Water and Money

Written By: - Date published: 7:26 am, April 7th, 2022 - 20 comments
Categories: Deep stuff, Environment, labour, Nanaia Mahuta, water - Tags:

If the 3 Waters reforms can survive its attacks and be implemented, a consequence will be that we are going to have a most enormous nationwide economic argument about the price of water and who pays for it all.

The politics of water will be loud and permanent.

We need to dig deeper into the politics of water, in particular water metering.

At a parliamentary level if any water reform is to survive we are going to need to get to a place where nearly all of Parliament agrees on the right way to manage water. One that rests the survival of our water system and New Zealand’s existing biosphere. That will mean threading the very difficult political terrain between water as taonga and water as resource and water as commodity. We’ve done it on climate change, we can do it on water.

Currently, political and bureaucratic careers in councils can live and die on whether they propose metering or not.

Councils that have water metering in place include: Whangarei, Auckland, Waipa District, Whangarei District, Waikato District Council, Tauranga, Western Bay of Plenty, Kapiti District, Marlborough District, Carterton, Nelson, Tasman, Central Otago, Dunedin (non-residential) … and here comes Christchurch. Not all of them target domestic users.

From 1 July 2022, people in Christchurch who use a lot of water will be metered and pay extra for their water supply. If you use more than 700 litres a day (about 100 toilet flushes) attract a targeted rate. Over 1,000 litres a day will get a charge of $1.35. Of course most households won’t do that and won’t get an invoice.

For Auckland, water metering came in 1990-2006, and that together with the big drought of 1994 saw water use per capita plummet and stay down. Total water use has grown as population has grown.

For those holdouts like Hamilton, water metering is a whole lot more likely under these reforms. Their pain delayed is pain magnified.

The four new water services entities will be not-for-profit and will have a range of social and cultural objectives that won’t be easy to measure with typical financial instruments used by regulators. We need to see the detail of how the regulator will operate once Minister Mahuta reintroduces her bill.

The government wants the four new water corporations to take over running the country’s drinking water and wastewater supplies in 2024. The reforms to stormwater networks are more complex and will likely take longer to implement.

I have a sneaking suspicion that the price of water is going to get hotter no matter what. It’s been in the mind of Treasury since at least 2013.

But there’s a really big step between one basic level of regulation which is open information disclosure (like District Health Boards used to), and the big step of putting in costs and fines in a price-quality regulation. I think it would take a few years before Directors of these entities would sign off on asset and investment plans that they could trust and hence be held to account on. I mean if you were a water entity director and were signing your reputation to the Asset Management Plan of Gore, would your signature finger pause for a moment? Mine would.

Feedback on water regulation was sought, and is now closed.

Stormwater is the biggie. The most recent environmental report estimated that 75% of our entire river length has a D or E for swimming. Water quality for cities is worse, but urban rivers only account for 1% of the length of our rivers. The polluter doesn’t yet pay enough.

But even here, markets are not impossible. A little toe was put into the water with the Lake Taupo Protection Trust.

In the late 1990s, research determined that increasing nutrient discharges from dairy farms were threatening Lake Taupo’s water quality. A partnership was formed between Waikato Regional Council, Taupo District Council, Tuwharetoa Maori Trust Board, central government and local landowners. In 2011, the regional government introduced a water quality policy package with three components:

  1. a cap on nitrogen emission levels within the Lake Taupo catchment;
  2. the establishment of the Taupo nitrogen market; and
  3. the formation of the Lake Taupo Protection Trust to fund the initiative. This bold policy is globally unique: it is the only trading programme or market where diffuse sources of pollution operate under a cap.

By 2015 the target of reducing nitrogen discharges by 170 tonnes or 20% of emissions, had been met 3 years ahead of time and on budget. It’s hard to tell even now whether that will be enough for Lake Taupo. But it shows that a cap-and-trade water quality market is possible, with property rights established and not much controversy.

Since 2020 Fonterra has been making marginal payments to farmers who are more sustainable producers. Honestly it’s a pretty miserable margin for a pretty big effort.

