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Auckland's councils are being thrown a lifeline to save themselves from a double-digit percentage jump in the bulk water price this year.
A proposal for the six councils' consideration next month calls for Auckland City Council to use its high financial standing to guarantee borrowing by regional water wholesaler Watercare Services for growth and renewal capital works.
Council backing would result in cheaper loans and lower cost hikes to be passed on to the local councils, who buy bulk water from Watercare at 45c per 1000 litres then add retailer's margins on what they supply through their pipe networks.
Watercare's prices have been pegged to less than the inflation rate over the past six years. But it said yesterday it faces increases from June of 12 per cent on water it sells to the councils, who are also its shareholders. It estimates a 17 per cent lift in its waste water charges to local councils.
In each of the following seven years, wholesale water prices could rise from 7 per cent to 15 per cent and waste water charges by between 7 and 14 per cent.
Council-owned water retailing businesses would face increased costs, which in the case of Auckland City's Metrowater would be about 70 per cent. The average city household's annual water bills is $717.
The effect of higher charges by Watercare on councils without a user-pays policy, such as Waitakere and North Shore, is not yet clear.
Watercare has revised the warning it gave to councils last April when it said it would have to double wholesale water charges over the next decade to meet higher borrowing costs.
Instead, its latest asset management plan forecasts spending of $4.6 billion over 20 years - a 3 per cent reduction on the figure forecast in 2006, which had councils fearing a public outcry.
The company said that in its new supply contract with councils in June prices would be higher than inflation, as a result of ongoing increases in the cost of planned maintenance, chemicals, energy and capital expenditure.
Coming to the rescue now with a proposal to reduce the debt burden is Auckland City, which is Watercare's largest shareholder at 41 per cent.
Council finance general manager Andrew McKenzie said yesterday the council could help Watercare to get cheaper finance.
"The price of water will go up but it means that water consumers will not pay $300 extra than they would have otherwise."
A Watercare spokesman said the guarantee was one option under consideration to soften the impact of future price rises.
