Govt investigates regulator to protect consumers

The Government is considering a new economic regulator of water to protect consumers from potential price-gouging and high-cost behaviour flowing from its proposed new water entities, which Local Government Minister Nanaia Mahuta announced yesterday.

The new rules would be designed to complement the newly empowered water regulator Taumata Arowai, to help oversee New Zealand’s new highly-centralised water system, which the Government announced in the face of intense opposition from many local governments. It is now slated to come into force in 2024.

Commerce Minister David Clark said that while he was seeking feedback on the shape and purpose of any potential regulator he was ‘‘leaning towards’’ giving the task to the Commerce Commission, which provides competition regulation to a number of other industries such as telecommunications and electricity lines.

‘‘Basically we want infrastructure that’s efficient, affordable, resilient. Those are the kind of cornerstones and in order to do that, you do have to have some kind of regulation in place,’’ Clark said.

A discussion document for the new regulator released by the Ministry of Business, Innovation and Employment warned that ‘‘the scale of the entities and the absence of competition means there are still significant risks that the entities do not act in the longterm interests of consumers’’.

Clark said that while a deliberate design feature of the new reforms was to effectively give the new entities ‘‘the power to rate’’ and revenue streams from consumers, their status as natural monopolies – that is, with no effective competition – meant that they would need to be closely watched.

‘‘With their power to extract

‘‘With their power to extract funding from the population needs to come some oversight . . .’’

Commerce Minister David

Clark

funding from the population needs

to come some oversight to ensure that they deliver what they say they’re going to do and that it’s the right amount,’’ Clark said.

Many councils and councillors over a long time, fearful of losing elections, ‘‘tended to under-invest in infrastructure, because costs of infrastructure are big and immediate, benefits are longer term’’.

Yesterday Mahuta announced that the Government would be overriding council objections and would legislate to fold councilowned water assets up and down the country into four new massive water service providers.

While Mahuta claimed that councils would continue to own their assets, the crucial question of effective control over the governance of the new entities had been farmed out to a working group, the membership of which is yet to be determined.

Mahuta argued that this would result in better water assets with stronger balance sheets. Detractors, including the other parties in Parliament, are either sceptical or dead against the proposals on grounds that they erode democracy and take away ratepayer assets.

‘‘This move is tantamount to state-sanctioned theft of assets that ratepayers have paid for decades to own,’’ National Party local government spokesman Christopher Luxon said. But Mahuta said any concern it was a confiscation of assets was misplaced. ‘‘They are wrong, that is not happening.’’

The Government also had global ratings agency S&P Global run an eye over different indicative proposals for how it would treat the entities’ balance sheets. The agency effectively confirmed that the further removed from councils the new entities were, the more separately it would treat their balance sheets for ratings purposes.

The MBIE discussion document called, Economic Regulation and Consumer Protection for Three Waters Services in New Zealand, was launched by Clark, and he encouraged the public to submit before its December 20 deadline.