complement the wider Local Water Done Well reform programme by promoting consumer interests and ensuring the new system is efficient and effective. 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 273 KB](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
Next steps
The Local Government (Water Services) Bill has been introduced to Parliament. You can follow the Bill, including when submissions are open for the Select Committee process, by visiting the Parliament website.
Local Government (Water Services) Bill(external link) — New Zealand Parliament Pāremata Aotearoa
The Commerce Commission will start implementing the enduring economic regulation regime after the Local Government (Water Services) Bill is passed, which is expected in mid-2025. More information about the Commission’s role is available here:
Water – Wai(external link) — Commerce Commission
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