With wastewater pricing undecided, we need to get to the start of an economic agreement that transcends politics: The whole of bulk water supply, everywhere, is going to have to be priced.

Water is New Zealand’s oil. Used badly it will damage us all. Taxed badly it will pollute us all. Is damaging us all, is polluting us all. Used sparingly it will revive our land, rivers, forests and wildlife. Used to the highest value it will make us rich. A comparison one could make is to North Sea Oil and how the United Kingdom and Norway approached oil extraction differently. They had a territorial share of the same oil field, they had access to it over the same period of time.

The result however is that Norway has a pension fund worth over US$1Trillion and owns over 1% of all shares in the world, and the U.K. used its oil wealth essentially to pay for the passive economic restructuring over the Thatcher years and now gets little out of it. Norway is one of the richest and happiest countries in the world per capita.

So now we get to the milk boom that New Zealand remains within. Imagine a New Zealand in which large water users – say (like Christchurch) any user taking than 700 litres a day – had to pay a royalty tax to the government. Government could pass it on to NZSuperFund. That fund would show the true wealth of mining water, able to be redistributed back to us.

A national price on wastewater and water for non-residential users would focus the mind of every milk company to make fewer and more expensive things, using less fresh water and making less wastewater.

A local historical comparison could be made to the 2006-08 regulation of our telecommunications industry. From 15 years ago it was impossible to imagine that our gaming industry, our world-leading i.t. firms like Xero, our at-home learning and working capacity, would be as huge as they are now. Even in 2006 the breakthrough Lord of the Rings films would not have grown into the film industry they are now without breaking the Telecom near-monopoly of the time. National took on the Labour regulations and built on them into the nationwide fibre-to-home project.

In water we’re at the 2006 moment. We don’t know fully the kinds of industry that could develop out of well-managed water because there is not enough incentive to do so. Perhaps it will mean more yogurt and less milk powder, more wine and fewer raw water bottling plants, less exported liquid milk and more horticulture. Perhaps. We treasure what we measure.

It’s very difficult to see any future political agreement on water regulation unless there is a very strong water market encouraged and regulated.

A better priced economy-of-water will be better for New Zealand’s people in lower use per person if it is metered, priced, and guided away from bulk and mass export towards higher value lower volume exports. That’s the most likely common platform for all political parties to agree.

It’s hard to see another enduring political way out of this.

20 comments on “Water and Money ”

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  1. Antonina 1
    7 April 2022 at 7:48 am

    Water is indeed NZ's oil!

  2. Hunter Thompson II 2
    7 April 2022 at 9:39 am

    Politicians have long used water to buy votes, which explains why they are so vehemently opposed to water conservation orders on our best rivers. Imagine all that water being locked up so it couldn't be gifted to irrigators and farmers!

    In NZ we must recognise that water is a finite resource and its use should be paid for. Farmers will moan they are being taxed, but that is untrue – a water levy means they will pay for use of a publicly-owned asset they used to get for nothing.

    If they owned the water, would they give it away? Yeah, right.

  3. RedLogix 3
    7 April 2022 at 9:57 am

    Good rational post. Obviously some time and thought was put into it.

    This is the aspect of water management rationalisation that I have consistently supported from the outset.

    • Ad 3.1
      7 April 2022 at 10:07 am

      It would not be difficult to imagine the Auckland-Northland entity enduring several years of drought (accelerated climate change), continued high water demand growth through population, and then saying:

      we are going to ban all all bulk water users across every summer.

      That's code for kill the dairy industry (in current form) from the Bombay Hills to Cape Reinga.

      Practise run: for the first time ever, all irrigation in Southland is now banned – just for two weeks mind. No new legislative powers were required.

      Drought-hit Southland slapped with two-week irrigation ban (1news.co.nz)

      Maybe we should start taking lessons from the Murray-Darling Authority.

  4. Tricledrown 4
    7 April 2022 at 10:52 am

    I am for water reform but it has to be fair.

    Many councils have invested heavily like Dunedin we have upgraded our water and sewage treatment infrastructure at huge cost $500 million plus we have a 48% increase in rates ! Now we are being asked to pay for everyone else's upgrade.

