Local Water Done Well

As Aotearoa New Zealand moves through the Local Water Done Well (LWDW) reforms, much of the attention has focused on Day 1 considerations - governance models, organisational structures, service delivery handover and regulatory settings. Yet beneath the policy and process lies a more fundamental challenge for Day 2; how to deliver water services that are safe, reliable and sustainable, without losing sight of what communities can afford.

For councils forming new CCOs and those continuing to deliver services in-house through an Independent Business Unit model (IBU), the financial sustainability of water services sits at the heart of the reform. Tariffs, debt settings, investment pipelines, operational costs and long-term asset renewals all rely on the quality of the asset information and the accuracy of technical understanding that underpins them. The long-term success of any delivery model will hinge on a clear understanding of existing assets, their condition and what it will take to fund and maintain them.

• Tariffs must reflect the real cost of service

Without strong insight into assets and networks, tariff setting quickly becomes guesswork, increasing the risk of underinvestment, affordability pressures and sudden cost shocks.

• Investment planning must be grounded in evidence

Councils and CCOs are now expected to justify their capital programmes with greater rigor. From treatment plant upgrades to reticulation renewals and resilience investments, financial decisions require clear evidence: asset condition, performance data, demand forecasts, risk assessments and lifecycle and trade-off considerations.

Over time, assuming the current energy-economic regulatory path continues, the pressure will only intensify. Organisations will face even stronger incentives to improve the quality of underlying information, particularly as service and performance standards must be delivered within a constrained revenue envelope.

These regulatory shifts make technical accuracy essential. Only when technical, operational and commercial advisory knowledge come together can decisions be both financially sound and technically realistic.

This also means looking beyond the state of the assets themselves. A clearer understanding of broader organisational factors, including risk exposure, demand forecasts and market variables such as the cost of capital, is now just as important. Together, these elements complete the picture, supporting investment decisions that are informed, defensible and future-focused. 

Water networks across Aotearoa New Zealand are diverse, historically underdocumented and often reliant on the knowledge of long-serving staff. Many councils now face the challenge of preparing water service strategies, future investment pathways and tariff models using asset information that varies widely in quality and completeness.

Weak asset information can lead to:

• Over  or underestimated investment needs
• Inaccurate tariff modelling
• Unplanned operational failures
• Poor visibility of future risks
• Inability to prioritise investment effectively

Transitioning to the new water services environment while addressing these gaps is one of the biggest operational and financial challenges facing the sector.

Water services are fundamentally physical systems; they are complex, interdependent and driven by real-world conditions. Decisions about budgets, risk, service levels and investment depend on a clear understanding of what is actually happening across the network, not just what the models suggest.

Deep technical knowledge helps to:

• Identify the true cost drivers within the network
• Validate investment assumptions
• Shape financially credible asset management plans
• Avoid unrealistic or unbuildable project options
• Translate operational reality into the financials and tariff setting

When technical insight and commercial advisory capability sit apart, decisions can drift away from the reality of the assets themselves. When they operate together, councils and CCOs are better equipped to make decisions that are practical, informed and grounded in real-world conditions — exactly what the reform calls for. This is reflected in learnings from recent projects, where bringing diverse perspectives together has sharpened technical thinking and placed greater emphasis on standardisation, as well as low-build and no-build solutions.  

One of the most significant, yet least discussed, aspects of the reform is the growing support gap for non-CCO councils utilising the IBU option. These councils are expected to deliver the same outcomes, meet the same regulatory standards and justify the same financial decisions as their CCO counterparts, but they do so with smaller teams, tighter budgets and far fewer resources.

That is precisely why their approach matters. When IBU councils adopt an integrated technical and commercial approach, they can significantly reduce delivery risks, strengthen the credibility of their decisions and develop investment cases that stand up to the same level of scrutiny as larger entities.

At its core, the reform is both a financial and technical exercise. It aims to align cost, risk, service levels and long-term investment so water services remain reliable, resilient and affordable.

Organisations best placed to navigate this are those that combine strong advisory guidance with robust technical insight – blending engineering domain knowledge, asset management and commercial acumen – and those that share and leverage the work of peer CCOs and councils through a disciplined, standardised industry lens to avoid reinvention, accelerate delivery and reduce unnecessary complexity.

At GHD, we are actively contributing to this shift. For example, our work with Tauranga City Council, recognised with a Special Gold Award at the national ACE Awards, focused on establishing the foundations of a digitally enabled asset management environment. Instead of delivering a static asset register, the programme created an integration-ready platform designed to support future CCO formation, commercial decisions and regulatory reporting.

Importantly, this wasn’t designed as a one-off. The data structures, asset hierarchies, governance arrangements and integration patterns developed for Tauranga are now being adapted and reused by other councils and CCOs facing similar transition challenges, helping to accelerate delivery and reduce implementation risk.

Another example is the efficiency masterclass framework we developed for a CCO navigating potential affordability pressures. The programme brought together leaders across governance, planning, operations, finance and assets to build a shared view of efficiency initiatives, trade-offs and deliverability.

The outcome was a collective understanding of which initiatives were practical, financially meaningful and aligned with long-term sustainability. Other emerging entities are now exploring similar approaches in response to their financial constraints.

The next few years will be pivotal. Councils and CCOs will refine tariffs, plan renewals, respond to evolving regulations and make decisions that shape water services for decades. The success of these efforts will depend on the quality of asset information and the integration of those who understand the networks with those designing the infrastructure.

Deep technical capability is no longer a “nice to have”, it is the foundation of financial sustainability, and the reform is making that clearer by the day.