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Saturday, February 23, 2013

Solid Energy
Extraordinary how people latch on to the wrong idea. Since the announcement that Solid Energy is in financial trouble it has been a consistent message repeated by many, is that part of their problem is that they made bad investments in green energy. In the next breadth Southland lignite is mentioned. Nothing to do with Southland lignite is green. The very best green news that there could be about Southland lignite is that it is going to be left in the ground. Sadly the near demise of the firm and the consequent loss of jobs may be what it has taken to get there.

Wednesday, February 20, 2013

Eden Park

The change of control at Eden Park is a welcome move, but it is not enough. The pre-World Cup arrangements where the site was supposedly run independently were always a farce. Three times to my memory the Trust had to be bailed out by Auckland City. Strangely the City seemed to tolerate this and never forced a change of control.  The Government in funding some of the stadium upgrade for the World Cup insisted on appointing a majority of the board. Now it has handed that right back to the Auckland Council.

The decision to use Eden Park for the World Cup was a controversial one but it was the best option. The many temporary seats installed for the event lessened the risk of over-investment but still the stadium is overly large for almost any purpose – the chairman of the time spoke of wanting to leave a legacy – well that is it.

Auckland has a somewhat ill-matched collection of stadia but the Council is showing willing to prioritise what is spent where and what is played where. The Council is the guarantor of a substantial loan taken out by the Eden Park Board. The stadium barely breaks even and does not cover its depreciation. Is there another bale out on the way ? – well probably.  Was the control transfer to avoid the Government being called on for more funds?  It is hard to imagine the Government would have been sympathetic in its present circumstances. It could have easily said no with little embarrassment or consequence, so it was probably more to get the responsibility where it should be.

How that responsibility should be exercised is the question – the transfer is unfinished business. Auckland Council should have the Trust wound up and assume direct responsibility itself – through its regional Facilities CCO would be best. That ways we can see the stadium is put to its best use, stem any more legacy projects and reduce the moral hazard of the Trust operating off an implied guarantee from the Government or the Council. 

Sunday, January 13, 2013

Water Businesses
The reported move by the Government to consider consolidating local government water business into a lot fewer entities is to be welcomed, not least as it shows it has not spent its reformist bent in creating Auckland Council.

Watercare is indeed a good model to start with, for it shows the benefits of scale, focus and business-like disciplines, lead by a commercially experienced Board. There are like Australian water businesses that could be compared – some with quite different regulatory settings. Water is a highly capital intensive business and the best results only emerge after decades of good decision making on capital projects – so while there are some immediate gains on offer, the best may only come in a stable regulatory and governance environment where good long term decisions can be made. It is the business environment that needs careful consideration for what has worked so far for Watercare may need some further consideration before being applied elsewhere.

The claimed advantage of the ability of a larger business to pay for the cost of upgrades in neglected areas, or in servicing new areas is a dubious one. Heavily cross-subsidised services ferment poor investments.  Nor would greater use of private capital be a very likely outcome of a new industry structure. It is not precluded now. It is not popular here or in Australia simply because the cost of private capital is higher than public capital and the benefits of competitive design, construction, maintenance, operation and of combinations of these, have already been taken up by the industry with little more a private long term capital provider can add. Nor is this change cost and risk free to local government – they will have legacy costs of shared systems no longer used by the water businesses, like call centres and they will lose the abilities of the transferring staff in application to things like civil defence and other Council services. Some staff who enjoy the wide range of council work and the public interaction resulting may find the change unattractive. Councils too will not welcome service area decisions being separated from themselves, for water services can be a powerful driver of land development which has a myriad of other costs to a council.

The environment then: There is no public appetite for privatisation of this service – it should be excluded. But placing businesses in the ownership of multiple local governments in their service area can lead to weak governance. The owners may well be divided on what the new service area boundaries should be, conflicted on capital investment priorities and little experienced in holding a water business to account on customer service performance.  In this environment customers may be substantially disempowered, for their historic route of complaint through their council will be much less effective. There needs to be a stable expectation on financial performance.   The one applying to Watercare of no dividends and cost moderation is one option but there are others that could be considered. Allowing or requiring a return on new investments, at a modest level aligned to the inherent low risk of the business is worth consideration and it may increase the discipline on boards. The regulatory environment for taking and discharging water is pretty much indifferent to structure so this is no impediment. The health requirements may seem to be similar but local government has been an effective lobbyist in resisting drinking water quality improvements, so removing their direct role here might not be a bad thing.

