On 14 September 2005 the ACCC granted a second extension of time to Epic Energy South Australia Pty Ltd (EESA) for it to lodge revisions to the access arrangement for the Moomba to Adelaide Pipeline System (MAPS) until 16 January 2006.
EESA applied to the National Competition Council (NCC) on 15 March 2005 for revocation of the MAPS as a covered pipeline. It submitted to the ACCC that an extension of time could help limit the resources spent on the revisions since it would not need to prepare and lodge the revisions if its revocation application was successful. EESA undertook to commence the work required to prepare the revisions if the NCC makes a final recommendation to the minister not to revoke coverage.
The second extension of time is to accommodate changes to the NCC’s timetable for making recommendations.
On 7 September 2005 the ACCC decided not to grant APT Petroleum Pipeline Limited (APTPPL) an extension of time to lodge revisions to the access arrangement for the Roma to Brisbane Pipeline (RBP).
APTPPL requested an extension until six months after the Federal Court releases its decision on the ACCC’s appeal of the Australian Competition Tribunal’s determination regarding the Moomba to Sydney Pipeline access arrangement.
After considering submissions from interested parties the ACCC concluded that the extension was not warranted and that it is reasonable for APTPPL to develop the revised access arrangement and to incorporate any new information when it occurs.
The ACCC is assessing Central Ranges Pipeline Pty Ltd’s proposed access arrangement for the pipeline it is building to transport gas from Dubbo to Tamworth in NSW. One submission was received from an interested party by the specified date of 23 September 2005. The ACCC will release its draft decision on the proposal after it has considered this submission and any other relevant matters.
There are two accounting approaches to recognising the point in time when capex is included in a Transmission Network Service Provider’s (TNSP’s) regulatory asset base. These accounting approaches are:
the ‘as-incurred’ approach where the record of capital expenditure in any one year is based on expenditure in that year
the as ‘as-commissioned’ approach where the record of capital of expenditure depends on whether the asset related to that expenditure has been commissioned.
TNSPs in the national electricity market (NEM) have adopted different regulatory accounting methods. The choice of accounting approach affects the compilation of regulatory accounts. More importantly it also affects the calculation of allowed revenues during the regulatory control period, and the method for establishing the closing regulatory asset base at the end of the regulatory period. As a result, the choice of accounting methodology is a significant input underpinning the operation of the AER’s regulatory regime.
The AER’s statement of regulatory principles (SRP) does not provide any guidance on this issue and the AER has previously provided flexibility in terms of an accounting approach that may be applied by the TNSPs. In view of the revised regulatory arrangements under the SRP, the AER has released a position paper inviting comments from interested parties on the two accounting approaches in terms of the compatibility of each accounting approach to the ex ante incentive arrangements, administrative complexity, and consistency of comparing expenditure across TNSPs. The AER’s preliminary position based on an examination of the issues identified in the paper is to favour an ‘as-incurred’ accounting approach that should be applied by all TNSPs in the NEM.
Public comments on this paper close on Monday 17 October 2005 and the AER will consider these comments in informing its decision. The AER expects to make a decision no later than 25 November 2005.
The establishment of the AER is a core component of the reform of the energy regulatory framework. The goals of the new organisation are very clear; increasing the efficiency, transparency and predictability of regulatory decisions, to ensure a streamlined and efficient process and ensuring a consistent framework across the jurisdictions.
The AER considers that the rules governing a revenue determination should be clear to the industry well in advance of any decision. In other words, the methodology to be used by the regulator in conducting their process should be apparent well in advance and not be changed halfway through.
Accordingly, the AER published a compendium of regulatory guidelines for electricity transmission on 22 August 2005. The compendium is largely based on approaches developed by the ACCC, but draws all material together as a complete set of reference documents, including the Statement of Principles for Regulation of Electricity Transmission Services (SRP).
The compendium has been designed to evolve over time. The AER will monitor the effectiveness of these guidelines and review aspects in response to issues raised by industry and other interested parties and as circumstances, theory and best practice regulation develop.
