Local Government (Water Services) Bill

2.1. Are there any publicly available inquiry, review or evaluation reports that have informed, or are relevant to, the policy to be given effect by this Bill?

YES

Reform of the water services sector began in 2017, triggered by the Government inquiry held for the 2016 water supply contamination incident in Havelock North. A 2017 report of the inquiry findings can be found at:

https://www.dia.govt.nz/Government-Inquiry-into-Havelock-North-Drinking-Water#Report-1 

Since then, there has been additional research related to the key challenges behind New Zealand water infrastructure and local government funding which has informed the policy to be given effect by this Bill, including the following reports:

https://tewaihanga.govt.nz/our-work/research-insights/sector-state-of-play-water (February 2021)

https://tewaihanga.govt.nz/our-work/research-insights/is-local-government-debt-constrained  (March 2024)

https://tewaihanga.govt.nz/our-work/research-insights/valuing-water-sustainable-water-services-and-the-role-of-volumetric-charging (August 2024)

2.2. Does this Bill seek to give effect to New Zealand action in relation to an international treaty?

NO

2.3. Were any regulatory impact statements provided to inform the policy decisions that led to this Bill?

YES

In June 2024, two Cabinet policy papers were considered by Cabinet: Local Water Done Well stage 3: water services delivery system and Local Water Done Well Stage 3: Water Services Regulatory System. These were accompanied by the Regulatory Impact Statement titled “Local Government Water Services Bill”.

The subsequent July 2024 Cabinet policy paper Local Water Done Well stage 3: further decisions was accompanied by the Regulatory Impact Statement titled “Local Government Water Services Bill (2)”.

The RISs were prepared by the Department of Internal Affairs. Copies are available on the Department’s website, and on the Treasury website.

2.3.1. If so, did the RIA Team in the Treasury provide an independent opinion on the quality of any of these regulatory impact statements?

NO

The Treasury reviewed the outline of the policy proposals and determined that an internal DIA RIS panel would be sufficient for quality assurance of both regulatory impact statements.

An internal quality assurance panel considered the regulatory impact statement and considered that both RIAs partially meet the quality assurance criteria.

2.3.2. Are there aspects of the policy to be given effect by this Bill that were not addressed by, or that now vary materially from, the policy options analysed in these regulatory impact statements?

NO

2.4. Has further impact analysis become available for any aspects of the policy to be given effect by this Bill?

NO

2.5. For the policy to be given effect by this Bill, is there analysis available on:

(a)   the size of the potential costs and benefits?

NO

(b)   the potential for any group of persons to suffer a substantial unavoidable loss of income or wealth?

NO

Analysis of the potential costs and benefits of the reformed water services system is available in the regulatory impact statements. For the most part, the costs and benefits cannot be quantified. Overall benefits will arise from an improved approach to water services infrastructure and utilisation. The extent of that benefit will be significantly determined by the way and extent to which territorial authorities respond to the requirements of the Bill and make use of the new powers and regulatory tools it will provide them. 

No one is expected to suffer a substantial unavoidable loss of income or wealth.

2.6. For the policy to be given effect by this Bill, are the potential costs or benefits likely to be impacted by:

(a)   the level of effective compliance or non-compliance with applicable obligations or standards?

YES

(b)   the nature and level of regulator effort put into encouraging or securing compliance?

YES

The Bill will establish a new and enduring economic regulatory regime for water services. It is likely that there will be some uncertainty for water service providers about what economic regulation will involve, as the industry has not been subject to it before. To account for this, the proposed reforms take a staged approach, where stronger forms of regulation can be applied to specific providers where necessary. The regime is also modelled off the existing provisions in Part 4 of the Commerce Act 1986. This will help providers, and their legal and regulatory advisors, to draw on comparative case law and familiar concepts to achieve compliance. The Commerce Commission is also expected to engage in advocacy efforts to educate and upskill providers.

