Water Services Economic Efficiency and Consumer Protection Bill

Members, the House is in committee on the Water Services Economic Efficiency and Consumer Protection Bill. We come first to the debate on Part 1.

Thank you, Madam Chair. I thought it would be useful, just whilst we have a chance, to just say a few introductory comments on the bill. Obviously, this is the last of the pieces of the puzzle to ensure that New Zealanders get safe, affordable, and reliable water services that support good health in a sustainable environment.

The aim of this bill and the other bills is to improve New Zealand’s water services system, which is made up of drinking water, waste water, and, of course, stormwater. We know that up to $185 billion in infrastructure is needed over the next 30 years to address historic under-investment. The increased size and scale of these water entities is the key to attracting this level of investment, and this reform will ensure that water infrastructure and services are planned, maintained, and delivered so that these critical services are affordable and fit for purpose. This bill establishes the Commerce Commission to oversee the economic regulation and consumer protection regime for the water entities and this will ensure that consumers directly benefit from these reforms and the delivery of affordable and high-quality water services.

Before I draw the committee’s attention to some of the more notable features, I do want to repeat my thanks to the Finance and Expenditure Committee for its scrutiny of the bill and its considered amendments, and all those people who submitted on it.

The affordable water reforms brought to light issues in the water sector that are often associated with critical infrastructure systems that have natural monopoly characteristics. These include service quality not reflecting community expectations, long-term under-investment in infrastructure, inefficient pricing that lacked transparency, and concerns about the capability of the sector to respond to consumer demands. It’s important that New Zealanders receive water services that meet their expectations now and into the future. For these reasons, this bill establishes an economic regulation and consumer protection regime, with the Commerce Commission as regulator.

This regime is an integral part of the water reforms to protect New Zealanders from the sort of harms that can occur when essential service providers have substantial market power and consumers are unable to switch providers. How the bill addresses this is that alongside Taumata Arowai’s focus on water quality, the economic regulation and consumer protection regime will promote the long-term interests of consumers in water services and ensure the new entities provide high-quality services at affordable prices. It will put protections in place for consumers so they can expect high-quality service when they contact the water supply with a query or complaint, clear communications about network outages, and transparency from their supplier about how water services are built.

The Commerce Commission is a high-performing regulator with experience regulating other essential infrastructure services and ensuring consumers are treated fairly. A Water Services Commissioner will be established within the commission to reflect the unique nature of the water sector and the vital importance of water, guided by the fundamental principle of Te Mana o te Wai. The scope of the Consumer Advocacy Council will also be broadened so that it can advocate on behalf of water consumers, and an independent consumer dispute resolution service will be established to resolve disputes between consumers. I look forward to answering any members’ questions.

Thank you, Madam Chair. Thank you, Minister, for taking one for the team, taking this bill up so that the ACT Party can ask some hard questions. Minister, how is an economic regulator supposed to regulate Māori tikanga—Te Mana o te Wai, spiritual concepts in water? How is an economic regulator supposed to work out—if the Minister truly believes what he’s said, that tikanga and Te Mana o te Wai is the primary reason for these water infrastructure reforms, how is it that an economic regulator saying, “Well, I’m looking at a $100 million proposal from a water services company to invest in a sewage treatment plant or a drinking-water plant but then I have this other report that says, actually, because of tikanga it’s going to cost $150 million.” Because that’s exactly the situation that the Palmerston North District Council is in right now, Minister; that’s the situation they’re in right now. They are being required, because of the need to meet the obligations under the Resource Management Act to meet Te Mana o te Wai obligations, to invest an enormous amount more, maybe even double the amount so that they could get a waste-water treatment plant to service the current and future growth needs of Palmerston North. They had a quote of about $200 million to start with; once you add in Te Mana o te Wai, it’s closer to $500 million.

This legislation, Minister, will further entrench flawed concepts like Te Mana o te Wai which says, “Anyone making a decision about water has to first regard the health of the water, its spiritual health or mauri—its life force—above the needs of communities for drinking water and above the needs of communities for economic and social development.” What country on earth—what developed country on earth is incorporating spiritual concepts in decision making around water? Well, New Zealand has under this Labour Government. And if there’s not an opportunity to change the direction of this Government in October, if that opportunity is not taken up by the voters, we could be on a slippery, slippery slope to having decisions about how water is allocated, about how pipes are built, about the cost of all our infrastructure, dedicated by people who are unappointed and unelected on co-governance panels in the water service entities, and, of course, will be unappointed—will be appointed but not elected—onto the Commerce Commission’s water commission.

Now, Minister, when we look at what else is wrong with this Commerce Commission approach, a gentleman by the name of Andrew Stevenson, who worked for the Commerce Commission, has pointed out some fatal flaws with this legislative approach. Andrew Stevenson says there will be a limited ability to have independent oversight of large projects and less opportunity for community input compared to the original intent of the regulation—less opportunity for community input, less oversight of large projects. Minister, it’s large infrastructure projects where things can typically go more wrong than simply doing routine maintenance on stormwater and waste-water pipes. And yet this legislation, according to an expert who’s worked in the water industry and in the Commerce Commission itself developing regulatory pricing models, has said that it’s not fit for purpose.

This gentleman Andrew Stevenson also says that if the purpose of the economic regulation is that providers will have to develop asset management plans and documents to meet the Commerce Commission’s specifications—but that’s different from the asset management plans that are required under the legislation that sets up the water service entities. Minister, this bill is being rushed through under urgency today. It is incomplete, it is incoherent, it introduces vague spiritual concepts into economic and infrastructure regulation—

Hon Willie Jackson: Oh, sit down.

