Grant on Watercare

March 24th, 2013 at 12:00 pm by David Farrar

writes in the HoS:

Chorus has 1.8 million connections and 550 staff. It is privately owned, made $400 million profit in the past seven months and charges $300 for a new phone connection.

has 1.4 million connections with 645 staff.

It is owned by the Auckland Council and charges $8000 to connect a property to water.

Watercare claims the fee is an infrastructure growth charge.

It isn’t.

It is a tax imposed on developers because it is easier than running an efficient business.

$8,000 seems well over the top I have to say. Does anyone know what it is in other areas?

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26 Responses to “Grant on Watercare”

  1. unklefesta (13 comments) says:

    Would the difference be competition ?

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  2. Nookin (3,354 comments) says:

    I imagine that it covers the arrears owed by the likes of the bright spark who doesn’t think it incumbent on her to contribute. Seriously, though, this seems to be an outrageous surcharge without apparent regard to future development costs. If there is a greenfields subdivision, the developer will be expected to carry the cost of the entire infrastructural extension and reticulation. Unless Auckland is markedly different to the rest of New Zealand, a developer is required to take water to the boundary.

    This leaves us with the question of what the $8000 represents. It is possible that the Water Care may have to establish new reservoirs et cetera – particularly if the need has come about for reasons not solely attributable to a single subdivision. It may be, however, that Water Care is not responsible for the establishment of reservoirs and capital works. That being the case, the connection fee seems wholly unreasonable.

    Most local authorities have to justify contributions required at the time of subdivision consent. They seem to be able to get around that by including some costs in the long term plans. Auckland seems to be able to get around it by having an independent body providing the supply.

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  3. Shunda barunda (2,983 comments) says:

    Would the difference be that one is a thin wire phone connection and one is an underground water connection?

    $8000 does seem very expensive all the same!

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  4. Scott Chris (6,150 comments) says:

    Most likely the council is running an inefficient operation but if you’re going to compare apples with pears then it would pay to identify some specific costs at least.

    Lazy journalism opinion piece.

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  5. Scott Chris (6,150 comments) says:

    edit:

    lazy journalism opinion piece.

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  6. Brian of Mt Wgtn (22 comments) says:

    This charge is outrageous. Now we know who is helping contribute to the expensive house prices in Auckland, the Auckland Council and its CCO. Someone down the line has to pay for this, so the executive can go on their overseas fact finding trips. If they are trying to average out costs over all the old council areas does this mean some people were paying more than 8k for a water connection. I would like to know which of the old councils were.
    This is just another rort and Brother Brown the nightmare will say and do nothing.

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  7. kowtow (8,522 comments) says:

    Yet another local govt organisation ,”rebranded” as a company, to provide what was once a basic rate payer service at exorbitant prices.

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  8. cnomorerates (6 comments) says:

    Most councils include a water supply element within Development Contributions – and make a specific charge for the supply of a meter, about $600. SuperCity legislation put in a provision for a separate Infrastructure Growth Charge, invoiced by Watercare, and therefore requiring less or no justification for the level of the charge.

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  9. Kea (12,841 comments) says:

    “Would the difference be that one is a thin wire phone connection and one is an underground water connection?”

    Maybe.

    Or would the difference be competition provided by there being alternative suppliers ?

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  10. wf (447 comments) says:

    They charge what they can get away with.
    Power Co wanted 20k to run overhead wires 30m to a building.
    Owner said bugger that and bought a generator.
    Power Co person was furious: ‘would have negotiated’. (What does that tell?)
    Too late.

    Rain water collection and a septic tank sounds good, but too primitive for Greater Auckland I expect.

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  11. Colville (2,272 comments) says:

    Chorus has 1.8 million connections and 550 staff. It is privately owned, made $400 million profit in the past seven months and charges $300 for a new phone connection.

    Bullshit.

    Last subdivision I did I got pinged $2K (inc gst) per site from Chorus and I still had to lay the cable for them.

