change in information gathering charge ta… · council meeting. in the interim, these consent...

Annual consent holder charges – water takes

1 Background Council changed the charging regime for information gathering activities for water takes in the 2015-2025 Long Term Plan (LTP) so that it was based on an amount corresponding to the maximum daily net take rate. Previously the charging regime was based on a three tiered system, prompting consent holders to request that Council shift to a more equitable charging regime. The information gathering component of the annual charge funds a portion of the Science and Strategy Directorate’s activities. Most consent holders with water takes in 2014/15 have received a reduction in their charge from the new policy but a smaller proportion of consent holders (about 132 or 12%) had an increase of between $100 and $500, see figure below. About 195 (17%) had an increase of more than $500. This impact was anticipated in the LTP decision. Some of the consent holders adversely affected by the new charges, particularly irrigators, have contacted council and expressed concern at the new charges and, in particular, they were not consulted with directly on these changes.

Attached to this report is the ‘Report to Council December 2015: Annual charges for 2015/16 water take consents’ which provides detail on the monitoring and research undertaken by WRC in relation to the water take charges (refer Appendix 3). Staff have been in communication with the affected consent holders, and advised that a decision of council in relation to the 2015/16 charges would be made at the February 2016 council meeting. In the interim, these consent holders have been asked to pay an amount equivalent to the charge they received for the 2014/15 financial year.

2 Legal basis for charges In order to carry out its water resource management functions, the council requires adequate information about the state of the environment. This requirement is formalised in section 35 of the RMA. Section 35(1) of the RMA states:

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Change in information gathering charge ‐ 2015/16

“Every local authority shall gather such information, and undertake or commission such research, as is necessary to carry out effectively its functions under this Act or regulations under this Act.”

Section 35(2)(a) of the RMA states that the council shall monitor:

“...the state of the whole or any part of the environment of its region…to the extent that it is appropriate to enable [it] to effectively carry out its functions under this Act.”

From this it is important to acknowledge that the charges do not relate solely to monitoring but also include research. Without this information council would be unable to ensure the sustainable management of water resources in the region. Hence, the council undertakes:

Monitoring of groundwater and rivers to determine allocable water resources. Particular focus in Pukekohe, Pukekawa, Matamata, Hamilton Basin, Taupo and Coromandel.

Investigations of the values in the water bodies to be managed including, accounting of existing water takes, fish, invertebrates, biodiversity and water quality. Since 2008 a focus in Coromandel, Waihou, Piako and Whakapipi catchments.

Activities to promote efficient use of water including workshops with consent holders and the development of irrigation water demand guidelines – implements Method 3.4.5.3 of the Waikato Regional Plan (Crop and Pasture Monitoring Programme).

Reporting to the public and central government (including LAWA, NPSFM 2014) on the level of water allocation in the region. Development and maintenance of Waikato region water allocation calculator.

If water was not taken by consent holders the council would not need to undertake the majority of this work. Details of the specific workstreams and costs recovered by these charged are included in the December council report (Included as Appendix 3 of this report, refer pages 36-38). The basis for charging consent holders for the council’s costs in relation to water allocation is section 36(4)(b) of the RMA. Variation 6 to the Waikato Regional Plan was a response to the problem of some catchments within the region being at, or approaching full allocation. Since consented users take 90 per cent of the water used in the region (the remainder being permitted activities), the need to implement these rules can also be considered to be in response to the demand for water by these users. The allocation of costs associated with the implementation of Variation 6 is based on section 36(4)(b) of the RMA, which states:

“...a particular person or persons should only be required to pay a charge (i) to the extent that the benefit of the local authority’s actions to which the charge relates is obtained by those persons as distinct from the community as a whole; or where the need for the local authority’s actions to which the charge relates is occasioned by the actions of those persons...”

Section 36(4)(b)(iii) of the RMA sets out the conditions under which a local authority may charge in relation to the state of the environment monitoring costs. In particular, it states that:

”...a particular person or persons should only be required to pay a charge...to the extent that the monitoring relates to the likely effects on the environment of those persons’ activities, or to the extent that the likely benefit to those persons of the monitoring exceeds the likely benefit of the monitoring to the community of the local authority as a whole...”

That is, people should be required to pay for the additional monitoring that is required because of their activities, or because they receive an exclusive benefit from the monitoring. This monitoring is separate to that which is undertaken by a consent holder in order for them to be compliant with their resource consent conditions. Consented water takes give rise to the need to monitor water flows since, as noted above, without the information produced by

monitoring, the council could not manage the resource (that is, allocate water). In the first instance, the Council needs to ensure that minimum environmental flows are met, and then that allocation of water over and above those minimum flows occurs according to the specifications of the Regional Plan.

3 Identification of charging options The following section provides an evaluation of alternative charging approaches for water take consents. The options presented have been developed with input from representatives from the irrigation sector. While staff have been actively engaging with this sector, we have remained cognisant of the need to achieve an outcome that considers the effects of and impacts on all water users (i.e. is sector neutral). Through this process, a number of concerns have been raised by Mr Phillips on behalf of the irrigators and Mr Phillips presents these in Appendix 1 of this report. A summary of the key concerns include:

1. Mighty River Power, though non-consumptive in its use of water, influences the Waikato River’s flow and the policy protection afforded it under the National Policy Statement for Renewable Electricity Generation (2011) limits the availability of water for other users upstream of Karapiro Dam.

2. Water take activities which have reduced availability should be charged less, this includes takes which:

a. Are restricted during summer low flows, and/or b. Do not operate all year – e.g. the majority are for agriculture or horticulture

irrigation. 3. The charges should be more equitable – no reduced charge for takes over a certain

magnitude. 4. Takes for uses outside the region (e.g. Watercare) do not contribute the same

amount of funds under the general rate component towards the monitoring and research costs. It is viewed as being inequitable when comparing the combined general rate and consent holder contribution between consent holders residing within and outside the Waikato Region.

5. The current charging model is based on net take approach which ignores: a. That the take could be having an allocation impact near the take location prior

to the water being returned. b. The water returned can be of lower water quality which can limit the

availability of water to others. c. Irrigation water draining past the root zone is not included in the net take

assessment. d. Discharge consents pay a significantly smaller consent holder charge.

In undertaking the modelling of the various charging models, staff note that there will be approximately 4,000 consents that will receive a charge in 2016/17 compared to the baseline number of consents used for the setting of the 2015/16 charges of approximately 1,000 consents. The significant increase in the number of consents reflects the granting of farm water consents over the last two years. The modelling includes taking into account projections of likely to be granted dairy shed consents under Variation 6 and the impact of the new Watercare application currently in the consent queue. Based on the identified options and adjustments put forward by Mr Phillips to address the irrigators’ concerns, staff have modelled the impact under the following scenarios:

Net take daily limit with reduced rate for water exceeding 30,000 m3/d. Status quo Net take daily limit with reduced rate for water exceeding 30,000 m3/d and a

minimum charge of $65. Annualised net take limits with no adjustments.

Annualised net take limits with summer adjustment factor1 and reduced rate for water exceeding 30,000 m3/d.

Annualised net take limits with summer adjustment factor, reduced rate for water exceeding 30,000 m3/d and minimum charge of $65.

Annualised gross take limits with reduced rate for water exceeding 30,000 m3/d. Gross take approach ignores water returned after use – e.g. hydropower discharges.

4 Impacts of charging options – results of models A summary of the key findings is provided below. The target for the total consent holder contribution for the model options is $1,060,000. Fuller details for each model are provided in Appendix 2 including a table of benefits and limitations for each model.

4.1 Status quo Consent charges for 2015/16 are based on a proportion of the daily net take allocation limit of each water take consent. Net take accounts for the return of water which can offset water availability impacts on downstream users. A consent holder which returns all of the water taken is assessed as having being non-consumptive. All takes are charged $0.53 per m3 up to their daily consent limit or a maximum of 30,000 m3/d. For water takes greater than 30,000 m3/d a lower rate of $0.1 per m3 is applied to the additional component exceeding this. This is shown in the next figure. The majority of water takes are less than 30,000 m3/d.

A concern raised by the irrigation sector is that the charge for many individual irrigation consents has increased markedly. It was anticipated that around 250 irrigation consents would have an increase in charges and a smaller number would see a decrease. This was noted in the report to council that set out the proposed charging model during the LTP deliberations.

1 Summer adjustment factor decreases the difference in charge between just summer takes and those operating all year.

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Consent Charge

Consent limit m3/d

2014/15 Status quo (2015/16)

The majority of consents most impacted range in size from about 2,000 m3/d to about 12,000 m3/d (shown by the first step in the graph above where the green line is greater than the blue line). The maximum increase in charge occurred for consents up to 10,000 m3/d which were previously charged $737 and are now charged up to $5,300. There were also a smaller number of consents for greater than 10,000 m3/d charged $11,841 and these decreased to nearer $5,300 (shown by the second step in the graph above where the blue line is greater than the green line). These impacts largely reflect the anomalies with the previous charging steps that the revised charging model was seeking to address. Where a 10,001 m3/d take paid $11,841 and a take just below this level paid $737. There are 383 consents for agriculture or horticulture irrigation. When comparing the 2014/15 step charges with the current 2015/16 charges:

95 (25%) received the largest increase of between $1,000 and $4,300. 143 (37%) had an increase of between $0.1 and $1000. 145 (38%) had a reduction of between $0.1 and $5,888.

The total increase in charges, from the stepped charges 2014/15 to the current 2015/16 charges2, for the combined irrigation consents is $220,235 which is an average of $575 per consent. Based on the new dairy shed consents, if these were charged under the 2014/15 (step charges) the total charge to dairy shed consent holders would have been $396,383, based on a surface water take charge of either $108 or $203. This reduces markedly to $85,726 under the existing 2015/16 charges model of $0.53 per m3 (a reduction of ~$310,000). In summary, under the existing 2015/16 charges model, based on projected consent numbers for 2017, the agricultural sector would pay an additional $220,235 for irrigation consents but would also receive a reduction of $310,000 for dairy shed consents compared to the previous 2014/15 stepped charges. The status quo model for 2015/16 was developed with four main principles in mind:

1. Administratively simple to apply and is largely based on legally defined information (being the daily consent limit).

2. Similar sized consents should pay a similar rate – i.e. no large step changes. 3. Based on the net take in response to remissions processed prior to 2014 and to align

with the Regional Plan. 4. That if challenged to the High Court, Staff could defend the charges in regards to s35

and s36 of the RMA – in essence the benefit to consent holders is justifiable. Pure equity between all takes does not apply unless it can be defended and justified. This was particularly the case for large water consent holders such as Watercare, Hamilton City and NZ Steel.

Projecting ahead to 2016/17, there will be an additional 3,000 consents since the $0.53 (for less than 30,000 m3/d) and $0.10 (for greater than 30,000 m3/d) rates were set in the LTP for 2015/16. Without changing the model but by reducing the charge rate to match the required budget for 2016/17 the total charge for each consent holder will reduce by approximately 20% from this year’s invoice. This is based on $0.44 for less than 30,000 m3/d and $0.12 for greater than 30,000 m3/d. 2 Using $0.53 per cubic metre.

