The water services delivery models

Deciding on the right delivery model involves more than simply meeting legal requirements. It is important that we thoroughly assess and compare various approaches to determine the option that best fits the unique needs of communities across Ōtepoti Dunedin. This includes how best to address flooding and climate change issues across the city, e.g., in South Dunedin.

Our proposal - In-house model (preferred option)

Our proposal is to keep managing water services within the DCC organisation, as we do now, but we would have a new way of working to ensure we meet the objectives of Local Water Done Well (LWDW).

Under our proposed model, the DCC would continue to directly manage and provide water supply, wastewater, and stormwater services to the community.

With this model:

• all aspects of water services, including strategic planning, day-to-day operations, and infrastructure management would remain within the DCC’s control
• we would also retain full accountability for ensuring that these services meet the community’s needs and comply with all relevant regulations
• the DCC can leverage its existing expertise, resources, and relationships to deliver efficient, effective, and integrated water services that align with the city’s broader goals and plans.

The in-house model is not a continuation of the status-quo as it would need to meet the new requirements of the LWDW reform.

How the in-house model would work

DCC ownership and responsibility

All assets, infrastructure, and operations related to water services would remain under the control and ownership of the DCC directly.

Community accountability

As water services would remain under the DCC’s governance, the community could engage directly with elected representatives and through Council’s decision-making processes when the Water Services Strategy and other planning and reporting documentation are being prepared. Currently, the Local Government (Water Services) Bill requires consultation with the community when preparing the Water Services Strategy, just like we would do under the DCC Long Term Plan. Under LWDW reform, the DCC's Water Services Strategy will essentially become our Long Term Plan for water.

Integrated management

The delivery of water services would continue to be managed alongside other DCC functions. This would ensure consistency and alignment with broader initiatives like urban planning and transport.

For example, our recent George Street and Bath Street 3 waters pipe upgrade projects took an integrated approach. While upgrading the pipes we were able to take the opportunity to enhance flood protection and improve above ground amenities.

Why the in-house model is our proposal

The in-house model offers a balanced approach that meets known regulatory requirements, ensures financial sustainability, and maintains local accountability. By choosing this model, Ōtepoti Dunedin can:

• capitalise on its existing strengths
• maintain direct control over water services
• preserve direct community involvement and accountability
• seamlessly coordinate water services with other DCC responsibilities such as urban planning and transport.

The in-house model also means that the DCC Group is expected to have $157 million less debt over the next 9 years than it would have under the CCO model, and $35 million less in interest costs.

The Government requires improvements to water services, and the in-house model provides the DCC with the necessary flexibility and control to adapt these changes to the specific needs of Ōtepoti Dunedin residents.

By leveraging established systems and governance structures, this approach:

• allows for a cohesive and integrated approach to water management
• aligns closely with the city’s long- term objectives
• ensures a smooth transition and minimal disruption
• lowers short-term transition costs compared to other models.

The alternative option - Water Services Council-Controlled Organisation model (CCO)

A water services CCO would involve establishing a separate company to deliver our water services. The CCO would be directly owned by DCC as sole shareholder. The diagram below shows where the water services CCO would fit in the DCC Group of companies.

Under this model, the CCO would assume full responsibility for delivering water services, i.e., drinking water, wastewater and stormwater, and the DCC would provide strategic direction as the sole shareholder.

How the CCO would work

Independent governance and management

The CCO would have its own governance and management structure, with the sole function of water services delivery separate from other DCC responsibilities.

DCC ownership

The CCO would operate separately as a company, but the DCC would, as the sole shareholder, retain ownership and strategic oversight through governance and accountability arrangements, including a statement of expectations. While the CCO would be responsible for preparing the Water Services Strategy, the DCC as sole shareholder can request involvement in preparing and finalising this.

The DCC would have the power to appoint and remove board directors.

Service delivery

The CCO would manage day-to-day operations, compliance with regulatory standards, and infrastructure investment planning.

It would have the ability to assess, set and collect water services charges from consumers, and could charge developers where additional demand or growth is created.

Why a CCO is not our proposal

This is not the DCC’s preferred option for Ōtepoti Dunedin at this time because:

• although the charges may be less over the next 9 years ($114 million in total), it is not clear that the CCO model will be the cheapest for customers in the long term. This is because the CCO would be charging less by taking on more debt. As that CCO debt increases, so will its interest costs.
• the CCO model would take on an additional estimated $157 million of debt by 2034 for the same amount of work
• although DCC would be the sole shareholder, it would not have direct control over water services
• there is the potential for less accountability to the community
• it would be more difficult to ensure that there is co-ordination with other DCC functions, such as urban planning and transport.

However, once the Water Services Delivery Plan is adopted and accepted, and if the city’s requirements evolve, the CCO model could be reconsidered assuming central government makes no other changes in the meantime.