Australian Competition and Consumer Commission and the Australian Energy Regulator

Annual Report 2009–10

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Part three: Report on performance

Regulating markets

Regulating national infrastructure services and other markets where there is limited competition.

A number of the ACCC's functions under the Trade Practices Act, and the following Acts, laws and rules, relate to regulating national infrastructure services and other markets where competition is limited.

National Gas Law 2008
National Gas Rules
National Electricity Law 2005
National Electricity Rules
Airports Act 1996
Australian Postal Corporation Act 1989
Broadcasting Services Act 1992
Copyright Act 1968
Radiocommunications Act 1992
Telecommunications Act 1997
Telecommunications (Consumer Protection and Service Standards) Act 1999
Water Act 2007
Water Market Rules 2009
Water Charge (Termination Fees) Rules 2009
Wheat Export Marketing Act 2008.

New South Wales state-owned electricity generators

In 2009 the New South Wales Government proposed a joint risk-management arrangement for state-owned electricity generators and future buyers—'Gentraders'—of rights to sell a generator's electricity.

Under the proposed co-insurance arrangement, if an outage at one of the generators caused electricity production to fall below a set level, the Gentraders would be required to compensate each other financially.

On 27 November 2009 the New South Wales Treasurer applied to the ACCC, on behalf of three state-owned generation businesses, for authorisation for the proposed conduct—that is, protection from action under the Trade Practices Act's competition provisions on the basis that the conduct's public benefits would outweigh its detriments.

The ACCC invited submissions from parties including other electricity industry participants, industry associations and government departments. On 25 March 2010 it released a draft determination proposing to deny authorisation. After further consultation, it confirmed this decision in a final determination issued on 20 May 2010.

The ACCC did not consider that there was a case for requiring the Gentraders to take part in a co-insurance arrangement they might not want or need. It concluded that there were a number of alternative risk-management options available to them that could effectively and efficiently manage the financial risk that the co-insurance arrangement sought to mitigate.

Deliverables

In performing its regulatory functions, the ACCC has the deliverables described in Table 3.10. The deliverables are taken from the ACCC's 2009−10 PBS.

Table 3.10: Regulating markets—deliverables and results
Deliverable Result
Complied with statutory reporting requirements—3 annual reports delivered to the Minister for Broadband, Communications and the Digital Economy; one 6-monthly report; 2 quarterly reports Met, with the exception of the 6-monthly current cost accounting report, which was delayed. See ‘Monitoring and advising’ (pp. 80−82) for more information.
Implemented reasonable terms and conditions of access in arbitral determinations—estimated 38 disputes under the telecommunications access regime 18 final determinations were issued for communications matters, resolving 19 disputes. See ‘Access terms, conditions and prices’ (pp. 71−74) for more information.
Reviewed declarations of declared services within statutory timeframes—estimated 6 declarations reviewed under telecommunications access regime See ‘Competition’ (pp. 67−71) for more information.
Assisted the Australian Competition Tribunal and courts in review of any appealed ACCC regulatory decisions—potentially 1 tribunal appeal and 38 judicable reviews under the telecommunications access regime The ACCC assisted the tribunal in three sets of communications matters; 14 matters were considered under judicial review.
Parliamentary inquiries and government agencies assisted to develop policies and processes

As outlined under ‘Consultation and assistance’ (pp. 30−32), the ACCC continues to provide assistance to parliamentary inquiries.

In addition, the ACCC provided to the government and published reports on the prices and market conditions for specific goods and services, including reports on:

  • the prices, costs and profits of unleaded petrol
  • price, financial performance and quality of service monitoring of aeronautical services and airport car parking
  • the prices, costs and profits of container terminal operator companies.

When requested, the ACCC also provides advice to government departments and agencies relating to the development of their policy and processes to promote competition and encourage new entrants into markets that rely on monopoly services.

In particular, in 2009−10 the ACCC:

  • supplied advice to the Murray‑Darling Basin Authority on water trading rules being developed as part of the Basin Plan
  • provided a submission to the Productivity Commission inquiry into wheat export marketing arrangements
  • provided a submission to Infrastructure Australia to assist with the development of a national ports strategy.

