The key matters arising for the Council during 2018-19 included the first matter it considered following the finalisation of significant legislative reforms to the National Access Regime in 2017-18, and policy reviews in relation to the regulation of certain monopoly infrastructure.
On the transactional front, in July 2018, Port of Newcastle Operations Pty Ltd (PNO) requested the Council to consider recommending under s 44J of the Competition and Consumer Act 2010 (Cth) (CCA) that the designated Minister revoke the declaration of the shipping channel service at the Port of Newcastle.
This request came to the Council following significant amendments to the National Access Regime introduced in October 2017, including material amendments to the declaration criteria in Part IIIA of the CCA to ensure that the Regime continues to be an accessible and effective regulatory option which can boost competition in the economy. The amendments to the declaration criteria follow extensive reviews by the Productivity Commission in 2013, and by the Competition Policy Review in 2014-15.
The shipping channel service at the Port of Newcastle was declared by the Australian Competition Tribunal (Tribunal) on 16 June 2016, following an application to review the decision of the designated Minister not to declare the service. The declaration has remained in effect despite subsequent review proceedings. In August 2017, the Full Federal Court decided to uphold the Tribunal’s decision to declare the service; and in March 2017, the High Court of Australia dismissed a special leave application to appeal the Full Court’s decision.
Following a request from PNO for a revocation recommendation under s 44J of the CCA, the Council commenced consideration of the matter. While s 44J has rarely been invoked, and contains no procedural requirements for the Council’s assessment, the Council has conducted consultation with interested parties in this matter to carefully consider its task under s 44J, including considering the amended declaration criteria.
As at the end of 2018-19, the Council’s consideration of whether to make a revocation recommendation to the designated Minister in respect of the declared service was ongoing. Given the importance of this matter, and the significance of the Port of Newcastle and its contribution to the National economy, the Council intends to return to and report on this matter in its next Annual Report.
On the policy review front, the Council provided submissions to the Productivity Commission’s Inquiry into the economic regulation of airports, in order to respond to calls from some stakeholders for reforms to bypass the declaration process under Part IIIA of the CCA and to enact a negotiate-arbitrate regulatory regime for airports (or certain airport services). A key argument raised by the proponents related to the difficulty they perceived of satisfying criterion (a) following the 2017 amendments. On this point, the Council provided views in its submission, outlining the history and application of the criterion and its consideration that the amended criterion (a) would not have the effect as claimed by the proponents. The Council also set out views regarding why reforms suggested by some stakeholders would be neither necessary nor appropriate.
In its February 2019 Draft Report, amongst other matters, the Productivity Commission recommended that the existing regulatory approach continue largely in its current form, subject to refinements. On the evidence before it, the Commission considered the four monitored airports in Sydney, Brisbane, Melbourne and Perth had not systemically exercised market power, suggesting that the existing regulatory framework was working well. Consistent with the Council’s views, the Commission considered the suggested reforms to bypass declaration and for Parliament to directly enact a negotiate-arbitrate regulatory model for airports (or airport services) would be inappropriate.
The Productivity Commission’s Final Report has been provided to the Government, and is scheduled to be tabled in Parliament in late July 2019. The Council will await the release of the Final Report with interest.
There has been considerable policy attention on the regulation of natural gas pipelines in recent years. Following the ACCC’s East Coast Gas Inquiry in 2015-16 and Dr Michael Vertigan AC’s Examination of the Current Test for the Regulation of Gas Pipelines in 2016, the Council of Australian Governments (COAG) Energy Council in 2017 endorsed a new regime which largely operates outside the Council’s area of responsibilities under the National Gas Law.
In 2017-18, the Australian Energy Market Commission (AEMC) completed a review into the economic regulation of covered pipelines. The review explored options for further reforms to integrate the new regime with the pre-existing framework administered by the Council. In December 2018, the COAG Energy Council’s Senior Committee of Officials was tasked to prepare a Regulatory Impact Statement (RIS) to further review the issues highlighted in the AEMC review and consider further reform options. The RIS process will be closely integrated with a review of the Part 23 regime, which is scheduled to commence in August 2019.
The Council will closely follow these two processes during 2019-20.