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Welcome to The Executive Exchange, a premier podcast series for on-the-go senior executives. Each episode features short, impactful podcasts where industry leaders share key insights and experiences from the water industry.
[00:00:00] Piers Clark: Welcome to the Exec Exchange, 15-minute podcast in which a leader from the water sector shares a story to inspire, inform, and educate other water sector leaders from around the globe.
[00:00:10] Piers Clark: My name is Piers Clark, and my guest today is Jon Lamonte, the former Chief Executive at Watercare, the largest water utility in New Zealand.
And what we're gonna talk about today is what's been going on in the New Zealand water industry, because Jon's career has followed both the ups and the downs and the twists and the turns, and it will be a fascinating story. Jon, wonderful to have you with us today.
[00:00:34] Jon Lamonte: Pleasure to be here.
[00:00:36] Piers Clark: Now, we always start with a little bit of background on our podcaster, so let's go back.
[00:00:42] Piers Clark: Where did you start life? How did you get to the role of Chief Executive of Watercare? And we'll obviously talk about what happened subsequently, but let's start with the how did you get to be Chief Exec of Watercare?
[00:00:53] Jon Lamonte: Tortuous journey, I would say. I started with 30-odd years in defense, working for the Air Force back in UK. Came out of that and went into transport for London, running tube lines, so little bit of London Underground.
And having done that for a bit, I got a call that say, "Would you like to run everything in Manchester?" So, I ran transport for Greater Manchester for five years or so.
[00:01:14] Jon Lamonte: And then got a call to say, "How do you fancy building and operating the first driverless metro in Sydney?" So off I went to Australia and did that, and two and a half years later, there came a call to say, "How do you fancy going into water?"
[00:01:29] Jon Lamonte: And I thought, "Well, at my age, am I ever gonna get the chance to do something entirely different?" I was 61 when the call came, and I thought, "Well, this is kind of interesting." And to be honest, I wanted to settle in New Zealand. It's been my dream place.
[00:01:45] Jon Lamonte: All the cards fell up in the right way. So, that's how I ended up at Watercare.
[00:01:49] Piers Clark: Yeah, and anyone listening might be thinking, "Well, that was an odd choice to go from transport to water. Why did the interviewees select you?"
[00:01:57] Piers Clark: And of course, the logic is it's infrastructure. It's about building big infrastructure projects, and whether you're doing airports or railways or roads, water and infrastructure are very similar.
[00:02:08] Piers Clark: Correct?
[00:02:09] Jon Lamonte: Well, I think that's part of it. But I also think it's partly around ability to run a large and a complicated organization. And the real reason for going to Auckland was there were a number of things happening at the time.
[00:02:22] Jon Lamonte: There was a drought and it was felt that the leadership hadn't really come through with a good plan to deal with the drought. As a result of not being able to articulate the plan, they'd lost the trust of the public and the local authority, in this case Auckland Council, and that needed some repairing.
[00:02:40] Jon Lamonte: And then, and probably germane to our conversation today, there was this thing out there called reform. And having done a little bit of reform work in my previous lives in defense and in transport, it was a good segue into doing that in Auckland.
[00:02:55] Piers Clark: Brilliant.
[00:02:56] Piers Clark: Now, we're gonna hold the reform bit because I want you to describe Watercare when you arrived in terms of the areas it covered, the activities it did, the population it served.
[00:03:07] Jon Lamonte: Auckland is unique in New Zealand. It's about 1.6 million people, amongst 5.5 million people, the largest city by a long way. Auckland covers all the former district councils that were there. So you're talking, just the Auckland region, and think greater Manchester-type area for a UK audience.
[00:03:27] Jon Lamonte: So in terms of water, providing services to half a million people. Watercare provides two water services, and it started off back in the day as a bulk water supplier. But then when Auckland Council got together, it brought in all the retail side of it as well, became an end-to-end holistic supplier. And at the stage I joined, it had probably moved from what I would call an engineering firm into something that was far more customer focused.
[00:03:55] Jon Lamonte: How do we relate far more to the customer? How are we gonna have that conversation? What are the things we ought to be talking about? Like, where's the next source of water coming from?
[00:04:04] Jon Lamonte: Let's give them an app so that they can actually see how much water they're using. Very much of a customer focused organization. Then it moved on much more into data and AI, and we might get into that as well.
[00:04:16] Piers Clark: Excellent. Now, can you just describe the rest of the water sector in New Zealand?
[00:04:21] Jon Lamonte: So there's about 70 odd councils in New Zealand. They all, at that time, had their own water outfit. With one other exception, which is Wellington Water, which covered five councils. So the rest of them would be individual water entities.
And inevitably, given what I said about the size of population, a lot of them were serving very small communities. So, all the diseconomies of scale were there, all the problems that you can imagine of having such a disparate organization.
