Publicly Speaking

29 Sep 2009

Infrastructure Bill – Utilities in the Road, Motorway and Rail Corridors

The Government has now introduced the Infrastructure Bill. This has the key objective of increasing efficiency in the way that utilities gain access to the road, rail and motorway corridors.

What is the issue?

This Bill arose out of an October 2006 position paper by the Ministry of Economic Development, that stated:

"Efficient and accessible roads and utility services are vital for New Zealand to maintain and improve its standard of living and economic growth."

The public policy objectives were:

1. "To reduce the costs and inefficiencies arising from the current statutory framework, including avoidable damage to roads and utility networks, delays and disputes, inconsistencies between statutes, and poor co-ordination.
2. To provide better management of the multi-use road corridors in the public interest, including road safety, and balancing the provision of utility services with efficient transport and universal access to roads.
3. To provide the potential for increased utility access to rail and motorway corridors while recognising the transport and safety responsibilities of Transit NZ (now NZ Transport Agency), and the transport, safety and business interests of OnTrack."

Government recognises that road, rail and motorway corridors are an increasingly valuable resource. Maximising their benefit requires an effective and mutually acceptable framework of rules.

Utility operators have a statutory right to place cables, pipes, poles and other infrastructure in roads, subject to "reasonable conditions". However they have expressed frustration over many years regarding inconsistent approaches to the setting of "reasonable conditions", leading to delays and additional costs.

On the other hand, road controlling authorities (RCAs) - local authorities and NZ Transport Agency - have long been dissatisfied with lack of co-ordination between utility operators causing disruption to businesses and communities, and poor quality road reinstatement by utility operators requiring remedial work at the cost of ratepayers and taxpayers.

The position paper was followed by a forum jointly hosted by the two major stakeholder groups, Local Government New Zealand and the New Zealand Utilities Advisory Group. Submissions were received from a large number of local authorities and utility operators.

A national code of practice emerged as the favoured option, such as has applied in the Auckland region in recent years. The proposal in the position paper that RCAs have a statutory governance role of "corridor guardianship" did not eventuate.

Purposes of the Bill

The Bill is intended to achieve two main purposes:

1. a national code of practice to coordinate the activities of utility operators and transport corridor managers (the Code);
2. to amend various separate Acts to align the criteria for setting conditions for utilities' access to the corridors, the allocation of costs when utilities have to be moved, and time periods for notification and response.

The benefit-cost ratio of these changes is given as potentially 10:1, and an estimated net economic benefit of the order of $30m per year.

The Bill will also:

• amend the New Zealand Railways Corporation Act 1981 in the area of governance;
• repeal the Affordable Housing: Enabling Territorial Authorities Act 2008, while enacting a prohibition on restrictive covenants relating to social housing.

The Code: all transport corridors

Clause 9 states that the purpose of the Code is to enable utility operators' access to transport corridors to be managed in a way that:

1. maximises the public benefit while ensuring fair treatment for all utility operators;
2. minimises disruption to transport corridors caused by utility operators' work, while ensuring public safety;
3. provides a nationally consistent approach to managing access to transport corridors.

Clause 10 states that the Code is to include:

• principles as to how utility operators and corridor managers deal with each other on access;
• processes and rules for coordinating work by utility operators in transport corridors;
• processes for dealing with conflicts of interest;
• compulsory dispute resolution procedures.

The draft Code is already operating on a voluntary basis. Once the Bill has been enacted, and the Minister has approved the Code, it is to be given legal force by notice in the New Zealand Gazette, expected in 2010.

Separate chapters deal with access to motorway and rail corridors, recognising that access is necessarily more limited than for local roads, due to their specific operational, physical and legal characteristics. There is no change to the provision in section 75 of the Railways Act allowing a reasonable charge to be made for such access.

The chapter in the draft Code dealing with costs includes these principles:

• all utilities should be treated alike
• the presumption of "causer pays"
• only direct costs are recoverable
• assets should be replaced on a "like for like" basis
• costs arising from wrongly located services should be borne by that operator.

Corridor managers (including RCAs) must comply with the Code in setting reasonable conditions for access, and utility operators must comply with the Code when carrying out work in a transport corridor. The Court can order compliance of the Code by another utility operator or corridor manager, and issue fines for non-compliance up to $200,000.

Amendments to statutory right of access to roads

Part 2 of the Bill will amend the following Acts:

• Telecommunications Act 2001;
• Electricity Act 1992; and
• Gas Act 1992.

The amendments will make these Acts consistent in dealing with utility operators' access to roads and state highways, by aligning:

• the various notice periods regarding access; and
• the criteria for setting "reasonable conditions".

Amenity improvement conditions

A new provision in the Telecommunications, Electricity and Gas Acts will limit the ability of RCAs to impose conditions requiring utility operators to improve amenity values in carrying out work. In order to do so, the work must be within an area identified in a long-term council community plan, and the RCA will be required to pay the additional costs of complying with the condition.

Cost of relocating Telecommunications

One often vexed issue is how the cost of having to relocate a utility should be borne. The following provisions of the Electricity and Gas Acts are to be replicated in the Telecommunications Act:

• that the cost of relocation is borne by the party that requires it, unless the utility is unlawful or unsafe; and
• the more detailed cost-sharing arrangements applying to State Highways, requiring the operator to pay for the cost of fittings, and for any upgrade in the utility. However these will not be extended to local roads.

These provisions will prevail over section 54 of the Government Roading Powers Act, under which the RCA can require a utility operator to remove "roadside structures" (including poles and towers) for safety or operational reasons. In that section the default position is for the cost of relocation to be shared equally. These changes are therefore expected to shift part of the cost of such relocations in State Highways from telecommunications operators to the RCA.

Government Roading Powers Act

Amendments to this Act (which deals primarily with State Highways and motorways) include:

• The RCA must give 10 working days' notice to the utility operator if it proposes to interfere with an existing pipe, line or other work, except in an emergency. This will also be included in the Local Government Act 1974.
• If a utility operator applies to do work within a motorway, the RCA must respond in writing within 30 working days.

Similar amendments are to be made to the Railways Act 2005.

Conclusion

There has been a high degree of co-operation between local government, utility representatives and government agencies in developing the draft national Code of Practice. All parties will be looking for the Code and other amendments to generate significant gains in efficiency and cost savings. The Bill is to be reported back to Parliament by the Select Committee on 13 November 2009, and is likely to become law in early 2010.

Authors

Duncan Laing

Partner - Public Sector

DDI: +64 4 924 3406 / +64 3 365 8056

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Michael Sage

Partner - Corporate & Commercial

DDI: +64 9 977 5006

Mobile: +64 21 664 993

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Elisabeth Welson

Partner - Corporate & Commercial

DDI: +64 4 924 3400

Mobile: +64 29 924 3400

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Michael Wood

Partner - Property & Infrastructure

DDI: +64 9 977 5329

Mobile: +64 21 772 974

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