See ‘Competition’(pp. 67−71), ‘Regulatory processes’ and ‘Monitoring and advising’ (pp. 80−82) below for more information.
Effectiveness of access regimes evidenced by price levels and service delivery standards See ‘Access terms, conditions and prices’ (pp. 71−74) and ‘Incentives’ (pp. 74−76) for more information.
Businesses using monopoly services pay prices that more closely reflect efficient costs 18 final determinations were issued for communications matters. See ‘Access terms, conditions and prices’ (pp. 71−74) for more information.
Regulatory reports, determinations, and issues papers are timely and accessible See ‘Access terms, conditions and prices’ (pp. 71−74), ‘Regulatory processes’ (pp. 76−78), ‘Monitoring and advising’ (pp. 80−82) and ‘Publicising outcomes’ (pp. 82−84) for more information.
Robustness and accuracy of methodology evidenced by industry acceptance AER—partially met. A number of AER determinations were appealed by businesses to the Australian Competition Tribunal. See ‘Access terms, conditions and prices’ (pp. 71−74) for more information. Others. See ‘Regulatory processes’ (pp. 76−78) and ‘Publicising outcomes’ (pp. 82−84) for more information.
Websites (www.accc.gov.au and www.aer.gov.au) accessible and a source of relevant and up-to-date information See ‘Monitoring and advising’ (pp. 80−82) and ‘Publicising outcomes’ (pp. 82−84) for more information.

Ice Hockey Australia

The sports association Ice Hockey Australia notified the ACCC that it proposed to suspend or expel members who took part in hockey games or leagues in Australia or overseas if the association had not sanctioned them. The policy would apply to players and officials, including referees and coaches.

The Trade Practices Act prohibits exclusive dealing, which is the situation where one party imposes restrictions on another's freedom to choose with whom, in what or where it deals. Parties can gain protection from the relevant provisions of the Act if the conduct does not substantially lessen competition, and if the public benefits would not outweigh the detriments.

The ACCC invited submissions on Ice Hockey Australia's notification from the public, including state associations, rinks, sport and recreation bodies and government departments. A pre-decision conference was also held to discuss the issues. On 2 March 2010 the ACCC revoked the notification and the protection that it provided.

The ACCC was concerned that the conduct would substantially lessen competition by creating barriers to entry for new ice hockey leagues and by making it difficult for existing leagues to remain competitively viable. The ACCC considered that the conduct would also harm players and officials by limiting their ability to participate in ice hockey competitions of their choice.

Energy market analysis reports

The AER issues weekly market analysis reports derived from its monitoring of activity in the gas and electricity wholesale markets.

These reports help participants, policy makers and others interested in the markets to stay informed of market outcomes. They also provide a way for the AER to identify possible non-compliance with the relevant rules and law.

The AER's electricity weekly market analysis reports include information on and analysis of wholesale market activity, including weekly average spot prices, financial year-to-date spot prices, and reasons for variations between forecast and actual prices.

The AER also undertakes detailed analysis where the spot price in a region exceeds $250 per megawatt hour and is greater than three times the weekly average price for that region. If needed, the AER seeks further information from participants.

Activity in the contract markets, including contract prices and volumes traded, is also reported. This reflects the significant interaction between the spot and forward markets and the important role this plays in the National Electricity Market framework.

The gas weekly analysis reports include information on the National Gas Market Bulletin Board, including flow data, production data, gas for gas-powered generation usage and gas demand. As part of the AER's monitoring and compliance activities, the report also highlights where participants have failed to provide flow data to the bulletin board operator.

Key performance indicators

The ACCC's and AER's performance in regulating markets where competition is limited—such as the communications, transport and energy markets—is assessed against a number of key performance indicators.

The ACCC and the AER, individually or in partnership, contribute to each indicator. Their performance against each key performance indicator is described below. For each performance indicator, the discussion is broken down into the relevant sectors.

Competition

The ACCC and the AER continued to facilitate and encourage competition in markets that depend on access to monopoly services, so that the benefits of utility regulation are spread throughout the Australian economy.

Telecommunications, broadcasting and content
Fixed Services Review declaration inquiry

In July 2009 the ACCC published its final decision to extend the declarations of six fixed-line services (the ULLS, LSS, PSTN OA, PSTN TA, LCS and WLR services). The declarations for these services were to expire on 31 July 2009. The ACCC decided to extend the declarations for a further five years until 31 July 2014. The extension of the declarations provides that standard access obligations remain in place for those services, thereby obliging an access provider to provide access to the service upon request. Access to these services allows companies to compete in providing both wholesale and retail telecommunication services.

Domestic Transmission Capacity Service review

In November 2009 the ACCC began a review of the Domestic Transmission Capacity Service (DTCS) declaration to clarify the service description by determining whether the current description should incorporate all transmission interface protocols commonly used over the Australian network. This will ensure that the service declaration describes the appropriate bottleneck facilities to which access seekers require access in order to provide services to end users.

Review of 1997 access pricing principles

In December 2009 the ACCC issued a discussion paper reviewing the 1997 access pricing principles for fixed-line telecommunications services.

In the paper the ACCC indicated that it was considering the adoption of a 'building block' approach (also known as a 'regulated asset base' approach), as commonly applied in regulating utilities in other industries. There was general support in submissions for the adoption of this approach. The Australian Competition Tribunal has also recently expressed support for 'a simpler and more appropriate pricing methodology' such as the building block approach (as stated in its 10 May 2010 decision affirming the ACCC's rejection of Telstra's undertaking for the unconditioned local loop service).