    That sucks.

    Labour will get dumped out at the next election if it pushes on with this ridiculous plan.

    The govt should provide loans to councils who have neglected their infrastructure for mainly politics of low rate rises by right wing councils cost cutting.

    Dunedin has had right wing councils in the past who put off infrastructure upgrades ie the 1.5 billion aurora debacle the Stadium underfunding buying cheap underground water pipes etc.

    We have paid to fix those plus all the aging infrastructure.

    $110 million this year for our mainstreet $30 million. For a population of 120,000 .

    And new pipes in Kaikorai Valley to Green Island.

    Now we are being asked to fund ever other councils who has failed to upgrade infrastructure like Christchurch, Wellington,Auckland, and most of rural NZ.

    This is completely unfair.

    • lprent 4.1
      7 April 2022 at 1:59 pm

      Many councils have invested heavily like Dunedin

      Even more so in Auckland over the last 25 years. Essentially since they started the waste water separation to reduce the amount of runoff into the harbours.

      Before that they'd done the various massive wastewater treatment

      Now we are being asked to fund ever other councils who has failed to upgrade infrastructure like … Auckland …

      WTF: Clearly you have absolutely no damn idea of what you're talking about. Reading about the current Dunedin water plans, it looks like the Dunedin is still back in the 1970s in the quality of their water decisions.

      Anyway, look at these charge sheets for Dunedin and Auckland.

      Taking Leanz numbers the average person uses 227 litres per day

      In my case I live in an Metro Auckland in an apartment. If I used 227 litres per day, it would mean water charges of $141 annually, and waste water charges of $442 annually inc GST. There are two of us in the apartment – so that would be about $1100/year.

      It looks like waste water is part of the fixed charge in Dunedin. So with a residential pipe of 40mm, our combined annual charge would be $247 per year.

      Which is pretty close to our fixed charges for wwaste water.

      In reality we don't use even close to 227 litres per day, and our annual charge is somewhere around $600-700.

      Roll on metered waste water for Dunedin. That will really show you where the costs are.

      • McFlock 4.1.1
        7 April 2022 at 5:02 pm

        And if it doesn't, we've introduced userpays for nothing.

        One thing I would like to know is how these "average" usage levels compare to the water lost through leaky infrastructure.

        Maybe we should also look at things like individual permits for industrial water use in the billions of litres a year before considering placing a direct cost on an essential need. Metering just means rich people can have fountains while the poor still share bathwater…

        • lprent 4.1.1.1
          8 April 2022 at 2:01 pm

          Maybe we should also look at things like individual permits for industrial water use in the billions of litres a year before considering placing a direct cost on an essential need. Metering just means rich people can have fountains while the poor still share bathwater…

          Not a useful analogy at any level. Sounds like the kind of silly diversionary talking point that those idiots in Act or the Taxpayers 'union' would use

          Those billions of allotment only really helps in looking at the use of fresh water in the rural country. It needs to be dealt with. But has fuckall to do with the costs in urban environments where the people are.

          You may have noticed that discussion in this comment thread was about urban water systems?

          The real expense in urban areas if dealing with waste water – ie what costs about 3-5x mores to process than just providing potable water.

          Having fountians isn't a problem. I haven't seen one of those that doesn't use re-circulation (outside of one noticeable farm who'd diverted a spring directly into fountain). It is basically a foolish diversion. Swimming pools would be more suitable target because they add real costs on waste water treatment systems. Chlorinated water isn't nice on waste water mainly biological treatment systems.

          However baths are a real waste of water and especially waste water management. I've pretty much used only showers for at least 22 years. Somehow I don't smell or have skin diseases.

          Baths are just as much a recreational activities as swimming pools are – one that uses excessive amounts of potable water, electricity, and waste water treatment. So trying to present it as a necessity for the poor having to share bath water is just plain stupid when having a while family each having a shower in water that isn't reused would probably cause less that half of the real costs of having a shared bath.