The following is a summary of charges for a typical range of consents: m3/d Pre 2014/15 stepped

charge Current charge 2015/16 $0.53/0.1

Projected 2016/17 charges $0.44/0.12

50 $ 128.00 $ 26.50 $ 22.00 500 $ 203.00 $ 265.00 $ 220.00

1,000 $ 203.00 $ 530.00 $ 440.00 2,000 $ 737.00 $1,060.00 $ 880.00 5,000 $ 737.00 $2,650.00 $2,200.00 7,500 $ 737.00 $3,975.00 $3,300.00

10,000 $ 737.00 $5,300.00 $4,400.00 10,001 $11,841.00 $5,300.53 $4,400.44

Under status quo the largest water user’s charge has increased by ~160%. This is equivalent to an increase per consent of about ~$18,500 from 2014/15 to 2015/16. The largest 3 consents are held by Watercare and combined equate to an increase of ~$50,000. Summary of charges for largest users:

Existing charge model 2016/17

$0.44/0.12

Existing charge model 2015/16

$0.53/0.10

Step charge model 2014/15

Top 2 consents $ 61,200 $ 60,800 $ 23,682

% of total revenue 6% 5% 2% % of consumptive allocation 12% 12% 12%

Top 6 consents $ 146,810 $ 151,742 $ 71,046

% of total revenue 13% 12% 6% % of consumptive allocation 26% 26% 26%

Graph of consent charge for status quo for 2015/16 (based on $0.53/$0.1) and 2016/17 (based on $0.44/$0.12) – right image is same data but at a finer scale for the size of most consents including those for irrigation. These show a reduction from 2015/16 to 2016/17.

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$10,000

$15,000

$20,000

$25,000

$30,000

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Consent Charge

Consent limit m3/d

Status quo (2015/16)


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$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

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Consent Charge

Consent limit m3/d



4.2 Model 1: Status quo but with addition of minimum charge This is similar to status quo but with the addition of a minimum uniform charge of $65. The two figures below show model 1. There are nearly 3300 consents which are for less than 175 m3/d which would have a fixed fee of $65. For the year 2016/17:

Charge decreases from $0.44 to $0.37 for less than 30,000 m3/d and remains at $0.12 for greater than 30,000 m3/d.

The $65 minimum charge, if implemented, would provide $211,380 in charges compared to $78,325 under the status quo 2015/16 and $416,256 if the 2014/15 lowest step charge of $128 was applied.

For the majority of medium to large consents (including those for irrigation) the charge is about 30% lower than for 2015/16 (status quo).

The largest six consents (Watercare x4, Hamilton City and Huntly Power Station) would pay $134,210 which is a slight reduction from charges under status quo 2015/16.

The following is a summary of charges for a typical range of consents:

m3/d Projected 2016/17 charges $0.37/0.12

& min $65

Pre 2014/15 stepped charge

Current charge 2015/16

$0.53/0.1

Projected 2016/17 charges

$0.44/0.12 50 $ 65.00 $ 128.00 $ 26.50 $ 22.00

500 $ 185.00 $ 203.00 $ 265.00 $ 220.00 1,000 $ 370.00 $ 203.00 $ 530.00 $ 440.00 2,000 $ 740.00 $ 737.00 $1,060.00 $ 880.00 5,000 $ 1,850.00 $ 737.00 $2,650.00 $2,200.00 7,500 $ 2,775.00 $ 737.00 $3,975.00 $3,300.00

10,000 $ 3,700.00 $ 737.00 $5,300.00 $4,400.00 10,001 $ 3,700.37 $11,841.00 $5,300.53 $4,400.44

4.2.1 Model 1a: status quo but with addition of minimum $100 charge This is similar to status quo but with the addition of a minimum uniform charge of $100. The three figures below show model 1a. There are nearly 3400 consents which are for less than 335 m3/d which would have a fixed fee of $100.

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Consent Charge

Consent limit m3/d


2014/15

M1 Status quo (2016/17) & minimum


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Consent Charge

Consent limit m3/d


2014/15



For the year 2016/17: Charge decreases from $0.44 to $0.30 for less than 30,000 m3/d and increases from

$0.12 to $0.13 for greater than 30,000 m3/d. The $100 minimum charge, if implemented, would provide $340,000 in charges (30%

of total) compared to $80,616 under the status quo 2015/16 and $441,875 if the 2014/15 lowest step charges of $128 and $203 were applied.

For the majority of medium to large consents (including those for irrigation) the charge is about 43% lower than for 2015/16 (status quo).

The largest six consents (Watercare x4, Hamilton City and Huntly Power Station) would pay $127,245 which is a 16% reduction from charges under status quo 2015/16.

The following is a summary of charges for a typical range of consents:


& min $100



$0.53/0.1


$0.44/0.12 50 $ 100.00 $ 128.00 $ 26.50 $ 22.00

500 $ 150.00 $ 203.00 $ 265.00 $ 220.00 1,000 $ 300.00 $ 203.00 $ 530.00 $ 440.00 2,000 $ 600.00 $ 737.00 $1,060.00 $ 880.00 5,000 $ 1,500.00 $ 737.00 $2,650.00 $2,200.00 7,500 $ 2,250.00 $ 737.00 $3,975.00 $3,300.00

10,000 $ 3,000.00 $ 737.00 $5,300.00 $4,400.00 10,001 $ 3,000.30 $11,841.00 $5,300.53 $4,400.44

Summary of charges for largest users:


& min $65

Existing charge 2016/17

$0.44/0.12


$0.53/0.10

step charge 2014/15

Top 2 consents $ 55,700 $ 61,200 $ 60,800 $ 23,682

% of total revenue 5% 6% 5% 2%

% of consumptive allocation 12% 12% 12% 12%

Top 6 consents $ 127,245 $ 146,810 $ 151,742 $ 71,046



4.3 Model 2: Annualised with no reduction above 30,000 m3/d Consent charges are based on a proportion of the annual net take allocation limit, represented as an average daily value, and no reduction for large water takes. This in essence results in two separate charge regimes depending if a take is seasonal (e.g. irrigation) or if it can operate all year (others).

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Consent limit m3/d


2014/15

M1 Status quo (2016/17) & min $100


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Consent Charge

Consent limit m3/d


2014/15

M1 Status quo (2016/17) & min $100


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Consent Charge

Consent limit m3/d


2014/15

M1 Status quo (2016/17) & min $100


For the year 2016/17: Charge increases from $0.44 to $0.52 for less than 30,000 m3/d and increases from

$0.12 to $0.52 for greater than 30,000 m3/d. Irrigation consents are charged ~60% less than identically sized water takes

(‘Irrigation consents’ compared with ‘Other consents’ in the following table). Irrigation consent charges are ~55% lower than for status quo 2016/17. All other types of consents, of similar size to irrigation, are nearly 20% higher

compared to status quo for 2016/17. The largest six consents (Watercare x4, Hamilton City and Huntly Power Station)

would pay $386,878 and increase of $240,000 compared to status quo 2014/15. The 2016/17 charge to these six consent holders is equivalent to 36% of the total consent charges for the region.

The following is a summary of charges for a typical range of irrigation consents:

m3/d Annualised no cap $0.52 Projected 2016/17 charges $0.44/0.12

Current 2015/16 charges $0.53/0.10 Irrigation

consents Other

consents 50 $ 9.97 $ 26.00 $ 22.00 $ 26.50

500 $ 99.73 $ 260.00 $ 220.00 $ 265.00

1,000 $ 199.45 $ 520.00 $ 440.00 $ 530.00

2,000 $ 398.90 $1,040.00 $ 880.00 $1,060.00

5,000 $ 997.26 $2,600.00 $2,200.00 $2,650.00

7,500 $ 1,495.89 $3,900.00 $3,300.00 $3,975.00

10,000 $ 1,994.52 $5,200.00 $4,400.00 $5,300.00

Graph of consent charge for irrigation versus other water takes for 2016/17 and status quo for 2015/16 and 2016/17 – right image is same data but at a finer scale for the size of most consents including those for irrigation.

4.4 Model 3: Annualised with reduction above 30,000 m3/d and increased weighting for summer takes This model builds on the annualised model (model 2 where consent charges are based on a proportion of the annual net take allocation limit, represented as an average daily value) but attempts to address a number of the concerns raised by staff by including a lower charge for

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Consent Charge

Consent limit m3/d

M2 Annualised charge (other)

M2 Annualised charge (Irrigation)



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$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

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Consent Charge

Consent limit m3/d





takes greater than 30,000 m3/d and increasing the charge for seasonal takes. As with model 2 this in essence results in two separate charge regimes depending if a take is seasonal (e.g. irrigation) or if it can operate all year (others). For the year 2016/17:

Charge increases from $0.44 to $0.57 for less than 30,000 m3/d and increases from $0.12 to $0.285 for greater than 30,000 m3/d.

Irrigation consents are charged ~40% less than identically sized water takes (‘Irrigation consents’ compared with ‘Other consents’ in the following table).

Irrigation consent charges are ~25% lower than for status quo 2016/17. All other types of consents, of similar size to irrigation, are nearly 30% higher




m3/d Annualised $0.57/$0.285 factor 1.5 Projected 2016/17 charges $0.44/0.12


consents Other

consents 50 $ 16.40 $ 28.50 $ 22.00 $ 26.50

500 $ 163.97 $ 285.00 $ 220.00 $ 265.00

1,000 $ 327.95 $ 570.00 $ 440.00 $ 530.00

2,000 $ 655.89 $1,140.00 $ 880.00 $1,060.00

5,000 $ 1,639.73 $2,850.00 $2,200.00 $2,650.00

7,500 $ 2,459.59 $4,275.00 $3,300.00 $3,975.00

10,000 $ 3,279.45 $5,700.00 $4,400.00 $5,300.00


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$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

‐ 50,000 100,000 150,000

Consent Charge

Consent limit m3/d

M3 Annualised, seasonal & cap (other)

M3 Annualised, seasonal & cap (Irrigation)



$‐

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

‐ 2,000 4,000 6,000 8,000 10,000 12,000

Consent Charge

Consent limit m3/d





4.5 Model 4: Annualised with reduction above 30,000 m3/d, increased weighting for summer takes and minimum charge This is similar to Model 3, but with the inclusion of a minimum charge. The two figures below show model 3. There are nearly 3300 consents which are for less than 200 m3/d which would have a fixed fee of $65. These are represented by the flattening of the two lines in the right-hand figure below. As with models 2 and 3 this in essence results in two separate charge regimes depending if a take is seasonal (e.g. irrigation) or if it can operate all year (others). For the year 2016/17:

Charge increases from $0.44 to $0.50 for less than 30,000 m3/d and increases from $0.12 to $0.25 for greater than 30,000 m3/d.

The $65 minimum charge, if implemented, would provide $212,355 in charges compared to $78,325 under the status quo 2015/16 and $416,256 if the 2014/15 lowest step charge of $128 was applied.


Irrigation consent charges are ~35% lower than for status quo 2016/17. All other types of consents, of similar size to irrigation, are nearly 13% higher




m3/d Annualised $0.50/$0.25 factor 1.5

and min $65 Projected 2016/17 charges $0.44/0.12


consents Other

consents 50 $ 65.00 $ 65.00 $ 22.00 $ 26.50

500 $ 143.84 $ 250.00 $ 220.00 $ 265.00

1,000 $ 287.67 $ 500.00 $ 440.00 $ 530.00

2,000 $ 575.34 $1,000.00 $ 880.00 $1,060.00

5,000 $ 1,438.36 $2,500.00 $2,200.00 $2,650.00

7,500 $ 2,157.53 $3,750.00 $3,300.00 $3,975.00

10,000 $ 2,876.71 $5,000.00 $4,400.00 $5,300.00


4.6 Model 5: Annualised gross takes with reduction above 30,000 m3/d The approach for the gross takes generally assumes all takes except for flood purposes are treated as consumptive. This approach ignores consents where water is returned after use via discharges as defined in the Waikato Regional Plan. For the year 2016/17:

Charge decreases from $0.44 to $0.27 for less than 30,000 m3/d and increases from $0.12 to $0.27 for greater than 30,000 m3/d.

Two additional charges are applied 1) takes for hydro power are charged $0.01 per m3, and 2) takes for industrial cooling are charged $0.02 per m3.


