Local Government (Water Services) Bill

Members, we come now to the debate on Part 5. Part 5 is the debate on clauses 215 to 343, “Amendments to other legislation”, and Schedules 5 to 11. The question is that Part 5 stand part.

Thank you, Madam Chair. This is a very interesting part because it seeks to amend other pieces of legislation, and each of them can be dealt with, potentially, in isolation, so I want to just slowly work through the first few of them.

The first one, which is clause 215, basically indicates that it amends the Civil Defence Emergency Management Act 2002. My first question to the Minister of Local Government in terms of clause 216—which cites replacing “Watercare Services Limited” with “a water organisation” in each of those places, which is rather generic in that regard—is how the Minister intends to give assurances, under that piece of legislation, that any consequential amendments to the legislation do not basically dilute aspects of emergency management that sit with local territorial authorities. This is a key component of the work that local territorial authorities do. Whilst it might, just on first glance, perhaps, appear that this is just basically taking out one definition and replacing it somewhere else but multiple times over, none the less it is a change to that primary legislation. So my question for the Minister on that one is: can he give some assurances that it will not dilute or interfere with the emergency management provisions or roles that councils may undertake, and, if it does, then what actually might those individual aspects be?

On clause 216, I want to make sure that—in emergency sort of circumstances where councils may initiate certain directives under that particular piece of legislation, there are often emergency funding provisions that exist. Can the Minister give an assurance, under what’s proposed here in 216, that there are some safeguards to ensure that there is no ability for any emergency funding provisions that would be available to councils to be directed elsewhere as a result of this change?

Thank you, Madam Chair. The points raised in regards to clauses 215 and 216 on the Civil Defence Emergency Management Act 2002 simply recognise that with the introduction of new water services entities, there is a need to extend the permanent legislative authority mechanism to all of those new water services entities. In particular, the member is referring to clause 216. In the scenario where an event occurs, then those water services entities have the ability to apply for reimbursement from Government in relation to emergency management costs, without having to go back through their local authority. That is the purpose of that, because, obviously, you don’t want a duplicated process in regards to that provision, and it simply acknowledges and will support the financial separation between the local authorities and the water services organisations.

I have a question on this subpart as well, around the amendment to the Civil Defence Emergency Management Act 2002. I have only one question, because my colleague Tangi Utikere is much more familiar with the source legislation than I am. Nevertheless, it is intriguing around the drafting, because everywhere “Watercare Services Limited” is being replaced with “a water organisation” in each place. Now, Watercare Services, of course, is the Auckland water entity, and now every single water services entity is, as it were, stepping into the place which Watercare Services held, including Watercare Services.

It’s like the drafter has said, “Here’s the civil defence legislation. We have some rules in here which we put in for Watercare Services. We don’t actually need to do anything for these new water entities. We can just pull out ‘Watercare Services’ and plug in the new water organisations.” That, on the surface of it, looks like a reasonable thing to do.

What I just want to understand from the Minister is what work his officials did to be sure that the simple “pull out, plug in” has actually captured the nuances that are needed for the new water organisations, with respect to civil defence. It looks like a straightforward thing to do; I’m sure it is. Well, I hope it’s the right thing to do, but, of course, Watercare Services was a very specific entity and there was legislation in the civil defence rules or law just for Watercare, but now it’s going to cover a whole lot of what could end up being quite different organisations in terms of size, scale, and where they operate.

I want an assurance that was the appropriate way to deal with it—that it was better to do that than, say, to set up a new set of laws with respect to all these new water organisations. With great respect, many of them are not going to operate in the same way as Watercare Services. They don’t cover the same number of people. They certainly have complex operations. They will, in many cases, cover larger territories with many fewer ratepayers. There will be all sorts of differences between these new organisations and Watercare Services. I’d like a bit of assurance around that, please.