          I'd take a bet that if family was taking bath every night for a couple of months, that their water and waste water cost to society will far exceeds having a unheated swimming pool that is only emptied once every few months and is idle for much of the year.

          Spa baths are probably more an issue.

          One thing I would like to know is how these "average" usage levels compare to the water lost through leaky infrastructure.

          Back in about 1988/1989 I did a contract that involved maintenance on the database that one of the Auckland water boards had for fresh water leaks on their network. There were a lot of leaks and they'd often been leaking for long periods of time – years in many cases. Some had been diverted into waste water systems.

          The estimates at the time were in the order of 40+% wastage of potable water. Most of that particular water board were being metered so they had a pretty good idea of the overall wastage. The leakage in the waste water systems was around 10-20% which was the primary reason that we started to death of harbours and stream issues.

          From what I could see (and remember) of the Dunedin systems at that time – they were far worse than that Auckland water board (I did some work on DCC systems as well). It doesn't sound like it has improved much since. From what I can figure out, it looks like they have just maintained rather than significantly improved their infrastructure. (links welcome)

          Those kinds of potable leaks are pretty much history in Auckland now. The target is about 13% and seems to be running just above that level. I believe the median time to repair system leaks are now in the order of a week rather than the months it used to take.

          I'd start in any area with simply metering all end-points. Aside from the obvious financial points, it is also effectively the only way to find out where you have leaks.

          In places without metering water companies simply don't know what they are losing because there is no simple way of knowing what is being wasted rather than used. You have to have comprehensive metering of end-point usage to look at flows against. But the only real way to know of hidden leaks to have meters at all end points.

          Plus industrial just adding meters and charging on usage makes for rapid changes in wastage behaviour. Same with residential.

          Incidentally outside of the urban environment, it is also the only way control the rural water and rural water pollution as well.

          Meter all water usage, charge for it, and excessively fine anyone stealing water.

          • McFlock 4.1.1.1.1
            8 April 2022 at 2:29 pm

            Three waters is about all types of water. If one wants to focus on wastewater, will we also meter the sewer connections? Poo-ser pays?

            Metering potable water at source and then at points along the network would be more precise than at the household connection for figuring out where the systemic problems are, and take fewer meters to detect the bulk of systemic leakage.

            Metering will result in userpays. Even if the current govt avoid it, the nats will leap on it as soon as they're in power. Dunedin's been through all this since at least Richard Walls.

            • lprent 4.1.1.1.1.1
              10 April 2022 at 10:33 pm

              The current way of dealing with waste water in Auckland is to just as a percentage of water being provided.

              In the case of my apartment it is as 95% of provided water. When I move to a house it will be something like 80% of water provided.

              The difference is to do with handing runoff in storm water. Less treatment for junk in storm water, and apartments have smaller roof area and ground run off. Almost all of their water is sewerage.

              The reason that I don't know of household sewerage metering is purely because of the solids content. Trying to meter shit and fat without jamming requires some really tricky tech. So does trying to measure flow in a highly inconsistent medium. Certainly not easy or cheap.

              But metering sewerage against average incoming flows of supplied potable water is remarkably accurate and fair. It tends to only penalise those who misuse their water. For things like long showers, baths, and indoor spas. Plus of course interior leaks that they haven't fixed.

              In other words, metering freshwater is easy and usually pretty cheap these days. Sewerage is hard, but has a direct relationship to provided potable water.

              • McFlock …
                10 April 2022 at 11:15 pm

                Metering also easily progesses to userpays, which Dunedin voters have rejected for decades.

                • lprent …
                  11 April 2022 at 3:41 pm

                  User-pays is an interesting concept. It has also been in place ever since I was a kid back in the 1960s in Auckland.

                  In Auckland it has been very useful in helping to deal with a decrepit water system and maintaining and upgrading it.

                  Not having it requires a very high standard of council accounting to make sure that the requisite level of maintenance is being performed to keep the systems viable over the long term, and that the environment isn't being used subsidising crowd pleasing neglect. Which is what I view most water systems around NZ as doing.

                  Personally I don't care if the systems gets metered or not. What I care about is that the councils pay the full cost for their waste water treatment. To achieve that, most areas on NZ need to at least double their spending on waste water.