Assistance to other agencies

In 2009−10 the ACCC made submissions to:

The ACCC also participated in the Fibre in Greenfields Stakeholder Reference Group, established by the Department of Broadband, Communications and the Digital Economy in August 2009.

Energy

The national energy laws aim to encourage competition in upstream and downstream markets by ensuring access to monopoly infrastructure and by providing the frameworks for contestable and competitive energy markets. The AER contributed to facilitating competitiveness through energy policy by making submissions to:

National ports strategy

The ACCC made a submission in June 2010 to Infrastructure Australia for its draft report on a national ports strategy. The submission outlined the ACCC's role in relation to ports and land-side supply chains.

Prices oversight

The ACCC appeared before the Senate Economics References Committee on 18 January 2010 in its inquiry into competition and pricing in the Australian dairy industry.

The ACCC appeared before the Senate Economics References Committee on 18 September 2009 and 28 October 2009 in its inquiry into the GROCERYchoice website.

Wheat export marketing arrangements

The ACCC made a submission in May 2010 to the Productivity Commission for its draft report on wheat export marketing arrangements. The submission outlined the ACCC's role in relation to the wheat export industry.

Container stevedoring

The ACCC is required to monitor the prices, costs and profits of container terminal operator companies at the ports of Adelaide, Brisbane, Burnie, Fremantle, Melbourne and Sydney. Further detail is provided under other key performance indicators below.

Airport monitoring report

The ACCC, under an Australian Government direction, monitors the prices, costs and profits relating to aeronautical services and car parking at Adelaide, Brisbane, Melbourne (Tullamarine), Perth and Sydney (Kingsford Smith) airports. Its Airport monitoring report 2008−09 was released in March 2010.

The airports, except Sydney, reported higher revenues and operating margins from aeronautical services than the year before—due to higher passenger numbers and average prices. Although Sydney was the only airport to handle fewer passengers, it maintained the largest operating margin.

Brisbane remained the highest-ranked airport for service quality, followed by Adelaide, Perth and Melbourne airports, while Sydney was ranked last for the fourth consecutive year.

Airlines have consistently identified Sydney in their survey responses as the least responsive airport for service delivery and quality over a sustained period. Sydney's international terminal was rated below satisfactory on average by the airlines from 2002−03 to 2008−09. While Sydney Airport has announced proposed terminal improvements, there is a question as to whether these should have been carried out earlier.

Another concern is that the airports were found to be in a position to set higher car‑parking prices because they are able to influence the costs of alternatives, including off-airport parking, taxis and buses. The ACCC found that this would result in the persistence of higher profits over time. Although the monitoring results are not definitive, they remain consistent with the ACCC's view that airport car-parking charges reflect some element of monopoly rents.

The ACCC's monitoring role does not extend to setting airport car-parking charges or otherwise intervening in the airports' price-setting decisions. In its monitoring role, the ACCC seeks to increase the transparency of the airports' performance to discourage airport operators from increasing prices excessively and providing unsatisfactory standards. To this end, in the Airport monitoring report 2008−09 the ACCC examined the relationship between the airports and airlines in the provision of aeronautical services, and the airports' market power in car parking.

Airports

To support competition, the ACCC monitors prices and quality of service for aeronautical services to airlines at major airports. Further information is provided under other key performance indicators below.

Sydney Airport is required to notify the ACCC of any proposals to increase the prices it charges to airlines providing regional air services. In May 2010 the Minister for Competition Policy and Consumer Affairs extended these arrangements for a further three years to 30 June 2013.

Airservices Australia

The ACCC assesses Airservices Australia's price notifications under Part VIIA of the Trade Practices Act. The ACCC must assess a proposed price and decide whether to object. Further detail is provided under other key performance indicators below.

Shipping

Part X of the Trade Practices Act deals with limited exemptions from certain provisions in Part IV of the Trade Practices Act for international liner cargo shipping conferences. The ACCC's role under Part X is to investigate complaints from parties adversely affected by shipping conference agreements and by the conduct of conference lines and non-conference lines with substantial market power. The ACCC can also initiate an investigation. During 2009−10 the ACCC responded to several inquiries regarding the conduct of shipping conference agreements. No formal investigations were undertaken.

Copyright licence fees

The ACCC may join matters in the Copyright Tribunal relating to the price paid by businesses for intellectual property provided by copyright licensing societies. Further detail is provided under other key performance indicators below.

Post

The ACCC assesses Australia Post's price notifications under Part VIIA of the Trade Practices Act, including prices for wholesale services provided to other businesses that provide mail services. The ACCC must assess a proposed price and decide whether to object. Further detail is provided under other key performance indicators below.

