Watts SimonLocal GovernmentSIMON WATTS (National—North Shore): Madam Chair I appreciate the call and acknowledge the Minister of Local Government who is about to assume the seat and as spokesperson for local government for National I've got a number of questions in regards to this debate involving three waters surprisingly Minister but we'll get into a little bit of that soon. Obviously this reform is the most significant reform of drinking waste and stormwater services: the megamerger of 67 local authorities into four separate entities. It's also not only one of the largest elements of reform planned by this Government it is also the most widely opposed reform by the majority—Kieran McAnulty: Point of order Madam Chair. Thank you Madam Chair. I apologise to the speaker for interrupting. However it's convention for the chair of the select committee to introduce the discussion of this not the spokesperson for the Opposition. CHAIRPERSON (Hon Jacqui Dean): Thank you very much for that. I'm entitled to place the call where I see it being sought and I did just that.Kieran McAnulty: I realise that but where's Ian McKelvie—he's sitting right there.CHAIRPERSON (Hon Jacqui Dean): The member will not argue.Kieran McAnulty: I'm not.CHAIRPERSON (Hon Jacqui Dean): The member will not argue with the Chair's ruling. SIMON WATTS: Madam Chair thank you very much for the opportunity. As I was saying—I just got the attention of the Minister; looking forward to some good questions. I just wanted to say as I was saying before we were interrupted this is also one of the most widely opposed elements of legislation but I've got a number of questions in regards to this in three key areas and one is around the compensation paid to councils. So the question for the Minister is: what compensation will be provided to councils for the value of their water assets? The second question I've got is in regards to the process you've used to estimate the value of those council assets and specifically did the Water Industry Commission for Scotland use national averages in order to value these assets or did they use actual replacement value? Why I think that is important is because the use of national averages potentially overstates that number. The other area of questioning Minister that I want to get into is around the profit-making of these new entities. So my question is: will water be metered under the new water services entities particularly in areas that aren't metered at the moment? The other question is around: will water entities be operated as State-owned enterprises and expected to make a profit which is required under the State-Owned Enterprises Act?The last tranche of questions Minister is in regards to probably what has been said on public record by yourself and by many members or your officials as regards to the whole basis of this reform being around economies of scale and the benefits related to that. My questions around that are: do you stand by the reform benefits being modelled on Scotland as a point of comparison for New Zealand acknowledging that with the exception of population between New Zealand and Scotland there isn't too much more in similarity between our two countries? The second question is in order to achieve those cost efficiencies it has been stated that the only way to achieve that is through the amalgamation of those 67 local entities into those four separate entities—my question is around the counterfactuals. So what assessment have you undertaken in regards to I guess what you'd refer to as the business as usual" or the "do-nothing" scenario—so councils or the local authorities continuing their programme of asset replacement and investment in the future versus this model around amalgamation and what was the differential in regards to that? And lastly the amalgamation in terms of the benefit modelling that's being quoted refers to the fact that the amalgamation of these entities will achieve a 50 percent capital expenditure efficiency improvement and that will be delivered through the consolidation of water networks in order to achieve that benefit. That assumption is fundamental and significant in terms of the underlying benefit case for this proposed reform and I want to understand Minister in terms of: how did you came to that number of 50 percent? What were the considerations in regards to other mechanisms in which you could achieve benefit and did you actually consider other counterfactuals around that and in terms of deriving that capital efficiency benefit what other considerations did you put thought to? So those are the three areas of questions and I'd really appreciate the Minister's contribution in terms of that."