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Key performance indicators for the Council’s purpose

1. Recommendations on declaration applications made within statutory time limits (consideration period of 180 days) and meet the advice requirements of Ministers

(Corporate Plan 2018-19 and Program 1.1, 2018-19 Portfolio Budget Statements p262).

The Council had no ongoing applications for declaration at the start of the 2018-19 year, and did not receive any new applications for declaration during 2018-19.

2. Recommendations on certification applications made within statutory time limits (consideration period of 180 days) and meet the advice requirements of Ministers

(Corporate Plan 2018-19 and Program 1.1, 2018-19 Portfolio Budget Statements p262).

The Council had no ongoing applications for certification at the start of 2018-19, and did not receive any new applications for certification during 2018-19.

3. Recommendations and decisions under the NGL made within specified time limits and recommendations under the NGL meet the advice requirements of Ministers

(Corporate Plan 2018-19 and Program 1, 2018-19 Portfolio Budget Statements p262).

The Council had no ongoing applications under the NGL at the start of 2018-19, and did not receive any new applications under the NGL in 2018-19.

4. Accessible information on all access regulation matters for which the NCC is responsible is provided on the NCC website

(Corporate Plan 2018-19 and Program 1.1, 2018-19 Portfolio Budget Statements p262).

The Council’s principal website (www.ncc.gov.au) contains information on the Council’s responsibilities and roles concerning third party access to infrastructure under both the CCA and the NGL. The website aims to provide ready access to:

  • information on current applications, including copies of the application and submissions and timing matters
  • information on past applications
  • Council guides and other publications and resources, and
  • details of the Council’s operations.

The Council has established a webpage on its website in relation to its current consideration of a possible recommendation to revoke the declaration of service at the Port of Newcastle. The webpage contains relevant background information to the matter, public submissions and relevant correspondence.

All Council submissions made in response to policy reviews during 2018-19 have been published on the Council’s website.

During 2018-19 there were 78 031 visits to the Council’s website (2017-18: 86 075).

The Council has a second website incorporating the material from its previous role and work on the National Competition Policy (NCP) reform program (www.ncp.ncc.gov.au). This website provides an historic record of governments’ development of, agreement to and implementation, and outcomes of the (now concluded) NCP reform program, the reforms under the program and the outcomes of the Council’s regular assessments of progress.

During 2018-19 there were 93 531 visits to the NCP website (2017-18: 112 202 visits).

5. Up to date and informative guidelines on all the NCC’s areas of responsibility are maintained on the NCC website

(Corporate Plan 2018-19 and Program 1.1, 2018-19 Portfolio Budget Statements p263).

The Council has published guides to declaration and certification under Part IIIA of the CCA and to coverage determinations and other Council responsibilities under the NGL. The current guidelines may be downloaded or printed from the Council’s website (www.ncc.gov.au).

The guides reflect the Council’s thinking as it has evolved through dealing with applications, and draws on relevant decisions of the Tribunal and the Courts. They are designed to be informative and assist prospective applicants to determine the merits of an application and, if appropriate, frame an application to the Council. They are also useful to service providers and other parties involved in declaration and similar processes under Part IIIA and the NGL.

As detailed in other parts of this report, while there have been recent policy reviews in relation to the regulation of airports and gas pipelines, at this time there is no policy decision to change the declaration process under Part IIIA of the CCA as it applies to airports; or change the coverage criteria for gas pipelines1 or any other mechanisms administered by the Council under the NGL. The Council intends to follow the Productivity Commission’s Final Report on airport regulation, as well as upcoming policy reviews in the second half of 2019 in relation to any matters related to the Council’s areas of responsibility under the NGL. If appropriate, the Council may undertake further consultation with relevant policy makers; and where necessitated by legislation and/or policy change, the Council will update its guidelines accordingly.

6. Case law developments, legislative amendments and developments in the NCC’s processes or policies are reflected in the NCC’s information resources within 30 days

(Corporate Plan 2018-19 and Program 1.1, 2018-19 Portfolio Budget Statements p263).