Water

Under the Water Act, the Minister for Climate Change, Energy Efficiency and Water may make rules relating to water markets and water charges. The objective of any rules made by the minister is to contribute to achieving the (Murray‑Darling) Basin water charging objectives and principles, including a specific requirement to facilitate the efficient functioning of water markets.

In making any rules, the minister is required to seek the advice of the ACCC and give weight to that advice. Similarly, the Act requires the Murray‑Darling Basin Authority to give weight to advice from the ACCC in any water trading rules it makes.

Policy advice requests from the Minister for Climate Change, Energy Efficiency and Water

In July 2009 the ACCC provided its final advice and draft Water Charge (Planning and Management Information) Rules.

During 2009−10 the ACCC received three requests from the minister for advice on water markets and water charges:

The ACCC provided each advice to the minister in the time requested.

The objective of the ACCC's advice was to promote efficient functioning of water markets. The Water Market Rules advice, which has been accepted by the minister, frees up the trade of water access rights by prohibiting irrigation infrastructure operators from impeding entitlement trade. Similarly, the advice on the Water Charge (Termination Fees) Rules aims to help irrigators enter and leave the sector by defining in what circumstances a termination fee can apply, capping termination charges and prohibiting exit fees.

Policy advice request from the Murray‑Darling Basin Authority

The Water Act requires the Murray‑Darling Basin Authority (MDBA) to develop a Basin Plan for the sustainable and integrated management of water resources in the Murray‑Darling Basin. The Act requires the ACCC to prepare advice for the MDBA on the proposed water trading rules component of the Basin Plan.

In response to this requirement, the ACCC released an issues paper in March 2009, a position paper in September 2009, draft advice in December 2009 and final advice in March 2010. The final advice addressed some of the impediments to trade currently imposed by state trading regimes.

Access terms, conditions and prices

The ACCC and the AER establish access terms, conditions and prices for infrastructure services that balance the interests of infrastructure owners and users and the broader public.

Telecommunications, broadcasting and content

The ACCC maintained the effectiveness of the telecommunications access regime's pricing levels and service delivery standards by:

At the beginning of 2009−10, the ACCC was actively considering 39 access disputes. Over the course of the year, two MTAS, one WLR and three LSS access disputes were notified. Twelve access disputes were withdrawn.

The ACCC issued an interim determination in one WLR access dispute and extended interim determinations in one LSS and three ULLS access disputes. It issued final determinations in relation to 11 ULLS and eight LSS access disputes. At the end of the reporting period, 13 disputes were under active consideration.

The ACCC took action in the Federal Court to enforce Telstra's standard access obligation to provide interconnection with ULLS access seekers. Telstra admitted to the majority of the pleaded contraventions in July 2009, and a contested hearing regarding the appropriate sanctions for the conduct was held in April and May 2010.

The ACCC conducted pre-lodgement discussions with NBN Co—the operator of the National Broadband Network—regarding NBN Co's intention to provide a special access undertaking to the ACCC. If the special access undertaking is lodged with the ACCC it will then be subject to a period of public consultation. If accepted, the special access undertaking will establish a regulatory framework for NBN Co's provision of access to service providers.

Energy

The AER makes electricity transmission and distribution determinations and gas access arrangements in accordance with the National Electricity Rules and National Gas Rules. The AER's determinations balance the interests of infrastructure owners, users and the broader public by promoting the national energy market objective set out in the National Electricity Law and National Gas Law—that is, to promote efficient investment in energy services for the interests of consumers with respect to price, quality, reliability, safety and security.

Electricity transmission and distribution determinations

The AER made no electricity transmission determinations in 2009−10.

In 2009−10 the AER made three electricity distribution determinations:

As part of responsibilities conferred on it by the Victorian Government, the AER assessed the costs associated with the transition to smart meters for Victorian electricity consumers over 2009 to 2011. It also published its final determination on Victorian metering charges for 2010 and 2011, including assessments of the initial budget applications of the Victorian distribution businesses.

During the reporting period, the Australian Competition Tribunal made orders to vary a number of the AER's electricity determinations:

The AER revised its final decision and distribution determination for EnergyAustralia's alternative control (public lighting) services, in accordance with the directions of the Australian Competition Tribunal. The determination specifies the maximum prices that may be charged for street lighting services for the remainder of the 1 July 2009 to 30 June 2014 regulatory control period.

Gas transmission and distribution access arrangements

The AER released decisions in 2009­−10 regarding gas distribution access arrangements for Jemena, Country Energy and ActewAGL's gas distribution networks for the period 1 July 2010 to 30 June 2015.

