Managing rising water costs in Aotearoa New Zealand

Affordability has quickly become a defining issue in Aotearoa New Zealand’s transition to a new water services delivery model. While Local Water Done Well reforms and the Water Services Delivery Plans (WSDPs) set a clear direction to deliver safe, compliant and financially sustainable water services, many communities face a significant rise in water charges over the next decade.

Recent pricing signals from new Water Service Organisations (WSOs) have brought this into public focus. In some areas, indicative household charges could more than double over ten years. Greater transparency has clarified the scale of change, but it has also heightened concerns against a backdrop of ongoing cost-of-living pressures.

Water reforms were never designed to reduce charges in absolute terms. Instead, they were framed as a way to limit long-term costs compared to no reform scenario, by addressing decades of underinvestment, improving scale efficiencies and strengthening financial sustainability.

A review of accepted WSDPs points to patterns in material increases in water charges across delivery models. Given the scale of renewal, compliance and resilience investment required nationwide, this is largely unavoidable. The more important question is how deliberately those pressures are managed.

By design, WSDPs are confronting documents. They expose asset condition, regulatory gaps and the real cost of delivering water services sustainably over time. Unsurprisingly, many plans reveal funding challenges that are difficult to address without higher charges.

In some cases, councils have published long‑term pricing paths. In others, affordability impacts appear less directly through projected revenue growth, accelerated depreciation funding or rising debt levels, rather than clear household bill forecasts. Regardless of how they are presented, the underlying drivers remain consistent: ageing infrastructure, rising construction costs, tighter service standards and the transition to fully funding depreciation.

This consistency reflects a system-wide challenge. But the investment programmes within WSDPs are not fixed. As plans move from approval into delivery, there is still scope to shape outcomes, including how much is spent, when it is spent and how efficiently capital is deployed.

One of the most effective, and often underused, levers to manage affordability lies in how projects are prioritised within WSDPs. As plans transition into delivery, the focus shifts from what needs to be done to what must be done first, what can be staged and what may not need to proceed.

A structured and defensible prioritisation framework helps minimise subjectivity, withstand political shifts and direct scarce funding to projects that deliver the most value.

At its core, the framework applies three sequential filters: 

Prioritisation alone does not address a deeper issue. There is a lack of rigour in how capital cost estimates are developed. Experience across the water sector shows that even where projects are genuinely warranted – having passed needs versus wants tests, regulatory screens and prioritisation frameworks – the underlying cost estimates do not always withstand scrutiny.

Common issues include early-stage concepts being treated as budget-ready estimates, insufficient allowance for risk, uncertainty and delivery constraints, inconsistent treatment of optimism bias and escalation, and limited testing against market capacity, sequencing and constructability.

The result is that capital programmes can appear affordable on paper, only to unravel as projects progress through business case development, procurement and delivery. In an environment of economic regulation, this presents a significant risk. Projects justified on the basis of early cost estimates may later drive sharper-than-expected price increases or may be rejected by the economic regulator.

Strengthening affordability therefore requires more than prioritising the right projects. It also depends on how robust, transparent and realistic the underlying cost estimates are. This means applying appropriate estimate class discipline, separating scope uncertainty from delivery risk, retesting affordability as estimates mature and being willing to rescope, stage or pause projects where costs escalate materially.

Without this discipline, even well-prioritised programmes risk embedding cost paths that are neither affordable nor defensible.

No-build and build-less options are an underused lever to manage affordability. Not every service challenge requires a new pipe, plant or reservoir.

Demand management, leakage reduction, pressure management, operational optimisation and customer behaviour change can defer or avoid capital investment, particularly in drinking water networks. In wastewater and stormwater systems, source control, catchment planning and nature-based solutions can reduce reliance on large, capital-intensive assets.

Embedding these options within prioritisation and cost estimation processes means capital solutions are pursued only where they deliver the most value. Where capital investment is required, asset renewals typically make up a large proportion of Water Services Delivery Plan programmes. Too often, renewal decisions are still driven by asset age rather than risk or performance. A more mature, risk based approach – focused on renewing the right assets at the right time – can materially reduce capital spend without compromising service outcomes.

Improvements in asset data quality, confidence and decision making maturity play a critical role here. Embedding build less options and risk based renewal decisions within prioritisation and cost estimation processes helps ensure capital is deployed only where it delivers the greatest value for communities.

As WSDPs transition from planning into delivery, affordability is no longer theoretical. It is visible to communities, politically sensitive and shaped by decisions made now. The challenge ahead is not to avoid cost increases altogether, but to demonstrate that every dollar spent is necessary, well-evidenced and value-adding.

This requires a coordinated approach to asset planning, prioritisation, cost estimation and funding strategy. Affordability will ultimately be judged not by the scale of the problem inherited, but by the discipline of the decisions that follow.

We work with councils and WSOs across Aotearoa New Zealand to navigate affordability challenges by strengthening asset and demand evidence, applying disciplined prioritisation, improving capital cost realism and integrating investment decisions with funding and financing strategies. By aligning technical insight with commercial and regulatory requirements, we help organisations make robust, defensible decisions that balance service outcomes with long-term affordability for their communities.