There were no significant case law development or legislative amendments that affected the Council’s work in 2018-19.

The Council’s policies, processes and other information resources remain up to date, and are expected to remain so until such time as legislative or other change is made and brought into legal effect.

7. The NCC’s annual report to the Parliament includes a comprehensive report that meets the requirements of section 29O of the CCA and is provided within the timeframe required by the PGPA Act

(Corporate Plan 2018-19 and Program 1.1, 2018-19 Portfolio Budget Statements p263).

Section 29O of the CCA requires the Council to report on various matters relating to the operation of the National Access Regime. The Council’s 2018-19 response on those matters follows below.

The Council’s performance in meeting legislative timeframes for recommendations on any applications under section 44F, 44M, 44NA or 44NBA

As outlined in the earlier sections of this Annual Report, there were no applications for declaration (under section 44F) or for certification (under section 44M, 44NA or 44NBA) under consideration by the Council during 2018-19.

Court or Tribunal decisions interpreting the definition of ‘service’ or the declaration criteria

There were no decisions addressing the definition of ‘service’ or the amended declaration criteria in Part IIIA of the CCA handed down during 2018-19.

Impediments to the operation of Part IIIA

The Council is not aware of any material impediments to the operation of Part IIIA arising during 2018-19.

As detailed in previous Annual Reports, the Council was in the main supportive of the 2017 amendments to the National Access Regime, particularly amendments to the declaration criterion in line with the recommendations of the Productivity Commission. The Council considered those amendments to be critical to the operation and effectiveness of the National Access Regime.

However, the Council is also cognisant that the amendments to Part IIIA have not been reflected in the NGL, the principles for certifying an access regime as effective,2 and potentially other State or Territory access regimes modelled on the original Part IIIA provisions.3

As discussed in the section below titled “implications for the future operation of Part IIIA”, the Council considers that similar amendments should be made in other regimes to follow the amendments to Part IIIA, in order to prevent the potential for divergence to arise in the approach to access regulation across regimes or industries.

Evidence of benefits from the Australian Competition and Consumer Commission’s arbitration determinations

In November 2016, the ACCC commenced arbitration of an access dispute between Glencore and PNO in relation to the declared shipping channel service at the Port of Newcastle. That arbitration was finalised by the ACCC during the 2018-19 year.

The access dispute follows the declaration of service at the Port of Newcastle by the Tribunal on 16 October 2016. On 4 November 2016, Glencore notified the ACCC of its access dispute with PNO regarding the access charges and other conditions for its access to the declared service.

By agreement of all parties, the arbitration was suspended for a period after the Full Federal Court had heard PNO’s application for judicial review of the Tribunal’s decision to declare the service but before the Full Court decided on the application.4 Following the decision of the Full Court to dismiss the application on 16 August 2017, the ACCC re-commenced the arbitration. The arbitration was concluded with the issue of an ACCC Final Determination on 18 September 2018, which was published on the ACCC website on 8 October 2018. Subsequently, both PNO and Glencore applied to the Tribunal for a review of the ACCC Final Determination (which, according to s 44ZP(3), is a re-arbitration of the access dispute). As at 30 June 2019, the Tribunal has heard the applications but has not handed down its decision.5

As reported in the section above titled “Consideration of possible recommendation to revoke the declaration of shipping channel service at the Port of Newcastle”, the Council sought submissions from interested parties in October 2018 on whether and, if so, how the Council should have regard to the ACCC Final Determination when considering whether to make a recommendation to revoke the declaration of service. Submissions from interested parties on this point, and the Council’s consideration in response, are set out in the Council’s SOPV released in December 2018 and will not be repeated here.

Given the outcome of the Tribunal’s review of the ACCC Final Determination is pending, and that the Council has not finalised its consideration of whether to recommend revocation of the declaration by the end of this reporting period, the Council will not make direct comments at this time on the evidence of benefits (or otherwise) from ACCC’s arbitration determination of the Glencore-PNO access dispute.