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  12. Reid (16,509 comments) says:

    Welcome to the wonderful of privatised water supply, which some wish to replicate throughout the country.

    Can one of the free-market fanatics pray explain how this could possibli happen in the wonderful world of competition, market-driven valuation, and whatever other fantasy they hallucinate just simply happens when they do what they did to MetroWater, all those years ago?

    Possibly they could also explain how precisely the Akld consumer has benefited from their wonderful wisdom as well.

    Seriously.

    Go on.

    Betcha can’t.

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  13. Colville (2,272 comments) says:

    A water conection for an infil site in Palmerston North is $1470.00

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  14. Pongo (372 comments) says:

    $480 in the people’s republic of Christchurch.

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  15. TM (99 comments) says:

    It does seem high. The charge is supposed to cover all new infrastructure required for the connection. So if you look at Watercare’s capital spending on new projects to increase capacity and divide it by the expected potential extra properties being served, it should be very close to what they are charging. Not sure how to get the data to check this though.

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  16. peterwn (3,275 comments) says:

    There is a difference between Watercare and Chorus – With Watercare (or similar Council agency) you know that water will come out of the tap when you move into your new house. With Chorus you have no such assurance. If there is an outside plant or ‘switch’ bottleneck upstream from your place you have to wait – a year or two perhaps. See:
    http://www.stuff.co.nz/dominion-post/news/wairarapa/8462647/Wait-for-phone-line-frustrates-couple

    Why Chorus cannot fit out several trailers with cabinets and microwave links to temporarily deal with bottlenecks goodness knows.

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  17. Ed Snack (1,883 comments) says:

    Wait, Watercare is privatised, and all along I thought that the place was owned by the council.

    The real reason you want privatisation is exactly what we have now. The council is supposed to regulate what the company does, but with the same owner. Being involved, shall we say that the regulating part comes second to getting a good income stream. Separate, change ownership, and regulate, that’s how to get efficiencies.

    Care to answer, Reid, why you think an explicitly council owned entity that wasn’t a separate company would do any better than Watercare are ? At least with Watercare, as bad as it is, you can identify the overcharging.

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  18. Reid (16,509 comments) says:

    Care to answer, Reid, why you think an explicitly council owned entity that wasn’t a separate company would do any better than Watercare are

    Certainly Ed. If Auckland’s water supply was still run as Wellington’s is, consumers would find precisely zero difference at the point of supply. In other words, water aplenty would still appear at the twist of a tap, on demand, just as much as you want, no more and no less. This is because you can’t market water, you can’t sell more of it, it’s not a product, unlike others, which consumers wish to consume more of. All you can do is keep it running.

    And somehow, mysteriously, Wellington does precisely as well as Auckland does in those stakes, which is the only stake that matters. Somehow, mysteriously, Wellington consumers receive precisely exactly the very same product as Auckland consumers do.

    But goodness. Lo and behold. Wellington consumers don’t pay metered rates, therefore the bill they pay for their water is much, much less, I would guess, by around a $1,000 or more per household. And yet, Wellington’s water supply and infrastructure isn’t broken at all, in any way. Somehow, without the magic market-forces in operation, somehow, lo and behold, Wellington’s infrastructure isn’t collapsing, like a rickety old shack that hasn’t been serviced for decades because no-one cares about it. No, that hasn’t happened, at all.

    See Ed, what occurs to me is that by the foolish setting up of Metrowater and whatever it’s now called under the Supercity model, Auckland has duplicated management, it’s duplicated invoicing, it’s duplicated office space, it’s duplicated vehicle fleets, it’s duplicated management, it’s duplicated a whole shitload of things that cost a whole hell of a lot more to run, the very same service that was previously supplied. On top of that it’s introduced a shareholder return factor. I’m not against privatisation in various things. Airports for example, are fine for privatisation. But water isn’t. This is because, as I said, water is NOT something you can market. People won’t buy more water, you can’t therefore increase your profit margin by selling more product. The only thing you can do is upgrade the delivery infrastructure and that is something that happens anyway, as is proven by the Wellington model which has a perfectly fine infrastructure, despite not having all those additional overheads I just enumerated.