The sort of settings that have applied elsewhere or in other utilities include state assumption of ownership (surely to be avoided), regulatory setting of a suite of performance measures and public reporting against them, regulatory setting of performance measure targets to be met, these set for each businesses, regulated control of service area boundaries, reporting and vetting of asset management plans (a key investment planning tool), customer charters setting service standards subject to regulatory approval, customer ombudsmen and regulated customer councils to help give customers some voice. Regulated price control is another step. However if one puts all these in place then the environment is exactly aligned to privatisation. That switch should not be made to be too easy. We should simply not regulate to this extent but rather give careful consideration of each of these. Analysis of the natural pressures on business will show some are unnecessary. Alternatively some can be left as threat, for no business welcomes regulation. With prices I believe the pressures on publicly owned businesses will be sufficient that the owner’s community interest will suffice and price regulation can be avoided.  Surely though some of these regulatory roles will be needed and where needed, the Government needs to consider where these powers will lie. There is no obvious current agent.  There are some pretty heavy regulation models available. Too much of that and the businesses will become focussed on their regulators rather than their customers – usually a bad outcome.

There may be a case for allowing inset private reticulation providers say in new development areas to give some competitive pressure but the settings to allow this are more complex again. A general power to place and access pipes would be needed rather than one which currently lies with local government. This would be analogous to other utilities and perhaps would not be a bad thing. The case for price regulation of such a private inset service provider would be strong for the service remains a natural monopoly.  As well the consequences of the performance or financial failure of such a reticulator need to have been established and be fair to the regional public business, which will be the provider of last resort.

The Government has a challenging task of analysing these options and then convincing the public of the answer. Some degree of consultation along the way might in the end speed the process, for there is a reservoir of distrust to be overcome.

Tuesday, October 30, 2012

Paul Moon: Water spirits wend way to Government's door - Opinion - NZ Herald News:
"...the demands placed on New Zealand rivers for most of the 19th century were so slight that the impression left was that there was plenty of water for everyone's needs, and probably always would be."
Comment: - Not so. There was early legislation to control the use of water for mining purposes. Rights and disputes were settled in mine wardens courts. Some rivers in mining areas were declared to be reserved for disposal of mine tailings - trumping any other uses of the river. There was early conflict over use of rivers for rafting logs, an action which destroyed Maori fishing stands - again the legislation was used to resolve use rights.
A professional historian should have known better.

Friday, October 19, 2012

Waitangi Tribunal and Water Ownership 

When the Waitangi Tribunal found the Maori retained a residual interest in the ownership of water it was to no-one's great surprise. To some it was a matter of “well they would wouldn’t they” but the reality is that historically Maori made a fairly broad use of water consistent with their culture. That use was an expanding one up until the New Zealand Wars, including the use of water for energy to drive flour mills. Subsequently Maori use was infringed, particularly in the disruption of indigenous fisheries and in ignoring the identity many Maori have with lakes and rivers. The Tribunal finding then was no surprise – its timing though is much more a matter of opportunity caused by the Government’s latest asset sales.  The proposed sales are not unprecedented. Contact Energy was fully privatised in the past and took into its ownership several hydroelectric assets once Crown property.

The Government’s public response seems to be limited to insisting no-one owns water and to only consult with Maori on the Waitangi Tribunals views. Strictly that may be true that no-one owns water but in some cases it comes pretty close to ownership. Contact Energy no doubt values its hydro plants on its books – but what would they be worth without the water use consents to operate them? Alternatively picture two farms with similar soils – one with water use consent for irrigation and one without – which farm is worth the more? The value of water use consents then is already capitalised and it is traded on capital markets. Sure the use rights can be modified or even cancelled but the regulators are rightly reluctant to do that without very good cause, because of the economic consequences. So no-one owns water? – No, but.  Simply put water has a very substantial value to its users, often far beyond any price they pay. Where a price is charged for water witness how little water use varies with price. The inelasticity of use with price reflects water’s large real value to its users. Very large parts of our community have an interest in using water commercially and recreationally. We do not have any history of resource use charges. We must be alarmed when such are in prospect, particularly if new interests have the opportunity to seek rents without limit.

Our modern law seeks to separate who regulate water from those who use it. It is a tradition going back to the gold mining days of mine warden’s courts. Increasingly the state has reserved to itself the rights to decide maters to do with the whole water cycle within catchments and beyond, where the infrastructure has allowed that. That is not to say it has always done it well. Until recently there has often been scant attention to cultural values and sometimes too little attention to recreational and environmental values. Never the less that control is fundamental. The consequence of the sort of private ownership of water that occurs in many US states is entirely unfortunate for those other values. As they say: ‘water flows uphill to money’. We should want none of that. Some are saying Maori owning water would look after it better than we have to date – but they are also users and have aspirations to use more. They will end up totally conflicted – it is no answer.

