Clause 10 provides for the establishment of a water services entity for each of the 4 service areas described in Parts 1 to 4 of Schedule 2.

Clause 11 sets out the objectives of the water services entities. These include—

• delivering water services and related infrastructure in an efficient and financially sustainable manner:

• protecting and promoting public health and the environment:

• supporting and enabling housing and urban development:

• operating in accordance with best commercial and business practices:

• giving effect to Te Mana o te Wai to the extent that it applies to the duties and functions of the entity:

• delivering water services in a sustainable and resilient manner that seeks to mitigate the effects of climate change and natural hazards.

Clause 12 sets out the functions of the water services entities. The general function of each water services entity is to provide safe, reliable, and efficient water services in its service area. The specific functions of the water services entities will be set out in a subsequent Bill.

Clause 13 sets out the operating principles of the water services entities. The operating principles of a water services entity are as follows:

• developing and sharing capability and technical expertise with other water services entities and across the water services sector:

• being innovative in the design and delivery of water services and infrastructure:

• being open and transparent, including in relation to calculation and setting of prices, determining levels of service delivery to consumers and communities, and reporting on performance:

• partnering and engaging early and meaningfully with Māori, including to inform how the water services entity can give effect to Te Mana o te Wai, and understand, support and enable the exercise of mātauranga, tikanga, and kaitiakitanga:

• giving effect to Treaty settlement obligations to the extent that the obligations apply to the duties and functions of an entity:

• partnering and engaging early and meaningfully with territorial authorities and their communities:

• co-operating with, and supporting, other water services entities, infrastructure providers, local authorities, and the transport sector.

Clause 14 requires a water services entity to provide—

• funding to its regional representative group and a regional advisory panel for that group or, as the case requires, to its territorial authority owners and to mana whenua, for remuneration, expenses, or costs, in accordance with clause 114(1); and

• information to its regional representative group, or a regional advisory panel for that group, in accordance with clause 114(2).

Clauses 15 to 19 set out the status of water services entities and their core powers. In summary,—

• a water services entity is a body corporate (a separate legal entity):

• a water services entity may do anything authorised by legislation. It also may do anything that a natural person of full age and capacity may do (for example, enter into contracts). However, the entity may act only for the purpose of performing its functions.

Clause 15 also provides that a water services entity is co-owned by the territorial authorities in its service area, and in shares allocated and reallocated under clause 16, but that it is not a company for the purposes of the Companies Act 1993, or a council organisation, council-controlled organisation, or local government organisation for the purposes of the Local Government Act 2002. Clause 166 also provides that territorial authority owners do not have any beneficial entitlement to, or beneficial interest in, the security of a water services entity.

Clauses 27 and 28 provide for—

• the establishment of a regional representative group for each water services entity:

• the regional representative group to consist of no fewer than 12, and no more than 14, regional representatives, and an equal number of territorial authority representatives and mana whenua representatives:

• the role of each regional representative group in appointing and removing board members and participating in the setting of the relevant entity’s strategic direction and performance expectations, as well as performing or exercising any other duties, functions, or powers it has under legislation.

Clause 30 requires decisions made by a regional representative group of a water services entity to be made—

• by consensus if consensus can be reached by regional representatives taking all reasonably practicable steps to reach consensus in accordance with a procedure, and within a time frame, specified in the constitution; and

• in any other case, by 75% of the regional representatives present and voting.

Clause 31 allows a regional representative group to regulate its own procedure for a matter if this Bill and the constitution do not specify a procedure for the matter.

Clauses 32 to 37 provide—

• for territorial authority representatives to be appointed to each entity’s regional representative group by the territorial authority owners of the entity:

• for mana whenua representatives to be appointed to each entity’s regional representative group by mana whenua of the rohe within the service area of the entity:

• for requirements before appointment as a regional representative.

The specific composition and appointment processes of each regional representative group will be provided for in the constitution (see clause 91).

Clauses 38 to 40 require each regional representative group to appoint a board appointment committee. The main functions of the board appointment committee are to appoint and remove board members and prepare and maintain an appointment and remuneration policy for the board.

Clause 41 provides that each regional representative group must elect or appoint, in accordance with the constitution,—

• 1 of its regional representatives as chairperson of the group; and

• 1 of its regional representatives as deputy chairperson of the group.

However, clause 41 does not apply if the constitution provides for the group to have co-chairpersons and deputy co-chairpersons, in accordance with clause 42.