Yeah, I’m happy to give the member assurance in that context. As I noted before, what this is simply reflecting is that there is financial separation between the new water services entities and the local authorities that previously would have had these services activities within them. As a result of that, these services are now within a new water services entity. It seems appropriate and reasonable that in the event of an emergency event, then that would be the entity to which it would look to seek reimbursement from Government in regards to emergency management costs related to activities that they undertake. That’s simply what this clause is doing.

Thank you, Madam Chair. I have a number of questions to do with Part 5, Subpart 2, the amendments to the Commerce Act. As my colleague Tangi Utikere has said, this is an interesting part, particularly for the amendments that are made to other Acts.

The guts of the question isn’t about whether the Commerce Commission is the appropriate regulator—we have had that debate. It was possible that this would be another regulator with more expertise in infrastructure, but we’ve chosen the Commerce Act to couch this in, so I’m going to ask the Minister questions about the definition of “consumer” here—about how a working definition of “consumer” in the Commerce Act is about people when they are engaging in sort of retail purchases; people who might expect a higher level of protection because of the sort of market power that exists between them and the people they are buying from, whether it’s small or large sized businesses. When you’re interacting in a market as an individual or as a household, you’re expected to have little market power. That’s relevant to the definition of consumer here, because we have used “consumer” for water services entities, but, obviously, people who use water services, businesses that use water services, manufacturers that use water services, are a broader range of entities. We need to make sure that, in framing it in the Commerce Act, we have given full effect to the way that the regulator will be expected to consider the relative power, the relative weighting, and the relative ability of that sort of entity to interact with local authorities and with the regulator. That’s one question.

I’m also interested in the differences between the Amendment Paper and what was initially proposed for this part. One of those seems to be to section 53ZG(1), which clarifies the way the different sort of regulated powers interact with each other. Really, the point of this question is that this is a pretty novel way to use a Commerce Act power for a regulator. There are four types of regulated information going on here. The Minister will be very familiar with price-quality path and price path regulation, but to also require a regulator in the same sector to use performance requirement and revenue threshold regulation at the same time seems, to me, to be novel. I want him to step the committee through what this might be comparable to in our law and whether the Commerce Act does fit this well.

Essentially, what we’re really asking the regulator to do—the task here of the regulator—is an infrastructure regulation like, say, regulated airports, regulated ports, where you have a regulated monopoly that has a way of levying people—you and I—for its reasonable costs, and its job is to spread those costs reasonably over time and over users. Because it’s in the Commerce Act, we now have to create four different mechanisms to get to pricing quality, which you might not expect of, say, an infrastructure regulator. It would be useful if the Minister could step us through those two before I ask any more questions on this part.

I thank the member for this question. What you’re seeing here, in the context of the changes being made, reflects a high degree of complexity as a result of now having, in effect, different types of water components within water services. You’ve got waste water, you’ve got fresh water, and in some instances a water services entity may also have responsibility for stormwater, but not in all cases, such as Watercare.

What this is simply signalling—and while there’s regulation for airports and other entities such as this, in this context it’s just simply recognising that from a consumer point of view, that consumer in the context of water services needs to be adequately protected and treated fairly by, in effect, what will be a water services entity, which is a regulated entity, and they do need to be treated fairly in that regard. It provides the Commerce Commission in this instance with the tools and mechanisms such as information-gathering powers to promote, in effect, a mechanism that is sufficient for it to undertake its activities, which in this case—relating to water services—is around revenue recovery or ensuring that our infrastructure investment is undertaken in an efficient manner.

That’s the mechanisms which are in here. It’s a new area of regulation and a new area of services that is being regulated in a New Zealand context. It is more complex than other regulated entities and hence that is what is outlined.

Thank you so much to the Minister for that fulsome answer; that’s really helpful. The question, then, I think remains: who is a consumer under this legislation, and how should local authorities give effect to those people who would not usually be defined as a consumer in the consumer legislation that we have? They’re not people and they’re not households; they’re industrial-sized users. Other market participants here wouldn’t usually be covered by the Commerce Commission’s powers, so I’m asking the Minister to help us to understand that definition in section 52C, amended by clause 221(1).

