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• Utilities & Corridors

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• Position Paper
• Regulatory Impact Statement
• Summary of Submissions
• Discussion Paper
• 19 Feb 2007 Forum

• Key Issues
• Discussion
  • Cost Sharing Arrangements for Works
  • Cost Sharing Arrangements for Auxiliary Charges
• Questions to Consider

Key Issues

58. The issue of sharing of the costs for utility related activities in the roading corridor has been an ongoing issue for both road controlling authorities and utilities for some time.

59. Issues that have arisen from consultation:

Is there inconsistency with the provision of cost sharing arrangements in the legislation?

Is there a lack of an accepted payment formula/ratio (depending on who wants the works, who owns them and who benefits from them)?

Is there agreement on the categories of chargeable services or on the principles for charging/not charging?

Discussion

60. There are two separate issues within the broader issue of cost sharing that will be addressed in this section:

1. Cost sharing arrangements for the works
2. Auxiliary service charges (e.g. inspections).

Cost Sharing Arrangements for Works

61. The NZUAG has identified 4 key issues in relation to charging for services in the road corridor as follows:

• Definition of the range of chargeable services and the beneficiaries;
• Establishment of fair and reasonable principles for charging and not charging;
• Definition of how charges are calculated and applied (i.e., application of fair ratios, e.g., 50:50 provisions); and
• Avoidance of duplication of charges.

62. For the relocation of utilities caused by another party's work within the road, it could be argued that the full cost should fall with the party initiating the work since it represents a cost of the work they are doing, and is not being caused by the utility asset owner. With 50:50 provisions there are circumstances where it may not be fair, e.g., in some cases a relocated utility will result in a brand new section of the network and the original network may have been at the end of its economic life.

63. The opposite of this is where an asset may have only recently been installed, and the utility has sought the approval of the road controlling authority and gained confidence that the road would not be altered in the near future, only to find that it is required to be shifted.

64. Table 2 illustrates the various statutory provisions for cost sharing for utility works within the road.

65. Section 54 of the Transit New Zealand Act 1989 (the removal of roadside structures) considers that where any structure has been erected upon, under or over any road by any utility authority, "the reasonable costs, subject to any agreement to the contrary, incurred by a utility authority in removing any structure shall be borne by the controlling authority and the utility authority in equal shares". A controlling authority or utility authority may apply to the District Court to vary the proportions in which the costs and the compensation shall be borne, and the District Court's decision shall be binding. Within the Act a "utility authority" means the Crown, a local authority, company or person lawfully authorised to construct, maintain, utilise or use the structure. Therefore this applies to Transit New Zealand Ltd (if they are a utility authority), local authorities (e.g. water, waste water, storm water) or utility owner.

66. Section 148 of the Telecommunications Act 2001 notes that if there is an alteration to a line on a road (requested by the owner), the person who makes the request is to meet the costs. The network operator may require the person who makes the request to pay the cost of the alteration. However, the network operator is not entitled to be paid the cost of any improvement to a line. The Telecommunications Act does not seem to provide an explicit provision for an "agreement to the contrary", but this could be covered by Section 54 of the Transit New Zealand Act 1989. As the Telecommunications Act does not provide any clause that negates Section 54 of the Transit New Zealand Act, it applies.

67. Section 33 of the Electricity Act 1992 indicates that the costs of work required by a RCA shall be paid by the person that requires the work to be done. However, where a RCA requires the work (as defined in the Transit New Zealand Act 1989), the owner of the works shall pay for the costs of all fittings and the owner of the works are also required to pay for increased costs or where the works are reconstructed to specifications different from those of the original works. This section is subject to any agreement between the persons requiring the work to be done and the owner of the works, i.e. alternative agreements are possible.

68. Section 24 of the Electricity Act 1992 (construction or maintenance of works in the road) notes that a local authority (or other body with road jurisdiction) may require the electricity operator to meet the reasonable costs and expenses of the local authority (or other body with road jurisdiction). Under the provisions of the Gas Act 1992, where a local authority requires work to be relocated this shall be paid for by the person that requires the work to be done. However, if it is a controlling authority (as defined in the Transit New Zealand Act 1989), the cost of fittings shall be paid for by the owner and increased costs or costs as a result of different specifications shall be paid for by the owner of the works. The provision for an alternative agreement is also available under the Gas Act 1992. The appeal provision against these provisions is by reference to an arbitrator under the provisions of the Arbitration Act. Both the Electricity Act 1992 and the Gas Act 1992 specifically provide that Section 54 of the Transit New Zealand Act 1989 shall not apply to electricity and gas.