Irrigation consent charges are ~75% lower than for status quo 2016/17. All other types of consents, of similar size to irrigation, are nearly 50% lower




m3/d Gross 0.27 Projected 2016/17 charges $0.44/0.12


consents Other

consents 50 $ 5.18 $ 13.50 $ 22.00 $ 26.50

500 $ 51.78 $ 135.00 $ 220.00 $ 265.00

1,000 $ 103.56 $ 270.00 $ 440.00 $ 530.00

2,000 $ 207.12 $ 540.00 $ 880.00 $1,060.00

5,000 $ 517.81 $1,350.00 $2,200.00 $2,650.00

7,500 $ 776.71 $2,025.00 $3,300.00 $3,975.00

10,000 $ 1,035.62 $2,700.00 $4,400.00 $5,300.00

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$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

‐ 50,000 100,000 150,000

Consent Charge

Consent limit m3/d

M4 Annualised, seasonal, cap & min (other)

M4 Annualised, seasonal, cap & min (Irrigation)



$‐

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

‐ 2,000 4,000 6,000 8,000 10,000 12,000

Consent Charge

Consent limit m3/d





Graph of consent charge for irrigation versus other water takes for 2016/17 and status quo for 2015/16 and 2016/17 – left image has extended horizontal axis to include MRP non-consumptive take, right image is same data but with finer scale for the size of most consents including those for irrigation.

5 Summary/assessment

5.1 Staff response to key concerns raised by Mr. Phillips 1. Mighty River Power, though non-consumptive in its use of water, influences the Waikato

River’s flow and the policy protection afforded it under the National Policy Statement for Renewable Electricity Generation (2011) limits the availability of water for other users upstream of Karapiro Dam.

In a policy sense MRP’s use of water for electricity generation results in lower availability of water for consumptive allocation – but staff are not of the view that this should influence the charges under discussion. Very little of WRC monitoring or investigations relating to water takes are directly attributed to MRP activities. MRP’s operation does have an impact on the flow regime, generally to the benefit of reducing water shortages (i.e. using the hydro lakes for summer storage) and increasing the reliability of existing water abstractors. It should also be noted that MRP co-fund 7 river flow recording sites and this data is available for managing water shortage restriction of other consents in particular pasture irrigation activities. MRP for its main operation does not have a surface water take consent but rather a damming consent which has conditions relating to minimum and maximum discharges from each dam. The charges applying to Mighty River Power under the dam charges increased from ~$4,000 in 2014/15 to ~$32,000 in 2015/16.

2. Water take activities which have reduced availability should be charged less, this

includes takes which: a. Are restricted during summer low flows, and/or b. Do not operate all year – e.g. the majority are for agriculture or horticulture

irrigation. There is no data available to differentiate between consents with lower reliably of water take – e.g. may be restricted more than other takes. There is a range of reliability across similar consents and this detail is not readily available in a database which could be used for assessing charges. Staff considered that there is little or no difference in the cost to WRC to operate its monitoring, research and investigations as a result of a particular consent’s availability to water during a drought. It is more likely that the charge should increase for

$‐

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

‐ 5,000,000 10,000,000 15,000,000

Consent Charge

Consent limit m3/d

Gross

Gross (irrigation)



$‐

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

‐ 2,000 4,000 6,000 8,000 10,000 12,000

Consent Charge

Consent limit m3/d

Gross

Gross (irrigation)



consents with lower reliability due to higher workload by WRC staff to ensure best information is available to consent holders to help manage their water takes. Staff consider that there should not be a marked differentiation between seasonal uses and all year users. WRC costs associated with research and investigation are largely driven by summer allocation levels which are generally better represented by the daily volume than annual volume. The annual volume does not distribute charges evenly based on users who cause the need for majority of monitoring and investigations. Summer users, even though they may operate for less than 140 days, result in the greatest allocation pressure during the times when allocation is most stressed.

3. The charges should be more equitable – no reduced charge for takes over a certain

magnitude. Staff consider that without a reduced charge they cannot justify the high charge for the largest uses based on the level of monitoring and research undertaken by WRC. WRC has received preliminary legal advice on this issue from Mr Milne. “In terms of risk management, I consider that the large users are the most likely to judicially review section 36 fixed charges which they consider to be unfair. As an illustration, Electricity Corporation of NZ Limited successfully judicially reviewed charges imposed under section 24K of the Water and Soil Conservation Act 1967 set by Council’s statutory predecessor, the Waikato Catchment Board.

My concern is heightened by the fact that you advise that although a few users use a large portion of the allocated resource, there is not a one-to-one relationship with the Council monitoring activities and costs. If Council were to adopt the proposed regime then large users could judicially review its decision and require Council to justify that at least 20% of its monitoring activities is directly related to their activities. I understand your opinion to be that Council could not justify that position. That being so, my advice has to be that Council should not agree to the proposed new basis of charging. “ 4. Takes for uses outside the region (e.g. Watercare) do not contribute the same amount

of funds under the general rate component towards the monitoring and research costs. It is viewed as being inequitable when comparing the combined general rate and consent holder contribution between consent holders residing within and outside the Waikato Region.

Council has received preliminary legal advice on this issue from Mr Milne: “In our telephone discussion on 5 February following your receipt of my opinion of that date you asked me to consider another related matter. You have been lobbied to impose s36 charges which differentiate between those within the Region and those outside it.

I confirm my verbal advice that there is no basis for any such differentiation in section 36. I consider that any application for judicial review of a charging regime on that basis would inevitably succeed. “ “I consider that there is no legal basis upon which consent holders who are not ratepayers within the Waikato Region or consent holders who are ratepayers within the Waikato Region but whose activities benefit persons outside the Waikato Region should be charged on a higher basis than consent holders within the Region who are ratepayers and where the benefit of Council’s activity relates to the property upon which the rates are paid.”

5. The model is based on net take approach which ignores: a. That the take could be having an allocation impact near the take location prior to

the water being returned, e.g. Carter Holt Harvey Pokaiwhenua take. b. The water returned can be of lower water quality which can limit the availability of

water to others, e.g. Huntly Power Station. c. Irrigation water draining past the root zone is not included in the net take

assessment. d. Discharge consents pay a significantly smaller consent holder charge.

For the CHH example the return of water to the Waikato River exceeds the amount taken from the surface water consents and are thus treated as being non-consumptive. That is they do not limit any other person from having access to water. CHH also have a large groundwater consent which is treated as being fully consumptive. Under the 1024/15 charges all the CHH consents received an extra large charge. However, the majority of this charge was remitted. Implementing a charge based on the quality of water would be very difficult. For example the temperature on the water returned by Huntly can be extremely variable depending on how many generators are operating. Huntly are already heavily constrained from operating during summer due to the ambient temperature of the Waikato River. They may consider that any other activity upstream should pay a higher charge due to their activity limiting Huntly’s operation. Genesis evidence to the environment Court for Variation 6, which was not disputed by any party including the agricultural sector, showed that every drop of water removed upstream of Huntly increased the ambient temperature of the river. Huntly may argue that there should be a higher charge for water takes above Huntly along the same premise given by Mr Phillips. Correctly operated irrigation consents should not return significant amounts of water beyond the root zone. Irrigation should be managed to minimize drainage below the root zone to minimise nutrient leaching to groundwater and then rivers. Minimising irrigation drainage is covered by rules 3.4.5.6 to 3.4.5.8 of the WRP which relate to the use of water for crop and pasture irrigation. As noted by Mr Phillips discharges are treated separately. There are some important differences. The water take charges are primarily around the implementation of water allocation which includes SOE monitoring but in additional the actively managing allocation of water. It is the active management of allocation which is considerably different to how discharges are managed. This may change under healthy rivers where the implementation may require extra funding and reconsideration of the funding mechanism used. At the moment the monitoring associated with discharges is primarily SOE. Council has received preliminary legal advice on the issue of gross takes from Mr Milne: “You have further advised that you are being lobbied to return to the use of gross take allocation rates rather than net take rates when assessing the charge to the large users. The net take approach contras the matching discharge against the volume of the take because the discharge contributes to the allocable flow available to downstream users. The Variation 6 process demonstrated that the net take approach is sensible and defensible. If Council were to change to the gross take approach then I note that you consider that very large users would pay a disproportionately large amount of the total monitoring charge compared to the Council monitoring related to their activities. Clearly that would place your Council at risk of challenge by way of judicial review. Again, my advice is that your Council should not agree to the proposed change.”

5.2 Assessment of models Status quo 2016/17: Projecting ahead to 2016/17, there will be an additional 3,000 consents since the $0.53 (for less than 30,000 m3/d) and $0.10 (for greater than 30,000 m3/d) rates were set in the LTP for 2015/16. Without changing the model but by reducing the charge rate to match the required budget for 2016/17 the total charge for each consent holder will reduce by approximately 20% from this year’s invoice. This is based on $0.44 for less than 30,000 m3/d and $0.12 for greater than 30,000 m3/d. The remission process is also available to deal with the small number of consents which may not fit the daily model e.g. those that operate for a few days each year. Status quo 2016/17 with minimum charge Model 1: A minimum charge of $65 is applied to all consents less than 150 m3/d. This minimum charge, if implemented, would apply to 3,267 consent holders and provide $211,380 in charges compared to $78,325 under the status quo. For the majority of medium to large consents the charge for 2016/17 is about 30% lower than for 2015/16. The remission process is also available to deal with the small number of consents which may not fit the daily model e.g. those that operate for a few days each year. Annualised models 2 to 4: Staff consider the three alternative models’ based around an annualising of water take volumes (with a variety of adjustment factors), as proposed by Mr Phillips on behalf of the irrigators, would be difficult to defend. If adopted a large number of consents would have a charge based on a derived annual value (i.e. not a legal value from their consent) and it is likely that there may be a large number of enquiries and remission requests as individual consent holders try to get a lower assessment. A financial buffer would need to be built-in to deal with the cost of this process. The annualised approach reduces the charge for seasonal consent holders, e.g. irrigators. However, the decrease in charge is generally apportioned on to a small number of large consent holders. Depending on the annualised model chosen, the six largest consent holder would be charged between $230,999 and $386,878. This being between 21% and 36% of the total revenue. This charge would be primarily against Watercare x4, Hamilton City and Huntly Power Station. Staff consider they could not defend that level of charge in relation to the monitoring and investigation undertaken by WRC. Gross take model 5: This approach is likely to see a legal challenge to the basis of charges from the large power generators. This will also result in a large number of remission requests from other non-consumptive consent holders. The previous step charges for 2014/15 were based on gross take, but with a maximum charge of $11,842, and WRC dealt with remissions for nearly all the hydropower generators, in particular the small scale schemes. The number of remissions will no doubt increase if adopted as the two largest consents by Mighty River Power and Genesis Energy for the Tongariro Power Scheme would receive a charge of $292,896. This is a quarter of the total budget applied to just two non-consumptive consent holders. The six largest consent holders (Genesis x2, MRP, and Watercare x3)3 are charged $489,804 which is nearly half of the total charge across all the users in the region. This distribution of the charge largely on to non-consumptive water users would be difficult for staff to justify and defend. It is worth noting that due to a clerical error the 2015/16 charges were consulted to the public without the adjustment for non-consumptive operations such as power stations. In essence the hydro power stations in the consultation document were treated as being consumptive,

3 Watercare also have the seventh largest take.

i.e. gross takes. This result in submissions by the major power companies to ensure their consents were not treated as gross takes. Council, through the LTP submission and hearing process, decided to not treated these activities as gross takes. As discussed above, Council has received preliminary legal advice on the gross take issue from Mr Milne: “You have further advised that you are being lobbied to return to the use of gross take allocation rates rather than net take rates when assessing the charge to the large users. The net take approach contras the matching discharge against the volume of the take because the discharge contributes to the allocable flow available to downstream users. The Variation 6 process demonstrated that the net take approach is sensible and defensible. If Council were to change to the gross take approach then I note that you consider that very large users would pay a disproportionately large amount of the total monitoring charge compared to the Council monitoring related to their activities. Clearly that would place your Council at risk of challenge by way of judicial review. Again, my advice is that your Council should not agree to the proposed change.”

