From 1 July 2004 the ACCC, in accordance with its responsibilities under the National Electricity Code, will reset the maximum allowable revenue for EnergyAustralia and TransGrid for the 2004 to 2009 regulatory period.
On 23 and 26 September 2003 EnergyAustralia and TransGrid submitted their applications to the ACCC. The ACCC determined that these applications failed to provide sufficient information and requested additional information.
EnergyAustralia and TransGrid provided this in October and November 2003. The ACCC invited interested parties to comment on the issues raised in EnergyAustralia’s and TransGrid’s applications by 30 January 2004. The ACCC received five submissions.
The ACCC engaged a consultant to assist in determining the revenue caps for EnergyAustralia and TransGrid. The ACCC published the consultant’s reports on 26 March 2004 and called for submissions on 8 April 2004. The ACCC has received several submissions.
The draft decisions were provided to the ACCC and the Energy Committee the week of 26 April 2004.
The ACCC expects to publish its draft decisions for public consultation in early May 2004. The final decisions are likely to take several months to complete.
SPI PowerNet application for pass-through of a change in taxes event and VENCorp application for adjustment to its MAAR
The Land Tax (Amendment) Act 2004 (Vic) will extend Victoria’s land tax regime to easements held by electricity transmission companies in Victoria. The new tax will apply to transmission easements from 1 July 2004.
Because of the land tax amendments SPI PowerNet (SPI) submitted a pass-through application to the ACCC on 7 April 2004. SPI’s application sought to obtain pass-through for the 2004–05 tax liability and associated administration costs as a ‘changes in tax’ event under the pass-through rules contained in its 2002 revenue cap decision. SPI sought yearly pass-through approval for the remainder of its regulatory period.
On 16 April 2004 VENCorp submitted an application for an adjustment to its maximum allowable aggregate revenue (MAAR) for the remainder of its regulatory period. The estimated revenue requirements in VENCorp’s application are contingent on the ACCC’s approval of SPI’s pass-through application. VENCorp’s application includes adjustments to reflect the effect of the extension of the land tax regime to SPI’s easements, payments of prescribed service charges to Murraylink because of Murraylink’s conversion to regulated status and annual charges relating to approved augmentations identified during the Murraylink conversion process.
The ACCC has consulted with interested parties on the applications and has taken into consideration comments provided in making its decision. The ACCC has approved SPI’s application for pass-through and VENCorp’s application for adjustment to its MAAR. The ACCC made its decision on 28 April and wrote to SPI and VENCorp on 30 April advising of its decision. These letters have been published on the ACCC’s website.
Minor variations to existing authorisations of the National Electricity Code
On 16 December 2003 the National Electricity Code Administrator (NECA) lodged two minor variations to the existing authorisations of the code relating to:
generator registration
inter-network testing.
The ACCC released its determination on both these matters on 3 March 2004. The ACCC’s determination grants authorisation to the minor variations without amendment.
Authorisation of amendments to the National Electricity Code—inter-regional settlement agreements
On 16 December 2003 the ACCC received applications for authorisation of amendments to the code relating to provisions facilitating inter-regional transfers. The applications were submitted by NECA.
These provisions relate to paying an importing region the relevant settlements residue auction proceeds on the basis that the importing region makes negotiated payments to the exporting region for use of its network assets. Victoria and South Australia are the only regions to have negotiated an agreement under these provisions. It was proposed that the provisions be extended until 1 July 2006.
The ACCC received no submissions and released its draft determination on 3 March 2004 proposing to grant authorisation.
The ACCC subsequently received no submissions on the draft determination and therefore authorisation was granted and the final determination released on 25 March 2004.
Authorisation of amendments to the National Electricity Code—Hydro Tasmania metering
On 16 December 2003 the ACCC received applications for authorisation of a derogation to the code. Hydro Tasmania (Hydro) is currently preparing for Tasmania’s entry to the national electricity market (NEM) in May 2005. It has embarked on a major program of upgrading its metering installations. Hydro is seeking a derogation under chapter 8 of the code should its metering program slip. The derogation would exempt any metering installations that have not been upgraded at the time of Tasmania’s entry to the NEM from the relevant metering provisions of the code for a maximum of 12 months. As part of its public consultation process, the ACCC called for submissions. No submissions were received and the ACCC released its draft determination on 10 March 2004.