The Bill will amend the existing water quality regulatory system. A number of these amendments are designed to reduce the regulatory burden on certain water service providers (especially small-scale drinking water suppliers), with the intent of having a more proportionate regulatory framework. In this context, the potential benefits of the policy are likely to be impacted by the extent to which water service providers direct their focus to compliance where obligations and standards remain, and by the extent to which Taumata Arowai - the Water Services Regulator (to be renamed the Water Services Authority in the Bill) is proactive in issuing appropriate exemptions and acceptable solutions to reduce compliance costs.

The Bill has been designed to ensure that applicable obligations and standards are clear and fit for purpose, so that compliance is facilitated. The Bill also provides a full range of effective enforcement tools, ranging from the publication of plans and rules, straightforward directions and notices, through to infringement fines and serious penalties including fines and imprisonment.

3.1. What steps have been taken to determine whether the policy to be given effect by this Bill is consistent with New Zealand’s international obligations?

No relevant international obligations were identified during the development of the policy proposals in the Bill.

3.2. What steps have been taken to determine whether the policy to be given effect by this Bill is consistent with the principles of the Treaty of Waitangi?

The Local Government Act 2002 requires local authorities to facilitate Māori participation in decision making processes within local government. The relationships, rights and interests that Māori have with water are often geographically or catchment specific and recognised at a local level, in agreements between mana whenua and councils. This Bill does not amend these requirements in the Local Government Act 2002. Existing requirements in Treaty settlement legislation will still apply to local authorities delivering water services, together with other arrangements that councils and Māori/iwi have entered into about the delivery of water services.

The Department of Internal Affairs commissioned a Treaty settlement specialist to provide a stocktake of the relevant settlement Acts and how they interact with Local Water Done Well policies. The Department is engaging with the post-settlement governance entities (PSGEs) for the settlements that are likely to be directly impacted, and with iwi/Māori more broadly, on the policy intent and implications of the Bill.

3.3. Has advice been provided to the Attorney-General on whether any provisions of this Bill appear to limit any of the rights and freedoms affirmed in the New Zealand Bill of Rights Act 1990?

YES

Advice provided to the Attorney-General by the Ministry of Justice is generally expected to be available on the Ministry of Justice’s website at introduction of a bill, and can be accessed at https://www.justice.govt.nz/justice-sector-policy/constitutional-issues-and-human-rights/the-bill-of-rights-act/advice/

3.4. Does this Bill create, amend, or remove:

(a)   offences or penalties (including infringement offences or penalties and civil pecuniary penalty regimes)?

YES

(b)   the jurisdiction of a court or tribunal (including rights to judicial review or rights of appeal)?

YES

The Bill creates a number of new offences to enable the water service providers to discharge their duties, and effectively manage their infrastructure and provide services. These are listed in Appendix One and cover the following areas:

·         Governance of water organisations: consumer trusts

·         Offences and penalties relating to economic regulation and consumer protection

·         Infrastructure Offences

·         Offences relating to water supply network

·         Offences relating to wastewater networks

·         Offences relating to stormwater network

·         Other offences relating to water supply network, wastewater network, and stormwater network

·         Offences relating to plans, rules, directions, and compliance orders

·         Offences relating to duties associated with administration of Act

·         Offences and penalties relating to economic regulation and consumer protection

The Bill includes criminal liability for strict liability offences, and for providing false or misleading information, punishable with fines or imprisonment or both. The Bill’s offence and penalty structures draws from similar legislation in equivalent areas, including the Hazardous Substances and New Organisms Act 1996 and the Building Act 2004 Part 12. The Bill also includes enabling provisions to set infringement offences and penalties in bylaws and specifies offences against clauses 393, 398, 401, 402, 406, 408 - 419 as infringement offences.

The enforcement regime is designed to disincentivise non-compliance with applicable standards and any behaviour by individuals, bodies corporate or unincorporated bodies which would put achievement of those standards at risk. Provision of infringement offences allows for a proportionate response to the nature of the offending and encourages effective engagement in preventative action.

