The Australian Competition and Consumer Commission today issued its Arbitration report regarding an access dispute between Services Sydney Pty Ltd and Sydney Water Corporation.
The dispute related to the methodology for pricing access to declared sewage transportation services supplied by Sydney Water by means of its North Head, Bondi and Malabar sewerage reticulation networks.
Services Sydney proposes to compete with Sydney Water to supply consumers connected to these three networks by undertaking the contestable activities involved in providing sewerage services—retailing, sewage treatment and sewage disposal/recycling.
On 22 June 2007 the ACCC determined that the access price that Services Sydney is to pay Sydney Water in respect of the customers supplied by Services Sydney is Sydney Water's regulated retail price for those customers minus Sydney Water's avoidable costs, plus any facilitation costs associated with providing access.
"The access pricing methodology promotes effective competition because it provides scope for an access seeker that is more efficient than Sydney Water in undertaking the contestable activities associated with providing sewerage services to enter and compete with Sydney Water," ACCC Chairman, Mr Graeme Samuel, said today.
"The ACCC's determination is the first application of access pricing to the water and sewerage industry in Australia. In determining the appropriate methodology, the ACCC had regard to the structural features of the sector, including that Sydney Water is a vertically integrated supplier with regulated retail prices set on a geographically uniform basis by the NSW Independent Pricing and Regulatory Tribunal.
"The determination is also the first made in respect of an access dispute under Part IIIA of the Trade Practices Act 1974. As set out in the detailed Statement of reasons, in making its determination the ACCC considered the relevant matters and pricing principles contained in Part IIIA of the Trade Practices Act."
Services Sydney has applied to the Australian Competition Tribunal for review of the determination.
The Arbitration Report, which provides the ACCC's Final determination and Statement of reasons in full, will be available from the ACCC's website.
Part IIIA of the Trade Practices Act 1974 establishes a regime for facilitating third-party access to services considered critical to competition in related markets and provided by facilities that are uneconomic to duplicate. It also establishes a negotiate/arbitrate framework for resolving disputes concerning the arrangements for access to declared services. When parties are unable to agree on access arrangements, either can request the ACCC to arbitrate the dispute.
On 21 December 2005 the Australian Competition Tribunal declared the following services supplied by Sydney Water for a period of 50 years:
a service for the transportation of sewage provided by means of the North Head Reticulation Network, from a customer's boundary trap to points of interconnection.
a service for the connection of new sewers to the North Head reticulation network at points of interconnection.
a service for the transportation of sewage provided by means of the Bondi reticulation network, from a customer's boundary trap to points of interconnection.
a service for the connection of new sewers to the Bondi reticulation network at points of interconnection.
a service for the transportation of sewage provided by means of the Malabar reticulation network, from a customer's boundary trap to points of interconnection.
a service for the connection of new sewers to the Malabar reticulation network at points of interconnection.
On 6 November 2006 Services Sydney notified the ACCC of an access dispute with Sydney Water in relation to the methodology for pricing access in respect of the three declared sewage transportation services.
On 22 June 2007 the ACCC determined that the access price that Services Sydney is to pay Sydney Water in respect of the customers supplied by Services Sydney is Sydney Water's regulated retail price for those customers minus Sydney Water's 'avoidable costs', plus any 'facilitation costs' associated with providing access.
Avoidable costs are those that Sydney Water could avoid if it no longer directly supplied sewerage services to any customers connected to the North Head, Bondi and Malabar sewerage systems. As avoidable costs include the capital costs associated with Sydney Water's sewage treatment and disposal infrastructure, access prices will be lower than if only the costs that Sydney Water actually avoids were subtracted from retail prices.
Facilitation costs are any additional costs that Sydney Water incurs in providing access to the declared transportation services, such as its prudently incurred costs of calculating access charges.