The Council will return to and report on these issues in its next Annual Report.

Evidence on the costs of, or disincentives for, investment in infrastructure by which declared services are provided

During the Council’s process for considering a possible revocation recommendation in respect of the declared shipping channel service at the Port of Newcastle, PNO and Ports Australia submitted to the Council that continued declaration of the service may have a chilling effect on investment by limiting the returns that would otherwise be realised.

However, as noted in the Council’s SOPV released in December 2018, other stakeholders have submitted that recent investments in the Port have been made by PNO.

The Council accepts as a general proposition that access regulation under Part IIIA may lessen incentives to invest in a declared service. However, the significance of this incentive must be assessed on a case-by-case basis having regard to the particular circumstances associated with individual declared services. As noted above, the Council’s consideration of whether to recommend revocation of the declared shipping channel service at the Port of Newcastle (and its assessment of submissions made by stakeholders during its consideration of this matter) was still ongoing at the end of this reporting period.

The Council is not aware of any evidence in relation to any other declared service relating to the costs of, or disincentives for, investment in infrastructure by which declared services are provided.

Implications for the future operation of Part IIIA

The Council considers that the National Access Regime offers substantial benefit by providing a legal framework for third parties to gain access to the services provided by nationally significant infrastructure that cannot be economically duplicated, where access is required by third parties in order to compete effectively in a dependent market.

The National Access Regime, and the declaration criteria that underpin its operation, seek to appropriately balance the promotion of competition in a dependent market; ensuring appropriate investment incentives; and other public interest considerations. As recognised by both the Productivity Commission and the Competition Policy Review, access regulation under Part IIIA can entail substantial costs. As such, the scope of the Regime should be confined and its use limited to exceptional cases where the benefits arising from increased competition in dependent markets are likely to outweigh the costs of regulated access.6

As noted above, the Amending Act was passed in 2017, which included material amendments to the declaration criteria in Part IIIA.

The amendments to criterion (a) return the focus of this criterion to considering the impact of access or increased access “on reasonable terms and conditions as a result of a declaration” on competition in other markets.

The amendments to criterion (b) clarifies that the test imposed under this criterion is a natural monopoly test, not a private profitability test as previously established by the High Court in The Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2012] HCA 36 (Pilbara HCA).

The amendments to criterion (d) (previously criterion (f)) ensures that the satisfaction of the criterion hinges on a finding that declaration would be positively in the public interest, not merely whether declaration would not be contrary to the public interest.

In addition, the Regime provides an overarching framework and guiding principles to encourage a consistent approach to access regulation, and operates as a model and ‘back stop’ to many industry-specific access regimes. This includes access regimes implemented through access undertakings accepted under Part IIIA, and access regimes implemented under state and territory laws, and certified as effective under Part IIIA.7

Notwithstanding this, the Council considers that the benefits noted above could be curtailed if the recent amendments to the declaration criteria in the National Access Regime in Part IIIA are not mirrored in the principles for certifying an access regime as effective, or in other access regimes modelled on the original Part IIIA provisions, including the regime for regulating access to gas pipelines under the NGL. For instance, to the extent that those other regimes still embody the wording of the previous criteria (a) and (b), the previous interpretation of these criteria, from which legislature has decided to move away by making amendments to those criteria, may continue to have an impact on future decisions relating to those regimes. If equivalent amendments are not made in those regimes, this will increase the prospect of divergent and potentially inconsistent approaches being taken to regulating access to infrastructure services across different regimes or industries, thereby undermining the intended benefits and consistency objective of Part IIIA.

Certification

Currently, there is difference in wording between the principles in clause 6(3)(a) of the CPA and the declaration criteria in Part IIIA of the CCA. The 2017 amendments to Part IIIA have resulted in yet further divergence in the wording.

Both the Productivity Commission and the Competition Policy Review recommended updating the principles in clause 6(3)(a) of the CPA to align with the revised declaration criteria.

