On 18 June 2004 the ACCC held a public forum on its draft decision relating to TransGrid’s revenue cap for the period 2004–2009. Commissioner John Martin chaired the meeting and emphasised that the forum was an opportunity for participants to comment on the draft decision and that the ACCC would take their comments into consideration. The forum saw interested parties offer constructive comments on the draft decision and each other's submissions. Several speakers introduced new arguments in their presentations and foreshadowed additional data in written submissions.
Mr David Croft, Chief Executive Officer of TransGrid, made several points regarding the draft decision which foreshadowed the more detailed response which would be included in TransGrid's written response. Mr Croft’s presentation is on the ACCC website. Several user group representatives also addressed the forum and raised issues of concern to them and their constituents.
Among the speakers and attendees were TNSPs, user groups and other interested parties such as electricity generators. Presentations from the forum are on the ACCC website. Submissions on the draft decision were due by 2 July 2004.
As noted in the draft decision the ACCC is in the process of developing a new capital expenditure framework which will be applied in the final decision. Therefore, TransGrid is to resubmit its forecast capital expenditure program by late October 2004 consistent with this new capital expenditure framework. The ACCC will review this application and release a supplementary draft decision on forecast capital expenditure by mid-February 2005.
The final decision will be released in April 2005.
On 23 September 2003 EnergyAustralia submitted its revenue cap application to the ACCC. The ACCC determined that EnergyAustralia’s application failed to provide sufficient information and the ACCC requested EnergyAustralia submit additional information to substantiate its claims. EnergyAustralia provided additional information in October and November 2003.
The ACCC invited interested parties to comment on the issues raised in EnergyAustralia’s application by 30 January 2004. The ACCC received four submissions.
The ACCC engaged a consultant to assist in determining the revenue cap for EnergyAustralia. The ACCC published the consultant’s report and called for submissions on 29 March 2004. The ACCC received three submissions on the consultant’s report.
The ACCC released its draft decision for public consultation on 4 May 2004. Submissions on the draft decision are due by 2 July 2004. The ACCC held a public forum on its draft decision in Sydney on 18 June 2004. Seven interested parties addressed the forum. The issues raised in submissions and at the public forum will be taken into consideration by the ACCC in finalising its revenue cap decision.
As noted in the draft decision the ACCC is in the process of developing a new capital expenditure framework which will be applied in the final decision. Therefore EnergyAustralia is to resubmit its forecast capital expenditure program by late October 2004 consistent with this new capital expenditure framework. The ACCC will review this application and release a supplementary draft decision on forecast capital expenditure by mid-February 2005.
The final decision will be released in April 2005.
Authorisation to amendments to the National Electricity Code—amendments to Victorian derogations—metering
On 6 April 2004 the ACCC received applications for authorisations (A90915, A90916, A90917) 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 considered this request and has decided, pursuant to subsection 91(2) of the Trade Practices Act 1974, to grant interim authorisation to the application. Interim authorisation has been granted due to the imminent expiry of the current derogations on 30 June 2004.
However, the ACCC has not formed a view on the public benefits of Victoria’s application. This aspect will be more fully considered in the ACCC’s final determination.
The interim authorisation became effective from 17 June 2004 and will lapse when the ACCC’s final determination comes into force. Under subsection 91(2) of the Act the ACCC may revoke an interim authorisation at any time.
Minor variations to the authorisation of the National Electricity Code—amendments to NSW derogations—transmission pricing
On 18 June 2004 the ACCC received applications under section 91A of the Act for minor variations to the existing authorisations of the code (A40074, A40075, A40076, as amended). NECA lodged the applications on behalf of the NSW Minister for Energy and Utilities. A request for interim authorisation was made at that time of lodgment of the application.
The applications relate to derogations governing the network pricing arrangements to apply in NSW. The derogations are designed to mitigate risks that may arise from the timing of the ACCC’s revenue cap decisions for TransGrid and EnergyAustralia. The proposed derogations replace similar derogations put in place at the time of the ACCC’s first revenue cap decisions for TransGrid and EnergyAustralia.
The ACCC has considered this request and has decided, pursuant to subsection 91(2)(e) of the Trade Practices Act, to grant interim authorisation to the derogations as submitted on 18 June 2004. This interim authorisation came into force on 23 June 2004 and will lapse when the ACCC’s final determination in regard to each application comes into force, unless revoked before this date.
Mike Buckley, Manager of the ACCC Gas Group, attended the South East Asia Australia Offshore Conference held in Darwin on 8 June 2004.
In his speech to the gathering of gas industry developers, a summary of which follows, Michael addressed the state of the gas sector in Australia and, by way of introducing the newly legislated Australian Energy Regulator (AER), reviewed the regulator’s legacy from a decade of administering the gas code.
The gas code
The ACCC is somewhat unique as a regulatory body, in part because we have responsibility on both sides of the market—consumer protection and promoting competition. Crucially, we are also responsible for regulation of aspects of the deregulated government monopolies such as gas, electricity and telecommunications.
The opening up of the gas sector to competition flowed from the 1994 Council of Australian Governments agreement on Free and fair trade in gas. These reforms recognised that simply privatising or deregulating the gas sector would, on its own, do little to promote competition because it would in most regions simple turn a state-owned monopoly into a private monopoly.
The gas code—as it is now known—was furthered through the 1997 Natural gas pipelines access intergovernmental agreement, which sets down the current legislative and regulatory framework for the gas industry.
The aim of the ACCC when administering the gas code is to achieve the same sort of outcome in terms of access prices and quality of service that would occur in a competitive market. From the experience of the past decade, the ACCC’s application of effective and careful regulation has been a success and should continue for the benefit of the gas industry and the wider Australian public.
The focus of the conference was the development of oil and gas reserves in Northern Australia and surrounding areas. Most of these reserves are located offshore and, for the moment, producers in Northern Australia are seeking markets outside of Australia for their gas.
This export focus requires massive and risky capital investment to build processing and transport facilities. These developments are underpinned by long-term contracts and are taking place in a highly competitive international environment.
The domestic market is somewhat different. Australia possesses very large reserves of natural gas. Known reserves could meet domestic demand for more than 100 years at current consumption levels.
However, while the vast majority of Australia’s population is in the south-east, nearly 90 per cent of these gas reserves are located at the exact opposite end of the country in basins off the north-west coast of Western Australia.
The gas reserves in south-east Australia that supply the major population centres are modest, but sufficient to meet demand for the next decade.
In August last year the Ministerial Council on Energy agreed to establish a single new regulator for both gas and electricity—the Australian Energy Regulator or AER.*
The AER will be a constituent part of the ACCC but a separate legal entity. This means that the AER will have the power to make decisions on regulatory matters independently of the ACCC.
However, it is intended that there will be a single body of staff providing assistance to both the AER and to the ACCC on energy matters to avoid duplication.
The objective in establishing a single energy regulator was to ensure a consistent approach to regulating gas and electricity that did not create unnecessary costs.
It was also acknowledged that making the AER a constituent part of the ACCC would ensure the new regulator could draw on the skills and expertise of the ACCC.
The AER will initially have responsibility for electricity transmission revenue regulation in the National Electricity Market. The AER will also be responsible for enforcing the National Electricity Code, with provision made for the Northern Territory and Western Australia to join at a later date.
On or before next July the AER will regulate gas transmission for all jurisdictions except Western Australia, again with provision for Western Australia to join at a later date, possibly 2006.
The AER will become responsible for national regulation of energy distribution and retailing (other than retail pricing) by 2006.
The nature of energy regulation will also be influenced by the response of Commonwealth, state and territory governments to the Productivity Commission report on the gas code.
