The Local Government (Water Services) Bill (Enduring Arrangements Bill) continues to make its way through the Parliamentary process; submissions on the Bill closed in February, and the Finance and Expenditure Committee is due to report back on 17 June 2025.
Local authorities will also be well underway with developing their Water Services Delivery Plans (WSDP) in time for the September deadline, as required by the Local Government (Water Services Preliminary Arrangement) Act 2024 (Preliminary Arrangements Act). However, a working understanding of the Enduring Arrangements Bill is key for local authorities as they proceed with developing their WSDP in consultation with their communities.
The Enduring Arrangements Bill "informs the development of water services delivery plans and the regulatory settings in which future water service providers will operate". Once the Enduring Arrangements Bill passes into law, it will provide local authorities with greater certainty and help inform further implementation work, including consultation with their communities on the enduring arrangements for water services.
There are, however, a number of matters that local authorities will want to keep in mind as they work through the process of setting up their enduring arrangements for water services. We summarise some of these issues below:
Structural arrangements
The Enduring Arrangements Bill gives local authorities a reasonable level of flexibility to determine, in consultation with their communities, what sort of enduring arrangements for the delivery of water services will best serve their city, district or region.
Local authorities have a wide range of options, in that they may:
- Continue to deliver water services in house
- Transfer responsibility to a water organisation that they establish (or is already established as a Council-controlled organisations (CCO))
- Contract with another body to provide water services
- Enter into a joint water services provider arrangement (eg, with one or more other local authorities or CCOs)
- Become a shareholder of another territorial authority's water organisation or
- Enter another arrangement that is consistent with the Preliminary Arrangements Bill.
There are, however, some important requirements for ownership of existing or newly established water organisations. In particular:
- A water organisation must be incorporated as a company under the Companies Act 1993, unless an exemption is granted by the Secretary for Local Government
- Consistent with the prohibition on water infrastructure becoming privately owned, the shareholders of water organisations must be one or more territorial authorities, one or more consumer trusts (governed by trustees elected by consumers), or a combination of both.
Local authorities may want to consider whether the consumer trust model is appropriate for their communities, and may find that consumer-owned electricity lines companies provide a model for how their proposed water services delivery arrangements could operate.
Water organisations that are wholly-owned by one or more local authorities will be CCOs for the purpose of the Local Government Act 2002. They may still be a CCO even if some of the shares are held by the trustees of one or more consumer trusts, depending on the extent of ownership and control held by local authorities.
Local authorities will be familiar with using CCOs as a model to deliver services and manage council assets. That said, Part 4 of the Enduring Arrangements Bill introduces new arrangements for planning, reporting and financial management of water organisations. For water organisations that are CCOs, these provisions apply instead of the corresponding provisions in the Local Government Act.
The Enduring Arrangements Bill also gives flexibility to local authorities over matters such as:
- Division of water services: local authorities can put different delivery arrangements into place for different water services (ie, water supply, stormwater, and wastewater) or different aspects of water services
- Asset transfer: through a transfer agreement with a water organisation, local authorities may transfer specified responsibilities for the delivery of water services to that water organisation, as well as infrastructure, related assets, or other matters. Accordingly, it will be up to each local authority to consider whether shifting assets to a new entity will facilitate the organisation's ability to achieve the objectives of the Act.
Decision-making processes
The introduction of the Enduring Arrangements Bill should give local authorities some certainty around the direction of travel for water service delivery. However, local authorities will need to be prepared and plan for the decision-making processes that are required under the Bill.
For many local authorities, multiple rounds of consultation will be required, following bespoke consultation and decision-making processes in the Preliminary Arrangements Act, and Enduring Arrangements Bill, that in large parts supersede the decision-making provisions in Part 6 of the Local Government Act.
The first consultation round is to develop each local authority's WSDP in accordance with the requirements of the Preliminary Arrangements Act. The second round is required for local authorities to put into place any proposal to change the provision of water services that do any of the following (change proposal):
- Establishing a water organisation
- Becoming a shareholder in a water organisation (established by that territorial authority or another in the same region)
- Disestablishing or changing the shareholding arrangement of an existing water organisation
- Entering into long term contract to provide water services or
- Entering into a joint water service provider arrangement.
If any significant amendments are made to a change proposal following the initial round of consultation, the relevant authority must go through a further consultation process on the amended proposal. There is no definition of what a significant amendment is, though a territorial authority must have regard to the extent that views and preferences that are already known, and the significance and nature of the change proposal, when deciding if further consultation is required.
Throughout the Government's progression of the Local Water Done Well policy, emphasis has been placed on recognising "the importance of local decision making and flexibility for communities and councils to determine how their water services will be delivered in the future." 1 When managed well, each round of consultation is intended to provide an opportunity for local authorities to further refine their enduring arrangement for the delivery of water services.
There are some common features of the bespoke decision-making processes (in the Preliminary Arrangements Act and Enduring Arrangements Bill) that local authorities need to carefully consider:
- Option identification: while developing their WSDP, or implementing a change proposal, local authorities need to clearly identify and assess the options for the delivery of water services. For a WSDP, the options considered by a local authority must include the existing approach to delivering water services, and establishing, joining or amending an existing Water Services Council Controlled Organisation (WSCCO), but can also include other options. Each option needs to be considered in terms of its advantages and disadvantages, and the local authority must consult on those options.
- Consultation material: whether consulting on a WSDP, or a future change proposal, local authorities need to be thinking about whether sufficient information is being provided to local communities about the options being put forward. In each case, that will include:
- detailing the options identified, and reasons why one option is preferred
- the effect that the proposal, and not proceeding with the proposal will have on rates, debt, levels of service, and water charges
- detailing the proposed monitoring and accountability arrangements where a proposal involves transferring strategic assets to an established water organisation.
Sound processes that comply with prescribed legislative requirements are key for local authorities to successfully usher in new arrangements to deliver water services. However, local authorities need to be aware of and prepare for the following if there are challenges to their proposal or practice:
- Ministerial intervention: under the Preliminary Arrangements Act, the Minister has powers to appoint a Crown facilitator, or Crown water services specialist to assist with developing the WSDP. The focus here is facilitative – helping local authorities get WSDPs approved by (or following) the September deadline. Under the Enduring Arrangements Bill, there are backstop powers for the Minister to appoint a Crown facilitator or Crown commissioners – water services. In each case, the Minister may do so on the request of the relevant local authorities, the water organisation, or trustees of the consumer trust, where significant problems are identified that cannot or will not be remedied, or where it would be beneficial to do so to improve arrangements in the area. These powers are more likely to be used in circumstances similar to the powers in Part 10 of the Local Government Act.
- Judicial review: a local authority's decision could be subject to judicial review challenges if the decisions are not in accordance with the procedural requirements in the Preliminary Arrangements Act or the Enduring Arrangements Bill. Regardless of the outcome, the delays caused by challenges will be an unwanted interference to delivering on the Local Water Done Well policy. However, challenges are sometimes inevitable with these kinds of proposals (as seen historically during the establishment of local lines companies) and local authorities should be in a position to answer those challenges with reference to clear, robust, and legally sound decision-making processes.
Our team of Local Water Done Well experts would be happy to talk to you about any questions you have on the implementation of Local Water Done Well.
This article was prepared by Natasha Wilson (partner), Susie Kilty (partner), Mark Odlin (partner), Diana Thomas (senior associate) and Hugo Schwarz (solicitor)
1 Government advances Local Water Done Well | Beehive.govt.nz
