Advice to Government on water legislation

Te Waihanga provided advice to the Department of Internal Affairs (DIA) on the Water Services Economic Efficiency and Consumer Protection Bill and Water Services Legislation Bill.


As part of this advice to DIA, Te Waihanga has conducted research into key areas of water infrastructure. There are four reports as part of this research:

  • a study on stormwater pricing
  • research on if water networks should charge unconnected consumers
  • report on the contestability initiatives in the English wholesale water market
  • research on water retail markets in the United Kingdom

Stormwater pricing study

Stormwater runoff is increased by urban development.  When not managed well, it can flood properties and deteriorate waterway health.  For these reasons, the way we pay for stormwater should encourage good stormwater management while ensuring cost-recovery, fairness and efficiency.

This report considers the way people pay for stormwater services in other countries as well as in New Zealand. Key findings include:

  • Including stormwater fees in property rates does nothing to incentivise property-owners to reduce their stormwater impacts.
  • A harmonised pricing approach for stormwater is likely to see rural areas cross-subsidising urban areas, whereas for drinking water and wastewater, harmonised pricing is more likely to reduce prices in rural – often poorer – areas. 
  • The Crown and other rates-exempt organisations, including Councils, should be charged for stormwater services.
  • There is not a strong case for incorporating stormwater charges with consumer charges for waste and potable water services.
  • The new Water Service Entities (WSEs) should have the flexibility to choose how they set stormwater fees and provide incentives.

Should water networks charge unconnected consumers?

Properties near water, wastewater and stormwater networks are commonly charged a fee even when those properties are unconnected. These charges influence whether property-owners choose to connect to services or install on-site systems. This report studies the impact that different pricing structures can have on property-owner decisions, performance incentives for the new Water Service Entities and the market for on-site systems. This report recommends that Water Service Entities should only be allowed to charge unconnected consumers where they can prove that there are economic benefits for doing so.

Contestability initiatives in the English wholesale water market

This report looks at how the English economic regulator encourages a competitive wholesale water market. Some of their key initiatives include allowing third-parties to own and operate certain assets, and provide water services to wholesalers or customers directly. The report recommends that more evidence is needed to decide if this approach would work for New Zealand.

Water retail markets in the UK

Scotland and England operate retail water markets for business customers only (they have no retail water market for residential customers). These operate similarly to those for gas, electricity and telecommunications – offering choice and competition. Although a retail water market such as this is not currently proposed in New Zealand, it may be useful to allow for it in the reforms.