Price-quality path for Watercare

We are setting the first price-quality path for Watercare (PQP28) under Part 4 of the Commerce Act. It will apply when the Charter ends in mid-2028.

Under a price-quality path we can set the maximum amount of money that Watercare can recover from consumers, and the quality of service they need to provide for that money. We can also set a minimum amount of money they can recover, if we think this helps consumers in the long term.

A price-quality path works with other components of economic regulation, like information disclosure (ID) that requires Watercare to publish information that lets stakeholders understand whether it's delivering the quality of service it must.

We are seeking views on how the cost of debt (an input to the cost of capital) should be set for Watercare's PQP28, due to a change in the Commission’s approach in other sectors.

On 23 September 2026 the Commission announced that, as part of the Common Cost of Capital Input Methodology Review, we have made a final decision to adopt a 5-year simple trailing average approach for the Cost of Debt (TACD) for sectors covered by Input Methodologies.

Read more about this decision for other sectors. 

As water is not covered by Input Methodologies, we are considering two options. Whether we should adopt the TACD for Watercare’s PQP28, or retain the prevailing rate approach to the Cost of Debt while the implementation details are worked out and adopt the trailing average at a future reset.

You can read more about our consideration of the options in the letter in the timeline below.

We invite submissions on the views in this letter. Please email to wai@comcom.govt.nz; with ‘Feedback on approach to the cost of capital for Watercare PQP28” in the subject line of your email.
Submissions are due by 5pm on Wednesday 14 October 2026.

On 25 June 2026 we published our Emerging Views Paper on PQP28 and the Supporting Financial Model. This paper sets out our emerging views on the key decisions needed to establish the price-quality path.

On 7 July 2026, we published additional information and models to support our analysis presented in the Emerging Views Paper. This included the models used to estimate components of the cost of capital (beta values, risk-free rate, and a regression model on water production and electricity consumption to Auckland’s gross domestic product). Watercare requested the release of this information and these models. Certain Bloomberg data has been redacted because the terms of our Bloomberg licence do not permit us to publish it.

We received submissions and cross-submissions on the paper. You can view these documents on the Project Timeline below.

Input methodologies 

Regulatory certainty and predictability are important. As outlined in our Approach Paper and Emerging Views Paper we consider the regulatory regime and long-term benefit of consumers are better served if we defer considering whether to set any input methodologies applying to Watercare until after setting PQP28, as permitted under the Commerce Act.