That’s really helpful for us to understand that these are now sort of four different parts of regulation that the Commerce Commission will have to use across the different types of water. Do they all apply to each type of water, or can we be clearer under clause 220(2A)(a), (b), (c), (d), and (e) which applies to what type of water, because that would be useful. That would step out local authorities’ understanding of what principles they will be regulated on, particularly the new threshold regulation and the price quality path, if those don’t apply to some sorts of water services.

I mean, as I noted before, the provisions that are there provide flexibility to the Commerce Commission (ComCom) to deal with the specific construction of the relevant water services entity. In this case, there will be a wide range of ways in which these water services entities are constructed and what are included within them, and hence the purposes of these provisions to provide enough flexibility for the ComCom to be able to adjust their style appropriately.

The other question that was asked was in regards to “What is a consumer?”, and this was actually covered in prior parts. I acknowledge the member may have missed that earlier on, but in this context, it’s around the account holder. The account holder is, in effect, in this model, the one that is liable for water charges and is, in that context, the entity in which it’s seen as the consumer.

I just have a final question on Subpart 1 before I think we’re all ready to move on to Subpart 2 and beyond—final question in terms of the Civil Defence Emergency Management Act 2002. I hear what the Minister is saying in terms of they’ll provide financial separation between local authorities and water organisations—I think that’s really important—which will also, hopefully, encourage and support consumer trusts owned by water organisations. I guess my question here is: with that separation, one of the challenges would be that the current threshold application is not appropriate in the context of financial independence. What are the Minister’s thoughts or what has the Minister received in terms of advice around the methodical approach to calculate the threshold, which would need to be revisited to ensure it’s suitable for both council and water organisations, to ensure that there is a level of equability, I guess? If the Minister—it’s a very small question—wouldn’t mind answering in terms of the recalibration of the calculation for the threshold with the separation between local authorities and water organisations.

Yeah, and I’m just looking at my colleagues from the Greens, because I know that they’ve written about this in their differing view. I’ve moved right ahead to Subpart 7, and they might want to come back to this in a minute as well. This seems to be an enormous change to the Resource Management Act (RMA) and one that is not mentioned in the Finance and Expenditure Committee report, that I haven’t heard discussed in the debates.

What it is doing is—and I’m afraid I have not got my internet on my phone working very well, because I have not gone to see the Water Services Act 2021 and the definitions that are now being referred to in this bill to be incorporated into the Resource Management Act. As a result of that, we are going to have an infrastructure design solution, a stormwater environmental performance standard, and a waste-water environmental performance standard that can then alter totally how the Resource Management Act works.

Where you would normally need a resource consent for something, there’s now—if it’s allowed by one of these three things—an infrastructure design solution or a stormwater environmental performance standard or a waste-water environmental standard; then it’s allowed. We have these exemptions in the Resource Management Act for things that are already provided in a national environmental standard. But that is an instrument that is made under the Resource Management Act and is subject to the purpose of the Resource Management Act. The purpose of the Resource Management Act is sustainable management, and, as we know, there are environmental requirements in the RMA, but this bill, somewhat innocuously, in Part 5—when the Government members are trying to shut down the debate—in Subpart 7, suddenly amends the Resource Management Act in a way that appears to be very significant.

I would like to know from the Minister of Local Government, if I am correct that these are significant changes to the Resource Management Act, that if these Water Services Act 2021 instruments are now actually going to perform as if they were Resource Management Act instruments, and if these Water Services Act 2021 instruments have any environmental requirements to them, how will they have to align with the purpose of the Resource Management Act—that is, sustainable management—or will they be something lesser that enables more pollution? Is that the point here—that these new organisations will be able to discharge stormwater and waste water in a way that the Resource Management Act wouldn’t allow for? Does the use of these performance standards mean that there will be more pollution? That is even when we’ve just been here debating clauses of the Resource Management Act being amended. I could briefly touch on that as well, because there are changes to provisions around designations and other things, that just a couple of hours ago we were voting on. I’m interested in how the two bills progressing in the committee stage, both changing similar parts of the RMA, will interact. Thank you.