5.3 Conclusion Mr Phillips on behalf of the irrigators he is representing provides provisional support for Model 4: Annualised with reduction above 30,000 m3/d, weighting for summer takes and minimum charge. The support is provisional as Mr Phillips is unable to meet with the irrigators to discuss the implications until the 26th February. Mr Phillips’ letter on the Irrigators’ position is provided in Appendix 4. Staff recommend that council continues charging consents using either:

a. the status quo model but taking into account the lower rates as a result of the increase in consent holder for 2016/17, or

b. the status quo model with minimum uniform charge (model 1).

6 Transitioning to new charges Once the council has made a decision on the preferred charging method, consideration needs to be given to the phasing of any significant increases in charges to consent holders. This includes consideration of any remission of charges already invoiced for the 2015/16 financial year. Staff intend to report back to Council on this matter to the 10 March council meeting.

7 Future matters to address Through the engagement with the irrigation sector, a number of areas have been identified where further dialogue is required:

Recognition of monitoring undertaken by consent holders. Staff note that a distinction needs to be made between monitoring undertaken in order to comply with consent conditions as opposed to monitoring that adds to the information the council uses to manage water resources (i.e. state of the environment monitoring).

Appendix 1 - Viewpoint as provided by Mr Phillips for the concerned irrigators

Concerns include:

The contention that the consented volume in a location is proportional to the demand for environmental monitoring is very difficult to demonstrate, particularly in the Waikato catchment where the river mainstem flows are significantly influenced by MRP and the allocable flows permitted above Karapiro are only 5% of Q5 which is lower than most other waterways in the region. It is accepted however that there is a requirement for Information Gathering and Data Monitoring for aquifer and river flows and water quality and that charging consent holders on the basis of their consented available water takes is not unreasonable.

The results with the change from the coarse size groupings that existed prior to 2015 created substantial increases in charges for a large number of consent holders with water takes in the ranges from 400 – 1,000m3/day (from about $200 up to as much as $500), and for those with consents between 1,400 and 10,000m3/day the charges went from about $740 up to between $740 and $5,300. A substantial number of the consent holders in this range are farmers taking water for irrigation and this water has, in most cases, consent restrictions on the volume able to be taken per year and are generally category C for surface takes which means in periods deemed to be water short, these consents are shut down completely so that domestic, stock, community and industrial water takes can continue.

When this was brought to the attention of councillors and staff after the regime had

been approved and the bills had been sent out, there was an acceptance that the affected consent holders had not been aware of the implications contained within the Long Term Plan. Mr Phillips considers many of the councillors who approved the Plan were also unaware of the impact of the change.

The irrigation community does not object to a charge that is related to the water volume available for the use of the consent holder and accepts that while there is no clear relationship between the consent holder charge and the direct benefit to each individual consent holder, the principle of a smoothed system is likely to be more equitable. This is consistent with the resolution contained within the LTP “Our decision To combine our charging for groundwater and surface water, and move to a more graduated charging mechanism which matches with the volume of take permitted under each resource consent.” Given the difficulty of overturning a newly approved policy in the Long Term Plan the irrigators have therefore suggested that the annual availability of the consented water should be the basis for the Information Gathering and Data Monitoring levy, rather than the daily availability of the consent. Of course for consents that do not have an annual cap the annual availability is 365 times the daily availability. On the other hand a consent of say 3,650m3/day for 100 days has an annualised daily availability of 1,000m3/day less the likely number of days of shut down.. The irrigators believe that this would enable the principle espoused in the Long Term Plan to be retained but this interpretation of the principle would be more equitable. In working through the detail with staff Mr Phillips believes that the original proposal has some anomalies that need to be addressed.

These are: 1. The seasonality of irrigation and some other takes which should be annualised

with or without an adjustment factor. 2. The fact that irrigation consents have the highest probability of shutdown in the

event of a declared water shortage and so there is less surety of supply, so are of lower value than category B takes.

3. Irrigation Takes are the only takes where water is only allocated to meet the predicted need 9 years out of 10. All other takes are in the basis of meeting total demand. Averaged actual use is typically in the order of 60-70% of consented annual volume.

4. If the concept of spreading the consent holder contribution is to be based on the consent holders’ access to water then the issue of a potential low level fixed charge for small takes and reduced rates for extra large consents needs to be part of the review. Reducing the rates for the largest consent holders means that the other consent holders are required to pay a higher fee to offset the discount (irrespective of the name given to the reduced rate).

5. Currently the Council has chosen to set the consent holder contribution at 40% of the cost of the Information Gathering and Data Monitoring levy and the balance is from the general rate. Where the water is taken and exported from the region this funding model does not produce an equitable outcome especially in regard to Auckland City’s Water Care which currently takes 25% of the annualised consented water and pays 7% of the consent holder share of the Information Gathering and Data Monitoring levy, and pays less than $2,000 in General Rates. Of course Water Care is in the process of seeking much more water and this equation will become much worse if the same method of charging remains. It also means the high volume reduced rate effectively increases the contribution from other consent holders by about 18%.

6. The current model is also based on a net take approach which means that a consent holder who returns water is only charged for the net. CHH has a take for 60,000m3 per day from a spring feeding the Pokaiwhenua and returns an equivalent volume of process water back into the Pokaiwhenua about 10km downstream and so makes no contribution to the Information Gathering and Data Monitoring levy and it is the 6th largest take in the region. The water returned is likely to be different in quality from that taken and that the volume equivalence is only valid if there has been no change in location, timing or quality. If it was equivalent, then there would not be any need for a large take as the actual take would only need to be for any losses within the recycling system.

If Genesis requires a minimum flow at Huntly to be maintained which would seem to imply a greater need for environmental monitoring than the Net take approach would indicate. It appears this Net take approach is ignoring the additional environmental monitoring needed for the true magnitude of the environmental effects. The result is that standard consent holders are being levied at a higher rate to cover this anomaly. As part of the modelling it would seem that we should be able to model the gross take and the volume returned with the option to have a negative value for the water returned but that value would be less than the take value. For example

If a user takes 100,000 m3/day and returns 80,000 m3/day then the 100,000 would pay an environmental contribution at the going rate (say $0.40) and would get a rebate of a percentage of the rate, depending on the impact category.

If the impact is solely heat then if the water temp of the discharge exceeds the water temp of the take by more than 20 degrees there could be a surcharge rather than a rebate and if less than say 2 degrees 100% rebate.

Take Rate

Charge/m3 Rebate for returned water based on quality difference

$0.40 i.e. Temperature differential between take & return

Based on previous years mean performance

Net Take Gross take Gross Return Rebate Net Fee

20000 100000 80000 Temp Diff Performance for 20,000m3/day

Charge $40,000 Rebate Rate degrees C factor

0.4 2 1 $8,000

0.3 5 0.75 $16,000

0.2 10 0.5 $24,000

0.1 15 0.25 $32,000

0 20 0 $40,000

‐0.2 25 ‐0.5 $56,000

If the water quality of the return is similar to the take

then the result is the same as for a net take based charge

Credit rates

Similarly for a sewage treatment plant, the rate of the rebate would improve along with the quality of the discharge. The reality is that we should be using a similar system for takes and discharges.

Discharge consents are paying a significantly smaller charge than the abstraction consents and using the net take approach means that the large dischargers are being seriously advantaged when the discharges arguably require a greater environmental monitoring assessment than the consumptive takes.

The whole net take approach sounds reasonable but ignores some major issues and which compound the existing anomalies in the current model. I believe that this means that some major contributors to the need for environmental monitoring are paying substantially less than the ordinary takes users.

This means that we should also model the gross takes and gross discharges because the environmental impacts and hence monitoring requirements would appear to be arguably linked. I suspect that this may even be a larger issue than annualizing the irrigation takes. In the debate round irrigation and ground water, Variation 6 presumes that all ground water is returned to the river systems. While I do not accept that in its totality, if that is the policy premise then we know that water passing beyond the root zone for irrigated pasture is significantly higher than for non irrigated pasture, but we are not treating that as an offset to arrive at a net return. I am not proposing that we should at this stage, but I am saying that we should not be treating large takes and large discharges as being equivalent to arrive at an arithmetic net.

Certainly with the emphasis on improving the water quality there needs to be an environmental monitoring programme and the outcome of any improvements will create significantly greater benefits for users especially at the downstream end and again Water Care will be a major beneficiary.

I accept that it may not be possible to use this tool to fix all of the issues raised but the possibility exists to adjust the model and the interpretations used to improve the equity of the charges and to give due regard to the economic circumstances of the parties, which is also a requirement of the RMA.

Appendix 2 - Impacts of charging options – detailed model results

1. Status quo Consent charges for 2015/16 are based on a proportion of the daily net take allocation limit of each water take consent. Net take accounts for the return of water which can offset water availability impacts on downstream users. A consent holder which returns all of the water taken is assessed as having being non-consumptive. All takes are charged $0.53 per m3 up to their daily consent limit or a maximum of 30,000 m3/d. For water takes greater than 30,000 m3/d a lower rate of $0.1 per m3 is applied to the additional component exceeding this. This is shown in the next figure. The majority of water takes are less than 30,000 m3/d.

A concern raised by the irrigation sector is that the charge for many individual irrigation consents has increased markedly. It was anticipated that around 250 irrigation consents would have an increase in charges and a smaller number would see a decrease. This was noted in the report to council that set out the proposed charging model. The majority of consents most impacted range in size from about 2,000 m3/d to about 12,000 m3/d (shown by the first step in the graph above where the green line is greater than the blue line). The maximum increase in charge occurred for consents up to 10,000 m3/d which were previously charged $737 and are now charged up to $5,300. There were also a smaller number of consents for greater than 10,000 m3/d charged $11,841 and these decreased to nearer $5,300 (shown by the second step in the graph above where the blue line is greater

0

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than the green line). These impacts largely reflect the anomalies with the previous charging steps that the revised charging model was seeking to address. There are 383 consents for agriculture or horticulture irrigation. When comparing the 2014/15 step charges with the current 2015/16 charges:

95 (25%) received the largest increase of between $1,000 and $4,300. 143 (37%) had an increase of between $0.1 and $1000. 145 (38%) had a reduction of between $0.1 and $5,888.

The total increase in charges, from the stepped charges 2014/15 to the current 2015/16 charges4, for the combined irrigation consents is $220,235 which is an average of $575 per consent. Based on the new dairy shed consents, if these were charged under the 2014/15 (step charges) the total charge to dairy shed consent holders would have been $396,383, based on a surface water take charge of either $108 or $203. This reduces markedly to $85,726 under the existing 2015/16 charges model of $0.53 per m3 (a reduction of ~$310,000). In summary, under the existing 2015/16 charges model, based on projected consent numbers for 2017, the agricultural sector would pay an additional $220,235 for irrigation consents but would also receive a reduction of $310,000 for dairy shed consents compared to the previous 2014/15 stepped charges. The status quo model for 2015/16 was developed with four main principles in mind:

5. Administratively simple to apply and is largely based on legally defined information (being the daily consent limit).

6. Similar sized consents should pay a similar rate – i.e. no large step changes. 7. Based on the net take in response to remissions processed prior to 2014 and to align

with the Regional Plan. 8. That if challenged to the High Court, Staff could defend the charges in regards to s35

and s36 of the RMA – in essence the benefit to consent holders is justifiable. Pure equity between all takes does not apply unless it can be defended and justified. This was particularly the case for large water consent holders such as Watercare, Hamilton City and NZ Steel.

