The ACCC is vested with powers to arbitrate telecommunications access disputes and make a final binding determination to resolve a dispute. Arbitration hearings are private and the ACCC generally does not make any public comment on disputes except to announce when a dispute has been notified.
Two access disputes on the supply of the mobile terminating access service (MTAS) previously notified have been withdrawn reducing the current number of MTAS access disputes in front of the Commission to 17.
Primus Telecommunications Pty Limited notified the ACCC of an access dispute with Telstra Corporation Limited.
XYZed Pty Limited notified the ACCC of an access dispute with Telstra Corporation Limited.
The ULLS involves the use of unconditioned cable, primarily copper pairs, between end users and a telephone exchange. The declared ULLS is being used by access seekers to support and connect to their own infrastructure for the supply of new and innovative voice and data services, such as those involving voice over IP and DSL technologies.
The ACCC has begun the arbitration process for these access disputes.
Optus has also withdrawn an earlier notification of an access dispute with Telstra concerning the ULLS. The ACCC will therefore not be making a determination on that notification.
Line sharing service access disputes
Amcom Pty Limited notified the ACCC of an access dispute with Telstra Corporation Limited. This access dispute relates to connection and disconnection charges associated with the supply of the line sharing service from Telstra to Amcom.
The line sharing service involves an access provider providing a voiceband PSTN service to an end-user, while providing access to another carrier (the access seeker) to simultaneously provide services to the same end-user over the high-frequency portion of the unconditioned local loop.
The ACCC has begun the arbitration process for these access disputes.
Domestic PSTN originating and terminating access disputes
Optus Networks Pty Limited and Optus Mobile Pty Limited notified the ACCC of separate access disputes with Telstra Corporation Limited. The two access disputes relate to the charges associated with the supply of the domestic PSTN originating and terminating access services from Telstra to Optus.
Background: These services involve carriage of telephone calls between customer premises equipment and a point of interconnection at or associated with a local switch. Access seekers can use these services to carry calls made and received by end users connected to the access provider's network.
The ACCC has begun the arbitration process for these access disputes.
The ACCC is currently undertaking assessments of the following undertakings under XIC of the Trade Practices Act. The undertakings are available on the ACCC website.
Telstra's unconditioned local loop service monthly charge undertaking
In December 2005 Telstra submitted two unconditioned local loop service (ULLS) undertakings. The undertakings set out how Telstra proposes to meet its standard access obligations to supply the ULLS for the period from 1 January 2006 to 30 June 2007 and from 1 July 2007 to 30 June 2008 respectively.
The undertakings relate to the monthly charge Telstra proposes to charge for the ULLS. The ACCC released Telstra's undertakings on 16 January 2006. The ACCC issued a discussion paper on the undertakings, along with public versions of Telstra's supporting material for the undertakings, on 31 January 2006.
The ACCC extended the deadline for submissions in response to the discussion paper by two weeks, until 28 March 2006.
Mobile terminating access service undertakings
On 23 February 2006, Optus applied to the Australian Competition Tribunal for review of the ACCC’s decision to reject the Optus access undertaking.
The Commission continues its work in relation to reaching a final decision in the Vodafone undertaking and a draft decision in the Hutchison undertaking.
The paper noted that once the government’s media framework has been settled, the ACCC would be asked to articulate its proposed approach to media mergers under s. 50 of the Trade Practices Act, particularly in relation to those factors that will affect its definition of media markets.
On 16 February 2006 the Australian Energy Market Commission (AEMC) released its draft rules governing electricity transmission network revenue regulation. The requirement for the AEMC to review this section of the national electricity rules is a legislative requirement, under the National Electricity Law.
The AER provided the AEMC with a submission on the draft rules on 24 March 2006, a copy of which is available from the AER’s website.
The draft rules, although partly reflecting current regulatory practice, represent a significant change in approach. The AER supports changes that move towards best practice regulation or address problems with current arrangements. However, the AER’s submission expresses concern that the AEMC has not explained its reasons for the substantial changes proposed, neither identifying problems with current practice, nor explaining how its changes will address them.
The AER’s comments fall into four main categories:
how the proposals affect incentives for efficient expenditure
the balance between regulated businesses and users
the capacity of the regulator to flexibly respond to the individual circumstances of each transmission business and to changing circumstances
transparency.
The AER’s submission covers these issues in detail and also provides an analysis of other elements of the AEMC’s package, including the new definition of prescribed services.