SIMON COURT: The Hon Willie Jackson knows it, that’s why he’s moaning and groaning. Not even the Hon Willie Jackson knows how it’s going to work. Minister, would you share with the House, with the people watching today: how is an economic regulator supposed to regulate tikanga?

Thank you, Madam Chair. First of all, I think it’s important to recognise that this legislation is about economic regulation, and the member’s comments strayed fairly well outside of the bill. And I certainly don’t think it’s a vague spiritual notion to say that the rights of Māori to the protection of their taonga accorded under Te Tiriti are to be protected in this bill. It’s quite clear that that obligation sits with the entities themselves—

Simon Court: Only because you made it so.

Hon Dr DUNCAN WEBB: —and under clause 5, if the member were to read it, rather than jibber-jabbering from the corner, he would understand that the Commerce Commission has a role to make sure that its function is discharged in light of the water services entities’ obligations to take into account the principles of the Treaty and also, of course, Te Mana o te Wai and any settlement obligations. And I am surprised that a member from a party that prides itself on private property and rights doesn’t recognise that the rights accorded Māori under the Treaty are just as important as the individualistic private property rights that the ACT Party sings for so loud. So I’m very proud that this bill properly protects, preserves, and enhances Te Mana o te Wai, because that’s the right thing to do.

In terms of the wider point he made about not having community input into larger projects, again, I think he’s talking about a different piece of legislation which quite appropriately provides for widespread community input, and in this piece of legislation—which is about economic regulation, about ensuring appropriate price and quality regulation—that this is quite appropriately addressed.

Before I call the next member, can I just say that at 4:45 p.m., which might be while you’re making your contribution, we will go to valedictory statements.

Thank you, Madam Chair. I see this debate’s got off to a flying start! Of course, I was very intrigued with the Minister’s introduction when he said this is the third leg of the puzzle. I would actually say it’s a very confusing puzzle; it’s normally called a conundrum, which means there’s no resolution—you can’t find the end of the puzzle. At least I acknowledge the Minister in the chair. I know it’s a difficult time for him. We’re going to have a long time on this tonight. I presume that’s why Willie Jackson’s turned up just now so he can help the Minister solve all these wonderful issues—the intellectual highlight here!

But, look, the first thing I want to ask about is we are talking about—and this is the Labour proposition that we’re going to set up these entities with really confused governance structures. We don’t know who owns them. And then we’re going to pile on this massive regulatory economic oversight. I think the question for the Minister is what other models did the Labour Government actually contemplate? Because this is not an industry where we’ve got a whole lot of people, a whole lot of players, commercial operators out there trying to rip off customers and consumers. The model that Labour has put forward is one where we’ve been told, time and time again, it’s all going to be in the best interest of consumers. Miraculously the water rates are going to decrease, and yet the Government wants to overlay on top of that this really extensive economic process and regulatory burden on these four or 10 entities—whatever might happen; it’s not going to happen under us.

And when I look at the roles of the commission, I find it quite staggering. This is for entities that are not meant to be out competing. They have no obligation, no determination in the bill to compete. What they are: they’ve been set up under the Labour Government to look after certain geographical areas. There’s no cross-competing over borders, nothing like that, and yet we’ve got a commission—I was just looking at the rights and functions of the commission under clause 4(1)(b) “to carry out inquiries, reviews, and studies (including international benchmarking)”, it can act as a regulator—well, gee, it does that for certain! It can issues warnings, reports, guidelines, making comments, it can perform and exercise duties and powers, it monitors compliance—it just goes on and on and on.

My first question to the Minister is: why on earth has the Labour Government decided that we need this over-the-top form of economic regulation on what would otherwise be reasonably benign organisations that are not meant to be out there competing, not meant to be out there ripping it off? If we listened to the member and actually to the Minister talking about the benefits of these types of organisations, it is way over the top. Can the Minister please explain that?

Oh, thank you very much, Madam Chair. Good choice. Look, I wanted just to thank the Minister. Very brave for a Labour MP to front up the issue of three waters—the way it’s gone down like a cup of cold sick among the public. I just wondered if he could confirm that the former Labour Christchurch Mayor Garry Moore said publicly that he resigned his Labour membership because of three waters—would never vote for Labour again.

Well, thank you, Madam Chair. We were hoping the Minister was going to jump up in front of this wonderful audience and explain why this economic regulation was required. And Mr Grant Robertson coming in to rescue him—Mr Robertson rescuing us. So can you explain—just carrying on what I was talking about before—why have a definition of “competition” which means workable and effective competition when each of these entities are not in the game of competing with each other across geographical boundaries, about competing for customer base? Why do you have such an onerous form of economic regulation when that form of competition does not exist under the model that the Labour Government has put forward, and so many people have said that is a poor and bad structure, ripping off the assets of residents and putting them into unaccountable entities?

Mr Bayly, I’m surprised, given your apparent background as a merchant banker, that you’re not aware of the wide-ranging economic regulation we have across a number of industries like telecommunications and electricity where natural monopoly or a definition of workable competition issues throughout. This is a very normal form of economic regulation in exactly these kinds of situations.

Members, the time has come for me to leave the Chair for valedictory statements from members. This committee is suspended.

House resumed.