It comes as no surprise that the New Zealand water industry is staring down the barrel of
Currently, in New
Zealand, the industry suffers from a fragmented governance structure with no
single ministry responsible for all water sectors. Guidance for the local and regional councils
is provided by the Ministry of Health, Ministry for the Environment, Ministry
for Primary Industries and the Resource Management Act. While the regulation of the industry is
undertaken by the Drinking Water Assessors and the 10 Regional Councils.
What can we learn
from other countries, and in particular the UK, that went through a significant
rationalisation (and privatisation) of the water industry in the early 1990s?
Putting aside the
"privatisation" issue, rationalisation in the UK resulted in the
Department for Environment, Food and Rural Affairs (DEFRA) becoming responsible
for the entire industry; water, wastewater, agriculture, fisheries and
environment. Subsequent regulation is undertaken by three independent agencies,
the Drinking Water Inspectorate, the Environmental Agency and the Water
Services Regulation Authority (OFWAT).
(The Water Services Regulation Authority) is the economic regulator of the
water and sewerage sectors. Every 5 years OFWAT renegotiates price limits with
the water companies on the basis of a series of initiatives that must be
addressed in the next 5 year Asset Management Period (AMP). In New Zealand this
is currently the responsibility of Local Government (District Councils or
Before each AMP,
DEFRA sets out new requirements for the water companies, setting expectations
and areas of increased level of service required. This gives DEFRA the ability to guide the
progress of the industry in a structured and staged manner, focusing on new
areas as needed at each AMP. This means
that each AMP can address the most pertinent issues in the industry at that
time, bringing about staged and steady improvements to the water services and
environment. The latest AMP (AMP6) in
the UK focuses on improved efficiency and reducing energy demands to bring
about lower operational costs.
The AMPs in the UK
effectively set a "glide path" for investment under the governance of
New Zealand water
quality information suggests that the current governance structure in NZ is not
delivering the outcomes we would expect from a country committed to a “100%
Pure” marketing image. And while agriculture is the backbone of
our economy, when we look to the tourism industry, we see that it provides over
$7 billion to our economy every year. This is not a market we can afford to
lose. Additionally to this is our marketability overseas which links back to
how we are perceived on the international stage.
The Ministry for
the Environment has taken significant steps with the revised National Policy
Statement for Fresh Water Management and committing government funding for
cleanup of the Waikato River, Rotorua Lakes and Lake Taupo. However, now is the
time for developing a “glide path” to where we want to
be in 20 years and implementing long term action plans while looking for smart
Our industry must be
led in the right direction and have guidance and clarity to make the correct
investment decisions. We must learn from
other countries that have gone before us about how to get to where we need to be. Setting limits and
regulations is all very well, but without the right governance structure and
the forethought to develop a pathway to the right answers, we may end up
spending much more and making the wrong decisions in the long run.
So, setting aside
the issue of privatisation, could the approach taken by DEFRA to guide the
investment decisions of the UK private water industry have application to the
public water industry in New Zealand?
of the governance and regulatory framework enable the water providers to make
better long term and affordable investment decisions?
Nicky Smallberger - Process Engineer
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