69. The Railways Act 2005 provides no mechanism for cost sharing for works in the road corridor. However, for utility access to the rail corridor, section 75 in the Railway Act 2005 gives the railways premises owner the right to set "reasonable" charges for granting access to works, that a charge for "a deed" or "agreement" must be "reasonable" and, similarly, access cannot be denied without "reasonable" grounds. In addition, section 75(7) states that the rental "from an easement granted to a public body on, over, or under a railway at a level crossing may be no more than nominal." The requirement for permission is imposed in section 75 "despite anything in any other Act", which negates rights under the other key infrastructure Acts, including the Gas and Electricity Acts 1992.

70. Under the Railway Safety and Corridor Management Act 1992 there was no restriction on the conditions that could be specified by a rail operator. Therefore, if a charge was imposed there were no criteria of reasonableness. Under the Railways Act 2005, this has been amended to ensure that any charge imposed must be "reasonable" (clause 75(4) of the Act).

71. Finally, section 198 of the Local Government Act 2002 indicates that a local authority may require a development contribution to be made when it grants a consent (resource and building) or an authorisation for a service connection. Development contributions may be required in relation to developments if the effect of the developments is to require new or additional assets or assets of increased capacity and, as a consequence, the territorial authority incurs capital expenditure to provide appropriately for reserves, network infrastructure or community infrastructure. Under section 197, it "does not include the pipes or lines of a network utility operator", however, this may mean that it could still cover other utility assets such as cellular network towers, cabinets, or letter boxes, for example.

72. In terms of non-statutory activity, the New Zealand Committee for the Co-ordination of Power and Telecommunication Systems (NZCCPTS) has produced a guide which sets down principles for determining the apportionment of costs between electricity and telecommunications network operators when cases of earth potential rise (EPR) hazard, induction hazard or interference to telecommunication networks require investigation and remedial action, and incur expenditure by either or both parties.¹³ The principles are aimed at achieving resolution of issues by agreement, thus avoiding costly litigation.

73. In 2004 the NZUAG carried out a survey of RCAs to help gather information on charging between RCAs and utilities as part of the Road Opening and Service Location processes. The survey provides a good indication of current practice and the NZUAG proposes to carry out further work on this issue, in particular the development of a Guideline to outline current legislative provisions and best practice for the various charging and cost relationships between utilities and road controlling authorities. In particular the Guideline could:

• provide legal clarification of whether the Transit New Zealand Act (section 54) applies to local authorities or not.
• explain the current legislative provisions for RCAs and utilities in plain language.
• discuss the advantages and disadvantages of cost sharing - from the perspective of the party initiating the work paying the full cost, 50:50 provisions, and the cost of the utility paying all the work.
• provide case studies of "agreements to the contrary" for different approaches.

74. Another issue is the long term damage of utilities to the road asset. RCAs note that there is a need to consider fair apportionment of the true whole of life costs.

Cost Sharing Arrangements for Auxiliary Charges

75. A further issue to consider is the charging for auxiliary service costs by local authorities to utility operators. This covers charges for expenditure that local authorities incur in their duty to inspect and audit utility network additions, maintain a register of utility network locations, ensure traffic safety, and ensure the return of the road to a state of roadworthiness post utility works. Currently, only some local authorities charge for these services, creating a perceived imbalance of fairness. A consequence is that extra charges create a disincentive for utility operators to disclose locations of networks to local authorities.

76. While this is an issue causing concern, the Ministry believes that local government and industry stakeholders are the more appropriate parties for discussing and implementing remedies to achieve consistency and fairness.

Questions to Consider

77. The Ministry offers no proposals for this issue at this stage. Instead the Ministry calls for submissions on the following questions:

What problems have respondents experienced with cost sharing arrangements for utility work within the road corridor?

Is there good reason for the legislative differences for cost sharing arrangements?

Should the legislation be consistent?

What solutions do respondents propose as providing the most balanced and effective outcome for resolving legislative inconsistency for cost sharing arrangements for utility work within the road corridor?

What solutions do respondents propose for ensuring the fair apportionment of the true whole of life costs of utility works to the road asset?

¹³New Zealand Committee for the Co-ordination of Power and Telecommunication Systems (NZCCPTS) (2002). Guide for Cost Apportioning Principles for the Mitigation of Hazards and/or Interference Between Power and Telecommunication Networks [link to NZCCPTS website].