Thank you, Madam Chair. I wish to provide assurance to the member in regards to her questions. The points that are included there simply reflect that this bill has a new mechanism for the establishment of mandatory national engineering design standards to ensure consistent and effective design and construction of water network infrastructure.

The bill also amends the Water Services Act to provide for making regulations that are set for infrastructure design solutions in regards to waste water or stormwater infrastructure. An example of that is in the instance of a standardised modular waste-water treatment plant or components of that waste-water treatment plant. The question asked was: is that going to lead to increases in pollution or other aspects? Well, the water quality standards, including the discharge standards, are set by the independent water quality regulator, so that has no consequential difference. That regulator maintains national standards separate to the discussion we’re having. We’re simply acknowledging that the establishment of these new aspects under this bill which have a relationship with the Resource Management Act—we’re simply reflecting those interrelationships.

Thank you, Madam Chair. I really appreciate the opportunity to speak to this very substantive part of the bill. I wanted to pick up on the Minister’s comments just then about those single set standards that sit outside of this regulation but are given effect to in Part 5, Subpart 7, and he was basically saying they’re inconsequential. Now, what we’re hearing and what we’ve heard very clearly from submissions was really quite the opposite, and I wanted to touch specifically on Selwyn District Council’s submission. They described the aspects in these sections when it comes to the single standards of waste water and stormwater performance standards, effectively removing “the ability for [the] Council to impose any community informed rules or standards, even where those rules are more restrictive due to local environmental needs.” They also talked about being really concerned about a lack of local oversight leading to potentially “worse environmental outcomes due to a lack of appreciation for local conditions, issues or nuances.”

Now, what I’d really like to hear from the Minister—because I know that the rationale that was presented to us as part of the Finance and Expenditure Committee was that the standards themselves have been landed on because they’re taking this kind of risk-based approach. I’m interested in that risk-based approach, because the information that we were given talked about these environmental limits being set to a higher standard for low-mixing environments—areas such as estuaries—to help manage these potential adverse effects, and then to a lower standard for high-mixing water environments, so things like rivers or along the coast. What I’m interested in understanding is: is that respective or irrespective of the current state of the receiving environment? That is the problem that these councils are trying to draw our attention to.

I also want to touch on Environment Canterbury’s submission—this is the regional council for Waitaha Canterbury—because they really spell it out very clearly when they give the specific example of the Christchurch Wastewater Treatment Plant and they talk about the limits for both enterococci and ammoniacal nitrogen that are more lenient than the current limits that are set in Canterbury. What they’re particularly concerned about here is the sensitive estuary and harbour environments. They give this example, that the current consent for the Christchurch City Council is no more than 75 percent of weekly samples in an eight-week period exceeding 1,000 coliform units of enterococci and no more than 25 percent exceeding 5,000. Now, the proposed single limits which will be given effect to in this part of the bill, which is new, is proposing 40,000 coliform units of enterococci standards 90 percent of the time. They’re using this example to demonstrate how much more strict current limits are, and I’m struggling to see the justification for putting these single standards—giving effect to them—in this bill when we know, particularly, that 60 percent of our waste-water consents are coming up for renewal in the next 10 years; 20 percent of those are already expired.

The section that I’m particularly concerned about with this and which I’m proposing amendments to is clause 269. I’m proposing to replace new section 58JA(2), where it says the section “applies whether the rule is more or less stringent than the wastewater environmental performance standard”—to delete “more”, because that is basically giving the ability for them to be set much higher, so we really want to get rid of that.

Members, the time has come for me to leave the Chair. The House is suspended until 9 a.m.

Debate interrupted.

Sitting suspended from 9:57 p.m. to 9 a.m. (Thursday)