[00:04:52] Piers Clark: Excellent. Right. We understand the water sector. It's 2023. You've been Chief Executive of Watercare for 2 or 3 years by now, I think.
[00:05:00] Piers Clark: And then the government announces it's doing reform, and they told you that the reform was coming when you'd taken the job. They told you they were planning something?
[00:05:07] Jon Lamonte: That's right. We knew the reform was coming.
[00:05:10] Jon Lamonte: The Labour government of the day, really keen on reforming the sector, and they came up with the "Three Waters Reforms". And essentially that came down to a compulsory organization of four different regions.
[00:05:25] Jon Lamonte: And I was going to look after Auckland and Northland, the largest by population. And because of the compulsory nature of it, that was one area that wasn't overly popular with local councils and the communities.
[00:05:39] Jon Lamonte: And the other thing that was contentious about it was co-governance with Māori and the minister of the day, Nanaia Mahuta, very keen on that to give traditional owners of the land and water a greater say in how it was managed.
[00:05:53] Piers Clark: And sorry, can we just go to why that was contentious? 'Cause it feels involving the traditional landowners feels like the right thing to do. Why was that so contentious?
[00:06:03] Jon Lamonte: Well, I think involving was fine by everyone, and no one doubted the historic knowledge of indigenous people.
[00:06:11] Jon Lamonte: What was issue for some was that by having co-governance, there was a sort of feeling of co-ownership, and suddenly that took on a whole different dimension. So, I personally had no issue with it at all, but I know a lot of people did. And that's one of the reasons why it failed.
[00:06:28] Piers Clark: Okay. What was happening in the rest of New Zealand?
Four entities were going to be established, as I say, Entity A. Entity B was broadly the rest of North Island, Entity C was Wellington and the top of the South Island, and entity D was the rest of the South Island. That was how it was gonna be sorted out.
[00:06:47] Piers Clark: Wonderful. Makes a lot of sense. Seems like a very sensible approach. Take five million people, spread across two islands, split the islands into two regions, split each of those regions into two, create four entities.
[00:06:57] Piers Clark: Wonderful. I assume that what then happened was that plan was implemented and everything went swimmingly.
[00:07:03] Jon Lamonte: Except for one small flaw which no one liked it. And as I say the compulsory element of it was particularly anathema to local councils.
[00:07:13] Jon Lamonte: When Jacinda Ardern left as prime minister, Chris Hipkins took over. One of the first things they said was, "We can't do this." So they looked at it and came up with a different plan.
[00:07:24] Jon Lamonte: They called it the "Affordable Water Reforms" because they'd been hearing from people that the cost of this was something they weren't very happy about. But the other thing they said was, "Look, rather than four, let's make it 10."
[00:07:36] Jon Lamonte: And the reason for that was to give more councils more of a voice in what was gonna happen. And that was where we got to by the time we got to the October '23 election. As everyone knows change of government party and the coalition came in, and swept that lot away. But that's where we were during my time in the reform. Now I was gonna keep going in Entity A 'cause we were so far ahead
[00:08:02] Piers Clark: You've been put into the nebulous of what Entity A was gonna be in April time.
[00:08:06] Jon Lamonte: February of '23, right the way through until December '23. And then the plug got pulled which was fine, but that's what happened. New government came in October '23, had a bit of a look at it and said, "Nope, we'll pull all that legislation", weren't very happy with it.
[00:08:21] Jon Lamonte: And what they wanted to do was come up with something that was voluntary, that would bring councils together by their own volition. So forming their own different groupings that also didn't have the co-governance element to it.
[00:08:36] Jon Lamonte: And what they said was, actually, Watercare was the sort of thing that they wanted to follow, the exemplar. So what they came up with was a different agenda called "Local Water Done Well", and that is what we're implementing now.
[00:08:49] Piers Clark: Okay, so I get it. You've been in Watercare, seen the reform coming, you were six months into the plan of one government, new government comes in, new rules, off we go.
[00:08:59] Piers Clark: Did they make the right choice, or was this a politically driven choice?
[00:09:04] Jon Lamonte: Look, I think the reforms were far more acceptable to local councils who could buy into what was gonna happen. There was a feeling of regret amongst many that we hadn't actually got to where we wanted to get to.
[00:09:18] Piers Clark: What happened next?
[00:09:20] Jon Lamonte: From a personal perspective, I went out of the game and into consulting for a while. But then when Local Water Done Well started and the entities started to come together, they said, "We need people on the boards who actually know about water." And suddenly I found my phone was ringing. And I ended up with two of them.
[00:09:39] Jon Lamonte: One of them is Tiaki Wai, which is what was Wellington Water. Now for four councils rather than five, but nevertheless fundamentally the same, but a new organization because it has the opportunity to be separate from councils. It can raise its own debt or use the local government funding agency to provide its debt facilities and it can make its own decisions about pricing, et cetera.
