The Australian Competition and Consumer Commission has issued a draft determination accepting NBN Co’s submission on its revenue controls for 2015-16. The ACCC has also set out its view that NBN Co’s prices did not exceed the maximum regulated prices in 2015-16.
NBN Co must make a submission to the ACCC each year on its allowable revenues to cover the costs of providing its services. The ACCC then assesses this against the methodology in the Special Access Undertaking.
“The ACCC’s draft decision is to accept NBN Co’s proposed values for determining allowable revenues for 2015-16. As the NBN’s rollout approaches a midway point, the ACCC’s has undertaken additional testing of the processes and procedures NBN Co has in place to ensure those costs are incurred in a prudent and efficient manner,” ACCC Chairman Rod Sims said.
This draft decision includes values for NBN Co’s actual capital and operating expenditure for 2015-16, as well as values for regulated assets and accumulated losses.
The Special Access Undertaking (SAU) also caps the prices that NBN Co is allowed to charge for its services, and sets out the process for pricing new products. As part of this process, NBN Co is required to certify that its prices have not exceeded these caps.
The outcome of the ACCC’s assessment of the prices that NBN Co charged for its services in 2015-16 is that these prices did not exceed the applicable maximum regulated prices in the SAU.
The ACCC invites stakeholder views on the draft determination for 2015-16, including reasons for those views. Submissions are due by 26 May 2017.
The ACCC’s draft determination, its reasons for making this draft determination, and NBN Co’s 2015-16 LTRCM proposal and support documents are available: NBN Co - Special Access Undertaking LTRCM 2015-16.
Background
The ACCC is required to make a determination on NBN Co’s revenue controls each year. This is conducted in accordance with the Long Term Revenue Constraint Methodology (LTRCM), which is set out in NBN Co’s SAU. The SAU is a key component of the regulatory framework for the National Broadband Network (NBN) and contains provisions that encourage NBN Co to incur expenditure efficiently.
The LTRCM determines how much revenue NBN Co is allowed to earn each financial year, in order to recover the costs of supplying and providing services. Where NBN Co is unable to recover its allowed revenue in a particular year, the difference between allowed revenue and actual revenue goes into a cost recovery account. NBN Co will have the opportunity to recover these accumulated losses over time as the take up of NBN services increases.