Arbitration threat brings commercial solutions—regulator

Two major commercial disputes have been resolved in the past few weeks soon after the Australian Competition and Consumer Commission was requested to intervene, Australian Energy Regulator board member and ACCC Commissioner, Mr Ed Willett, has said.

"The prospect of intervention can help bring parties to the bargaining table," Mr Willett, who was speaking at a State of the Nation forum in Canberra held by the Committee for Economic Development of Australia, said. "This is especially important where one party has substantial market power and might otherwise resist a commercial solution."

Mr Willett pointed to recent examples in the airline and natural gas industries.

"In May, we saw the resolution of a long running dispute between Sydney Airport Corporation and Virgin Blue, only a few weeks after Virgin notified a dispute to the ACCC. The fact that the issue was quickly resolved once the dispute was notified suggests that the prospect of intervention may have motivated the parties to reach an agreement to avoid an arbitrated outcome.

"We now have a similar example in gas, with AGL Wholesale Gas Ltd and East Australia Pipeline Limited reaching commercial agreement on a delivery point issue under the National Gas Code in relation to the Moomba to Sydney Gas Pipeline. The parties reached agreement soon after AGL notified the long running dispute to the ACCC in December. AGL withdrew its dispute notice this week."

Mr Willett said both cases highlighted the importance of allowing parties recourse to regulation in situations where network monopoly market power exists.

"It is not always necessary for the regulator to intervene. Sometimes the prospect of intervention is enough to bring about efficient solutions."

Background

The ACCC is vested with arbitration powers in relation to access to infrastructure services under Part IIIA of the Trade Practices Act 1974 and the National Gas Pipelines Access Code. For the ACCC to engage in arbitration, an access seeker and/or an access provider must notify the ACCC of an access dispute. Where the ACCC is notified of an access dispute, it must determine the matter unless it decides to terminate the arbitration or the notification is otherwise withdrawn.