9 Jan 2021

Auckland water bills may need to double to plug fiscal hole

3:24 pm on 9 January 2021

Aucklanders could see their water bills more than double in a decade after Watercare approved rates increases to help plug a fiscal hole punched by the Covid-19 pandemic and the region's long-lasting drought.

Water running from a tap

Photo: RNZ / Cole Eastham-Farrelly

Watercare's board has approved recommendations in an agenda report to increase water rates by 7 percent - about $1.50 per week or $78 per annum - on 1 July this year and then again in 2022.

Water rates would then increase by 9.5 percent each year between 2023 and 2029, then by 3.5 percent in 2030 and 2031.

This meant waterbills for the average household would more than double during the decade, from $1069 this year to $2261 in 2031.

This increase would also add to the extra $100 the average Auckland household would pay if the Auckland Council's proposed 5 percent rate rise gets the tick of approval.

The Covid-19 pandemic and the Auckland region's drought were the two main factors taken into account in the recommendations.

The pandemic has punched a $1b hole in the council's revenue, while Watercare splashed out $209m in additional water sources and treatment.

In addition to higher rates, the reccomendations also included increases in infrastructure growth charges - the fee for connecting a new dwelling or property to the water network - of 12 percent from 1 July this year followed by a 8 percent rise annually from then.

The plan, approved by the board at a meeting on 23 December last year, would be included in the Auckland Council's draft 2022-2031 Long Term Plan (LTP).

The LTP is yet to be approved and is due to go out to public consultation in Feburary 2021, meaning the water rates increases are not yet definite.

Board chair Margaret Devlin said in a statement that Watercare had developed an asset management plan that showed an investment of $8.9b was needed over the next 10 years.

Devlin said the company had to scale back its capital works programme to avoid hiking rates up further than those in the reccomendations.

This meant projects that are underway or contracted would continue, such as the Central Interceptor wastewater tunnelling project and the Hūnua 4 watermain project.

However, other projects would be postponed, such as the Huia Water Treatment Plant replacement project and the Rosedale Wastewater Treatment Plant upgrade.

Assett renewals and replacements would also be cut by half.

Watercare funded its operations and capital investment using water rates, infrastructure growth charges and borrowings. While it does not receive funding from property rates, its balance sheet sits within the Auckland Council group.

According to the board's agenda report, separation of Watercare's balance sheet from the council would allow a significant increase in the company's ability to finance investment in long term assets through debt.

Devlin said Watercare was working with Auckland Council and the government to find an interim measure to address the balance sheet issue until the water industry was reformed.

The government could possibly underwrite the company's debt, enabling it to borrow more without affecting the council group's credit rating.

"We have a strong balance sheet with a debt-to-asset ratio that is far lower than most utilities. This means that if we were free of our current financial constraints, we could comfortably fund our preferred asset management plan without higher-than-normal price rises," Devlin said.

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