    At least with Watercare, as bad as it is, you can identify the overcharging.

    Ed, overcharging is everywhere, with every consumer in Auckland. So who cares if you can identify it, nothings going to happen, is it. It’s not going to stop, is it. Overcharging has been happening since it was created, to pay for all those overheads.

    And who but an insane moron would want to deploy that stupid model to the rest of the country?

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  19. Kleva Kiwi (289 comments) says:

    $8000 is not over the top. I would have expected somewhere between $4-6k for a smaller city, so 8k is in the ball park. Laying a pressurised water pipe with a backflow, manifold, meter and valve out to the watermain in the road is nowhere like laying a bit of copper wire/fibre 300mm below the topsoil or hanging a cable from a overhead line.
    You have excavator cost, truck hire, labour (typically 3 staff forat least half the day) back fill, saw cutting, ashpalt, reinstatement, testing, parts, travel, consent etc possibly even a grundamag for trenchless installs.
    Buired pipe connections like stormwater, foulsewer, watermains, gasmains etc cost a lot to put in the ground

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  20. Joseph Carpenter (214 comments) says:

    Reid is obviously totally ignorant of water supply in NZ. The Wellington water infrastructure has major problems – they have imposed Level-4 emergency water use restrictions (blanket ban on any outside water use by anyone, Level-5 is catastrophic emergency with rationed water) for over three weeks and ongoing indefinitely.

    And Watercare is NOT a private company, it is totally owned 100% and controlled by the new Auckland City Council. It has a 100% monopoly with the exception of Papakura which has the water & drainage infrastructure subcontracted to Veolia (a hangover from pre-merger days their contract expires in six years I believe). Papakura is interesting because the private Veolia is significantly cheaper than Watercare, in fact pre-merger Papakura had a philosophy of contracting out most operational functions through open tenders and as a result was the cheapest/lowest rates and debt in the Auckland region.

    Also Wellington’s (and Porirua, Lower Hutt and Upper Hutt) water (and drainage) system is run by Capacity – a joint venture Council Controlled Company (exactly the same as Watercare) – that contracts to the Wellington Regional Council with all the share holdings owned pro-rata by the local councils. The big difference is in the ownership imperatives – in Auckland Watercare is paying a huge dividend to the owner ACC – a hidden tax exactly the same as the power company SOE’s during the Labour regime. In the Wellington region Capacity doesn’t make a profit or any return at all to the owners – it’s mission is to provide water and drainage at maximum efficiency/lowest cost consistent with long term reliability (you could possibly argue they have under invested in water storage capacity/supplies in a cost trade-off).

    At the end of the day ownership is fairly irrelevant, what really matters is governance and management and having the correct goals and incentives/sanctions to reach them.

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  21. Joseph Carpenter (214 comments) says:

    You’re only correct Kleva Kiwi for a connection to an existing old water system (and domestic supplies don’t have backflow preventers or a manifold – they break in with a saddle tap), but this only applies to less then 3% of new connections. Most new connections are for houses in new subdivisions where the developer has already supplied and installed the water mains, the local pumping and or storage tanks as required by the council, all the sub main reticulation, the branch lateral and pit box with a toby right to the allotment boundary – these are then all given free to and vested in the Local Authority (and thus Watercare). All Watercare does is install the meter (costs them $148) in the box, make the final connection to the water piping inside the section installed by your plumber and test it, they probably spend more time traveling to and from the job than actually onsite.

    Plus Cnomorerates is correct, ACC is actually having a QUADRUPLE bite at the cherry – 1) You the owner ultimately pay the developer for all the infrastructure (which is given to the council).
    2) You the owner then pay a development levy (and for ACC that includes altering an EXISTING property which has all the infrastructure in place and sunk costs for decades).
    3) You the owner then pay a connection fee/charge.
    4) And finally you then pay an ongoing levy to the CCO (or rates to the council) FOREVER which includes an OPEX and a CAPEX charge.

