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Government takes the plunge and introduces first Three Waters legislation into Parliament

Home Insights Government takes the plunge and introduces first Three Waters legislation into Parliament

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Contributed by: Craig Shrive, Petra Carey, Victoria Piatov, and Ihlara McIndoe

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Published on: June 03, 2022


Water Services Entities Bill introduced

Yesterday the Water Services Entities Bill (Bill) was introduced to the House – a standalone Bill that would establish four publicly owned water services entities to provide water services in place of local authorities. The Bill contains the ownership, governance, and accountability arrangements relating to those entities, and provides for transitional arrangements during an establishment period. The Bill provides for the entities to commence delivery of water services on 1 July 2024.
The Bill is one component of a comprehensive legislative package to reform water services. There will be further legislation to provide for implementation arrangements, specific powers and functions of the new water services entities, economic regulation and consumer protection, any changes to Treaty of Waitangi settlement legislation, and detailed changes to other relevant legislation.
Key changes as compared to the Exposure Draft of the Bill are set out below. The Bill's first reading is expected to take place next week, and there will be an opportunity for the public to provide feedback on the Bill at the select committee stage. In the meantime, please get in touch with one of our experts below if you have any queries.

Working Group recommendations incorporated

In March 2022, the Working Group on Representation, Governance and Accountability (Working Group) made 47 recommendations in response to the Bill's Exposure Draft. The Government responded to the Working Group's recommendations in late April, agreeing to 44 recommendations in full, partially and in principle, with three that required further work. The Bill broadly reflects the recommendations put forward by the Working Group and the Government's stated response to the recommendations.
A key aspect of the Working Group's recommendations was the emphasis of the Government's existing bottom line of public ownership of the four water services entities. The recommendations of the Working Group looked to reinforce the public ownership model, while maintaining direct governance oversight by a board appointed for its expertise. 

Key changes against the Exposure Draft

The Bill includes the following key changes (compared to the Bill's Exposure Draft):

  • Ownership of a water services entity is to be through shares assigned to each territorial authority in an entity's service area, with each share assigned to the relevant council per 50,000 people in its district (rounded up, with at least one share for every territorial authority).
  • Detailed provisions regarding what must be included in the constitution of a water services entity. Among other things, this will determine how the regional representative group is appointed and operates (the Exposure Draft proposed that only the regional representative group itself would have a constitution). The first constitution for the entities will be set out in regulations. The constitution must not be inconsistent with the Bill.
  • Constitutions of water services entities can provide for sub-regional advisory groups or committees of a regional representative group. Specifically, the Bill states that water services entities' constitutions may provide for collective or individual experience, expertise, qualifications, or skills required of a regional representative group or regional advisory panel; additional reporting and monitoring requirements, and reviews done by the regional representative group of the board's performance; and any other matters that are not inconsistent with the overall Act.
  • If there is a proposal for a water services entity to divest its ownership or other interest in a water service or control of significant infrastructure, the Bill provides that it must receive unanimous support from the relevant entity's territorial authority owners, and support from at least 75% of an entity's regional representative group and votes cast by electors in its service area in a poll.
  • Provision for water services entities to have regional advisory panels if they choose to, based on a geographic area in the entity’s service area. The role of a regional advisory panel is to provide advice to the regional representative group about how to perform or exercise its duties, functions, and powers.
  • Decisions made by the regional representative group of a water services entity must be made by consensus (if consensus can be reached by a regional representative taking all reasonably practicable steps to reach consensus in accordance with a procedure, and within a timeframe specified in the constitution), and in any other case, by 75% of the regional representatives present and voting. The same requirements apply in respect of decisions made by a regional advisory panel.
  • The Minister, a territorial authority owner, a regional representative, or a regional representative group cannot direct a water services entity or a board member or employee of a water services entity in relation to the performance of duties, functions or powers under the Bill, or to require a particular act or result.
  • The Bill also emphasises the financial independence of water service entities, and restricts the influence of territorial authority owners, regional representative groups and representatives in this regard. For example, the Bill provides that a territorial authority owner, a regional representative group, or a regional representative has no right, title or interest in the assets, security, debts, or liabilities of a water services entity, must not receive any equity return from an entity, and must not give an entity any financial support or capital.
  • Clear requirements for all persons (compared to the more high-level entity focused obligations of the Exposure Draft) who exercise functions, duties and powers under the Bill to give effect to the principles of Te Tiriti o Waitangi in addition to giving effect to Te Mana o te Wai (Te Mana o te Wai is a concept that refers to the fundamental importance of water and recognises that protecting the health of freshwater protects the health and well-being of the wider environment).

Additionally, there are two recommendations made by the Working Group which have been brought into the Bill in a modified form, as follows:

  • The requirement for ongoing review of the new three waters system, in a two-stage process involving an interim review of the water services entities' governance and accountability arrangement within five years of establishment, and a comprehensive review of the need for, and operation and effectiveness of, water services legislation within 10 years of establishment. This is a modified inclusion of the Working Group's recommendation, which involved a more comprehensive review at the 5-year point.
  • The Working Group recommended the establishment of a Water Services Ombudsman with jurisdiction over all the public facing activities of each water services entity, incorporating a tikanga based dispute resolution process. In its response to this recommendation, the Government acknowledged the need to ensure a consumer protection framework for the three waters system with provision for public complaints and dispute resolution. While the Bill does not provide for the establishment of a Water Services Ombudsman, it does include amendment to the Ombudsmen Act 1975 to include regional representative groups under the Water Services Entities Act (when established) to the list of entities that the Ombudsmen Act applies to.
The Government also aims to entrench provisions safeguarding against privatisation of a water services entity and its significant infrastructure and services, with a requirement of a 75% majority of the House of Representatives to repeal or amend such provisions. This will require cross party support at the Committee of the whole House stage.

This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.

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