Projecting ahead to 2016/17, there will be an additional 3,000 consents since the $0.53 (for less than 30,000 m3/d) and $0.10 (for greater than 30,000 m3/d) rates were set in the LTP for 2015/16. Without changing the model but by reducing the charge rate to match the required budget for 2016/17 the total charge for each consent holder will reduce by approximately 20% from this year’s invoice. This is based on $0.44 for less than 30,000 m3/d and $0.12 for greater than 30,000 m3/d. The following is a summary of charges for a typical range of consents: m3/d Pre 2014/15 stepped

charge Current charge 2015/16 $0.53/0.1


50 $ 128.00 $ 26.50 $ 22.00 500 $ 203.00 $ 265.00 $ 220.00

1,000 $ 203.00 $ 530.00 $ 440.00 2,000 $ 737.00 $1,060.00 $ 880.00 5,000 $ 737.00 $2,650.00 $2,200.00 7,500 $ 737.00 $3,975.00 $3,300.00

10,000 $ 737.00 $5,300.00 $4,400.00 10,001 $11,841.00 $5,300.53 $4,400.44

4 Using $0.53 per cubic metre.

Under Status quo the largest water user’s charge has increased by ~160%. This is equivalent to an increase per consent of about ~$18,500 from 2014/15 to 2015/16. The largest 3 consents are held by Watercare and combined equate to an increase of ~$50,000. Summary of charges for largest users:

Existing charge model 2016/17 $0.44/0.12

Existing charge model 2015/16 $0.53/0.10

Step charge model 2014/15

Top 2 consents $ 61,200 $ 60,800 $ 23,682

% of total revenue 6% 5% 2%

% of consumptive allocation 12% 12% 12%

Top 6 consents $ 146,810 $ 151,742 $ 71,046

% of total revenue 13% 12% 6%

% of consumptive allocation 26% 26% 26%

Graph of consent charge for Status quo for 2015/16 (based on $0.53/$0.1) and 2016/17 (based on $0.44/$0.12) – right image is same data but at a finer scale for the size of most consents including those for irrigation. These show a reduction from 2015/16 to 2016/17. The following table summarises the benefits and limitations/impacts of this model as determined by Staff and Mr Phillips: Daily limit for setting charges Benefits Limitations/impacts Utilises most readily available and complete consent information – being daily volume. Nearly all consents have a daily limit specified in their consent certificates.

WRC costs associated with research and investigation are largely driven by summer allocation levels which are generally better represented by the daily volume than annual volume.

$‐

$5,000

$10,000

$15,000

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The more water taken based on the daily rate the more the consent holder is charged. Consents with extreme seasonality, e.g. only operate for a few days/weeks each year, can apply for a remission.

Daily volume does not differentiate between users that operate for specific periods (e.g. irrigation) of the year compared to all year takes (Domestic supply, industry).

Adjustment: Reduction for large water takes – e.g. >30,000 m3/d. Benefits Limitations/impacts WRC staff consider without an upper threshold change a purely proportional approach can be perceived as users paying for water rather than the associated monitoring, research and investigations. WRC cannot charge for water.

Viewed as only providing a benefit to the few very large users where they are not paying their share of the monitoring, investigation and research costs.

A different threshold or charge associated with the threshold could be used depending on the distribution of consents.

This option creates an incentive for large individual consent holders with multiple sites and consents to amalgamate to reduce their fees. Any system with a threshold can result in users trying to minimise their fee. Such changes may result in an increase in the m3 charge for all consent holders.

WRC staff consider the resulting charge for very large users is reasonable and can be related back in specific value terms to the cause and effect bases of s36(4) of the RMA.

2. Model 1: Status quo but with addition of minimum charge

This is similar to Status quo but with the addition of a minimum charge of $65. The two figures below shows model 1. There are nearly 3300 consents which are for less than 175 m3/d which would have a fixed fee of $65. These are represented by the flattening of the two lines in the right-hand figure below:

A consequence of this approach is the charge decreases from $0.44 to $0.37 for less than 30,000 m3/d and remains at $0.12 for greater than 30,000 m3/d. A minimum charge of $65 is applied to all consents less than 175 m3/d. This minimum charge, if implemented, would apply to 3,267 consent holders and provide $211,380 in charges compared to $78,325 under the status quo 2015/16. If the 2014/15 lowest step charge of $128 was applied to these 3267 small consent holders this would provide $416,256. For the majority of medium to large consents (see following table and figure), model 1: status quo but with a minimum charge, the charge is about 70% of those for 2015/16. Model 1 charges are about 84% of the current charges for 2016/17. The following is a summary of charges for a typical range of consents:


& min $65



$0.53/0.1


$0.44/0.12 50 $ 65.00 $ 128.00 $ 26.50 $ 22.00

500 $ 185.00 $ 203.00 $ 265.00 $ 220.00 1,000 $ 370.00 $ 203.00 $ 530.00 $ 440.00 2,000 $ 740.00 $ 737.00 $1,060.00 $ 880.00 5,000 $ 1,850.00 $ 737.00 $2,650.00 $2,200.00 7,500 $ 2,775.00 $ 737.00 $3,975.00 $3,300.00

10,000 $ 3,700.00 $ 737.00 $5,300.00 $4,400.00 10,001 $ 3,700.37 $11,841.00 $5,300.53 $4,400.44

0

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Consent limit m3/d

2014/15


0

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Consent limit m3/d

2014/15


For the large users there is little difference between the charge for the Status quo 2015/16,current charge 2016/17 and model 1 (status quo with minimum). Summary of charges for largest users:


& min $65


$0.44/0.12


$0.53/0.10

step charge 2014/15

Top 2 consents $ 57,000 $ 61,200 $ 60,800 $ 23,682



Top 6 consents $ 134,210 $ 146,810 $ 151,742 $ 71,046



The following table summarises the benefits and limitations/impacts of this model as determined by Staff and Mr Phillips: Daily limit for setting charges Benefits Limitations/impacts Utilises most readily available and complete consent information – being daily volume. Nearly all consents have a daily limit specified in their consent certificates.

WRC costs associated with research and investigation are largely driven by summer allocation levels which are generally better represented by the daily volume than annual volume.

The more water taken based on the daily rate the more the consent holder is charged. Consents with extreme seasonality, e.g. only operate for a few days/weeks each year, can

Daily volume does not differentiate between users that operate for specific periods (e.g. irrigation) of the year compared to all year takes (Domestic supply, industry).

‐

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

‐ 50,000 100,000 150,000

Consent Charge

Consent limit m3/d


2014/15



‐

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

500.00

‐ 200 400 600 800 1,000

Consent Charge

Consent limit m3/d


2014/15



apply for a remission. Adjustment: Reduction for large water takes – e.g. >30,000 m3/d. Benefits Limitations/impacts WRC staff consider without an upper threshold change a purely proportional approach can be perceived as users paying for water rather than the associated monitoring, research and investigations. WRC cannot charge for water.





Adjustment: Minimum base charge to all consents Benefits Limitations/impacts Can bring in a relatively large total of revenue while only adding a nominal additional cost to all consents.

A minimum base charge for consent holders with small takes is likely to be less than the charges levied in 2014/15 with the two lowest step charges being $128 and $203.

This amount though nominal can be very large in relation to the small size of the majority of water takes in the region. There are over 3000 new dairy shed consents for which this charge could apply. Introduction of a minimum fixed charge would result in a proportionately high increase for many consent holders from the charges they have received in 2015/16. The majority of those affected will be holders of new dairy shed consents, where the first charges they received were the minimal charges for 2015/16. The reason for the change would need to be carefully communicated to this sector. Consideration of a maximum % increase in charges has been requested – this may need to be considered for this group under this scenario.

Would reduce the charge required from the small number of larger water takes in the region.

May be viewed as a subsidy from the small users to the larger users.

A minimum base charge recognises that a proportion of the costs of monitoring are fixed, and so should be shared equitably across all consent holders.

The amount to charge could be subjective and not easily related back in specific value terms to the cause and effect bases of s36(4) of the RMA.

3. Model 2: Annualised with no reduction above 30,000 m3/d Consent charges are based on a proportion of the annual net take allocation limit, represented as an average daily value, and no reduction for large water takes. This in essence results in two separate charge regimes depending if a take is seasonal (e.g. irrigation) or if it can operate all year (others) – see following figure:

This charge is based on using the consented annual limit where available or a derived value where it is not. About 40% of the major consents do not have an annual limit specified in their consent and a value would need to be derived. The benefit of an annualised charge is that for consents operated for only part of the year the amount of water applied to their charge is reduced when calculated as a daily average take. For example, an irrigation take for 5,000 m3/d is assumed to operate for 140 days and gives an annual total of 700,000 m3/yr. When smoothed over the whole year (divided by 365 days) this is equivalent to 1,918 m3/d. It is this lesser value for which a charge is applied. In contrast a 5,000 m3/d consent for industry or domestic supply which does not have a limit is assumed to operate 365 days and the charge is based on 5,000 m3/d. A consequence of this approach, where some consents are reduced in size, is that the charge per cubic metre increases from $0.44 to $0.52 for less than 30,000 m3/d and $0.12 to $0.52 for greater than 30,000 m3/d. As shown by the summary table below this results in the irrigation consents being charged about a third of the charge of identically sized water takes (‘Irrigation consents’ compared with ‘Other consents’ in the following table). The charges for irrigation takes are about half that for status quo option for 2016/17 whereas for all other consents the charge is higher. The charge for the all Other consents is the same as for status quo current 2015/16 charges.

$‐

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

‐ 50,000 100,000 150,000

Consent Charge

Consent limit m3/d




m3/d Annualised no cap $0.52 Projected 2016/17 charges $0.44/0.12


consents Other

consents 50 $ 9.97 $ 26.00 $ 22.00 $ 26.50

500 $ 99.73 $ 260.00 $ 220.00 $ 265.00

1,000 $ 199.45 $ 520.00 $ 440.00 $ 530.00

2,000 $ 398.90 $1,040.00 $ 880.00 $1,060.00

5,000 $ 997.26 $2,600.00 $2,200.00 $2,650.00

7,500 $ 1,495.89 $3,900.00 $3,300.00 $3,975.00

10,000 $ 1,994.52 $5,200.00 $4,400.00 $5,300.00

Graph of consent charge for irrigation versus other water takes for 2016/17 and status quo for 2015/16 and 2016/17 – right image is same data but at a finer scale for the size of most consents including those for irrigation. The reduction in charge for irrigators is largely achieved by increasing the charge for consents greater than 30,000 m3/d and also increasing the charge for non-irrigation consents of similar size. This results in small number of very large consents paying a major portion of the total charges. This would result in Watercare paying $182,000 for two of its consents. The largest six consents (Watercare x4, Hamilton City and Huntly Power Station) would pay $386,878.

$‐

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

‐ 50,000 100,000 150,000

Consent Charge

Consent limit m3/d





$‐

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

‐ 2,000 4,000 6,000 8,000 10,000 12,000

Consent Charge

Consent limit m3/d






Annualised charge $0.52


$0.44/0.12


$0.53/0.10

step charge 2014/15

Top 2 consents $ 182,000 $ 61,200 $ 60,800 $ 23,682



Top 6 consents $ 386,878 $ 146,810 $ 151,742 $ 71,046



The following table summarises the benefits and limitations/impacts of this model as determined by Staff and Mr Phillips: Annualising water takes for setting limits Benefits Limitations/impacts Reduced the potential charge for consents which have a high daily limit but low annual limit. E.g. are only used for short periods during the year.

WRC costs associated with research and investigation are largely driven by summer allocation levels which are generally better represented by the daily volume than annual volume. The annual volume does not distribute charges evenly based on users who cause the need for majority of monitoring and investigations. Summer users even though they may operate for less than 120 days cause the greatest allocation pressure during the summer. Annual volume could be weighted depending on time of year of operation – greater weight on summer consents compared to all year round or winter takes.

Of the 1,053 consents 385 or 36.5% are for Irrigation/Frost protection where consent conditions may be able to be reviewed in order to set an annual limit for the purpose of these charges. There may be others that have similar constraints outside of irrigation that also need to be considered. All of the irrigation consents are recorded as such and very few do not have an annual limit and those that do not are seasonally limited to a number of days, or are in the process of renewal where limits are being applied

Incomplete data to action this. Up to 45% of all water take consents do not have a specified seasonal or annual limit. Any annual based charge for irrigation / frost protection consents would need to be inferred. Inferred rates would also need to be considered for other sectors where takes may not be exercised uniformly over the year. This may even apply to consents with an annual limit. Changing of consent condition would incur additional charges to the consent holder.