The AER is considering ways of improving the current process to make regulation less intrusive and more efficient. All interested parties have a role to play in improving the processes. There are some sectors of industry that are guilty of a myopic approach to regulation, in that some seek to 'win points' on great detail. The current reforms of the regulatory framework provide an opportunity for parties to take a step back and examine how they approach the regulatory process.
However, none of this should be read to mean that the AER will be taking an approach which seeks to skew the outcome in favour of higher returns to infrastructure owners. The focus will remain on ensuring that consumers are able to share in efficiency gains and that the right incentives are placed on participants. Again, these reforms are about increasing the quality of regulation.
It is clear that one of the biggest strengths of the ACCC’s approach to regulatory decisions has been its open and transparent consultation processes. The AER is keen to ensure that this form of consultation process is continued and is built upon.
It is worth noting, however, that the consultation processes are only ever going to be as good as the input that is received. To date, industry participants have been active and effective participants in consultation processes, however, consumer groups may not have been quite as effective in this process. One of the challenges to overcome is how consumer groups can be effectively engaged in the regulatory process.
The obvious question for industry is what approach the AER will take in administering the new functions when they are transferred. As noted earlier, the AER is keen to develop an up-front set of rules and methodology for regulation, to maximise transparency and predictability. As the AER develops its approach it will consult extensively with all interested parties.
Airservices Australia (Airservices) has recently reviewed the basis of charging for its aviation rescue and fire fighting (ARFF) services with its customers, in anticipation of submitting a long-term path of prices for the ACCC to consider.
This review has involved Airservices releasing a paper which discusses alternative charging options for the ARFF service. Airservices has sought comment on the paper at consultation meetings with its customers at a number of Australian airports.
The ACCC also sought and received comment from a number of interested parties on the alternative charging options, in response to an issues paper released in August 2005.
Airservices’ review follows the ACCC’s 2004 preliminary decision to object to proposed price increases for these services, on the basis that the charging structure was unlikely to be efficient or equitable because the charges were not related to the impact of particular user groups on Airservices’ costs.
Airservices has indicated that it will submit a draft price notification to the ACCC on 30 September 2005. The ACCC will assess this draft price notification during October, and anticipates releasing a preliminary view for comment in November 2005.
Airservices’ options paper, the ACCC’s issues paper, and submissions from interested parties are available on the ACCC’s website.
In December 2004 Telstra lodged unconditioned local loop service (ULLS) and line sharing service (LSS) undertakings. The undertakings set out how Telstra proposes to meet its standard access obligations to supply these services.
The ULLS undertakings relate to the monthly and connection charges Telstra proposes for the ULLS and replaces the November 2003 ULLS undertakings. The LSS undertakings relate to the connection, disconnection and monthly charges proposed by Telstra.
The ACCC's draft decision on Telstra's ULLS and LSS monthly charges undertakings was released in August 2005.
On 28 September 2005 the ACCC informed Telstra it had extended the six-month timeframe for assessing Telstra's four undertakings by a further three months. As a result, the ACCC's period for assessment of the monthly rate undertakings under s. 152BU of the Trade Practices Act currently expires on 12 January 2006.
The draft decision on Telstra's ULLS and LSS connection and disconnection charges undertakings will be released separately.
The ACCC is required under the Act to have regard to the pricing principle determination when arbitrating an access dispute between telecommunications service providers on the mobile terminating access service (MTAS).
The Domestic MTAS is a wholesale input, used by providers of fixed-to-mobile and mobile-to-mobile calls, to allow their customers to call mobile phone users. It allows consumers (either fixed-line or mobile) to call mobile users connected to another network. The carrier whose customer initiates the call pays the carrier whose customer receives the call for the mobile terminating access service.
In June 2004 the ACCC determined pricing principles for the MTAS that included a new approach to regulating the price of the service. It aimed at ensuring a closer correlation between its price and cost.