Clause 42 ensures that the constitution may provide that a regional representative group must elect or appoint, in accordance with the constitution,—

• 2 of its regional representatives as co-chairpersons of the group; and

• 2 of its regional representatives as deputy co-chairpersons of the group.

If the constitution provides for, and requires, a regional representative group to elect or appoint co-chairpersons and deputy co-chairpersons of the group,—

• 1 co-chairperson and 1 deputy co-chairperson must be elected or appointed by the group’s territorial authority representatives; and

• one co-chairperson, and one deputy co-chairperson, must be elected or appointed by the group’s mana whenua representatives; and

• references in legislation, other than clause 42, to the group’s chairperson are taken to be references to both of its co-chairpersons; and

• references in legislation, other than clause 42, to the group’s deputy chairperson are taken to be references to both of its deputy co-chairpersons.

Clause 43 provides a process by which disputes are to be resolved if regional representatives disagree on a matter that they are required under the Bill to work together on, jointly develop, or agree.

Clause 44 applies Part 7 of the Local Government Official Information and Meetings Act 1987 to each regional representative group.

Clauses 45 and 46 provide for—

• the constitution of a water services entity to establish 1 or more regional advisory panels:

• each regional advisory panel to include an equal number of territorial authority panel members and mana whenua panel members:

• the role of each regional advisory panel to be providing advice to a regional representative group about the group’s performance or exercise of its duties, functions, or powers (see clause 28) in respect of, or otherwise affecting, a particular geographic area—

  • in the service area of the water services entity; and

  • for which the panel is responsible under the constitution (see clause 91(f)(ii)).

Clause 48 requires decisions made by a regional advisory panel to be made—

• by consensus if consensus can be reached by regional advisory panel members taking all reasonably practicable steps to reach consensus in accordance with a procedure, and within a time frame, specified in the constitution; and

• in any other case, by 75% of the regional advisory panel members present and voting.

Clause 49 allows a regional advisory panel to regulate its own procedure for a matter if this Bill and the constitution do not specify a procedure for the matter.

Clauses 50 to 52 provide—

• for territorial authority panel members to be appointed to a regional advisory panel by the territorial authority owners of the entity:

• for mana whenua panel members to be appointed to a regional advisory panel by mana whenua of the rohe or takiwā within the service area of the entity:

• for requirements before appointment as a regional advisory panel member.

The specific composition of, and appointment processes for, each regional advisory panel will be provided for in the constitution (see clause 91(f)).

Clause 53 provides that each regional advisory panel must elect or appoint, in accordance with the constitution,—

• 1 of its regional advisory panel members as chairperson of the panel; and

• 1 of its regional advisory panel members as deputy chairperson of the panel.

However, clause 53 does not apply if the constitution provides for the panel to have co-chairpersons and deputy co-chairpersons, in accordance with clause 54.

Clause 54 ensures that the constitution may provide that a regional advisory panel must elect or appoint, in accordance with the constitution,—

• 2 of its regional advisory panel members as co-chairpersons of the panel; and

• 2 of its regional advisory panel members as deputy co-chairpersons of the panel.

If the constitution provides for, and requires, a regional advisory panel to elect or appoint co-chairpersons and deputy co-chairpersons of the panel,—

• 1 co-chairperson and 1 deputy co-chairperson must be elected or appointed by the panel’s territorial authority panel members; and

• 1 co-chairperson and 1 deputy co-chairperson must be elected or appointed by the panel’s mana whenua panel members; and

• references in legislation, other than clause 54, to the panel’s chairperson are taken to be references to both of its co-chairpersons; and

• references in legislation, other than clause 54, to the panel’s deputy chairperson are taken to be references to both of its deputy co-chairpersons.

Clause 55 applies Part 7 of the Local Government Official Information and Meetings Act 1987 to a regional advisory panel for the regional representative group of a water services entity.

Clauses 56 to 59 provide for—

• the board to be the governing body of the water services entity:

• the board to consist of no fewer than 6, and no more than 10, members:

• the board to have a chairperson and a deputy chairperson appointed by the regional representative group, or by its board appointment committee, in accordance with the constitution:

• board members to be accountable to the regional representative group.

Clause 60 requires the board to hold at least 2 board meetings during each financial year that are open to the public.

Clause 61 applies Parts 1 to 6 of the Local Government Official Information and Meetings Act 1987 to each water services entity.