Dispute resolution

The AER's role under the National Gas Law and National Electricity Law includes resolving access and connection disputes.

In 2009−10 the AER terminated one access dispute, lodged by Origin Energy under the National Gas Law, as the dispute related to contractual matters.

Annual energy pricing approval processes

Under the National Electricity Rules and National Gas Rules, network businesses are required to submit their pricing proposals and tariff variations to the AER for approval.

Electricity pricing proposals

The AER approved the pricing proposals of seven electricity distribution businesses: ActewAGL, Country Energy, Energex, EnergyAustralia, Ergon Energy, ETSA Utilities and Integral Energy. The pricing proposals were assessed as compliant with the National Electricity Rules and the relevant distribution determination for each business.

Gas annual tariff variations

The AER approved 10 annual tariff variations: for Envestra gas distribution in South Australia; the Allgas and Envestra gas distribution Roma to Brisbane and Dawson Valley pipelines in Queensland; the Central Ranges gas transmission and distribution pipeline in New South Wales; Envestra Victoria; Envestra Albury; and SP AusNet, GasNet and Multinet in Victoria.

Rail

The ACCC provided guidance to the Australian Rail Track Corporation (ARTC), industry and stakeholders to assist in the ARTC's development of a proposed voluntary access undertaking for access to the Hunter Valley Rail Network.

In March 2010 the ACCC issued a draft decision indicating its preliminary view that the undertaking was not likely to be appropriate in its current form and providing extensive guidance on how the undertaking could be amended to be appropriate. The ACCC expects that an acceptable undertaking from the ARTC will promote economically efficient use of and investment in infrastructure and promote effective competition in upstream and downstream markets in accordance with the objectives of Part IIIA of the Trade Practices Act. In April 2010 the ARTC withdrew the undertaking and advised that it would shortly lodge a revised undertaking.

The ACCC also continued to monitor and administer relevant provisions of the ARTC interstate undertaking accepted in 2008, which facilitates competition by providing access to services on the interstate rail network.

Wheat export marketing arrangements

In September 2009 the ACCC accepted three wheat access undertakings covering wheat export terminals at 17 ports. The aim of these undertakings is to unlock constraints at grain ports and benefit the Australian economy by promoting the development of a wheat export marketing industry that is efficient and competitive and advances the needs of wheat growers. The undertakings provide robust prohibitions against port operators anti‑competitively discriminating in favour of their own wheat trading businesses or hindering access to their port terminal services. They enable the ACCC to order independent audits of each port operator's compliance with the non‑discrimination obligations.

Water

In its final advice and draft Water Charge (Infrastructure) Rules provided to the Minister for Climate Change, Energy Efficiency and Water, the ACCC established a framework of access terms and conditions between infrastructure operators and their customers. These arrangements:

Incentives

The ACCC and the AER provide incentives that stimulate efficient investment in and use of services with natural monopoly characteristics.

Telecommunications, broadcasting and content

As noted above, in July 2009 the ACCC published its final decision to extend the declarations of six fixed-line services (the ULLS, LSS, PSTN OA, PSTN TA, LCS and WLR services) until 31 July 2014.

Following the extension of the declarations, the ACCC issued pricing principles and indicative prices for the services for the period from 1 August 2009 to 31 December 2010.

Extending the declarations and setting pricing principles and indicative prices for these key services provides certainty to industry and encourages continued investment in and use of bottleneck services to supply telecommunications services to end users.

Energy

In applying revenue and price caps to electricity and gas transmission and distribution businesses, the AER implements the incentive regime specified in the National Electricity Law, the National Electricity Rules, the National Gas Law and the National Gas Rules. This regime includes specific incentives for increasing or maintaining service standards, seeking operating cost efficiencies and implementing demand management schemes.

The AER has developed national incentive schemes for electricity businesses in the national electricity market. These incentive schemes were developed in consultation with industry participants and are amended from time to time.

In addition to the determinations and access arrangements mentioned under 'Access terms, conditions and prices', the AER released the following reports in 2009−10:

Copyright

The ACCC was a party to two matters decided by the Copyright Tribunal in 2009−10. In December 2009 the tribunal made a decision approving the commercial settlement reached by the Australasian Performing Right Association and the Australasian Mechanical Copyright Owners Society in relation to licence fees for digital downloads services. In May 2010 the tribunal handed down its decision in relation to the reference brought by the Phonographic Performance Company of Australia for fitness class tariffs. The ACCC's role as a party to each matter helped the tribunal make decisions reflecting efficient pricing principles.

Post

In 2009−10 the ACCC assessed two proposals by Australia Post to increase prices for its monopoly postal services.

