ACCC draft decision allows SPI PowerNet to integrate its distribution and transmission operations

21 December 2004

The Australian Competition and Consumer Commission today issued a draft decision to waive SPI PowerNet's obligations under one of the provisions of its Transmission Ring-Fencing Guidelines*. This clause prohibits a transmission network service provider (TNSP) from carrying on a related business, which is defined to include distribution activities.

"The decision will allow SPI to integrate its network operations", an ACCC Commissioner, Mr Ed Willett, said. "The resulting cost savings will flow on to consumers when the ACCC makes its next revenue determination.

"SPI's application follows the recent acquisition by SPI of TXU's Australian assets, which included distribution, retail and merchant generation businesses. The transaction raised significant competition concerns about the joint ownership of the Victorian transmission network and merchant activities in generation and retail.

"The ACCC did not oppose the acquisition on the basis of a court enforceable undertaking submitted by SPI. The undertaking includes provisions for the separation of the transmission and generation businesses and separation of SPI's transmission business from TXU's retail business.

"SPI's obligations in its undertaking to the ACCC will remain unchanged. The separation of the contestable from the non-contestable parts of the businesses will continue".

In reaching its decision, the ACCC weighed the benefit to the public of complying with the ring-fencing obligations against the administrative costs to SPI PowerNet and its related businesses.

The ACCC also considered the Victorian transmission arrangements where VENCorp remains the independent transmission planner, and the combined regulatory oversight provided by the ACCC and the Essential Services Commission of Victoria, which will remain unaffected by the waiver decision.

There are a number of efficiencies associated with the integration of transmission and distribution operations which would be lost if the waiver was not granted. The ACCC is satisfied that the costs of compliance will outweigh the public benefits of compliance and, on that basis, the ACCC has decided to grant a waiver.

The ACCC considered submissions from interested parties before issuing its draft decision.

The ACCC invites written submissions in response to its draft decision, which close on 21 January 2005.

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Release number: 
MR 294/04
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