Wellington's new water entity is under scrutiny from the Commerce Commission over proposed water bills it released last month, and charges may not reach the steep amounts initially projected.
By Ellen O'Dwyer of RNZ
Commerce Commission Chair John Small said the entity and the five Wellington councils had started meeting, and is looking at a revised Water Services Strategy, which includes pricing.
Last month Tiaki Wai released a set of projected charges - including bills of up to $6800 per year in a decade for residents - as it tries to upgrade old, failing infrastructure.
Chair Will Peet warned of "very steep" price increases, with average increases of 14.7% this coming financial year, potentially increasing by 28% in 2027-2028, and more than doubling by 2036.
The Commission was called to step into discussions after the Local Government Minister Simon Watts and Wellington Mayor Andrew Little expressed concern over the charges.
Small said the commission was "looking closely" at Tiaki Wai's model.
"We will be looking at that model ourselves to make sure they are not overcharging.
"I have not got sufficient information to say they are over-charging, and if I did we would do something about it."
Small said there were "a lot of moving parts in the model", and one way "the pain could be eased" was how quickly the entity reached financial viability, and climbed out of debt.
"This is about the recovery of costs over time and how quickly this company gets up into a position where essentially it can borrow its money on its own account."
Tiaki Wai is taking over $9 billion of water assets from Greater Wellington, Porirua, Wellington, Lower Hutt and Upper Hutt councils from July 1.
It's also taking on $1.7b in debt, and has a capital spending programme of $6.8b over ten years.
Peet previously warned operating revenue in the first year or $385 million would not be enough to take on the huge back-log of failing, non-compliant plants, and a network of old, leaking pipes.
Small said it was up to both the five councils and directors of the company to agree on the financial model for Tiaki Wai.
"Everybody wants it to be set up to succeed, nobody wants to have the leaks and the failures that have been there in the past."
The commission is regulating water services under the Local Water Done Well model, including asking organisations to publicly report on how much money is being spent on water networks.
It may also have the power to put in performance requirements or regulate pricing - as they do with Watercare and with electricity and lines companies - but they need sign off from the minister to allow that.
Prices 'unreasonable and unnecessary' - mayors
Wellington's mayor Andrew Little said he personally felt the initial indicative charges were "unreasonable and unnecessary", but detailed work needed to happen to see whether they could come down.
"I can't predict what they are going to do, or where their thinking is at, but they should note that there is concern.
"As a consequence of that concern and with the help of the minister the meeting with Commerce Commission was convened.
"They should read into that [that] there is genuine concern, and the first draft of their pricing strategy isn't the best one, and that things need to be re-considered."
When asked whether Tiaki Wai has asked councils for more money to operate, Little said the entity was reserving that as an option, and every council needed to be involved in examining Tiaki Wai's timeframes and priorities.
Porirua mayor Anita Baker said Tiaki Wai could revise its programme of work as a potential way to bring down charges.
"It's about prioritising what they do. Do we need another set of [storage] lakes right now? Or do we need to get other things that are non-compliant going, or do we get [water] meters quickly so that people save money.
"I think the long term figures that they've put out for people are horrendous and not achievable for anybody."
Lower Hutt City Council Mayor Ken Laban said the indicative charges would be too expensive for some people, but affordable for others.
"The scale of the transfer, and the scale of this model is enormous."
Laban said the councils were debating with Tiaki Wai over what timeframe to spread the "pain" of such high costs.
"The cost is the cost, the reality is water is getting more expensive and it has to be paid for - these are the very debates we are having."
Upper Hutt Mayor Peri Zee said she thought the Wellington region needed specific government funding help to solve the issue.
"The problem isn't the Water Services Strategy, the problem is the scale of work required to fix the scale of the infrastructure.
"If I was the government and I was intending to spend a few billion dollars of infrastructure in Wellington, it wouldn't be on a tunnel."
Greater Wellington Regional council chair Daran Ponter said he was pleased the Commerce Commission had leaned into the issue.
"We acknowledge that Tiaki Wai are in a difficult situation but they must find a better way to ease consumers into the cost increases that are coming."
Local government minister Simon Watts said he understands the opening debt position for Tiaki Wai is significant.
"This represents the legacy of model that wasn't working and which we are correcting with Local Water Done Well.
"The Government has been very clear that under Local Water Done Well the Crown will not be providing financial assistance to local government for the delivery of water services.
"The Commerce Commission is now working with Tiaki Wai's board, management, and shareholding councils on financial models which will manage the impact on customers. This is the most appropriate way forward."
'Looking at options' - Tiaki Wai
Tiaki Wai declined an interview with RNZ, saying board chair Will Peet was unavailable.
But Peet said in a recent community webinar that he was "hearing loud and clear from the community that these charges are unaffordable - and we are looking at options".
"But overall it comes down to what we start off, but more importantly, the state of the asset and how much is going to be required to fix it and provide the people of Wellington with the safe, clean, reliable, water, wastewater, and stormwater that we all want."
Peet also said in a statement the board was committed to working with the councils and the commission to get to a stable financial foundation, while managing the impact on customers.
He said Tiaki Wai's task was to charge enough to deliver improvements on essential water services, but not charge more than necessary.
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