Watercare's ability to charge for services enables timely investment in infrastructure

01 Jul 2016 12:51 PM | Anonymous

Watercare's new asset management plan released this week demonstrates the value of having a strategically capable specialist infrastructure provider with the ability to set prices to fund growth," says Stephen Selwood CEO of the New Zealand Council for Infrastructure Development.

"Aucklands water Council-Controlled Organisation (CCO) 20 year asset management plan details a $4.9 billion fully funded capital spend over the next decade aligned with the Councils vision for growth. Approximately $3 billion will be directed towards wastewater provision and $2 billion towards water supply.

In addition, some $2.6 billion will be allocated to operational spending, signalling a total $7.4 billion spend overall by 2026 and $18.4 billion over 20 years.

Investment over the next decade will ensure provision for a further 195,000 dwellings across the region on top of present capacity for 45,000 more dwellings, exceeding population growth projections.

Timely investment ahead of demand will help unlock developable land and take pressure off house prices.

The ability to look out 10 and 20 years and produce a fully funded investment programme is made possible by Watercares consolidation of activities inside a special purpose, non-profit council company resourced by user charges.

Having the ability to charge customers directly to fund future investment to support growth is fundamental to the success of this model.

Compare this situation to other publicly owned entities like Auckland Transport and dozens of council funded water programmes where investment decisions are more influenced by politics than by good asset management.

Auckland faces a transport funding gap of up to $20 billion over the next 30 years having assumed a legacy of underinvestment that goes back some decades and cant use prices to raise revenue or send price signals to users. The result is congestion.

Many local authorities across the nation have water renewal and upgrade programmes that remain unfunded. Local politicians are fearful of ratepayer reaction to rates increases so arent funding investment needed to meet basic levels of service.

Although Watercares AMP does not contain a detailed investment pipeline, this is something Watercare will no doubt develop over subsequent iterations.

Comprising one third of New Zealands urban water sector, Watercare has the capacity to send strong forward signals to the supply market and drive best value from appropriately scaled business partners.

This kind of CCO model is worthy of serious consideration by other Councils, many of whom lack the scale, expertise and funding needed to enable timely investment in water infrastructure services, Selwood says.

Watercares 2016-36 AMP can be found here

For further comment, please contact Stephen Selwood on 021 791 209

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