ACCC consents to variation of 2011 Hunter Valley Access Undertaking

29 June 2017

The Australian Competition and Consumer Commission has consented to the Australian Rail Track Corporation’s (ARTC’s) application to vary the 2011 Hunter Valley Access Undertaking (HVAU). The 2011 HVAU regulates the rail network that is predominantly used to transport coal from the mines in the Hunter Valley to the Port of Newcastle for export.

The final variation application was submitted by ARTC on 16 June 2017. The current undertaking is due to expire on 30 June 2017.

The ACCC’s decision means that the term of operation of the 2011 HVAU is now extended to 31 December 2021, with some modifications. Specifically:

  • a reduced rate of return, being a real pre-tax rate of return of 5.38 per cent and a nominal pre-tax rate of return of 7.91 per cent, to be applied from 1 July 2016
  • an increased remaining mine life, being 23 years as at 1 July 2016
  • a commitment to submit a further variation to address a number of  matters that remain unresolved from ARTC’s previous application for a replacement HVAU.

The June 2017 application follows over two years of extensive work by ARTC, stakeholders, and the ACCC to develop a replacement HVAU.

“This variation to the Hunter Valley Access Undertaking provides regulatory certainty for ARTC and its users, including coal producers as well as passenger trains and non-coal freight. Regulatory certainty and stakeholder support are factors that the ACCC takes into account in making its decision,” ACCC Commissioner Cristina Cifuentes said.  

“Stakeholders were disappointed by the short timeframe and that the application did not address all the issues that had been identified as part of ARTC’s earlier application. However, given the expiry date of the current undertaking, stakeholders supported the variation as the best way to ensure stability in the regulatory framework.”

“The ACCC acknowledges and shares stakeholders concerns that this process illustrates significant issues with the current regulatory framework as it applies to the Hunter Valley rail network,” Ms Cifuentes said.  

The ACCC acknowledges the extensive work that has been undertaken by all parties throughout the current assessment process and its consideration of previous applications by ARTC for a replacement HVAU throughout 2015, 2016, and 2017

“The ACCC now expects ARTC to commence good faith negotiations with stakeholders to address outstanding issues in a new variation application in a timely manner,” Ms Cifuentes said.

The final decision is available on the ACCC website: June 2017 variation of the 2011 Hunter Valley Access Undertaking

Background

The ACCC accepted an access undertaking from ARTC for the Hunter Valley Rail Network in June 2011. The undertaking covers the terms and conditions of access for parties seeking to run trains on the rail network owned or leased by ARTC in the Hunter Valley region. The 2011 HVAU was due to expire on 30 June 2017, following two previous six month extensions.

In December 2015, ARTC submitted a proposed access undertaking to the ACCC for assessment. ARTC withdrew the proposed access undertaking from consideration in June 2016.

ARTC submitted the 2017 Hunter Valley Access Undertaking (2017 HVAU) to the ACCC for assessment in December 2016. ARTC withdrew this application from the ACCC’s consideration on 8 May 2017. On 6 June 2017, ARTC submitted an application to vary the existing HVAU. ARTC subsequently submitted a revised variation application incorporating finalised access charges on 16 June 2017. 

If the ACCC did not consent to ARTC’s application, regulation of the rail network would have transferred to the New South Wales Rail Access Undertaking overseen by the Independent Pricing and Regulatory Tribunal of NSW. There are a number of differences between the regulatory frameworks applying under the 2011 HVAU and the NSWRAU.

An unplanned and rushed transition to a new regulatory regime would have lacked an agreement on how such a transition would occur in practice. This would have resulted in significant uncertainty for both ARTC and its users and had a significant flow on effect upon the efficient operation of and future investment in the rail network and the broader coal supply chain.

 

Release number: 
MR 103/17
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