Local water reform reshapes services in New Zealand
The Coalition’s Local Water Done Well programme has replaced Labour’s Three Waters reforms, handing control back to councils while imposing new regulatory oversight.
For more than a decade, New Zealand’s water infrastructure has been the subject of political skirmishes, policy resets and costly delays. At the heart of the problem is a yawning investment gap: Treasury estimates at least $120 billion and up to $185 billion will be needed over the next 30 years to replace ageing pipes, deal with contamination, and make services financially sustainable.
Labour’s Three Waters programme, introduced in 2021, sought to fix this through four large regional entities, balance sheet separation, and co-governance with Māori. It was scrapped after fierce opposition from councils and voters.
The Coalition Government has now completed its replacement, Local Water Done Well. Enacted through three pieces of legislation between 2024 and 2025, the programme restores local council ownership, provides flexibility in how services are delivered, and places economic regulation under the Commerce Commission.
Supporters say it preserves democratic control and financial discipline. Critics see ballooning costs, patchwork governance, and weaker environmental protections.
For regulators, the reforms mark the start of a new era.
Councils must develop delivery plans, CCOs gain enhanced borrowing powers, and the Commission takes on oversight comparable to utilities regulation in the UK and Australia. But whether this model can deliver affordable water services remains to be seen.
Legislative reset
The repeal of Labour’s Three Waters laws was swift and ideological.
In February 2024, just months after taking office, the Coalition passed the Water Services Acts Repeal Act, scrapping the complex legal scaffolding of Labour’s regional model. In its place came a staged rollout of legislation under the banner of Local Water Done Well – a deliberate nod to simplicity, sovereignty and local choice.
By September 2024, the second act in the sequence required all councils to prepare detailed Water Services Delivery Plans within 12 months. These plans would determine how services like drinking water, wastewater and stormwater would be delivered – and by whom. Then, in August 2025, the final legislation locked in the enduring regulatory framework: one built on economic oversight, financial guardrails, and the promise of local control.
What the government dismantled was a single, top-down structure. What it built instead is a choose-your-own-model approach, one where councils can deliver water services through in-house teams, stand-alone council-controlled organisations (CCOs), regional joint ventures, or even consumer trust models. For the first time in years, the question of “how” was left entirely to the councils.
Regulation and finance
In giving councils control, the government has also handed them the bill. To keep that spending in check, a new layer of regulation has been added.
The Commerce Commission, best known for regulating electricity lines and telecommunications, now takes on a new role as the economic regulator for water services. At first, its oversight will focus on transparency – forcing providers to disclose information on performance, revenue and infrastructure spending. Over time, the regime could evolve to include price-quality regulation, a model already used in sectors such as electricity and gas, and envisioned in the enabling legislation for water regulation.
That regulation matters because the financing arrangements are aggressive. Under the new regime, water CCOs can borrow up to five times their operating revenue – nearly double the cap for councils themselves. Debt can also be carved out from a council’s main balance sheet, giving these CCOs greater autonomy and, potentially, better credit ratings. For growth councils, the borrowing ceiling may stretch even further.
But the public cost is already visible. Councils have released projected household water bills under their new delivery plans, with Christchurch estimating around $900 per year, Hamilton $1,700, Dunedin $1,200, and Selwyn nearly $1,800. The government argues that ring-fencing and economic oversight will ensure that these funds are spent on infrastructure. But for ratepayers, the bottom line may be the only number that matters.
Council choices
When the dust settled on the delivery plan deadline in September 2025, the results painted a picture of pragmatic compromise.
Roughly two-thirds of councils chose to establish CCOs – some going it alone, others partnering regionally. The rest opted to keep services in-house, using new rules to ring-fence water revenues and shield them from political or fiscal creep.
Auckland stuck with Watercare but rewrote its operating charter. Christchurch chose to go solo, retaining full control of its in-house delivery model. Selwyn was first to set up a dedicated water CCO. Meanwhile, in the lower South Island, Clutha, Central Otago and Gore moved ahead with a shared CCO after Waitaki pulled out. Wellington’s five councils agreed to disband Wellington Water entirely and start fresh with a new regional entity by mid-2026.
What unites these models is their diversity. What divides them is almost everything else: governance structures, financial risk, regulatory exposure. For the Department of Internal Affairs and the Commerce Commission, stitching coherence from this mosaic will be no small task.
Politics and pushback
In politics, language does a lot of heavy lifting. Local Water Done Well is no exception. It signals competence, responsiveness, and the idea that the old system was overreach disguised as reform.
Minister Simeon Brown framed it bluntly: Three Waters was “bureaucratic,” “expensive,” and “stripped communities of control.” His colleague, Minister Andrew Bayly, added that the new system gave ratepayers “peace of mind” that their money would be used solely for water services.
But the opposition sees something else. Labour’s Kieran McAnulty warned of spiralling household costs and the loss of scale-driven savings. Leader Chris Hipkins said the government had “scrapped” the one mechanism that protected ratepayers from bearing the full financial burden of infrastructure upgrades.
Māori perspectives have also shifted. Where Three Waters embedded co-governance and Te Mana o te Wai, the new laws move toward consultation rather than obligation. Treaty language has been softened, if not sidelined. Environmental protections, especially around wastewater, have been streamlined or removed.
Treasury, for its part, was quietly critical. It flagged concerns over the government’s limited engagement with councils, iwi, and industry experts – warning that policy made in haste may be difficult to implement at scale.
What this means for regulators
The real work now falls to regulators. The Commerce Commission must stand up a new regulatory regime, enforce ring-fencing rules, and oversee dozens of service models with wildly different structures and maturity levels.
Taumata Arowai, renamed the Water Services Authority–Taumata Arowai, retains its role in drinking water regulation and environmental oversight. But its mandate has narrowed, and its influence may wane as economic regulation takes centre stage.
The promise of Local Water Done Well was simplicity. What’s emerged is something more complex: a decentralised system wrapped in centralised oversight. It’s a political compromise dressed as a regulatory framework. For officials tasked with making it work, the road ahead will be anything but simple.
A fragile settlement
If Three Waters was too much reform, Local Water Done Well may be too little. It puts the burden back on councils to fix a multibillion-dollar infrastructure problem, but without the structural advantages of Labour’s plan. It limits central interference but asks regulators to enforce uniformity across fragmented systems.
The real test will be whether the reforms deliver better water services for the people paying the bills.