If not otherwise stated, takes for more than 183 days equivalent may be deemed to be annualised at the peak daily rate. Takes that have fewer than 183 days equivalent are annualised based on the actual availability

Where consent holders believe that they should have an annual limit of less than 183 days they can apply for a consent variation. Changing of consent condition would incur additional charges to the consent holder.

The ability to implement a charging structure such as this would require additional administration and may be difficult to convey to consent holders. Greater likelihood of WRC receiving a large number of remission requests to modify the annualised rate assessed by WRC. A buffer would need to be built in to deal with the cost of this process.

Annual volume on its own does not provide for the situation that much of the WRC costs associated with research and investigation are driven by summer allocation levels which are generally better represented by the daily volume.

4. Model 3: Annualised with reduction above 30,000 m3/d and increased weighting for summer takes

This model builds on the annualised model (model 2 where consent charges are based on a proportion of the annual net take allocation limit, represented as an average daily value) but attempts to address a number of the concerns raised by staff by including a lower charge for takes greater than 30,000 m3/d and increasing the charge for seasonal takes. As with model 2 this in essence results in two separate charge regimes depending if a take is seasonal (e.g. irrigation) or if it can operate all year (others) – see following figure.

The seasonal takes (primarily for irrigation) are calculated as for Model 1 but with a lower charge for above 30,000 m3/d and a scaling factor for seasonal takes. The seasonal factor

$‐

$10,000.00

$20,000.00

$30,000.00

$40,000.00

$50,000.00

$60,000.00

‐ 50,000 100,000 150,000

Consent Charge

Consent limit m3/d



increases the charge from around 38%5 of an equivalent consent to 57%6 of an equivalent consent. For example, a consent for 5,000 m3/d when annualised (as per model 1) is 1,918 m3/d but with an adjustment is increased to 2,877 m3/d.7 A consequence of this model, compared to status quo, is the charge increases from $0.44 to $0.57 for less than 30,000 m3/d and $0.12 to $0.285 for greater than 30,000 m3/d. As shown by the summary table below, this results in the irrigation consents being charged about 60 per cent of the charge of identically sized water takes. The charges for irrigation takes are about 75% of that for status quo option whereas for all other consents it is more expensive. The following is a summary of charges for a typical range of irrigation consents:

m3/d Annualised $0.57/$0.285 factor 1.5 Projected 2016/17 charges $0.44/0.12


consents Other

consents 50 $ 16.40 $ 28.50 $ 22.00 $ 26.50

500 $ 163.97 $ 285.00 $ 220.00 $ 265.00

1,000 $ 327.95 $ 570.00 $ 440.00 $ 530.00

2,000 $ 655.89 $1,140.00 $ 880.00 $1,060.00

5,000 $ 1,639.73 $2,850.00 $2,200.00 $2,650.00

7,500 $ 2,459.59 $4,275.00 $3,300.00 $3,975.00

10,000 $ 3,279.45 $5,700.00 $4,400.00 $5,300.00

Graph of consent charge for irrigation versus other water takes for 2016/17 and status quo for 2015/16 and 2016/17 – right image is same data but at a finer scale for the size of most consents including those for irrigation. This model still results in small number of very large consents paying a major portion of the total charges. This would result in Watercare paying $117,000 for two of its consents. The largest six consents (Watercare x4, Hamilton City and Huntly Power Station) would pay $263,175.

5 Assuming 140 days operation for an irrigation consent, 140/365 days = 38%. Where year round consents operate for 365

days. 6 Assuming 140 days operation for an irrigation consent. 140 days * 1.5 scaling factor gives 210 days. 210/365 days = 57%. 7 Adjustment factor consider appropriate by Mr Phillips was 1.5.

$‐

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

‐ 50,000 100,000 150,000

Consent Charge

Consent limit m3/d





$‐

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

‐ 2,000 4,000 6,000 8,000 10,000 12,000

Consent Charge

Consent limit m3/d






Annualised charge $0.57/0.285 and

summer factor of 1.5


$0.44/0.12


$0.53/0.10

step charge 2014/15

Top 2 consents $ 116,850 $ 61,200 $ 60,800 $ 23,682



Top 6 consents $ 263,175 $ 146,810 $ 151,742 $ 71,046




WRC costs associated with research and investigation are largely driven by summer allocation levels which are generally better represented by the daily volume than annual volume. The annual volume does not distribute charges evenly based on users who cause the need for majority of monitoring and investigations. Summer users even though they may operate for less than 120 days cause the greatest allocation pressure during the summer. Annual volume could be weighted depending on time of year of operation – greater weight on summer consents compared to all year round or winter takes.

Of the 1,053 consents 385 or 36.5% are for Irrigation/Frost protection where consent conditions may be able to be reviewed in order to set an annual limit for the purpose of these charges. There may be others that have similar constraints outside of irrigation that also need to be considered.


If not otherwise stated, takes for more than 183 days equivalent may be deemed to be annualised at the peak daily rate. Takes that have fewer than 183 days equivalent are

Where consent holders believe that they should have an annual limit of less than 183 days they can apply for a consent variation.

annualised based on the actual availability Changing of consent condition would incur additional charges to the consent holder. The ability to implement a charging structure such as this would require additional administration and may be difficult to convey to consent holders. Greater likelihood of WRC receiving a large number of remission requests to modify the annualised rate assessed by WRC. A buffer would need to be built in to deal with the cost of this process.







Adjustment: weighting factor for increasing charge to summer seasonal takes Benefits Limitations/impacts Distributes the charge in a more similar way for both seasonal and all year round consents.

No guidance available on what is a suitable factor. Staff consider a high factor should be used as seasonal takes occur at the critical time of year. This therefore reduces the benefits identified by the irrigators for using the annualised approach.

5. Model 4: Annualised with reduction above 30,000 m3/d, increased weighting for summer takes and minimum charge

This is similar to Model 3, but with the inclusion of a minimum charge. The two figures below show model 3. There are nearly 3300 consents which are for less than 200 m3/d which would have a fixed fee of $65. These are represented by the flattening of the two lines in the right-hand figure below. As with models 2 and 3 this in essence results in two separate charge regimes depending if a take is seasonal (e.g. irrigation) or if it can operate all year (others).

A consequence of this approach is the charge increases from $0.44 to $0.50 for less than 30,000 m3/d and $0.12 to $0.25 for greater than 30,000 m3/d. A minimum charge of $65 is applied to all consents less than 130 m3/d. This minimum charge, if implemented, would apply to 3,267 consent holders and provide $212,355 in charges (~20% of the total charges) compared to $78,325 under the status quo. As shown by the summary table below, this results in the irrigation consents being charged about 57 per cent of the charge of identically sized water takes. The charges for irrigation takes are about 65% of that for status quo 2016/17 whereas for all other consents the charges are about 10% higher than the status quo 2016/17 and similar to the current 2015/16 charges. The offset in charge for the 95 most impacted irrigation consent holders, with greater than $1,000 increase in 2015/16 charge, is largely provided by increasing the charge via a flat fee for 3,267 small users primarily for dairy shed water. The following is a summary of charges for a typical range of irrigation consents:

m3/d Annualised $0.50/$0.25 factor 1.5

and min $65 Projected 2016/17 charges $0.44/0.12


consents Other

consents 50 $ 65.00 $ 65.00 $ 22.00 $ 26.50

500 $ 143.84 $ 250.00 $ 220.00 $ 265.00

1,000 $ 287.67 $ 500.00 $ 440.00 $ 530.00

$‐

$5,000.00

$10,000.00

$15,000.00

$20,000.00

$25,000.00

$30,000.00

$35,000.00

$40,000.00

$45,000.00

$50,000.00

‐ 50,000 100,000 150,000

Consent Charge

Consent limit m3/d



$‐

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

$450.00

$500.00

‐ 200 400 600 800 1,000

Consent Charge

Consent limit m3/d



2,000 $ 575.34 $1,000.00 $ 880.00 $1,060.00

5,000 $ 1,438.36 $2,500.00 $2,200.00 $2,650.00

7,500 $ 2,157.53 $3,750.00 $3,300.00 $3,975.00

10,000 $ 2,876.71 $5,000.00 $4,400.00 $5,300.00

Graph of consent charge for irrigation versus other water takes for 2016/17 and status quo for 2015/16 and 2016/17 – right image is same data but at a finer scale for the size of most consents including those for irrigation. This model still results in small number of very large consents paying a large portion of the total charges. This would result in Watercare paying $102,500 for two of its consents. The largest six consents (Watercare x4, Hamilton City and Huntly Power Station) would pay $230,999. Summary of charges for largest users:

Annualised charge $0.50/0.25, summer factor 1.5 & min $65


$0.44/0.12


$0.53/0.10

step charge 2014/15

Top 2 consents $ 102,500 $ 61,200 $ 60,800 $ 23,682



Top 6 consents $ 230,999 $ 146,810 $ 151,742 $ 71,046




WRC costs associated with research and investigation are largely driven by summer allocation levels which are generally better represented by the daily volume than annual

$‐

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

‐ 50,000 100,000 150,000

Consent Charge

Consent limit m3/d





$‐

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

‐ 2,000 4,000 6,000 8,000 10,000 12,000

Consent Charge

Consent limit m3/d





volume. The annual volume does not distribute charges evenly based on users who cause the need for majority of monitoring and investigations. Summer users even though they may operate for less than 120 days cause the greatest allocation pressure during the summer. Annual volume could be weighted depending on time of year of operation – greater weight on summer consents compared to all year round or winter takes.

Of the 1,053 consents 385 or 36.5% are for Irrigation/Frost protection where consent conditions may be able to be reviewed in order to set an annual limit for the purpose of these charges. There may be others that have similar constraints outside of irrigation that also need to be considered.


If not otherwise stated, takes for more than 183 days equivalent may be deemed to be annualised at the peak daily rate. Takes that have fewer than 183 days equivalent are annualised based on the actual availability

Where consent holders believe that they should have an annual limit of less than 183 days they can apply for a consent variation. Changing of consent condition would incur additional charges to the consent holder. The ability to implement a charging structure such as this would require additional administration and may be difficult to convey to consent holders. Greater likelihood of WRC receiving a large number of remission requests to modify the annualised rate assessed by WRC. A buffer would need to be built in to deal with the cost of this process.


Adjustment: Reduction for large water takes – e.g. >30,000 m3/d. Benefits Limitations/impacts WRC staff consider without an upper threshold change a purely proportional

Viewed as only providing a benefit to the few very large users where they are not paying

approach can be perceived as users paying for water rather than the associated monitoring, research and investigations. WRC cannot charge for water.

their share of the monitoring, investigation and research costs.




Adjustment: weighting factor for increasing charge to summer seasonal takes Benefits Limitations/impacts Distributes the charge in a more similar way for both seasonal and all year round consents.

No guidance available on what is a suitable factor. Staff consider a high factor should be used as seasonal takes occur at the critical time of year. This therefore reduces the benefits identified by the irrigators for using the annualised approach.

Adjustment: Minimum base charge to all consents Benefits Limitations/impacts Can bring in a relatively large total of revenue while only adding a nominal additional cost to all consents.

A minimum base charge for consent holders with small takes is likely to be less than the charges levied in 2014/15 with the two lowest step chares being $128 and $203.

This amount though nominal can be very large in relation to the small size of the majority of water takes in the region. There are over 3000 new dairy shed consents for which this charge could apply. Introduction of a minimum fixed charge would result in a proportionately high increase for many consent holders from the charges they have received in 2015/16. The majority of those affected will be holders of new dairy shed consents, where the first charges they received were the minimal charges for 2015/16. The reason for the change would need to be carefully communicated to this sector. Consideration of a maximum % increase in charges has been requested – this may need to be considered for this group under this scenario.