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  22. Viking2 (11,488 comments) says:

    Tga City decided to install a new meter to an old connection (that wasn’t really needed but existed from the past as a fire hose connection. No consultation with the building occupiers despite the fact the there had been no water consumption for years.
    When challanged after the install they complained that it had cost about $2500 and were not pleased to remove said fancy meter and backflows so now we have a water meter in a building that uses no water and they expect someone to pay them line fees..
    That argument is about to begin.

    Still it will have helped the CHCH city ratepayers by some profitable margin I guess as their outfit called City Care get uncontested work from our stupid council at an exhorbitant price.

    Sooner we have some real caps on these spendthrifts the better. They roam out of control.

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  23. Reid (16,509 comments) says:

    The Wellington water infrastructure has major problems – they have imposed Level-4 emergency water use restrictions (blanket ban on any outside water use by anyone, Level-5 is catastrophic emergency with rationed water) for over three weeks and ongoing indefinitely.

    No I’m not ignorant of the water ban Joseph but the fact is, the water ban has nothing whatsoever to do with the delivery infrastructure which is the only thing the water company is responsible for, therefore it’s not at all relevant in any way, to the topic under discussion. Unless you hallucinate the water company is in charge of making the water as well as delivering it, which as far as I’m aware, isn’t the case, at least in Wgtn.

    The big difference is in the ownership imperatives – in Auckland Watercare is paying a huge dividend to the owner ACC

    Yes, duh. That’s what I was saying. And how come that’s considered necessary, when it used to be the same entity. I mean the Watercare model is as profoundly mental as some idiot who sets up internal competition in his own company, whereby each division charges each other division at market rates for some service that the other division consumes. I mean how fucking stupid is that, talk about cannabilisation. But that’s OK, if you’re a mental, cos we’ll just charge the consumer for all that duplication of all that management, office space, etc etc etc etc etc etc etc etc etc and we’ll call it a “profit” and who gives a shit, except of course the poor old consumer, but who gives a shit about them? And that’s what’s happened Joseph. And I repeat all this has happened at the same time as there has been ABSOLUTELY NO INCREASE IN SERVICE TO THE CONSUMER. ZERO. ZILCH. NADA. NONE. You call that a success? If you do, I suppose you think burning your own house down in order the fire brigade has something to do in return for all that money you pay for the fire service is a similar “success” because that’s about the same level of logic you’re using.

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  24. Warren Murray (311 comments) says:

    Every council’s development contributions for water, waste services, etc is published in its LTP long term plan (LTP) and annual plan.

    A good journalist would have done some comparison checks as part of their story. Setting development contributions can be tricky as it involves making assumptions about increased demand from new connections (as distinct from increasing consumption from existing consumers), the cost of new assets to meet this demand, the timing of development, etc. The Council has to stay ahead of the demand curve, otherwise the lack of capacity will stifle development. That’s why sanitary assessments, related capex projects and development contributions are required to be included in the LTP.

    Worth noting that if the planned works do not proceed, the Council may have to refund the contributions it has collected.

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  25. eziryder (15 comments) says:

    FYI

    Just paid $886.00 for a new water connection for a section subdivision in Hastings District. Required to pay a separate development contribution of 19,406 incl GST.

    Cheers

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  26. GJM (63 comments) says:

    A 100mm fire sprinkler connection in Auckland costs around $30,000 – this is a 100mm pipe connected to the main to the property boundary. I say “around”, as they won’t actually quote and give you a price, rather it seems to be entirely random and dependent on what they think they can get away with, what earnings are like that month etc. I used to allow $20k, but had a few jobs that came in higher over the last year or 2. There is no meter cost in this as it is usually an unmetered supply.
    In many cases, a good civil contractor could do it for $5k, but you are stuck with Watercare and their nominated contractor.
    The backflow preventer and gate valves is on top of that – paid for by the owner but required by Watercare, and with ongoing testing by the owner as well.

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