Wellington City Council has accidentally been undercharging for water meters, leaving the organisation with a potential $3 million shortfall. 

But residential and commercial water meter users won't be lumped with the bill as the council is proposing to debt fund the shortfall, rather than attempt to recover the money. 

Meanwhile, a senior rates expert has been seconded from Auckland Council to help out with the situation. 

Wellington City Council chief financial officer Sara Hay said the shortfall was the result of a data-inputting error through a combination of systems and manual processes. The error was detected late last year. 

"This is a very unfortunate situation and I have undertaken a review of our procedures and checking system to ensure that this doesn't happen again." 

Meter users were supposed to be charged $2.88 per cubic-metre of water but were in fact charged $2.435/m3. Additionally the annual rate for the fixed charge per water meter connection was supposed to be $160.68 but users were charged $135.96. 

There are 3151 commercial water meters around the city and 630 residential water meters. 

Hay said the error could result in a $3 million revenue loss for the council, depending on actual water usage for metered accounts versus budgeted volumes. 

Council officials have recommended that any shortfall should be debt-funded, which will be considered at an Audit and Risk Subcommittee next week. 

"Debt funding any shortfall is recommended given the administrative efficiencies available, over the costs and uncertainties of initiating a statutory process to replace the rates settings", a report in the subcommittee's upcoming meeting agenda said. 

"Not explicitly debt funding any shortfall lacks sufficient transparency." 

As well as improvements to systems and processes to prevent errors like this occurring in the future, an independent third party is being engaged to provide quality assurance these changes will work as intended. 

Furthermore, a senior rates expert has been seconded from Auckland Council to work alongside staff to improve capabilities and systems. 

If the proposal is approved, the correct charge will appear on the first-quarter invoice for the 2022/23 financial year in July.