Auckland household Watercare water bills could double in less than a decade

Auckland household water bills could more than double in less than a decade after Watercare approved increases to tackle rising costs and settle its books.

Watercare says it is the only way to raise funds needed due to borrowing limits, but an Auckland councillor has slammed the agency saying “years of underinvestment” have finally caught up, hitting ratepayers already suffering due to Covid-19 impacts hard.

The proposed price increases, approved by the Watercare board on December 23, would see the average household pay an extra $70 next year, adding to the already-proposed $150 in extra rates to Auckland Council.

Over 10 years the household annual water fee would more than double, from $1069 to $2261.

The recommendations, like the rates increases, will be included in the council’s draft 2022-2031 Long Term Plan consultation document, and thus were not yet a certainty.

But board chairwoman Margaret Devlin told the Herald it had already been a “long process”, and indicated that without other methods to raise funds to pay for “major infrastructure investment” they would likely stick.

“It is a balance of the need for investment versus affordability.”

The proposal would see the price per 1000 litres of water increase 7 per cent over the next two years from July 1, followed by 9.5 per cent over the following six years and 3.5 per cent in the remaining two years of the 10-year plan.

The board also approved increasing infrastructure growth charges – fees for servicing new properties – by 12 per cent from July 1, followed by an 8 per cent price rise annually.

This would all help fund a capital programme of $8.1 billion over the 10-year period.

Asked why such a drastic increase was needed now, Devlin said it had been formulated over a long period of time and reflected the big investment programme needed to service a growing region.

The Watercare agenda report noted that at present it supplied water and wastewater services to 1.7 million people – expected to increase to 1.93 million by 2031 and 2.33 million by 2051.

The increases also reflected a request from Auckland Council to reduce its debt-to-revenue ratio in view of the effects of the Covid-19 pandemic.

The drought response had seen Watercare spend an additional $209m, affecting the additional debt it could take on for the following year.

To maintain spending levels required this left the only option to increase water prices, Devlin said.

The agenda report also noted that allowing rating agencies to treat Watercare debt as separate to the council would allow it to invest more.

Another option put to the board would have seen a double-digit percentage increase next year and ultimately ending up $220 higher at the end of the decade than the final proposal.

This would have fully met the council’s debt-to-revenue targets, but Watercare staff advised against this because it would increase costs ahead of water reforms.

“The number we got to was not the number we started with – there has been a moderation,” Devlin said.

The decision also followed an independent review of Watercare by the Water Industry Commission for Scotland, which recommended an additional $1.7b of spending over the next decade.

These factors were all combined with increasing costs around needing to continually improve wastewater, stormwater and drinking water systems; and the fact many assets were also reaching their end of life.

The peak in investment would be needed from 2022 to 2025, reflecting concurrent major projects such as the Central Interceptor – a $1.2b wastewater tunnel that will significantly reduce overflows into waterways and beaches – and the Huia Water Treatment Plant.

Some of these projects were part-funded by the Auckland Council through its water-quality targeted rate, which mayor Phil Goff previously said was to address “years of underinvestment in our environment”.

Goff could not be reached for comment before deadline.

Auckland councillor and planning committee chair Chris Darby said the price increases would be “hard to bear” for the public, particularly for lower-income families and those suffering from the economic impacts of Covid-19.

Watercare had been too focused on keeping the price of water low, but in doing so had underinvested and consequently costs had risen, Darby said.

The proposal follows a mere 2.5 per cent price rise this year, and a previous decade of meagre price increases.

Since Watercare formed in 2011/2012 the price per 1000 litres of water has increased just $0.29, from $1.30 to $1.59.

The ability to keep water prices low had been praised by many politicians – particularly those in favour of small government, and the independent review noted Watercare had delivered savings to customers of $100m per year compared to legacy council forecasts.

But the proposed price increases would see a huge reversal in that trend, with the cost per 1000 litres increasing to $1.706 next year and more than doubling over the next decade to $3.37.

“But we have to recognise this is the product of probably not just a decade of Watercare, but even before, years of underinvestment, and it has caught up on us,” Darby said.

“The Covid cloak cannot conceal this.”

Darby was not convinced yet that the proposed increases were the way forward.

“The big question is really how much can Aucklanders pay?”

There were “easy wins” in demand management – including rolling out smart metering, and improving education around water use, which would all reduce costs for Watercare.

Darby also wanted to see 100 per cent of the infrastructure growth charge recovered from developers, as had been recommended by the Productivity Commission.

During consultation on the Long Term Plan Darby said councillors needed to take a “hard look” at council assets, including potentially cashing out a portion of its $2.1b stake in Auckland Airport.

“We need to make sure we do not place the burden on ratepayers that compound the already-precarious situation.”

The price increase proposal comes as Auckland continues to experience a severe water shortage, with storage dams at 67.1 per cent, well below the average for this time of year of 87.7 per cent.

And things are not expected to improve any time soon, with Niwa’s latest seasonal outlook painting warmer-than-average temperatures over the next three months, potentially driving high water usage.

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