On 3 March 2006 the AER made its final decision on the Directlink Joint Venturers’ application for conversion from a market network service to a prescribed service and revenue cap. The decision sets out the AER’s consideration of issues raised by submissions and matters requiring resolution following the draft decision.
The AER’s draft decision on the Directlink conversion was issued on 8 November 2005. The AER received seven submissions in response to the draft decision. No substantive new material was raised on the decision to allow Directlink to convert to a prescribed service. No submissions objected to the AER’s approach of setting the asset value based on the expected market benefits of Directlink.
The AER determined that Directlink meets the requirements under the national electricity rules and should therefore be allowed to convert. The AER then set an asset value based on the expected market benefits—$150.55 million. This value was adjusted for lifecycle operating costs, benchmark equity raising costs and depreciation, to provide an opening asset value of $116.7 million.
The opening asset value was used to determine a maximum allowed revenue for Direct Joint Venturers of between $11.8 million in 2005–06 to $13.6 million in 2014–15. The decision includes an operating cost allowance of around $2 million per annum and a post-tax nominal return on equity of 11.5 per cent.
Powerlink revenue reset
Under the national electricity rules, the AER is responsible for regulating the revenues associated with the non-contestable elements of transmission services provided by Powerlink Queensland. The AER will set Powerlink’s revenue cap for a five-year period from 1 July 2007 to 30 June 2012.
The AER issued a public notice on 21 March 2006 advising interested parties of its intention to hold a public forum on Powerlink Queensland’s revenue cap reset application, which is due to be lodged with the AER on 3 April 2006. A copy of Powerlink’s application is expected to be available on the AER internet site in early April.
The forum will be held in Brisbane on 20 April 2006. Additional information on the public forum and the revenue reset process is available on the AER’s website at www.aer.gov.au.
AER position paper—regulatory accounting methodologies
There are two accounting approaches to establishing when capex (capital expenditure) is included in a transmission network service provider’s (TNSP’s) regulatory asset base. These accounting approaches are outlined below:
the ‘as-incurred’ approach with the record of capital expenditure in any one year being based on expenditure in that year
the ‘as-commissioned’ approach with the record of capital of expenditure depending 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 of this, 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 been flexible on accounting approaches that may be applied by the TNSPs. Given the revised regulatory arrangements under the SRP, the AER has released a position paper inviting comments from interested parties on the two accounting approaches about:
the compatibility of each accounting approach to the ex ante incentive arrangements
administrative complexity
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.
The AER’s primary consideration in finalising the choice of regulatory accounting methodology is the impact on the capex incentive framework in the SRP. However, the Australian Energy Market Commission (AEMC) has recently released draft rule change proposals as part of its review of electricity transmission regulation. These draft rule change proposals have amended the SRP capex incentive framework by removing the reward or penalty on an under-spend or over-spend, respectively, for the return of capital. The changes may affect how the AER implements the as incurred approach.
Accordingly, the AER has decided to delay the release of a decision on regulatory accounting methodologies until the AEMC has finalised its review. The AER now expects to release a decision by the end of the second quarter 2006.
The AER continues to publish weekly market analyses that set out the spot price for each 30-minute trading interval in each region of the national electricity market. These reports highlight wholesale market prices more than three times the weekly average. They compare the demand and price forecasts published by NEMMCO four and twelve hours ahead of despatch with actual outcomes and publish the most probable reasons for significant variations between actual and forecast prices. Those reports are available on the AER website at www.aer.gov.au.
The AER also published a pricing report, describing the circumstances that led to the 30-minute trading price exceeding $5000/MWh on 26 January. Investigations into the events of 2 February and 23–24 February, when the 30-minute trading price also exceeded $5000/MWh, are continuing.
The AER published its first quarterly compliance report detailing the AER’s compliance monitoring activities during the period from October to December 2005.
The AER’s current compliance program targets 24 specific provisions of the national electricity rules each year. The aim is to ensure compliance by getting participants to evaluate their obligations under the rules.
ACCC energy activities
Moomba to Adelaide pipeline system access arrangement
On 22 March 2006 the ACCC decided, in accordance with s. 7.19 of the National Third Party Access Code for Natural Gas Pipeline Systems, to grant an extension of time for the lodgment of proposed revisions to the access arrangement for the Moomba to Adelaide pipeline system. The new lodgment date will be two months after the South Australian Minister for Energy's decision on coverage of the pipeline.
Epic Energy requested an extension of time for the lodgment of proposed revisions to the access arrangement for the Moomba to Adelaide pipeline system following the December 2005 final recommendation of the National Competition Council to revoke coverage of the Moomba to Adelaide pipeline system.