In December 2009 the ACCC objected to a draft pricing proposal lodged by Australia Post in July 2009. The ACCC had concerns that Australia Post's costs were not falling in response to declining volumes. Additionally, the ACCC identified a number of deficiencies in Australia Post's demand and cost forecasts which prevented an informed assessment of the appropriateness of the proposed price increases.

In May 2010 the ACCC announced its decision not to object to price increases proposed by Australia Post in April 2010. This decision was informed by an assessment of the extent to which Australia Post's proposed prices were forecast to recover the efficient costs of providing reserved letter services.

Rail

The ACCC expressed its support for the ARTC utilising a loss-capitalisation model for its Hunter Valley rail network access undertaking that will facilitate its investment strategy in the Hunter Valley. The ARTC investment strategy aims to increase the throughput of the whole of the Hunter Valley coal chain by aligning investment in rail with investment in port and mining facilities.

The ARTC is expected to continue to use a loss-capitalisation model as it works with the ACCC, industry and stakeholders to develop an appropriate access undertaking under Part IIIA of the Trade Practices Act.

Airservices Australia

The ACCC decided in January 2010 not to object to a proposed price by Airservices Australia for a terminal navigation service at Avalon Airport. Airlines using Avalon Airport pay terminal navigation service charges on a user-pays basis reflecting their use of air traffic control services.

Sydney Airport price notification

The ACCC received a price notification from Sydney Airport Corporation Ltd on 24 June 2010 covering a proposal to increase prices to regional airlines at Sydney Airport by a maximum of 2.9 per cent. The ACCC released an issues paper in July 2010 seeking comment from interested parties.

Water

In its final advice and draft Water Charge (Infrastructure) Rules provided to the Minister for Climate Change, Energy Efficiency and Water, the ACCC proposed a framework for regulating large water infrastructure operators. In relation to medium-sized and member‑owned operators the ACCC assumes that reasonable, efficient pricing and investment incentives exist. The ACCC proposed that these operators provide details of their asset planning processes and their network service plans. This will increase transparency and help customers assess the relationships between investments, service standards and prices.

In relation to large non-member operations that are subject to price cap regulation, the ACCC proposed a framework that provides the necessary revenues for efficient investment and provides incentives for operators to continually reduce costs over time and offer cost-reflective prices.

Regulatory processes

The ACCC and the AER help to ensure that regulatory processes that support efficient allocation of resources, including investment in the regulated businesses, are predictable and consistent.

In carrying out their regulatory processes, the ACCC and the AER work to five guiding principles—transparency, consistency, fairness, timeliness and confidentiality.

Telecommunications, broadcasting and content

The ACCC liaised directly with key parties on individual matters, and used speeches and media releases to educate industry and consumers on telecommunications regulation. It consulted interested parties in the course of its decision-making processes, inviting them to provide submissions on discussion papers, draft decisions and final decisions.

Examples of the consultations conducted are:

Energy

All of the AER's regulatory decisions are made through open and transparent consultation processes which facilitate participation by regulated businesses, energy consumers and interested parties.

In 2009−10 the AER hosted forums on Victorian wholesale gas market monitoring and reporting, its approach to compliance and enforcement in wholesale electricity and gas, and new energy retail functions.

The AER began preliminary consultation on the various guidelines that it will be required to develop after the passage of the proposed National Energy Retail Law. This included consultation on:

Gas transmission and distribution compliance

The AER reviewed the 2008−09 annual compliance reports of 23 nominated service providers (submitted under the annual compliance regulatory information order made under section 48 of the National Gas Law) and found two breaches requiring detailed explanation and/or corrective action.

Publication of final rebidding and Technical Parameters Guideline

Following the release of a draft report, the AER published the final Rebidding and Technical Parameters Guideline. This outlines the details that must be contained in a rebid reason submitted to the Australian Energy Market Operator, and covers several related areas associated with the bidding and rebidding of technical parameters.

Compliance bulletin

The AER published a compliance bulletin dealing with the provision and updating of generator availability. The bulletin covers National Electricity Rules reporting requirements for short- and medium-term projected capacity assessments, and daily bid and pre dispatch processes.

Draft regulatory investment test for transmission

Following the release of an issues paper in September 2009, in March 2010 the AER commenced consultation on its draft regulatory investment test for transmission. Under the National Electricity Rules, the AER must publish the regulatory investment test for transmission (to replace the existing regulatory test for electricity transmission investments) by 1 July 2010, to commence on 1 August 2010.

Transport and general prices oversight

The ACCC assesses price notifications from declared firms under Part VIIA of the Trade Practices Act.

In 2009−10 the ACCC assessed three price notifications: one from Airservices Australia and two from Australia Post. (All are described under 'Incentives' above on p. 74.) In undertaking these assessments it followed the 'Statement of regulatory approach to assessing price notifications', which is available on the ACCC website.