The Bill provides for a person affected by specified decisions of water service providers to apply for an internal review. The Bill also enables a person affected by those decisions to appeal to the District Court, High Court and then to the Court of Appeal or Supreme Court. Appeals concerning Māori land go through the Māori Land Court. Appeals to the Court of Appeal or Supreme Court may be made only on questions of law arising from appeals.

The Bill also grants jurisdiction to the High Court to hear merits appeals on water services price-quality determinations made by the Commerce Commission.

3.4.1. Was the Ministry of Justice consulted about these provisions?

YES

The Department has engaged with the Ministry of Justice on the offences and penalties during drafting stages and supplied policy papers and Regulatory Impact Statements. Their feedback was considered and adopted as appropriate. This engagement will continue during the Select Committee process.

3.5. Does this Bill create, amend or remove any provisions relating to the collection, storage, access to, correction of, use or disclosure of personal information?

YES

Clause 101 (Rating information needed by water organisation) of the Bill requires water organisations to give the relevant territorial authority customer information that the authority reasonably requires to calculate entitlements to rebates under the Rates Rebates Act 1973 for the previous rating year.

In Part 6, subpart 2, there are a number of compliance powers that, subject to specified safeguards, allow the water service providers to collect information from a person. Provisions have been included to clarify the purpose and use of information, and to clarify that the protections provided by the Privacy Act 2020 are preserved.

3.5.1. Was the Privacy Commissioner consulted about these provisions?

NO

The Privacy Commissioner was not consulted because the provisions replicate those in the Water Services Entities Act 2022 which was previously reviewed by the Commissioner.

3.6. Has there been any external consultation on the policy to be given effect by this Bill, or on a draft of this Bill?

YES

Policy design was discussed in detail with an independent Technical Advisory Group; Auckland Council; Taumata Arowai-the Water Services Regulator; and the Commerce Commission. Relevant sections of the draft bill were consulted on with Taumata Arowai-the Water Services Regulator, the Commerce Commission, and the Infrastructure Commission.

3.7. Have the policy details to be given effect by this Bill been otherwise tested or assessed in any way to ensure the Bill’s provisions are workable and complete?

NO

4.1. Does this Bill contain any provisions that could result in the compulsory acquisition of private property?

YES

The Bill will consequentially amend the Public Works Act 1981 to include water service providers under the definition of local authority. The consequential amendment therefore confers the power for water service providers to acquire private land, obtain an easement over private land, or to lease private land to carry out work to water services for any public purpose.

Clause 84 (Compensation) of the Bill entitles a person whose property is damaged when a water service provider carries out infrastructure work on private land to compensation. If the amount of compensation cannot be agreed, it will be determined in the manner provided for by the Public Works Act.

4.2. Does this Bill create or amend a power to impose a fee, levy or charge in the nature of a tax?

YES

Water organisations need legislative authority to charge for their services. The charge is compulsory and enforceable by law. The provisions are set out in Part 3, subpart 1 Charges for water services.

Subpart 1 sets out the framework for setting charges, and includes provisions to manage specific issues, such as unconnected properties, liability for occupiers of Māori land, penalty rates in the event of non-payment, and making development contributions available to water organisations.

Property owners will continue to be liable for the payment of water services bills, with owners of residential properties able to continue to pass through any consumption-based charges to tenants.

The Bill also enables the levy regulation-making power in Part 4 of the Commerce Act 1986 to be applied to regulated water service providers with respect to economic regulation and consumer protection.

4.3. Does this Bill affect rights, freedoms, or impose obligations, retrospectively?

YES

The Bill amends the Local Government (Water Services Preliminary Arrangements) Act 2024 to clarify that expenses incurred by the Crown monitor and recoverable from Watercare under section 89(1)(a) include expenses relating to all functions, duties and powers under the Act. On enactment of the Bill, this amendment will apply to expenses incurred by the Crown monitor from 3 September 2024. This obligation aligns with the expectations of the parties under the Preliminary Arrangements Act in terms of recoverable expenses of the Crown monitor.

4.4. Does this Bill:

(a)   create or amend a strict or absolute liability offence?