Would reduce the charge required from the small number of larger water takes in the region.

May be viewed as a subsidy from the small users to the larger users.

A minimum base charge recognises that a proportion of the costs of monitoring are fixed, and so should be shared equitably across all consent holders.

The amount to charge could be subjective and not easily related back in specific value terms to the cause and effect bases of s36(4) of the RMA.

6. Model 5: Annualised gross takes with reduction above 30,000 m3/d

The approach for the gross takes generally assumes all takes except for flood purposes are treated as consumptive. This approach ignores consents where water is returned after use via discharges as defined in the Waikato Regional Plan. A consequence of this approach is the charge decreases from $0.44 to $0.27 for less than 30,000 m3/d and $0.12 to $0.27 for greater than 30,000 m3/d. Two additional charges are applied 1) takes for hydro power are charged $0.01 per m3, and 2) takes for industrial cooling are charged $0.02 per m3. This apportioning of charges to non-consumptive takes reduces the charge for the majority of consumptive consents, both irrigation and others. See the following table where the irrigation consents are charged a quarter of the current charges (2016/17) and other consents just over half of the current charges (2016/17). The following is a summary of charges for a typical range of irrigation consents:

m3/d Gross 0.27 Projected 2016/17 charges $0.44/0.12


consents Other

consents 50 $ 5.18 $ 13.50 $ 22.00 $ 26.50

500 $ 51.78 $ 135.00 $ 220.00 $ 265.00

1,000 $ 103.56 $ 270.00 $ 440.00 $ 530.00

2,000 $ 207.12 $ 540.00 $ 880.00 $1,060.00

5,000 $ 517.81 $1,350.00 $2,200.00 $2,650.00

7,500 $ 776.71 $2,025.00 $3,300.00 $3,975.00

10,000 $ 1,035.62 $2,700.00 $4,400.00 $5,300.00

Graph of consent charge for irrigation versus other water takes for 2016/17 and status quo for 2015/16 and 2016/17 – left image has extended horizontal axis to include MRP non-consumptive take, right image is same data but with finer scale for the size of most consents including those for irrigation. The two largest non-consumptive consents by Mighty River Power and Genesis Energy (for the Tongariro Power Scheme) would receive a charge of $292,896. This is a quarter of the total budget billed to just two non-consumptive consent holders. The six largest consent holders (Genesis x2, MRP, and Watercare x3)8 are charged $489,804 which is nearly half of the total charge – see following table. Summary of charges for largest users:

Gross 2016/17


$0.44/0.12


$0.53/0.10

step charge 2014/15

Top 2 consents $ 292,896 $ 61,200 $ 60,800 $ 23,682



Top 6 consents $ 489,804 $ 146,810 $ 151,742 $ 71,046



In this model Mr Phillips considers that the Mighty River Power dam consent which includes the diversion of the entire Waikato River’s flow should be included as part of the surface water charges. MRP does not have a surface water consent for the Waikato Hydro Scheme. If the gross method is adopted there would need to be a consequential change to the dam charges specifically listed for the Waikato Hydro Scheme. In the model presented MRP’s consent has been modelled as if it was a surface water consent equivalent to a consumptive take of 17,280,000 m3/d.

8 Watercare also have the seventh largest take.

$‐

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

‐ 5,000,000 10,000,000 15,000,000

Consent Charge

Consent limit m3/d

Gross

Gross (irrigation)



$‐

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

‐ 2,000 4,000 6,000 8,000 10,000 12,000

Consent Charge

Consent limit m3/d

Gross

Gross (irrigation)



Annual gross take allocation limit Benefits Limitations/impacts Hydro generation is benefiting from the water and is effectively limiting the availability of water to the rest of the community.

High likelihood of legal challenge by those receiving a large charge for a non-consumptive activity. Staff consider they could not defend non-consumptive takes being charged considerable more than consumptive takes.

WRC costs associated with research and investigation are largely driven by summer consumptive allocation levels which are generally better represented by daily net take values.






Doc # 3707749

Appendix 3

Report to Council December 2015 – Decision Required

File No: 56 10 05B

Date: 3 December 2015

To: Chief Executive Officer

From: Director, Science and Strategy

Subject: Annual charges for 2015/16 water take consents

1 Purpose The purpose of this report is to present concerns raised by some consent holders regarding the increase in their 2015/16 Annual charges for water takes and options for Council to consider to address the issues raised. Recommendation:

1. That the report ‘Annual charges for 2015/16 water take consents’ (Doc # 3632744 dated 3 December 2015) be received, and

2. That council confirm that either:

a) all water take annual consent charges should be invoiced according to the fees and charges schedule as outlined in the Long Term Plan 2015-2025 and advise the 212 consent holders previously written to that an extended/deferred payment date of 20 October 2016 be available for payment of the 2015/16 consent charges, or

b) full or part remission (to be determined) be provided to water take consent holders who had existing consents in 2014/15 and new invoices issued.

2 Background Council changed the charging regime for information gathering activities for water takes in the 2015-2025 Long Term Plan (LTP) so that it was based on an amount corresponding to maximum daily water take rate. The information gathering component of the annual charge funds a portion of the Science and Strategy Directorate’s activities (refer section 3). Most consent holders with water takes in 2014/15 have received a reduction in their charge from the new policy but a smaller proportion xx consent holders (about 25%) had significantly higher charges. This impact was anticipated in the LTP decision. Some of these consent holders adversely affected by the new charges, particularly irrigators, have contacted council and expressed concern at the new charges.

Doc # 3707749

The following table lists the 20 consent holders with the largest $ increase as a result of the changed policy. Many of the consent holders have more than one consent and the increases shown are the total increase across all the consents. For example Watercare has three separate consents with a combined increase $55,708. Consent holder 2014/15 charge 2015/16 charge Increase Watercare Services Ltd 24,002 79,710 55,708Wairakei Pastoral Ltd 110,064 151,582 41,517Waikato North Head Mining Ltd 21,226 33,656 12,430AS Wilcox and Sons Ltd 4,727 13,873 9,146Solid Energy New Zealand Ltd 9,980 18,819 8,839Genesis Energy Ltd 13,149 21,988 8,839Taupo District Council 20,139 28,933 8,795New Zealand Steel Mining Ltd 25,295 33,994 8,699Balle Bros Growers Ltd 11,742 20,088 8,346DR & CJ Brown 1,436 8,385 6,949Hauraki District Council 18,512 25,058 6,546Matamata-Piako District Council 6,677 12,950 6,273Hamilton City Council 26,164 31,919 5,755Waikato District Council 5,707 11,195 5,488New Zealand Steel Ltd 12,001 17,030 5,029Thames-Coromandel District Council 8,039 13,003 4,964Trinity Lands Ltd 2,918 7,376 4,459Hill Family Trusts Partnership 1,148 5,602 4,454Rangatira 8A17 Trust 574 4,900 4,326Okuhau Farm Partnership 574 4,900 4,326TOTAL 324,073 544,962 220,890 Staff wrote to 212 affected consent holders advising them their issues would be raised with councillors at the 15 December 2015 council meeting so that councillors could decide how they wished to deal with the matters raised. The issues raised by irrigators were discussed with councillors recently at the Draft Annual Plan workshop held on 2 December 2015.

15 4 10

149

526

68 55 7746

70 70

6 3

Change in information gathering charge ‐ 2015/16

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3 Activities funded by the information gathering charge The information gathering charge funds up to 40% of science water quantity investigation and monitoring activities, including installation and monitoring of water levels in stream for allocation, water shortage directions, ground water and aquifer investigations, understanding impacts of users on the region’s water resources etc.. The remaining 60% is funded by General rate. The overall funding of these activities was determined based on the detailed review of charging undertaken through the 2012 LTP. At this time, each project was assessed to determine the benefit / causation across resource user groups:

Consented resource users Permitted activity resource users The general public

The outcome from this review was to determine the share of costs that should be funded by consented resource users, with the remaining share funded through the general rate. The funding shares for each project vary, depending on the assessment of benefit / causation relating to the specific work delivered by individual projects. The summary of the funding of the key projects that receive funding through the state of the environment monitoring charge is presented below: Project 2015/16 budgeted

expenditure Funded by

Fees and charges General rate D1003 – Water allocation plan implementation

616,980 65% 35%

D1005- Hydrological Regimes (low flow/flood)

288,173 28% 72%

S1003 Pressure Analysis

203,465 85% 15%

D1202 – EM Flow Regimes SW and GW

1,051,024 40% 60%

A description of the key projects funded, and the work that is delivered is presented in this section. D1003 – Water Allocation Plan Implementation This work stream provides current information and decision-making tools supporting water allocation to deal with the increasing level of demand or competition for water. The management of water demand and use requires: 1) a robust understanding and monitoring of how much water is available under various environmental conditions, and 2) effective tools to allocate water. D1003 addresses the second point and works in connection with D1005 (Hydrological Regimes) Work stream. D1003 sets sustainable yields for aquifer and flow limits for streams and rivers to manage surface water quantity. Groundwater models are developed and used to set sustainable yields at catchment level. Minimum and allocable flows are now assessed to identify how much can be removed for allocation. Surface and groundwater allocation calculators are developed and maintained to assist the water allocation process and prioritisation. Recent investigations and research include:

Development of water allocation accounting system as required by Waikato Regional Plan and National Policy Statement on Freshwater Management 2014.

Provision of hydrology and water allocation data to LAWA and MfE for official reporting.

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Review of river flow statistics. Recent work has substantially increased the amount of water available in the Piako catchment.

Development of irrigation water demand guidelines in conjunction with commercial vegetable growers, farmers and associated industries – used in the processing of all irrigation consents.

Investigation of groundwater limits in the Pukekawa and Pukekohe volcanic aquifers – highly utilised by horticulture irrigation.

Investigation of groundwater limits in Hauraki Plains aquifers – highly utilised by Agriculture and horticulture irrigation.

Investigation of surface water limits; Lower Waikato tributaries, Coromandel streams, Piako and Waihou rivers.

Information is included as allocation limits in the regional plan, reported on WRC website in the form web-based calculators and water allocation tool, verbal presentations, technical reports, guidelines and indicators for consent holders, consent officers and the public. Total D1003 revenue is $617,000 of which 65% are from consent charges. Staff labour excluding indirect costs – Investigations and research are in the order of $192,000 per annum. Direct costs - Investigations and research are in the order of $200,000 per annum D1005- Hydrological Regimes (low flow/flood) This Work stream identifies and characterises surface and groundwater responses to changes of climate, land use and water use to ensure flow regimes are maintained or enhanced. The management of water demand and use requires :

1) a robust understanding and monitoring of how much water is available under various environmental conditions and

2) effective tools to allocate water.

D1005 addresses the first point and work in connection with D1003 (Water Allocation) Work stream.

D1005 focuses on surface and groundwater interactions. Water levels and streams are analysed to understand why and how rivers respond to extreme events such as flood or drought. A better understanding is gained on why and how rivers respond to climate variability and change. Early warning signals for drought events are being developed to assist drought-response planning process. Information is reported on WRC website in the form of verbal presentations, technical reports, guidelines, indicators and web-based calculators and water allocation tool. Recent investigations and research include:

Annual flow data to internal and external users; Annual analysis and report on significant changes in GW level; Annual analysis and report on significant changes in SW level; Investigation on surface-groundwater interaction in the Reporoa area to better understand

stream depletion effect from major water takes consents; Development of in-flow model to assess optimum level for Lakes Whangape and Waahi; Revision of Upper Waikato 3D geological model to better understand transfer of water and

nutrients; and Development of adverse event (drought) assessment criteria that provide more certainty

during dry periods. Total D1005 revenue is $208,000 of which 28% is funded by consent charges. This percentage is lower than for D1003 and D1202. This is because the reasons as to “why we need to do the work’ and “who benefits from it?” have a higher public -user component than private users when the apportionment of the cost was assessed. Labour excluding indirect costs – Investigations and research are in the order of $54,000 per annum. Direct costs - Investigations and research in the

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order of $150,000 in 2015-16 only. This includes $115,000 of additional funding allocated to the Fresh Water Quantity Network Review in the LTP 2015-25. S1003 Pressure Analysis This Work stream focuses on the maintenance and update of IRIS and WISKI databases which store water use data, consent information and hydrology data used for managing the allocation of freshwater. It also coordinates the storage of data in each respective database and provides the ability to merge this data for internal and external reporting purposes.