Water
Advice

The Minister for Climate Change, Energy Efficiency and Water requested that the ACCC, in developing its advice, undertake the relevant consultancies with Basin state ministers, irrigation infrastructure operators and the public to satisfy the consultation requirements set out in regulations 4.05 and 4.18 of the Water Regulations 2008. In 2009−10 the ACCC satisfied these requirements by:

In preparing its advice the ACCC also sought third-party technical or legal assessment. The proposed water trading rules were subject to two consultant reviews.

Enforcement guidelines

In August 2009 the ACCC released its enforcement guideline for irrigation infrastructure operators. The guideline explains the ACCC's approach to policing the Water Market Rules and Water Charge (Termination Fees) Rules.

Regulators forum

The ACCC, with state and territory regulatory agencies, convenes a utility regulators forum to exchange information, encourage consistent application of regulatory functions and review new ideas about regulatory practices. In 2009−10, forum meetings took place in Fremantle and Melbourne. The forum's newsletter, Network, continued to be published quarterly.

Fuel price monitoring

The ACCC analyses general fuel price movements to produce informed briefings for the public and government.

The major findings of the ACCC's general fuel price monitoring in 2009­−10 were as follows:

Unleaded petrol
  • Movements in domestic retail petrol prices were largely driven by movements in the international refined petrol price (measured by the spot price of Singapore Mogas 95 Unleaded).
  • Retail petrol prices (seven-day rolling average) in Australia's five largest cities were volatile during the year within a fairly narrow band—14 cents per litre (cpl). Prices ranged from a low of around 116 cpl in October 2009 to a high of around 130 cpl in March and May 2010.
Diesel
  • Movements in retail diesel prices were largely driven by movements in the international refined diesel price (measured by the spot price of Singapore Gasoil 10 parts per million sulphur) and the Australian − United States dollar exchange rate.
  • Retail diesel prices (seven-day rolling average) in the five largest cities were broadly stable in the first half of 2009−10 and reached a low of around 118 cpl in October 2009. Retail prices generally increased in the first half of 2010, in line with increases in the international benchmark price for diesel.
LPG
  • Increases in automotive LPG retail prices generally followed the increase in the Saudi international benchmark prices for propane and butane.
  • Automotive LPG prices (seven-day rolling average) in the five largest cities increased from a low of around 46 cpl in July 2009 to around 66 cpl in March 2010, an increase of 20 cpl. At the end of the year retail prices were around 60 cpl.

Monitoring and advising

The ACCC and the AER monitor prices to assess the effect of market conditions on the price levels of specified goods and services and advise the government and the public on its findings.

This involves assessing a range of price, non-price and market conditions.

Telecommunications, broadcasting and content

In 2009−10 the ACCC complied with its statutory requirements by:

The ACCC did not fully comply with the requirement to publish the current cost accounting reports relating to Telstra's accounting separation regime within one month of receiving the data from Telstra. After a delay, these reports were published in June 2010.

Fuel

The ACCC conducted general fuel price monitoring, including:

These monitoring activities enabled the ACCC to keep abreast of developments in the market and provide briefings and advice to the government and the public.

The ACCC continued its formal monitoring of the petrol industry under a direction from the minister in 2007 to monitor the prices, costs and profits of unleaded petrol products for a period of three years.

The ACCC submitted its second formal monitoring report on the petrol industry to the minister in December 2009. The two monitoring reports are available on the ACCC website.

In May 2010 the minister directed the ACCC to undertake formal monitoring for a further 12 months.

Energy

The AER continuously monitors activity in the gas and electricity wholesale markets and publishes the results in weekly gas and electricity market analysis reports. The reports are available on the AER website and are provided to the Ministerial Council on Energy.

The AER's weekly electricity market analysis reports provide information on and analysis of wholesale market activity, including weekly average spot prices, financial year-to-date spot prices, and reasons for variations between forecast and actual prices.

The weekly gas market analysis reports, which began in mid-2009, provide information on the Victorian declared wholesale market, including bids and market prices.

Airports

Following a direction from the Australian Government under Part VIIA of the Trade Practices Act, the ACCC monitors prices, costs and profits relating to the supply of aeronautical services and car parking at Adelaide, Brisbane, Melbourne, Perth and Sydney airports. Under parts 7 and 8 of the Airports Act, the ACCC is also responsible for monitoring those airports' financial account reporting and quality of service.

The Airport monitoring report 2008−09 was delivered to the minister on 4 March 2010. This complied with the requirement to provide the report as soon as practicable following the end of the financial year. The report was published on the ACCC website in March 2010. For a discussion of its findings, see p. 69.