YES

(b)   reverse or modify the usual burden of proof for an offence or a civil pecuniary penalty proceeding?

NO

The Bill provides the following strict liability offences:

·         cl 225 (which inserts Part 4A, cl 57ZN(1)(b) into the Commerce Act 1986) Offence relating to Commission service quality codes

·         cl 398 Connecting to, disconnecting from, or discharging into wastewater network without authorisation

·         cl 401 Discharging trade waste without trade waste permit

·         cl 402 Breach of trade waste permit

·         cl 408 Discharging into water supply network without authorisation

·         cl 411 Breach of controlled drinking water catchment management plan

·         cl 417 Failure to comply with direction issued by compliance officer

·         cl 418 Failure to comply with compliance order or court order

·         cl 419 Tampering with water meter

These offences have maximum fines between $20,000 and $500,000 for individuals and between $100,000 and $3 million for bodies corporate. Appropriate statutory defences are provided for in the Bill.

4.5. Does this Bill create or amend a civil or criminal immunity for any person?

NO

4.6. Does this Bill create or amend a decision-making power to make a determination about a person’s rights, obligations, or interests protected or recognised by law, and that could have a significant impact on those rights, obligations, or interests?

YES

Part 2, subpart 4 of the Bill provides for water service providers to access private land to install new works with consent of the owner, or a District Court decision. Water service providers can also access existing works on land following notification to the owner. Owners can set reasonable conditions, and District Court decisions can be appealed. Specific processes are provided for Māori land to allow for equivalent protections for landowners, recognising the distinct nature of Māori land ownership. Land access without consent is allowed for in emergency situations.

Part 3, subpart 4 provides that water service providers must make controlled catchment management plans, which can require permits for certain activities. Decisions to issue permits are reviewable.

Under Subpart 5, water service providers can make decisions about the issuing of trade waste permits. These must be subject to the provider’s trade waste plan and decisions are reviewable.

4.7. Does this Bill create or amend a power to make delegated legislation that could amend an Act, define the meaning of a term in an Act, or grant an exemption from an Act or delegated legislation?

YES

Part 5, Subpart 2 creates the power for the Commerce Commission to exempt local authorities from compliance with any provision of new Subpart 12 of Part 4 of the Commerce Act 1986 (clause 226 which inserts new clause 57S).

Part 6, Subpart 1 replaces bylaw making powers in the LGA02 for territorial authorities relating to water services. Bylaw making power remains with territorial authorities to ensure democratic accountability, but water organisations are able to propose new bylaws which territorial authorities must enact as long as relevant statutory criteria are met.

4.8. Does this Bill create or amend any other powers to make delegated legislation?

YES

The Bill contains provisions for delegated decision-making powers through secondary legislation that allows:

·         local authorities to make new water services bylaws;

·         exemptions to some minimum requirements for water organisations to be made by Order in Council;

·         regulations to be made by Order in Council to govern the consumer trust delivery model and provide rules for consumer trust elections;

·         stormwater and additional entities to become subject to the economic regulation regime by designation through an Order in Council;

·         the Commerce Commission to issue determinations and determine and amend input methodologies for water services;

·         regulations to be made by Order in Council specifying requirements relating to consumer protections;

·         the Commerce Commission to develop and implement a service quality code;

·         regulations to be made by Order in Council to bring the economic regulation levy regime into effect;

·         wastewater and stormwater environmental performance standards to be made by Order in Council; and

·         regulations to be made by Order in Council for detailed requirements for national engineering design standards.

This secondary legislation is necessary because there are likely to be technical requirements in specific detail that are highly subject to change as information develops. Containing them in the primary legislation may be too prescriptive and rigid. Secondary legislation also enables local authorities to make detailed rules appropriate to local circumstances within the legislative scheme. It allows the Commerce Commission to tailor the economic regulation regime appropriately, for example, by staging the application of different economic regulation tools to different providers to take account of particular circumstances, including risk and complexity.

4.9. Does this Bill contain any provisions (other than those noted above) that are unusual or call for special comment?

NO