The IGA, initially announced in December 2016, was intended by COAG Council as a successor policy to the CPA; and contained updated wording of the principles for certifying State and Territory access regimes in order for it to be consistent with the amended declaration criteria in Part IIIA. As at the end of June 2019, the IGA has not been agreed by all heads of government and the principles in clause 6(3)(a) of the CPA continue to have effect.

Despite those principles in the CPA and the amended declaration criteria in Part IIIA now being in substantially different terms, the Council has indicated in its Certification of State and Territory Access Regime Guide that it intends to interpret them in broadly the same manner, as far as possible.8

Coverage criteria under the NGL

For many years, the regime governing access to natural gas pipelines under the NGL had maintained broad consistency with the National Access Regime. The coverage criteria were previously near identical to the declaration criteria; and the Council, Tribunal and the Courts used to draw on declaration decisions under Part IIIA in considering similar issues for coverage decisions under the NGL, and vice versa.

However, due to the 2017 amendments to the declaration criteria, there is now notable difference between the wording of the declaration criteria and the coverage criteria. The divergence could require the Council (and the relevant Minister) to apply different approaches when considering recommendations (and decisions) concerning declaration and coverage.

Currently, the coverage criteria still reflect the language of the previous declaration criteria. As such, the interpretation of the previous declaration criterion (a)9 as decided by the Full Federal Court in Sydney Airport No.2 and PNO v Tribunal will continue to prevail. Further, the interpretation of the previous declaration criterion (b)10 arising from the High Court decision in Pilbara HCA could continue to have application, affecting future decisions relating to coverage of pipelines under the NGL.

To lessen the likelihood of inconsistent approaches arising, the Council urges that consideration be given by the COAG Energy Council to align the coverage criteria to the now-amended declaration criteria.

However, against this backdrop, the Council is also mindful of the recent reform to gas pipelines regulation introduced by the Part 23 regime, and the current RIS process being undertaken by COAG Energy Council’s Senior Committee of Officials, and the scheduled review of Part 23 that is yet to occur. The outcome of these processes could change the coverage criteria and the process for determining the forms of regulation administered by the Council.

Without getting ahead of the future reviews (in which the Council intends to participate and provide further comments in due course), the Council notes its reservations and concerns regarding any considerations to potentially lower the threshold of the coverage criteria, or to bypass the coverage criteria.

Calls for ‘deemed’ declaration

As shown in the context of the current Productivity Commission Inquiry into the regulation of airports, stakeholders in some industries will on occasion argue that services provided by monopoly infrastructure should be ‘deemed’ to be declared. In response to those calls, the Council notes that access regulation has substantial costs, and should not be imposed by simply ‘deeming’ particular services as declared (or covered). The intention of the National Access Regime is that access regulation should only be imposed where it could be demonstrated, through satisfaction of each of the declaration (or coverage) criteria, that regulation would be necessary, effective and in the public interest, such that the benefits arising from increased competition in dependent markets are likely to outweigh the costs of regulated access. Where the declaration (or coverage) process is bypassed, there is no reasonable certainty and it cannot be assumed that access regulation would be beneficial.

Analysis of performance against the purpose

In the Council’s view, it met all the key performance indicators for its purpose during 2018-19. The Council’s performance in meeting its key performance indicators (set out in the Treasury Portfolio Budget Statements and Corporate Plan 2018-19) is summarised in Table 2‑3.

Table 2-3 Summary of National Competition Council output performance indicators and performance 2018-19

Key performance indicator

2018-19 target

Outcome

Recommendations on declaration applications made within statutory time limits (consideration period of 180 days) and meet advice requirements of Ministers.

Recommendations are made within 180 days.

Recommendations meet the advice requirements of decision making Ministers.

Not applicable – the Council did not consider any declaration applications during 2018-19.

Recommendations on certification applications made within statutory time limits (consideration period of 180 days) and meet advice requirements of Ministers.

Recommendations on applications are made within 180 days.

