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Implications for the future operation of Part IIIA

Benefits 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.[1]

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

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.[2]

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.

The negotiate-arbitrate framework

Apart from providing a pathway for access seekers to obtain access to infrastructure services provided by facilities that are owned by another business, the declaration process also provides a negotiate-arbitrate framework to resolve terms and conditions of access. Once a service is declared, this framework allows for terms to be set though arbitration by the ACCC in the event that parties are unable to reach an agreement through private negotiations.

As noted above, the determination of access charges for the shipping channel service at the Port of Newcastle continues to be the subject of ongoing dispute and appeal since the ACCC was first notified of an access dispute in November 2016. Where parties avail themselves of appeal rights in relation to arbitration decisions made under Part IIIA of the CCA, this may compromise the ability of access seekers and service providers to reach timely conclusions to access disputes.

The Council will follow the negotiate-arbitrate process with interest and will report on outcomes from the Glencore-PNO access dispute in its next annual report.

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 as a successor policy to the CPA. The IGA 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 2020, 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.[3]

Coverage criteria under the NGL

As stated in previous annual reports, the regime governing access to natural gas pipelines under the NGL had maintained broad consistency with the National Access Regime for many years. 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 are now notable differences in the wording of the Part IIIA declaration criteria and the coverage criteria contained under the NGL. The divergence could require the Council (and the relevant Minister) to apply different approaches when considering recommendations (and decisions) concerning declaration and coverage of natural gas pipelines.

Currently, the coverage criteria still reflect the language of the previous declaration criteria. As such, the interpretation of the previous declaration criterion (a)[4] as decided by the Full Federal Court in Sydney Airport No.2 and PNO v Tribunal continues to prevail. Further, the interpretation of the previous declaration criterion (b)[5] 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.

As mentioned above, in its supplementary submission to COAG’s consultation, the Council advocated that consideration be given by the COAG Energy Council to align the coverage criteria under the NGL to the now-amended Part IIIA declaration criteria.

In the same submission, the Council continued to advocate for the retention of the National Access Regime (and its equivalent under the NGL), citing that there are likely to be circumstances where the benefits of access regulation are likely to outweigh the costs of regulated access where there is a monopoly provider of infrastructure services.

The Council will closely follow the outcome of COAG’s consultation RIS and will report on any developments in its next Annual Report.

[1] In recommending changes to the declaration criteria in Part IIIA of the CCA, the Productivity Commission noted that “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).

[2] Competition Policy Review, Final Report, March 2015, p. 430.

[3] 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.”

[4] 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.

[5] 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.