• Robyn McDonald
Consumer Affairs

The Minister of Consumer Affairs, Hon Robyn McDonald, today said that the recently released customer contract by Metrowater (New Zealand's first retail water Local Authority Trading Enterprise) was appalling in its failure to recognise the rights of their customers.

"The new contract reflects a very poor attitude by Metrowater to their customers," said Robyn McDonald.

"I am very concerned that they claim to have used the Ministry of Consumer Affairs guidelines in developing their new contract. The Ministry had an initial discussion with the company and supplied a copy of the benchmarks for developing a good contract. Metrowater has clearly not taken account of those benchmarks and the Ministry did not see the contract before it was put in place.

"I am appalled too, that there has been absolutely no consultation with customers and community groups on the content of the contract when it was being developed. This is one of the Consumer Affairs Ministry's key benchmarks," the Minister stated.

"Metrowater's customer contract fails in a number of areas and I have asked my Ministry to immediately work with Metrowater to achieve a vastly improved customer contract.

"I have major concerns over the wide powers that Metrowater has given itself under the customer contract, for example over disconnecting the water supply of customers," said Robyn McDonald.

"Metrowater has in its contract, the power to disconnect customers without a clear process for giving customers the opportunity to rectify any account difficulties.

"Water is essential for New Zealanders health and survival. A water company must take responsibility for considering health implications, the requirements of special needs customers and have processes which seek to avoid disconnection.

"I am very disappointed that Metrowater's contract makes disconnection of water supply a first option. I believe very strongly that an appropriate disputes resolution process should be established to work through issues with customers.

"Rather than disconnect, as a final part of any dispute, the company could for example, use an option of restricting water supply to provide a daily minimum. But such action should only occur as a very final resort in any dispute between the company and its customers," said the Minister.

"The customer contract fails to meet the legitimate rights of customers in a number of other areas, including:

No consultation with customers on changes to their contracts;
No provision for an independent process to handle deadlocked disputes;
Requires customers to pay for the installation of water meters which can only be supplied by Metrowater;
No payment of bonds into a trust account;
No payment of interest on bond to customers.
"Metrowater's approach to their customers is very disappointing particularly taking into account that they are in a monopoly position and have no competitors to force a more customer oriented service. Corporatisation of essential services such as water, should always mean a better deal for consumers - Metrowater's initial management approach is to give the company a better deal and ignore customers rights.

"I cannot force them to make changes but I will continue to publicise the issues as they affect consumers until I see Metrowater actually put into the contract, the recognition of customers rights. The positive response from the electricity industry to our benchmarks for a good customer contract does illustrate that highlighting the problems from the perspective of customers rights can achieve beneficial results for customers," said Robyn McDonald.

"Metrowater has over 120,000 captive customers who need to be made aware of the poor contract that has been devised for managing their water supply.

"I have asked my Ministry to discuss my concerns over the contract with Metrowater. I expect constructive responses from the company with the immediate amendment of their customer contract by offering terms and conditions which reflect the legitimate rights and interests of customers," concluded Robyn McDonald.


For further information please contact:
Michelle Johns, Press Secretary
Telephone: wk (04) 471 9863
pager: 026 103 335


Background and Summary of Key Points in Metro Water's Contract
On 16 January 1997, the Ministry of Consumer Affairs released a report on domestic electricity contracts, metering and disputes procedures. This study sets out the benchmarks of a good customer contract that are relevant to any public utility supplied under monopoly conditions.

On July 1 1997, Metro Water imposed unilaterally, a contract on consumers in the Auckland City area. Metro Water's new contract falls below the Ministry's benchmarks of a good contract and contracts that will be offered to consumers in the retail electricity industry. The main areas where Metro Water fails to meet the benchmarks of a good contract are:

Disconnection should be a measure of last resort. Metro Water will not restrict water supply to provide a daily minimum but will disconnect customers. Specifically the Metrowater contract:

does not specify the notice period for disconnection. Metrowater could therefore disconnect with only 24 hours notice, or provide the same notice that some power companies currently do.
has wide and sweeping powers to disconnect customers. Customers can be disconnected for not paying an estimated account and any breach of the contract.
Metrowater does not give customers the right to be consulted on changes to their contract. A contract should not be presented on a take it or leave it basis. The Metrowater contract should entrench the right for customers to be consulted.

Metrowater will not pay interest on bonds, not hold bonds in a Trust account, and only refund the bond when you finalise your account (this may be after several years). The level of the bond for Metrowater is for six months supply which is excessive compared to the standard of two months in the electricity industry.

Metrowater gives itself the right to make customers pay for the installation of their water meter. Placing this liability onto consumers is unreasonable given that it is Metrowater's role to accurately measure the water consumption. The Ministry notes that even the most unbalanced electricity contracts do not contain such provisions.

Metrowater does not provide a deadlocked disputes process. In contrast, all power companies complying with the ESANZ Codes of Practice will contain provisions for independent dispute resolution.

The benchmarks of good practice provide a clear indication of where improvements to customer contracts are required.