If change is in prospect the whole community needs to be consulted, not just Maori. We are all interested. Mr Key has a mandate to partially privatise some state assets. The mistake of his predecessors on the foreshore and seabed issue was to rush ahead – not just say ‘let’s pause for a cup of tea’ and talk about it.
Dame Anne Salmond has pointed to some sage advice about managing assets of the public domain. They align closely to what has been happening in the Land and Water forum and are worthy of consideration. Mr Key should have a pause for that cup of tea and then could usefully put some limits around the current debate, along those lines. He could say that:

  • The matters raised are an issue for the whole community and any changes need broad discussion,
  • The Government will continue to take the lead role in regulating how water is used, or left unused including considering cultural, recreational and environmental values,
  • No holder of a water use consent will have it infringed within its term, for the purpose of recognition of Waitangi rights and
  • The separation of regulators and users is a fundamental that will be retained.

Does that leave room for Maori aspirations to have past wrongs on water to be addressed, for Maori views to come into regulation and for water use by Maori? – In my view yes – but they are not all matters to be fixed by placing them “in the one pocket”.  That may not be compatible with some views of Maori sovereignty. So be it – we are one nation.

Wednesday, March 14, 2012

Survey shows mine water programme is working |

OECD report 'shows now is time for action' over water quality |

Wednesday, March 07, 2012

Water vital resource and key to health | Columns

Government Puts $800,000 Into Wainono Lagoon Clean-Up... |

Monday, March 05, 2012

Crown asks tribunal to dismiss SOE sale claim - National - NZ Herald News

Sunday, March 04, 2012

Radio New Zealand : News : National : Storm disrupts power and water supply

Further steps to improve NZ's fresh water |

Plant slammed for continued sewage dumping | NATIONAL News

Friday, March 02, 2012

Lack of action will cost water consent holders |

Tuesday, February 28, 2012

People key to success - small-business - business |

Saturday, February 25, 2012

Water storage may mean rise in Ashburton River levels

Friday, February 24, 2012

Huge economic spinoffs from water storage

Manawatu River quality not worst |

Sunday, February 19, 2012

Fracking the new 'nuke-free' - national |

Friday, February 17, 2012

Water tower closed on earthquake risk fears |

Is NZ sustainable in global market place? |

Thursday, February 16, 2012

Wairoa man saving rivers from pollution | NATIONAL News

Wednesday, February 15, 2012

Smart water meter generates its own power - FierceEnergy

River report hailed by conservationists | Otago Daily Times Online News : Otago, South Island, New Zealand & International News

Tuesday, February 14, 2012

Water quality to decide Transmission Gully fate |

Farmer adaptation to change with the threat of regulation | Scoop News

Public Ownership of Energy Companies and Water | Scoop News

Monday, February 13, 2012

Drive for more water from Lake Coleridge

Sunday, February 12, 2012

Editorial: Working together for lake's sake |

Friday, February 10, 2012

Lake Horowhenua toxic enough to kill a child |

Thursday, February 09, 2012

Radio New Zealand : News : National : Iwi chair says water claim still on agenda

Asset sale hui moves on to Wanganui | NATIONAL News

Wednesday, February 08, 2012

Opinion: the emerging tool of water footprinting for agricultural performance | Fresh Fruit Portal

Water ownership not up for negotiation, says Key - Politics - NZ Herald News

Saturday, February 04, 2012

Grey water recycling an option for keen gardeners |

Rethink needed on water allocation in New Zealand | Scoop News

Environment Minister Urged to Focus on Maori Rights... |

American water expert laments the waste |

Friday, February 03, 2012

Excavations at Oihi mission station, Marsden Cross Historic Reserve, Bay of Islands
Archaeological investigations at the site of the first permanent European settlement in New Zealand are being undertaken between 7th and 24th February as a joint project between the University of Otago and the Department of Conservation.
You can follow the progress of the excavation at:
and our related facebook page:
There will be a public open day on Saturday18th February starting at 10:00am. Directions will be posted on the web page.
Ian Smith and Andrew Blanshard

Thursday, February 02, 2012

Meridian says water caution could hit earnings - Business - NZ Herald News

Meridian says water caution could hit earnings - Business - NZ Herald News

Tuesday, January 31, 2012

'Gunge' In Water Prompts Complaints |

Storage dam proposed for Hawke's Bay | BUSINESS News

Sunday, January 29, 2012

Auckland's amazing cave network | Auckland News

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Good advice for environmental problems