Container stevedoring

The ACCC is required to monitor the prices, costs and profits of container terminal operator companies at the ports of Adelaide, Brisbane, Burnie, Fremantle, Melbourne and Sydney. The ACCC delivered its Container stevedoring: Monitoring report no. 11 for 2008−09 to the minister on 30 October 2009. This complied with the requirement to provide the report within four months of the end of each financial year. The report was published on the ACCC website in November 2009.

Post

The ACCC analysed Australia Post's 2007−08 regulatory accounts as part of its fourth cross-subsidy report. It also undertook an assessment of costs and return on capital as part of its assessment of Australia Post's price notification in April 2010.

Water

Under the Water Act, the ACCC is required to monitor a range of regulated water charges imposed across the Murray‑Darling Basin as well as compliance with the water charge rules and water market rules.

The proposed Water Charge (Planning and Management Information) Rules will assist the ACCC in its monitoring by requiring state and territory water agencies to publish details of water planning and management charges imposed in their jurisdiction.

Under the proposed Water Charge (Infrastructure) Rules, specific types of infrastructure operators will be required to publish a schedule of their regulated water charges, and the ACCC will monitor these charges.

Publicising outcomes

The ACCC and the AER publicise the outcomes of access arbitrations, arrangements and undertakings, and of monitoring activities and inquiry findings. This is achieved through news releases on major decisions on a range of reporting mechanisms as set out below.

Telecommunications, broadcasting and content

The ACCC published:

Fuel

The ACCC continued to publicise the results of its fuel price monitoring activities.

Energy

The AER website was kept up to date and provided clear links to all of the AER's regulatory, monitoring, reporting and enforcement activities, including:

The AER notifies regulated businesses, energy consumers and interested parties of significant events, including public forums and meetings; publication of decisions, determinations or reports; and opportunities to participate in regulatory processes. Notification is by email and, if required, by advertising in national newspapers. Over 100 notices were sent to energy market participants and interested parties in 2009−10.

The AER's website allows people to register to be notified promptly of updates to specific pages.

Airports

The ACCC published its annual airports monitoring report for 2008−09 and an accompanying media release in March 2010. The report was made available on the ACCC website.

In January 2010 the ACCC announced its final decision on Airservices Australia's proposed pricing for air traffic control services at Avalon Airport and placed the text of the decision on its website, along with the public price notification.

Container stevedoring

The ACCC maintains a waterfront and shipping page on its website, on which all of its container stevedoring monitoring reports are made publicly available.

Post

In its consideration of Australia Post's 2009 and 2010 pricing proposals the ACCC released timely issues papers and decision documents that were made available to the public and stakeholders on the ACCC website and through emails, letters and media releases.

The ACCC maintains a postal services page on its website, which provides up-to-date information about its ongoing role in the regulation of postal services and about specific postal regulatory activities.

Rail

The ACCC's position paper and draft decision paper on its assessment of the ARTC's 2009 Hunter Valley rail network access undertaking were made available to the public and stakeholders on the ACCC website, through email alerts to stakeholders and by media release.

The ACCC's ARTC Hunter Valley rail network undertaking web page keeps stakeholders and the wider public informed about the status and progress of developing an access undertaking for the Hunter Valley rail network. The ACCC uses the site to publish ARTC proposals, submissions from industry and stakeholders, and ACCC decisions in a timely manner.

Wheat export marketing arrangements

In September 2009 the ACCC accepted grain port terminal access undertakings from bulk handling companies Co-operative Bulk Handling, AusBulk (now Viterra) and GrainCorp Operations. The decision to accept the three undertakings was publicised broadly through media release and email alerts. Following acceptance of the undertakings the ACCC delivered a comprehensive education campaign to inform access seekers about the new arrangements.

In the course of assessing the wheat access undertakings, the ACCC made its issues papers and draft and final decision papers available to the public and stakeholders on the ACCC website and through email alerts and media releases.

The wheat access undertakings page on the ACCC website is an important tool to ensure stakeholders are kept up to date on activities concerning the undertakings. The ACCC uses it to publish undertaking compliance investigation outcomes and to provide information about the ACCC's ongoing role and current activities relating to port access for wheat exporters.

Water

In relation to all requests for policy advice from the Minister for Climate Change, Energy Efficiency and Water and other Australian Government agencies, the ACCC releases on its website all draft advice documents and public submissions received. The ACCC releases final advice documents on its website once the minister has provided notice of an intention to make rules.

In June 2009 the ACCC and the Minister for Climate Change, Energy Efficiency and Water finalised an agreement on monitoring industry compliance of the water market rules and the water charge rules. In August 2009 and February and May 2010 the ACCC released information disclosure requests to stakeholders to seek comment on the proposed monitoring regime. Both the information requests and the public submissions received by the ACCC were made public through the ACCC website.

As part of its Water Act enforcement role, the ACCC will publicise the outcome of all enforcement activities where appropriate.