09 June 2005
Infrastructure investment is a hot topic at present, with intense public debate over whether regulatory and political conditions are stymieing badly needed investment. It is in this context that the Government introduced the Trade Practices Amendment (National Access Regime) Bill 2005 into Parliament last week.
The Bill’s changes may not be radical, but they are in line with industry calls for greater certainty in what infrastructure can be declared and the regulatory approach to pricing. Further, the changes recognise the need for timeliness in regulatory decision-making, which has long been an industry concern.
Greater certainty in declaration
Under the Bill, an infrastructure service cannot be declared unless access promotes competition to a "material" degree. This flows from concerns that declaration had been allowed where the level of increased competition was only trivial. Under the Bill there will need to be evidence that there will be a substantive increase in the level of competition following declaration.
The Bill also introduces an overarching objects clause to be used in interpreting PartIIIA. The stated objects are "to promote the economically efficient operation" of infrastructure, thereby promoting competition in dependent markets and "to encourage a consistent approach to access regulation" by providing a framework and guiding principles.
Pricing guidelines for the ACCC to consider
The Commonwealth Minister will be able to determine pricing guidelines that the ACCC must "have regard to" in arbitrating terms and conditions of access. The principles will also apply to access undertakings and access codes. While the devil will be in the detail in assessing the effectiveness of the guidelines, the approach may improve certainty and regulatory consistency.
Time targets
Part IIIA decision-makers will have new time limits, ranging from 60 days for a Minister to revoke a declaration, through to six months for assessing an access code or state access regime. The most important is the four month limit on the NCC to assess applications for declaration, and on the Australian Competition Tribunal to process an application for review. These limits can be extended by notice in writing, with no limit as to the number of extensions.
Despite the possibility of extensions, these new limits will be useful. By setting out a basic timetable for all involved, they raise the expectation that decision-makers - and, for that matter, applicants - will comply with those timeframes.
The ACCC will be able to backdate the application of an arbitrated outcome to the later of the date the access negotiations commenced and the declaration decision.
Regulatory holidays
Under the Bill, infrastructure developed pursuant to a government competitive tendering process will be immune from declaration under Part IIIA, but only if the tender process has been approved by the ACCC. Approval requires a finding by the ACCC that the process would lead to reasonable terms and conditions for access. The approval can be revoked if it is satisfied that tenders were not assessed in accordance with the approved process.
A step in the right direction?
There’s a lot of debate over infrastructure investment; the Prime Minister's Exports and Infrastructure Taskforce recently completed its review, and the Council of Australian Governments at its most recent meeting identified infrastructure as a key national concern recommending various investment enhancing initiatives.
Against this background, the Bill’s Explanatory Memorandum says it is intended to encourage efficient investment in new infrastructure, to strengthen incentives for commercial negotiation and to improve the certainty, transparency and accountability of regulatory processes.
The proposed changes appear consistent with these objectives. It’s unclear at this stage whether in practice there will be much difference to the way in which the National Access Regime is currently applied. It is, however, a clear recognition of industry concerns and, combined with the industry-specific regulatory changes underway (for example, the new Australian Energy Regulator and the recently completed review by the Prime Minister's Exports and Infrastructure Taskforce), there are significant changes afoot. We will keep you informed as they progress
