ACCC, AER release energy infrastructure paper ahead of NSW election

THE Australian Competition and Consumer Commissioner (ACCC) and Australian Energy Regulator (AER) have jointly published the tenth paper in the ACCC/AER Working Paper Series: International Insights for the Better Economic Regulation of Infrastructure.

Staff Reporter

The paper is based on a major study of seven key infrastructure areas - energy, telecommunications, postal services, water and wastewater, rail, airports and ports - across 17 countries including Australia.

These countries include the 10 largest economies in the OECD and encompass a wide range of physical, economic and social conditions.

One key aspect of the paper relates to the energy infrastructure sector, which has been a hot topic with the looming NSW elections.

With the election less than two weeks away, NSW Premier Mike Baird, is promising to privatise the electricity network in the state.

The NSW government plans to lease 49% of NSW's electricity networks (the "poles and wires") to a private operator for 99 years to fill the coffers of its Rebuilding NSW infrastructure fund.

The deal is projected deliver $20 billion to the state, including interest earned on the proceeds of the lease accrued and payments from the Commonwealth's asset recycling initiative.

Baird said the election would be a referendum on privatisation, but would likely rely on the government's overall popularity to withstand the electorate's opposition to his signature policy.

In releasing the paper, ACCC chairman Rod Sims said: “The arrangements for the economic regulation of infrastructure affects pricing and quality of service outcomes for consumers, as well as the level of investment and economy-wide productivity growth."

AER statistics show Australia's highest electricity bills - $2,388 a year - are in South Australia, a privatised network. SA also has the highest rate of customer disconnections.

Meanwhile, Sims said the cost structure of the energy networks is much higher in NSW and Queensland than in states with privately owned networks.

“This paper provides insights for the continuous development of Australia’s regulation of infrastructure by comparing and contrasting regulatory design, processes and practices that exist around the world," Sims added.

“While this research suggests that Australia is in a comparatively good position with respect to regulatory design and practice, there are a lot of good ideas around that are worth considering. There are also some lessons of the other kind – things that should probably be avoided.”

Key insights highlighted in the paper include:

  • ​Regulatory agencies that are independent of government are a common feature of the surveyed jurisdictions. However, the precise nature of ‘independence’ varies across countries, with ministerial involvement in regulation evident in a few.
  • Regulators in most surveyed jurisdictions are assigned efficiency-based objectives. Where regulators are given broader remits, such as the promotion of social and environmental objectives, conflicts with regulatory objectives often arise.
  • The collection of regulatory responsibilities for a number of infrastructure industries in a single institution, at least to the sectoral level (for example, energy or communications), is common.
  • In four of the five surveyed jurisdictions where national multi-sectoral regulators exist, the multi-sectoral regulator also has responsibility for competition enforcement. There appears to be a trend towards a single-institution model, with Spain and the Netherlands both combining regulatory and competition activities in recent years.
  • Regulators are placing an increasing emphasis on establishing processes for more effective ‘engagement’ with consumers.
  • The surveyed jurisdictions have different approaches to issues of information asymmetry between regulators and the businesses they regulate; balancing the trade-off between broad information collection powers, the protection of commercial-in-confidence information, and timeliness in regulatory processes.
  • Innovations such as ‘alternative dispute resolution’ and negotiated settlements can potentially speed-up regulatory outcomes if they are successful in avoiding the full, formal regulatory process. However, speedier decision-making may come at the cost of diminished consultation and less transparency.

As this is a working paper, the views expressed are those of the authors and not necessarily those of the ACCC/AER.

Nevertheless, the ACCC/AER considers that these working papers are part of its important role to disseminate material that will inform discussion of how to regulate nationally significant infrastructure to achieve good outcomes for Australian consumers and businesses.

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