Once again, submissions were called for. No submissions were received and a PDC was not called. The final determination was then released on 7 April 2004 accepting the authorisation of derogation. The determination grants authorisation without conditions.
Authorisation of amendments to the National Electricity Code—despatching the market
On 16 December 2003 the ACCC received applications for authorisation of a derogation to the code relating to the management of network limitations and constraint formulation in the NEM.
NECA states that the proposed code changes address the inadequacy of existing arrangements in managing power system security and efficient use of available transmission capacity in the short term. The changes provide the National Electricity Market Management Company (NEMMCO) with express powers to manage negative settlement residues and to combine inter and intra-regional limits in the same constraint equations. The derogation has a sunset clause which means it will cease to have effect at the end of December 2004.
The ACCC received one submission on this matter.
The ACCC considers that the overall approach is a pragmatic interim response. The approach has the benefit of promoting interregional trade by providing firmness in the settlement residue auctions, which is essential to promoting a national market. The approach is a transparent and consistent short-term solution.
The ACCC released its draft determination on 7 April 2004. No submissions were received and no pre-determination conference was requested. Consequently, the ACCC released its final determination on 28 April 2004.
Authorisation of amendments to the National Electricity Code—amendments to Victorian derogations
On 18 March 2004 the ACCC received applications for authorisation (Nos A90909–11) of amendments to the Victorian derogations in chapter 9 of the code. The applications were lodged on behalf of the Victorian Minister for Energy Industries and Resources.
The amendments clarify the application of the existing Victorian derogations. In particular, the derogations seek to clarify that VENCorp, Victoria’s transmission planning body and provider of transmission network services, has the ability to fully recover its costs within a regulatory period. The ACCC consulted interested parties on NECA’s application, receiving one submission from TransGrid.
On 29 March 2004 the Victorian Minister for Energy Industries and Resources requested that the ACCC grant interim authorisation to the derogations. The minister requested this primarily because of the decision to extend the Land Tax Act 1958 (Vic) to SPI PowerNet’s transmission easements and the requirement that transmission companies publish their transmission charges each year by 15 May 2004.
The ACCC granted interim authorisation to the applications on 14 April 2004. The decision to grant interim authorisation was made to give full consideration to the applications while allowing the proposed changes to become operational before the deadline for transmission charges are published. The interim authorisation came into force on 15 April 2004 and will lapse when the ACCC’s final determination on each application comes into force, unless revoked before this date.
On 22 April the ACCC released its draft determination in response to the applications. In its decision the ACCC proposes, subject to any pre-determination conference called before 6 May, to grant authorisation to the applications. Submissions on the draft determination close on 13 May 2004. If no pre-determination conference is called or no written submissions are received then the draft determination will form the basis for the final determination.
Authorisation to amendments to the National Electricity Code—amendments to Victorian derogations (metering)
On 6 April 2004 the ACCC received applications for authorisations (A90915–17) of amendments to the Victorian derogations. These applications were lodged by the National Electricity Code Administrator (NECA) on behalf of the Victorian Minister for Energy Industries and Resources.
The stated purpose of the applications for authorisation is to extend the existing Victorian derogations contained in chapter 9 of the code. The existing derogations relate to chapter 7 of the code, and grant exclusivity for the provision of metering services by distribution businesses in Victoria.
The ACCC has called for submissions on the applications which close Friday 7 May 2004.
On 16 September 1998 the ACCC, under s. 44ZZAA of the Trade Practices Act, accepted chapters 1, 2 and 4–10 of version 2.3 of the code as an industry access code, referred to as the NEM access code. The ACCC accepted variations to the NEM access code on 20 January 1999.
Since that time there have been several code changes which have been authorised by the ACCC under Part VII of the Act. Those changes also vary components of the code which comprise the NEM access code or affect the NEM access code. On 10 May 2002 the ACCC received a further application from NECA to vary the NEM access code. NECA sought to include all provisions of the code, incorporating any amendments to the code as of 10 May 2002 in the NEM access code. This would have included chapter 3 of the code in the NEM access code for the first time.