Recommendations meet the advice requirements of decision making Ministers.

Not applicable – the Council did not consider any certification applications during 2018-19.

Recommendations and decisions under the NGL made within specified time limits and recommendations under the NGL meet the advice requirements of Ministers.

Recommendations and decisions are made within statutory time limits.

Recommendations meet the advice requirements of decision making Ministers.

Not applicable – the Council did not consider any matters under the NGL during 2018-19.

Accessible information on all access regulation matters for which the NCC is responsible is provided on the NCC website.

Council website holds all documents relevant to the Council’s functions.

The Council’s website is up to date.

Up to date and informative guidelines on all the NCC’s areas of responsibility are maintained on the NCC website.

Guides to all aspects of the National Access Regime and the Council’s responsibilities under the NGL are available.

Guides are updated within 30 days of relevant decisions or developments in case law.

Guides to declaration and certification and all Council functions under the NGL are available on the Council’s website.

Case law developments, legislative amendments and developments in the NCC’s processes or policies are reflected in the NCC’s information resources within 30 days.

Case law developments, legislative amendments and developments in Council processes or policies are reflected in Council information resources within 30 days.

There were no case law development, legislative amendments or changes in the Council’s processes or policies during the reporting year.

The NCC’s annual report to the Parliament includes a comprehensive report that meets the requirements of s29O of the CCA and is provided within the timeframe required by the PGPA Act (i.e. by the 15th day of the fourth month after the end of the reporting period).

The Council annual report provides comprehensive information on the National Access Regime and NGL, addresses all matters required under section 29O of the CCA and is provided within the required timeframe.

The Council will provide its 2018-19 Annual Report to the Treasurer by 15 October 2019.

The Council’s Annual Report will include a report on the National Access Regime as required by s29O of the CCA.

Footnotes

  1. See also the ‘Coverage criteria under the NGL’ section on page 22 of this Annual Report.
  2. While clause 6(3)(a) principles in the CPA still apply at present (as the CPA has not been replaced by the IGA), the Council has stated in its Certification of State and Territory Access Regime Guide that it will interpret the clause 6(3)(a) principles in the CPA in a manner consistent with the amended declaration criteria as far as possible, while recognising the differences in wording.
  3. The Queensland access regime is an exception. In March 2018 the Queensland Government amended the Queensland Competition Authority Act 1997 (Qld) (QCA Act) to ensure that the ‘access criteria’ in s 76 of the QCA Act, which govern access to services in Part 5 of the QCA Act, are consistent with the amended declaration criteria in Part IIIA.
  4. That is, the period from 2 February 2017 to 16 August 2017.
  5. Australian Competition Tribunal File Nos. ACT 2 of 2018 (Application by Port of Newcastle Operations Pty Ltd) and ACT 3 of 2018 (Application by Glencore Coal Asset Australia Pty Ltd).
  6. In recommending changes to the declaration criteria in Part IIIA of the CCA, the Productivity Commission noted, “renewed emphasis should be given to ensuring that the Regime better targets the economic problem to reduce the risk of imposing unnecessary costs on the community and deterring investment in markets for infrastructure services for little gain” (p. 10, Final Report).
  7. Competition Policy Review, Final Report, March 2015, p. 430.
  8. As stated in paragraph 4.12 of the Guide, “given that certification of an access regime displaces the availability of declaration of the services covered by the access regime and noting the requirement that the clause 6 principles are guidelines rather than binding rules, the Council considers it appropriate to interpret the clause 6(3)(a) principles as far as possible in a manner consistent with the declaration criteria, while recognising the differences in wording.”
  9. The previous criterion (a) was set out in s 44H(4) and s 44G(2) of the CCA. As a result of the 2013 amendments, the criterion is now set out in s 44CA(1) of the CCA.
  10. The previous criterion (b) was set out in s 44H(4) and s 44G(2) of the CCA. As a result of the 2013 amendments, the criterion is now set out in s 44CA(1) of the CCA.