Recent Investigations include: Stream lined process for receiving water use data with minimal Council required manual

data entry. Collection and analysis of real-time data contributes to effective and efficient allocation of

water resources by providing the following: o Water use reporting by individual consents – accounts for 75% of all consented

water o Where water is available for transfer or redistribution o Water use compared to consent conditions and limits.

Automated analysis of water use compared to consent limits including during restrictions. Readily available measures of data accuracy (QA/QC) Web based reporting of water use trends and availability. IRIS and WISKI maintained with information which supports reporting on RMA s360

Regulations.

Total S1003 revenue is $203,000 charged as a flat fee. Staff labour excluding indirect costs – Investigations and research are in the order of $80,000 per annum. Direct costs - Investigations and research are in the order of $3,000 per annum D1202 – EM Flow Regimes SW and GW Data is collected, quality assured, analysed and managed to provide a region-wide picture of historical and current water flow. WRC maintains River flow monitoring at 68 locations. The cost attributed towards water allocation is in the order of $300,000 per annum. These sites are used by consent holder to trigger when they can and cannot take water, and to determine if water can be allocated or not to new applicants. This use of the flow recorder sites for water allocation purposes has required a considerable increase in time or effort ensuring the data are accurate and readily available for consent holders. WRC also maintains Groundwater level monitoring at 242 locations in the order of $60,000 per annum. Total D1202 revenue is $1,050,000 of which 40% are from consent charges. Staff labour excluding indirect costs – Monitoring are in the order of $360,000 per annum. Direct cost - Monitoring are in the order of $210,000 per annum

4 Issues raised by consent holders The issues raised by water take consent holders that have contacted council with concerns are summarised as follows:

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1. Inadequate direct consultation during development of the Long Term Plan and notification of final decisions, meaning the invoices with higher charges came as a surprise to consent holders.

2. Concern by some about volumetric charging in general. 3. Concern that capping the charge rate of 53 cents/m3/day at 30 000 m3/day and then

decreasing to 10 cents/m3/day thereafter is unfair and effectively means smaller water take consent holders subsidise larger water users.

4. Daily volumetric charges don’t reflect total amounts taken annually and an annual basis for charging water takes better reflects impacts on the resource and would be a fairer way of charging.

5. Actual use is not reflected by allocated use. 6. There are specific issues relating to use of water that need to be taken into account. There have been specific requests to council that consent holders who held consents in 2014/15 should not have to pay the new charges and, instead, pay a similar quantum to the previous year. It has also been requested that a fees and charges policy is re-consulted with consent holders during the 2016/17 Draft Annual Plan process. A few consent holders have indicated they will not pay the current invoice. There have also been requests by a few consent holders that their issues be put before council at the 15 December meeting and these are attached to this report. Staff are meeting representatives from the Irrigators group on Monday December 14 and will update Councillors on those discussions at the Council meeting.

5 Discussion Discussion of the issues with council at the Draft Annual Plan workshop on 2 December 2015 indicated there are advantages and disadvantages with different charging mechanisms that will favour or adversely affect different consent holders. Information on impacts to existing consent holders had been raised with council during the 2015-2025 LTP deliberations and retrospective changes to the current year’s schedule of fees and charges is not possible. The total number of existing consent holders estimated to be affected by the charges (~250) is similar to those predicted in the LTP discussions, with 212 consent holders receiving an invoice for water take consents greater than $50 over the previous year. The following commentary responds to the concerns raised by consent holders: Concern by some about volumetric charging in general. Council has used a volumetric approach since 2012 in an attempt to have a fairer charging structure. Volumetric charging matches with the principle that our monitoring programme addresses the cumulative effects of resource use, and that intensity of resource use is a key driver of costs. In general the more water you take the closer we get to the allocation limits. The closer we are to the allocation limits the more work council needs to do as there is greater stress on the resource. The current LTP continues using the volumetric approach but with a per-unit of water charge compared to four broad per-unit of water categories. Prior to 2012, charges were volumetric but without explicit direct reference to volume specified in the LTP. Until now the volumetric approach has not been an identified as an issue based on the feedback while addressing remissions.

Concern that capping the charge rate of 53 cents/m3/day at 30 000 m3/day and then decreasing to 10 cents/m3/day thereafter is unfair and means smaller water take consent holders subsidise larger water users. The current charges remedy the situation where small users were previously significantly subsidising large users. Under the 2012 LTP charges, small user paid at least $100 whereas large users paid at the most $11,400. Under the current charges over half the consent holders pay substantially less than $100 and the large users pay up to $28,000. Staff consider that without apply a decreasing rate above 30,000 m3/day Council will not be meeting the requirements of s36(b) of the RMA where the “actions to which the charge relates is occasioned by the actions of

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those persons”. That is it would be difficult to justify that nearly all of the monitoring and investigations that are a occurring are as a direct result of the taking of water by the few very large users above 30,000 m3/day.

Daily volumetric charges don’t reflect total amounts taken annually and an annual basis for charging water takes better reflects impacts on the resource and would be a fairer way of charging. Staff consider annual based charges do not better reflect the impacts of the consented activities on the resource. All catchments in the Waikato region are under greatest allocation pressure during the summer months. The daily consented take rate better reflects the peak allocation demand that necessitates the summer time focussed monitoring, investigations and research undertaken by WRC. The daily based charge is also more likely to be included in water take consent conditions whereas many water takes, including irrigation, do not have an annual or seasonal limit as a condition. This is being rectified when these consents are renewed, but will not be complete across all consents for at least another 5 years. If annual charges were used these would need additional factors applied to take account of consents which operate more during summer. Further weighting could also be applied to consents from highly and over allocated catchments as these catchments require more WRC input compared to low stress catchments.

Actual use is not reflected by allocated use. This is correct. Actual use can be substantially less, especially during wetter summers. Funding based on actual use would result in considerable variation from year to year in charges received. Individual consent holders with have little certainty of what they would be charged each year as it would depend on how much water they used and also how much water all the other consent holder used.

6 Current remission policy Remission may be applied where:

There is a mistake with the information used in setting the charge, e.g. incorrect rate of water allocated.

The take is non-consumptive. This is now addressed in the current charges with a subcategory for non-consumptive takes.

The consent holder is providing a significant level of monitoring of stream flows. A partial remission may be considered in this situation.

The new charges are intended to minimise the number of remissions compared to prior years. To ensure consistency in the remission process a sub-group of staff including Janine Becker, Edmund Brown and Dominique Noiton will meet to discuss the reasons a remission might be given. Some of the issues raised in the recent letters may be addressed through the remissions process, e.g. Matthew and David Dean case (related to Attachment 3) where a remission has been applied for this year’s charges as the activity only takes water via harvesting (only at high flows) and the pumping equipment has not been installed.

7 Options to address the concerns raised The options identified by staff in light of the concerns raised by some consent holders are:

Retain the current charges, but allow an extended period over which payment may be made

Remit all or a portion of the increased charges. The basis (and amount) of this remission would need to be determined. Remission is also complicated by the fact that it is difficult to compare year on charges with some existing consent holders. For example, some existing

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consent holders have surrendered or received new consents during the past year, or had consents for only part of the past or current year.

Any remission of charges would affect the revenue of Science and Strategy and current work programmes of the directorate. Council would need to consider how to offset or mitigate this impact if they choose a remission option. The full remission of increased water charges would equate to $437,000 (excluding GST).If this was applied then the impact of the 20 largest increases would be $220,890 (refer table above of 20 largest $ increases). If the Council choose to remit all or part of the increased charges it could do so on the basis that the impacted parties were unaware of the financial impact in this financial year. In doing this, Council could consider to exclude those organisations who would reasonably have been expected to have known of the proposed changes. This would include local authorities, CCOs and organisations who submitted to the LTP. If required, this will be quantified at the council meeting.

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Appendix 4

Letter from Mr Philips – Irrigators’ Position 19 Feb 2016

Agricultural Business Associates PO Box 14 107 Hamilton 3252

Phone 07 838 0477 Fax 07 838 0476

19 February 2016 Ed Brown and Mike Garrett Waikato Regional Council Dear Ed and Mike,

Re the proposed consent holder charges As we discussed, there does not appear to be any strong, quantifiable, relationship between consented volume take and the direct costs associated with environmental monitoring and research. Having said that, the irrigators accept that making a direct contribution, related to water availability, is not unreasonable. This is to arrive at a 40% user contribution to support the 60% ratepayer contribution to this programme. To quote the resolution contained in the LTP Our decision To combine our charging for groundwater and surface water, and move to a more graduated charging mechanism which matches with the volume of take permitted under each resource consent. From an irrigators perspective any contribution must recognise that irrigation consents are not directly comparable with other consents that provide for year round supply, that meet the total potential demand of the consent holder and are essentially not subject to likely shutdown. For that not to be recognised would in my view be inequitable. This means that any supported option must annualise the consent daily take values to arrive at the correct volume of take permitted under each resource consent. This means that an irrigation take and any other take restricted in days of availability would pay less than a standard consent with the same daily take volume, but would pay the same as another standard take with the same annualised volume. For example an irrigation take of 122 days availability and 6000m3/day has an annualised take of 200m3/day and would pay the same rate as a 2000m3/day consent with 365 days availability.

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We recognise that the greatest pressure on monitoring is in the summer and that a weighting factor could be appropriate. What that means is that year round consents are effectively getting a discount on their non summer water. It is important to accept that this levy on consent holders is to meet 40% of the total programme irrespective of the peaks and troughs of the workload within the year. Weighting factors be they positive or negative as with the takes above 30,000m3/day have to be moderate and handled with care. On this basis we come from a start point

1. that the consents should be annualised 2. That adjustment factors may be applied to consents to recognise high volumes and

low volumes but that adjustments should be fine tuning rather than blunt instruments For example it is my perception that if an adjustment to the basic model is a factor greater than 50%, then the basic model premise is not appropriate.

This should also apply to the top end of the scale with the super large consents because if the super large consents are paying a reduced rate, then that funding is by default, loaded onto the smaller consent holders. From the Irrigation consent holder group perspective, this too is regarded as inequitable. For these reasons the status quo is not supported. Given the alternative options modelled The simplest model is Model 2 which is a straight annualised approach across all consents with no cap and while this appears the most equitable, you believe that it would be hard to justify to the large users under section 36(4)(b). It needs to be recognised that all of the irrigation takes have a lower daily take rate than the current 30,000m3 cap. So the cap only applies to consents held by Hamilton City, Genesis Energy, New Zealand Steel and Water Care. Water Care makes a near zero contribution to the 60% from the general rate. Model 4 recognises that a summer use factor on irrigation consents recognises that summer is the period when monitoring intensity is greatest. What the final factor value between 0 and 50% would need to be worked through. Model 5 is believed to have the potential to be the most equitable model but has some major hurdles to be overcome and may not be able to be achieved in the medium term. It is likely to be vigorously contested by the largest water users unless it can be done by negotiation rather than through the traditional submission and legal process. As a consequence Model 4 is deemed to be the most appropriate but I am not able to meet with the irrigators to discuss the implications until the 26th February. Yours sincerely Fred Phillips Natural Resource Engineer

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