Clauses 62 to 72 provide—

• for board members to be appointed by the board appointment committee of the regional representative group:

• that the board appointment committee may only recommend a person who, in the committee’s opinion, has the appropriate knowledge, skills, and experience to assist the entity to achieve its objectives and perform its functions:

• for board members to hold office for up to 5 years and that board members may be reappointed:

• for the board appointment committee to remove a board member from office at any time for just cause:

• for when board members cease to hold office.

Clauses 73 and 74 set out the collective duties of the board. The collective duties of the board of a water services entity are to—

• ensure that the entity acts consistently with its objectives, functions, operating principles, and current statement of intent:

• ensure that the entity maintains systems and processes to ensure that, for the purposes of carrying out its functions, it has the capacity and capability to give effect to the principles of te Tiriti o Waitangi/the Treaty of Waitangi and engage with, and understand perspectives of, mana whenua:

• maintain systems and processes for the continuing education of all board members to enable them to gain knowledge of, and experience and expertise in relation to the principles of te Tiriti o Waitangi/the Treaty of Waitangi.

Clauses 75 to 79 impose individual duties on board members, including duties—

• not to contravene, or cause the contravention of, or agree to the entity contravening, relevant legislation:

• to act with honesty and integrity:

• to act in good faith and not at the expense of the entity’s interests:

• to act with reasonable care, diligence, and skill:

• to comply with requirements relating to the disclosure of information.

Clause 80 and 81 provide that—

• the collective duties of the board are owed to the regional representative group:

• an individual board member is not liable for a breach of a collective duty. However, the board member may be removed from office in certain circumstances (for example, if they failed to take all reasonable steps to prevent the breach).

Clauses 82 and 83 provide that—

• the individual duties of the board members are owed to the regional representative group and the relevant water services entity:

• if a board member breaches an individual duty, the member may be removed from office and the entity may bring an action against them. A board member is otherwise not liable for a breach of an individual duty.

Clause 84 enables the Minister or a regional representative to apply to a court for an order restraining the board or a board member from contravening a statutory requirement.

Clauses 85 to 88 allow the board of a water services entity to delegate any of the functions or powers of the entity or the board, either generally or specifically, to certain persons (for example, to the chief executive or another employee of the entity).

Clause 89 allows the board to regulate its own procedure for a matter if this Bill and the constitution do not specify a procedure for the matter.

Clause 90 requires each water services entity to have a constitution.

Clauses 91 to 93 provide for the required and permitted content and effect of the constitution. The constitution must provide for the following matters:

• the composition of the regional representative group, including—

  • whether the group consists of 12 or 14 regional representatives:

  • procedures for appointing territorial authority representatives and mana whenua representatives:

  • the composition of, and procedures for, committees of the regional representative group (including the board appointment committee):

  • the process for removing regional representatives from the regional representative group:

• procedures for the regional representative group, including—

  • how the group will perform or exercise its functions, powers, and duties:

  • arrangements and requirements for meetings of the group and of committees (including the board appointment committee) of the group:

  • procedures and time frames for making decisions by consensus:

• the composition of a regional advisory panel, including—

  • the particular geographical area for which the panel is responsible:

  • procedures for appointing territorial authority panel members and mana whenua panel members:

  • the composition of, and procedures for, committees of the regional advisory group:

  • the process for removing regional advisory panel members from the regional advisory panel:

• procedures for a regional advisory panel, including—

  • how the panel will perform or exercise its functions, powers, and duties:

  • arrangements and requirements for meetings of the panel, and committees of the panel:

  • procedures and time frames for making decisions by consensus:

• procedures for the entity to perform its duty under clause 114(1) to provide funding to its regional representative group and a regional advisory panel for that group or, as the case requires, to its territorial authority owners and to mana whenua, for specified remuneration, expenses, or costs:

• the composition of the board, including the procedures for the appointment of board members by the board appointment committee:

• procedures for the board, including—

  • arrangements and requirements for meetings of the board:

  • decision-making procedures, including any requirements relating to voting or consensus decision-making:

• procedures for dispute resolution:

• procedures for reviewing, amending, or replacing the constitution (see clauses 95 and 96).

Clause 94 provides that the first constitution of a water services entity is the model constitution for the entity set out in regulations. Clause 94 also ensures that, when that model constitution is first amended or replaced under clause 95 or 96,—

• that model constitution as so amended or replaced must set out all provisions of the entity’s constitution (including any unchanged from that model constitution); and

• the regulations setting out the model constitution, for the entity, are revoked.