The pricing principle determination provides that the price of the service should follow an adjustment path such that there is a closer association of the price and underlying cost of the MTAS. The determination also sets out price-related terms and conditions which provide indicative prices for the MTAS along an adjustment path. The indicative prices suggested a price of 21 cent per minute for the last half of 2004, dropping to 18 cents per minute from 1 January 2005, then to 15 cents per minute from 1 January 2006 and, finally down to the conservative benchmarked 'target' price of 12 cents per minute from 1 January 2007.
To the extent the MTAS price is set above cost, the ACCC has consistently argued this will have negative impacts in downstream markets. This will be particularly so in the market within which fixed-to-mobile services are provided where high termination prices end up being passed on to consumers in the form of higher prices for fixed-to-mobile calls.
The pricing principle determination also included indicative price-related terms and conditions that set a conservative benchmarked 'target' price of 12 cents per minute, to be reached over a staged adjustment period from 1 July 2004 to 30 June 2007.
Vodafone instituted proceedings in July 2004, challenging the power of the ACCC to include prices in its pricing principle determination. Vodafone also argued that the prices set out in the ACCC’s pricing principles determination should not apply to third generation (3G) mobile networks.
Vodafone's challenge was recently rejected by the Federal Court. Justice Edmonds found that the Act ‘does empower the Commission, if it decides to exercise the discretion vested in it by that provision, to specify a price or prices as part of its … determination …’. It was noted that such specification of prices are indicative only.
Justice Edmonds also upheld the ACCC's decision that the price-related terms and conditions should apply equally to the supply of the service on second generation (2G) and 3G networks.
On 19 September 2005, the ACCC released its latest Snapshot of Broadband Deployment.
The report shows that as at the end of June 2005, there were 2 183 300 broadband services connected across Australia.
This represents an increase of over 1 million customers, or 108 per cent, over the preceding 12-month period. Total quarterly growth in broadband was 18.7 per cent for the June 2005 quarter. This is broadly in line with the March 2005 growth (18.8 per cent). The take up of ADSL services continues to be significant, with more than 1.5 million customers connected to ADSL services in the June 2005 quarter.
The report details the deployment of broadband services throughout Australia as at 30 June 2005 and is based on data provided by major carriers of broadband services. The report includes aggregated data in relation to the availability of broadband services and gives estimated numbers of services in operation in respect of cable, satellite, ADSL, other DSL and miscellaneous offerings. However, not all broadband providers are included in this survey.
On 14 September 2005 the ACCC issued its final report on its inquiry into mobile international roaming.
International roaming enables mobile phone subscribers to use their mobile phone while travelling overseas. It enables travellers to make and receive voice calls, short message services (SMS), voicemail and other mobile services.
To enable travellers to use their mobile phones while travelling overseas, international roaming allows consumers to temporarily connect to (or 'roam' on to) a mobile network when using their mobile phones in overseas countries. For this service to be provided, the mobile phone service provider used by a consumer in Australia must enter into a wholesale roaming agreement with a mobile network operator in the overseas country where the consumer is travelling.
The ACCC's final report expresses concerns that prices for international roaming services appear to be very high—especially as compared to charges set for other mobile telephone services. The inquiry also found that the most significant factor in the setting of retail prices paid by Australian travellers for international roaming services are the wholesale charges set by overseas mobile network operators when consumers roam onto their networks.
While these charges are likely to be pushing up the price of international roaming services for Australian travellers, the ACCC does not have jurisdiction to directly regulate wholesale charges set by overseas mobile operators.
However, the final report does observe that competition in the retail market for international roaming services appears to be improving, with the increased availability of substitute services for consumers. These include prepaid international calling cards, SIM cards and mobile phone rentals.
The ACCC also believes that market developments may drive greater price competition among mobile operators and improve price transparency and simplicity for end-users. These developments include advancements in technology that have allowed subscribers to select the network they roam on to, innovative pricing practices by carriers (such as ‘flat rates’ for world geographical zones), and new entrants in the wholesale roaming market.
The inquiry also found that the information provided by mobile operators to consumers about the prices for, and the use of, international roaming has improved in recent years.
Notwithstanding these developments, the ACCC intends to assist emerging competitive forces in these markets by helping Australian mobile phone subscribers to make more informed choices in relation to international roaming services.
