Part 4: Levy implementation
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Plan to implement and review the levy
The levy will be payable from 1 July 2025 and invoiced as soon as practicable after that date. Consistent with the existing levy recovery regime under Part 4 of the Commerce Act, MBIE will administer the levy on behalf of the Minister, including by:
- Calculating the estimate of the Commission’s costs at the start of the financial year, for that activity and apportioned to regulated suppliers at that time; and
- Invoicing regulated water services suppliers quarterly in advance.[1]
The levy wash-up process is proposed to occur annually to ensure the regulated suppliers only pay the Commission’s actual costs. As the wash-up would be based on the Commission’s actual cost, this would enable any underspend, or additional spend, to be returned, or recovered from regulated suppliers. The Commission’s actual costs would be capped by the appropriation.
Under the proposed model, regulated suppliers will have flexibility to decide how best to fund payment of the levy. A Council Controlled Organisation that provides drinking water and wastewater services, for example, may choose to charge the households and businesses connected to its networks an equal amount.
Alternatively, a regulated supplier, such as territorial authority that provides drinking water, wastewater and stormwater services in its district, may choose to pass on the levy through a targeted rate directed at connected properties for drinking water and wastewater services, and a targeted rate directed at ratepayers who own properties in an urban area for stormwater services.
It will be up to regulated water services supplier to determine how best to recover the levy costs from consumers (ie rates, water charges, etc.) and how best to ensure these costs are recorded (ie, whether to include levy charges as an explicit line in rates bills).
Monitoring and evaluation of the levy
Given that it is proposed that a levy methodology, rather than fixed levy costs, are prescribed in regulations, the approach is designed to be enduring. However, the levy will still need to be monitored and reviewed to ensure it continues to promote the principles of equity, efficiency (including simplicity), justifiability, and transparency.
It has been proposed that the Commission will be funded through a Crown appropriation. The first review of the levy and appropriation will be undertaken after two years in FY2027/2028, unless issues are identified earlier. This aligns with when the Water Services Authority – Taumata Arowai, is proposing to review its levy. The Minister will consult regulated suppliers or their representatives as part of this levy review.[2]
MBIE also supports the Minister to fulfil their role as being responsible for the Commission in accordance with the Crown Entities Act 2004. Performances measures will be set to monitor the Commission’s performance, including specifying expected outputs (eg quantity, timeliness and quality) and intended impacts. The Commission will be subject to normal accountability arrangements to Parliament relating to its activities under the appropriation, such as annual reporting and incorporating the new water services regime into its Statement of Intent and annual Statement of Performance Expectations.
Questions on this section
8. Do you see any issues with your implementation of the levy (receipt of invoices, payment and passing the cost on as you may determine)? If so, what are those issues?
9. Would the proposed implementation approach create any challenges for your organisation? If so, what would these be in practice and are there solutions you wish to propose?
10. Do you have a preference for when the levy should be reviewed next? If so, why?
[1] In the first year, transitional arrangements will allow for recovery of any Commission costs arising after 1 July 2025 and before the levy regulations are passed or before the regulated supplier becomes subject to the regime.
[2] This is consistent with other levy regimes to recover the Commerce Commission costs. For example, Review of the Commerce Commission’s funding for the regulation of Telecommunications and Fibre under the Telecommunications Act 2001, 2020 [PDF, 788KB](external link) — Commerce Commission New Zealand
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