Clauses 95 and 96 set out the process for amending or replacing the constitution of a water services entity. A proposed amendment to the entity’s constitution or a proposed new constitution for the entity must be approved by the Minister before it is effective. The constitution as amended or replaced under clause 95 or 96 is secondary legislation. The maker must publish it in accordance with the Legislation (Publication) Regulations 2021.

Clause 97 provides for the qualifications of regional representatives, regional advisory panel members, and board members.

Clause 98 allows regional representatives, regional advisory panel members, and board members to rely on information and advice given by certain persons. They must still act in good faith, make proper inquiries, and have no knowledge that the reliance is unwarranted.

Clauses 99 to 112 set out rules that require each of the following to disclose the interest concerned:

• a board member who is interested in a matter relating to a water services entity:

• a regional representative who is interested in a matter relating to a regional representative group:

• a regional advisory panel member who is interested in a matter relating to the panel.

The interests include, for example, where the board member, regional representative, or regional advisory panel member may derive a financial benefit from a matter or has a financial interest in a person to whom the matter relates. In summary,—

• the nature and extent of the interest must be disclosed in an interests register as soon as practicable after the board member, regional representative, or regional advisory panel member (as applicable) becomes aware that they are interested:

• a board member must not vote or take part in any discussion or decision about the matter or otherwise participate in any activity of the entity that relates to the matter (unless the chairperson or a deputy chairperson of the board gives permission to act):

• a regional representative must not vote or take part in any discussion or decision about the matter or otherwise participate in any activity of the regional representative group that relates to the matter (unless the chairperson or deputy chairperson of the group gives permission to act or, if the constitution provides for the group to have co-chairpersons and deputy co-chairpersons, permission is given in accordance with a procedure specified for the purpose in the constitution):

• a regional advisory panel member must not vote or take part in any discussion or decision about the matter or otherwise participate in any activity of the regional advisory panel that relates to the matter (unless the chairperson or deputy chairperson of the panel gives permission to act or, if the constitution provides for the panel to have co-chairpersons and deputy co-chairpersons, permission is given in accordance with a procedure specified for the purpose in the constitution):

• the entity may avoid certain acts done in breach of the rules. However, the entity may not avoid an act if the entity receives fair value:

• the rights of certain innocent third parties are protected if the entity avoids a matter.

Clause 113 provides that the powers and functions of a water services entity, its regional representative group, or a regional advisory panel for that group are not affected by specified vacancies in their membership.

Clause 114(1) imposes a duty on a water services entity to provide funding to its regional representative group and a regional advisory panel for that group or, as the case requires, to its territorial authority owners and to mana whenua, for the remuneration, expenses, or costs specified in clause 91(j). Clause 91(j) requires the entity’s constitution to provide for procedures for the entity to perform that duty.

Clause 114(2) requires a water services entity to provide information that the entity holds if that information is required—

• by the entity’s regional representative group or a regional advisory panel for that group; and

• to help the group or panel perform or exercise its duties, functions, or powers.

But personal information within the meaning of the Privacy Act 2020 may be provided under clause 114(2) only in accordance with that Act.

Clause 133 provides for the process for amending a Government policy statement.

Clause 134 requires the Minister to present a copy of a Government policy statement to the House of Representatives as soon as practicable after issuing it and requires. Clause 134(2) requires the department to publish the statement on its website.

Clause 137 provides that the board of a water services entity must give effect to the statement of strategic and performance expectations for the entity when performing its functions.

Clause 138 requires the board of an entity to publish the regional representative group’s statement of strategic and performance expectations on the entity’s website.

Clause 139 requires an entity’s regional representative group to annually review the performance of the entity’s board in giving effect to the statement of strategic and performance expectations.

Clause 142 requires the board of a water services entity to publish its response to a Te Mana o te Wai statement for water services as soon as practicable after issuing the response and, in any event, within 2 years after receiving the statement to which the response relates.

Clauses 143 to 146 require the board of a water services entity to annually provide a statement of intent for the entity. The purpose of a water services entity’s statement of intent is to promote the public accountability of the entity by setting out the entity’s strategic intentions and providing a base against which the water services entity’s actual performance can later be assessed.

Clauses 147 to 149 require the board of an entity to provide an asset management plan to the entity’s regional representative group at least once in every 3-year period. The asset management plan must cover a period of not less than 10 consecutive financial years.

