Tuiono Teanau; Brown Simeon; Brooking Rachel; Williams ArenaPart 4 Watercare Services Limited CHAIRPERSON (Teanau Tuiono): Members we now come to Part 4. This is the debate on clauses 59A to 98 Watercare Services Limited". The question is that Part 4 stand part.Hon SIMEON BROWN (Minister of Local Government): Thank you Mr Chair. The purpose of this part is to ensure the financial separation of Watercare and Auckland Council to enable Watercare to be able to provide water services to Auckland in a financially sustainable way. This has been negotiated as part of the deal announced in May between the—Hon Dr Deborah Russell: Point of order. We just can't quite hear the Minister because of the mike. Thank you.Hon SIMEON BROWN: Sorry. I apologise this has become a recurring theme in relation to this microphone.Hon Member: For once we want to hear you and we can't!Hon SIMEON BROWN: I know I know.CHAIRPERSON (Teanau Tuiono): Could somebody who controls the mike turn his volume up?Hon SIMEON BROWN: It's unfortunate. I will attempt to speak with my "question time voice" again.This part was part of the negotiation between Auckland Council and the Government in relation to the Local Water Done Well deal announced in May between the mayor and the Prime Minister. It relates to a number of elements of that plan in relation to financial separation putting in place a Crown monitor a charter and in relation to the financial separation.Hon RACHEL BROOKING (Labour—Dunedin): Thank you Mr Chair. Starting at the start of Part 4 is clause 59A "Purposes of this Part". We read that they are "(a) to promote the long-term benefit of consumers" etc. What I'm interested in asking the Minister about is at clause 59A(2)(c) this comment that it "is limited in its ability to extract excessive profits." This is to do with "(2) … promoting outcomes that are consistent with outcomes produced in competitive markets such that Watercare— … (c) is limited in its ability to extract excessive profits." What I'm interested in—and I'll come to it in another point as well—is how this relates to stormwater because of course the purpose of this part in clause 59A(1)(a) is "to promote the long-term benefit of consumers of water services". And as we know that definition of "water services" includes stormwater. So does this limit "in its ability to extract excessive profits" apply to stormwater? And if so how? How does that work? That's what I'm interested in there.Then we've got over the page still on clause 59A that "(3) This Part relates only to delivering the purpose of this Act under section 3(2)(e)." which is the section about providing a financially sustainable model for Auckland. That makes sense but then we go to clause 59B which is the "Application of this Part" and it says "This Part applies to water services provided by Watercare in circumstances if there is—" and these are the words I'm interested in "if there is"; I presume it means that if there is not then this part does not apply which seems a little bit odd. I mean it is all to do with competition but if we go back to the purposes of the part it did seem to be about the long-term benefit of consumers. So clause 59B is saying that it only applies if there is (a) little or no competition in providing those services; and (b) little or no likelihood of a substantial increase in the level of competition."I'd really like some clarification from the Minister about the breadth of this part of the bill. Is it only supposed to be where there is little or no competition? Presumably again that would always be around stormwater. I can't imagine a circumstance where there'd be competition for stormwater but I'm happy to hear an explanation of how I might be wrong on that and should be more imaginative—or if in fact that's a mistake and the part applies to water services generally by Watercare and it's not limited to those areas where there's no competition. Because as we've heard the purpose of the part in clause 59A is to promote the long-term benefit of consumers and water services and then at subsection (3) there we've got that reference back to the start of the bill at what will be section 3(2)(a) which is the specific provision around Watercare which I think is what the Minister was referring to when he was saying that there was this deal done in May with Auckland.My final question for now is given the Minister's statements about this as the deal for Auckland what happens to Northland? Is there any ability for Northland to enter this arrangement or not? Of course we all know that Northland has a number of councils with very small ratepayer bases that have had huge problems historically with water treatment in particular. So I am interested in the Minister's answers on that and across—really when answering it would be very helpful to know what services are being talked about when we're talking about drinking water when we're talking about waste water and when we're talking about stormwater. Because the way this is written it really seems to be focused on drinking water that you're charging for water usage—you've got your water meters in there. And that's what already happens is my understanding with Watercare—that people are charged for their water use. But "water services" is defined to be much broader than just the drinking water. Drinking water's very important—I don't mean just in any derogatory way—but so is waste water and so is stormwater.ARENA WILLIAMS (Labour—Manurewa): Thank you Mr Chair—a confined set of questions to the Minister on clause 62A(1) and (2). There will be a number of issues to discuss in the Watercare charter but I want to just offer the Minister an opportunity to comment on proposed amendments to this section here. As he has said this is an arrangement that has been reached by his Government and the Auckland Council. But the issue here is that the powers belong to the secretary to prepare the Watercare charter and not to Aucklanders. I know that he is committed as Minister to delivering localism under this plan; in fact he used his call in answer to my question to remind me of that.And so if he's going to remind this House of his commitment to localism is it then a mistake in clause 62A(1) that it's the secretary preparing the Watercare charter and at clause 62A(2) that it's consultation with Auckland Council rather than development by Auckland Council? Should clause 62A not read "Auckland Council to prepare the Watercare charter" and clause 62A(2)(a) read that Auckland Council Watercare and Taumata Arowai would develop under the commission's regulation the draft charter? Because those words would do what he has said he would do which is restore localism in this way and protect local ownership of those assets and local provision of local services. There are flow-on effects of the secretary preparing the charter here for a number of things which then are given effect to by that clause 62A.But given that that's the new provision which he's introduced I want him to be able to comment to this committee on that particular section now. I guess the question to him is would it be appropriate for Auckland Council to develop that charter and to have the power to do so under this part given that Auckland Council is the decision maker up until this point and could continue to be the decision maker about the values and about the protections that are in place under his legislation that he has proposed? Thank you Mr Chair.Hon SIMEON BROWN (Minister of Local Government): I thank the members for their questions. What happens to Northland? Part 4 deals with services for Watercare in the Auckland region—it does not apply to Northland—but it does not prevent Auckland Council from entering into joint arrangements with other councils if they wish. How does it apply to stormwater? Auckland Council will continue to retain stormwater. The arrangement set out in Part 4 is mutually beneficial for both Auckland Council and Watercare and ultimately consumers because it enables them both to borrow independently of each other.In relation to the issue in clauses 59A and 59B these clauses are here because ultimately Watercare is a monopoly provider and so this is about clarifying that they are a monopoly provider. Of course then the point of having a Crown monitor and in terms of having a charter is to ensure that there are consumer protections in place to protect consumers and to ensure that as it says in the purpose section clause 59A(1)(c) "Watercare manages its operations efficiently with a view to keeping the overall costs of delivering water services at the minimum levels consistent with the effective conduct of its undertakings and the maintenance of the long-term integrity of its assets." That is what those clauses are to do with.In relation to the question asked by Arena Williams this is a point that was discussed between the Government and the Crown. In relation to the preparation of the charter it was agreed that the secretary would prepare it but that would obviously be done in consultation with Auckland Council. That is ultimately due to the fact that the arrangement here needs to ensure that the financial separation which is articulated works to the benefit of both the Crown and the council.CHAIRPERSON (Teanau Tuiono): Members the time has come for me to leave the Chair for the dinner break. The committee will resume at 7.30 p.m.Sitting suspended from 6 p.m. to 7.30 p.m."