                  Some areas also need to do the same to get their potable water up to standards.

                  Personally, I suspect to make that happen at council levels, we just need to make polluting as criminal offence with mandatory minimum jail sentences for managers of perpetrator organisations and their regulatory bodies.

                  Or do something like 3 Waters to remove it from the demonstrated incompetence of the existing system (and have the same criminal offence there as well).

                  • McFlock …
                    11 April 2022 at 4:31 pm

                    No metering at the household connection doesn't mean they can't meter along different sections to find faulty infrastructure.

                    Similarly, there's no reason councils can't be required to run their systems responsibly, rather than handing everything over to a monolithic organisation with bugger all population representation. Just basic standards, enforced by anything from the health act, OSH, or the environment court would hasten upgrades.

                    User pays is interesting in the same way every way it is implemented in roading, electricity, or anything else – payers get to use, the poor get disconnected or self-ration to an unhealthy level. Just because some places have done it for ages doesn't mean it's a good idea to apply to life's necessities.

  5. Graeme 5
    7 April 2022 at 10:09 pm

    Good post, certainly pulled out the emotion that flows with any discussion about measuring and potentially pricing water.

    Scale that up to the level of agricultural businesses with multi million dollar annual turnover and the howls will be intense, accurate and deafening. And the farmers will have strong support from people in town and right across the political spectrum.

    At a hypothetical level a resource levy set at a level that encouraged the most profitable use of all water would be the best thing for New Zealand agriculture. But there's already drivers like land prices which winnow out the less profitable uses, look how dairy displaced sheep in Southland and Canterbury, and forestry (with a little encouragement for carbon prices) is displacing hill country sheep farming. And grapes have well and truly sent the sheep packing in lowland Marlbourgh and a lot of Central Otago.

    Irrigation isn't cheap, there's a lot of money tied up in the plant, and there's generally energy required to move the water, and quite a bit. 'Free' gravity irrigation schemes are quite rear. The current milk prices pushing $10 will keep the cows under the pivots, but if the milk price goes back to $6, or volume drops, we might see cropping under the same pivots.

    Metering on all water takes and uses is essential. You can't manage what you don't measure. And just because you measure doesn't mean you have to charge. Measure water in and out of a network and you have a very good idea where your leaks are, and can concentrate other resources to find and fix them.

    Agricultural takes have been metered for about 10 years, and data reported to Regional Councils, generally in near real time. There were the usual howls of protest at the time but it came to be and no one died. Farmers found their water meters valuable management tools and were able to irrigate better, and irrigate more as their water use became more efficient.

    I'll go round in a circle and say that a resource levy would have a similar outcome, and drive another level of efficiency in water use once it was up and running. But it would be one hell of a fight getting to that point.

  6. Hunter Thompson II 6
    8 April 2022 at 2:39 pm

    Sure, we got increased agricultural production but it came at a huge environmental cost – something Federated Farmers likes to ignore.

    Only recently, four Southland rivers were reported as containing cyanobacteria, and Canterbury's Selwyn river is in bad shape too.

    Foreign media such as Al Jazeera picked up on this years ago, so the "clean green" tourism message is now seen for what it is – 100% manure.

  7. Robert Guyton 7
    8 April 2022 at 2:58 pm

    "The left should admit that irrigation and dairy farming has made extensive pastoral land far more productive. "

    "The left" know that is true, but don't believe that's the be-all and end-all of the story, as you do.

    There are more important aspects to the "water" story than "productivity" as defined by those profiting most from using the word as the measure of success.

  8. Binders full of women 8
    8 April 2022 at 6:07 pm

    I'm anti 3 -Waters but interested in things water as I am currently not connected to either water & sewage and now and then reticulation is mooted for my suburb- so it becomes very topical locally. Anyhoo I can't believe that new builds aren't forced to put in meters as future proofing. My council says 'oh we're never gonna meter water cos it's too expensive'. It may be expensive- but it would be less expensive if we spend lots of small expense on each new build installing an unmetered meter.