Clauses 150 to 152 require the board of an entity to provide a funding and pricing plan to the entity’s regional representative group at least once in every 3-year period. The funding and pricing plan must cover a period of not less than 10 consecutive financial years and include a financial strategy for the years covered by the plan.

Clauses 153 to 155 require the board of an entity to provide an infrastructure strategy to the entity’s regional representative group at least once in every 3-year period. In summary, the strategy must cover a period of at least 30 consecutive financial years and identify—

• significant infrastructure issues for the water services entity over the period covered by the strategy:

• the main options for managing those issues and the implications of those options.

Clauses 156 to 164 require a water services entity to provide an annual report to the entity’s regional representative group after each financial year. An entity must publish a copy as soon as practicable after it has been provided to the regional representative group and, in any event, no later than 20 working days after receiving the audit report provided by the Auditor-General under clause 161.

Clause 165 provides for requirements relating to the bank accounts of water services entities.

Clause 166 provides that a territorial authority owner (in its capacity as a holder of shares in a water services entity, or any other capacity), a regional representative group, or a regional representative—

• has no right, title, or interest (legal or equitable) in the assets, security, debts, or liabilities of a water services entity (and the constitution cannot confer any such right, title, or interest — see also clauses 15(3) and 93(2)(c)); and

• must not receive any equity return, directly or indirectly, from a water services entity; and

• must not give a water services entity any financial support or capital; and

• must not lend money or provide credit to a water services entity; and

• must not give any person any guarantee, indemnity, or security in relation to the performance of any obligation by a water services entity.

However, under clause 166(2), nothing in clause 166(1) or (3) limits or affects—

• the allocation or reallocation of shares under clauses 15(2) and 16; or

• the holding of those shares by the relevant territorial authority owner; or

• voting under Schedule 4 on a divestment proposal.

Clause 167 requires the board of a water services entity to ensure that proper accounting records are kept.

Clause 168 permits a water services entity to borrow or enter into incidental arrangements, within or outside New Zealand, in currency other than New Zealand currency.

Clause 169 provides for the Minister to appoint a department as the monitor for the purposes of the Bill. The monitor’s role is to assist the Minister to carry out their role (see clause 26) and to perform and exercise certain functions and powers, including administering appropriations and legislation and tendering advice to ministers.

Clauses 170 to 173 provide for—

• the monitor’s power to request information from a water services entity:

• good reasons for an entity to refuse to provide information requested:

• civil proceedings relating to non-compliance with an information request.

Clause 174 defines problem, for the purposes of the Minister’s powers to intervene, as a matter, circumstance, or failure that has actual or probable adverse consequences for consumers or communities in a water services entity’s service area and includes—

• a matter or circumstance relating to the management or governance of the entity that detracts from, or is likely to detract from, its ability to give effect to its purpose:

• a significant or persistent failure by the entity to perform 1 or more of its functions or duties under the Bill or to give effect to a Government policy statement:

• the consequences of a state of emergency:

• a failure by the entity to demonstrate prudent management of its revenues, expenses, assets, liabilities, investments, or general financial dealing.

Clauses 177 and 178 provide for the power to appoint a Crown observer. In summary, the Minister may appoint a Crown observer in relation to a water services entity on the entity’s request or if the Minister believes, on reasonable grounds, that a problem relating to a water services entity exists and—

• the appointment of a Crown observer is necessary to enable, or better enable, the Minister to effectively address the problem; or

• the appointment of a Crown observer is necessary to enable, or better enable, the Minister to monitor the water services entity’s progress in addressing the problem; or

• another ministerial body has recommended the appointment.

Clause 202 provides for engagement requirements relating to—

• the preparation of a water services entity’s response to Te Mana o te Wai statements:

• the development of a model constitution:

• the preparation of asset management plans, funding and pricing plans, and infrastructure strategies.

Clauses 203 to 205 provide for engagement requirements relating to consumers, including requirements for the chief executive of a water services entity to—

• establish 1 or more consumer forums:

• annually prepare a consumer engagement stocktake.

Clause 206 provides for the power to make regulations, including to provide for—

• a model constitution for each water services entity that will be the first constitution of the entity under clause 94:

• financial and non-financial disclosure requirements relating to the statement of intent, asset management plan, funding and pricing plan, and infrastructure strategy:

• additional transitional and savings provisions concerning the coming into force of the Bill, including transitional reporting obligations that apply to local government organisations and water services entities.