[00:10:02] Jon Lamonte: Likewise, Waikato Waters, which is the other one that I'm involved with, got six councils working together, potentially with a seventh. Three of those councils go live in a week from now and then another one in October and then in a year's time the final two come on board. So, the largest grouping of councils in New Zealand.
[00:10:22] Jon Lamonte: A very interesting construct, councils that have never really worked together coming together to actually form a new entity.
[00:10:28] Jon Lamonte: There's another two coming online in a week's time as well. Kaikōura is coming online and our counterparts in the Waikato District and Hamilton coming together as one entity called IAWAI.
[00:10:41] Jon Lamonte: There's one already operating, which is Selwyn District Council have got their own organization.
[00:10:46] Jon Lamonte: And then in a year's time, a load more come online. So what's gonna happen is there's a whole real mixed bag of councils that are going to run their own entities as Council Controlled Organizations. Some of them are gonna have an in-house operation, and then there are some council groupings that are coming together.
[00:11:04] Jon Lamonte: What that means is about the next year or so, you will have 40 or so different water entities serving New Zealand. And they will have a range of sizes and shapes and forms and mechanisms around them.
[00:11:19] Jon Lamonte: And I suppose, to come back to your earlier question was that quite where we wanted to get to? And I suspect the answer to that is no, but this is where we go for the next few years.
[00:11:31] Piers Clark: It's a stepping stone. The phrase mixed bag is never good when you're talking about a regulated industry that needs to have comparators for regulators to look at.
As you were talking, I found myself thinking, is the industry going to be better equipped for the challenges of 2040, 2050 that the water industry's got to face?
[00:11:49] Piers Clark: It's a bit of an unfair question to you, but can I ask you to give me the things you're excited about that you think are going to make it better, but also the things that worry you that you think, "Well, maybe we're a bit lagging on this unless we get political motivation to drive them forward"?
[00:12:05] Jon Lamonte: Look, I think, what I should have said in the reform is that a number of extra things come in.
[00:12:10] Jon Lamonte: So, we have a drinking water regulator who's also going to look after wastewater now as well. That takes over from Ministry of Health as a sort of subdivision. And having that front and center, Taumata Arowai, really important.
[00:12:24] Jon Lamonte: Having an economic regulator, the Commerce Commission, will undoubtedly change the face of water supply in New Zealand. We're not getting into price quality determination straightaway. We're more into information disclosure, but it will force change. Not being reliant on council debt, and some councils were already close to their debt ceilings, getting funding from local government funding agency for most places other than Watercare gives a lot of freedom .
Needless to say , the agency wants to see their money come back before too long, but nevertheless, having freedom to make decisions has to be good. Having larger areas, all the economies of scale, all the investment that's needed, years of neglect that's what we suffer from in New Zealand.
[00:13:12] Jon Lamonte: We can finally start to do it. Not overnight, clearly, but we can get into it, so lots to look forward to.
[00:13:20] Piers Clark: Excellent. That was such a fascinating case study, and it's great that the story hasn't finished, that there'll be a settlement period, and then there'll be a bit more consolidation probably in the next five, 10 years as the industry moves on.
[00:13:34] Piers Clark: And my takeaway is that politically, this is the way that you bring everybody on board, is to do it in a slow and steady way, rather than tearing everything up and doing a massive change that would be incredibly disruptive and alienate lots of people. You bring them on that journey.
[00:13:50] Jon Lamonte: Yeah, you've got to bring people with you.
[00:13:52] Jon Lamonte: You've got to bring the councils alongside. You've got to bring the Māori iwi, the tribes, along with you. You've got to bring everyone on that journey. And you have to do it in an affordable way, 'cause it's no good if you suddenly go, "Well, here's a new organization, but by the way, it's gonna cost another arm and a leg to run."
[00:14:11] Piers Clark: Brilliant. Fascinating speaking to you, Jon. Unfortunately, we're running out of time. Now, I'm gonna ask you to go back to when you took that call, age 61 around do you want to join the water sector.
[00:14:23] Piers Clark: What advice would you give your younger self?
[00:14:26] Jon Lamonte: I think the advice to someone starting out is always believe that you can do it. It doesn't matter what it is, but you can always do it. If you want to shift from defense to transport to water, go do it.
[00:14:42] Jon Lamonte: Have faith in yourself. Take the opportunities.
[00:14:45] Piers Clark: You have been listening to the Exec Exchange with me, Piers Clark, and my guest today has been Jon Lamonte, the former Chief Executive of Watercare in New Zealand. And we've been talking about reform of the New Zealand water sector.
[00:15:01] Piers Clark: Jon, I wish you the very best for your future roles in this journey.
[00:15:06] Piers Clark: Thank you to our sponsors, and until next time, keep asking questions, keep sharing, and keep safe.