Under s. 44ZZAA(6) of the Act, the ACCC consented to the application by NECA dated 10 May 2002 to vary the NEM access code except to the extent that the application proposes to include chapter 3 in the NEM access code. However, where deemed appropriate, the ACCC may consent to an application by NECA to vary the NEM access code to include such provisions in chapter 3 as, from time to time, are necessary or incidental to the operation of the other chapters that form the NEM access code.
The ACCC’s decision took effect from 11 March 2004.
Statement of principles for the regulation of transmission revenues
The ACCC released of the draft regulatory principles and developments during this period, the ACCC is currently reviewing its draft regulatory principles. In August 2003 the ACCC released a discussion paper outlining several key issues for review and called for submissions.
The ACCC held a workshop on 2 April to discuss the key issues of the review. After taking into account discussions at these workshops and issues raised in submissions the ACCC will release a revised version of the regulatory principles by the end of July 2004. The ACCC plans to release the final document by the end of 2004.
The ACCC released its service standards guidelines on 12 November 2003. After the release, ACCC staff formed a working group of industry participants to provide input in developing a sound and practical market-based performance-incentive scheme to add some market impact measures to the service standards guidelines. The working group has met on three occasions and is working towards a practical framework which can be used as an input to improving the service standards guidelines.
The working group consists of relevant industry participants (e.g. generators, transmission companies, retailers, consumer representatives, NECA, NEMMCO and ACCC staff, as well as ACCC consultants).
In December 1999 the ACCC published its regulatory test, which is the prudency test set out in the code to assess the economic efficiency of investment decisions.
The regulatory test is currently under review. As part of its review process the ACCC published an issues paper in May 2002 and a discussion paper on 5 February 2003. A competition benefits and market review forum was held in July 2003. Public consultation was invited in each of the above cases, and all submissions considered.
On 10 March 2004 the ACCC released its draft decision on the review of the regulatory test. An important element of the draft decision is the definition of competition benefits, which has been a contentious issue throughout the consultation process.
The ACCC has invited submissions on the draft decision and will consider these submissions before issuing a final decision. The ACCC considers that the regulatory test will ultimately form part of its statement of principles for the regulation of transmission revenues.
The ACCC issued its final approval regarding the terms and conditions of gas transportation services for the Moomba to Sydney pipeline (MSP) on 8 December 2003.
On 19 December 2003 EAPL lodged an application with the Australian Competition Tribunal for review of the ACCC’s decision to draft and approve its own access arrangement. The tribunal’s hearing of this matter concluded on 22 April 2004. The issues to be determined by the tribunal are:
the initial capital base for the whole of the MSP
the benchmark credit rating to be applied when determining the WACC.
Coverage of the Moomba to Sydney pipeline system
On 19 November 2003 the Minister for Industry, Tourism and Resources, the Hon. Ian Macfarlane, released his decision on EAPL’s application for revocation of coverage under the gas code of the Moomba to Wilton mainline and Canberra lateral.
The minister decided that coverage should be revoked between Moomba and Marsden, but that coverage would remain between Marsden and Wilton and also on the Canberra lateral.
On 5 December 2003 five parties, Orica IC Assets Ltd, Endeavour Coal Pty Ltd, Amcor Limited, Energy Users Association of Australia Inc. and Energy Action Group Inc. lodged an application for review of the minister’s decision.
The review process was terminated on 20 April following the withdrawal of the last of the applicants (Orica). The minister’s decision now applies. The ACCC therefore no longer has the authority to regulate the terms and conditions of access, including reference tariffs, between Moomba and Marsden.
Productivity Commission review of gas access regime
On 19 March 2004 the ACCC provided a further submission to the Productivity Commission in response to its draft report of the ‘Review of the gas access regime’. The submission addresses the Productivity Commission’s key finding that the current regime requires significant adjustment.
The ACCC’s submission reviews the conceptual arguments and anecdotal evidence relied on by the Productivity Commission. The submission also provides empirical evidence indicating that the current gas framework has the potential to increase Australia’s GDP by up to $1.1 billion over the next decade.
The ACCC concludes that a cautious and measured approach to reforming the gas code is needed. The Productivity Commission is due to release its final report in June 2004.
