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President's review

The 2019-20 financial year was particularly significant for the Council, as it completed its first recommendation applying the new declaration criteria set out in section 44CA of the Competition and Consumer Act (CCA). The Council also considered whether to recommend certification of a state-based water infrastructure services access regime; and continued to participate in policy reviews relating to the appropriate regulation of natural gas pipeline services.

With respect to the application of the new declaration criteria set out in section 44CA of the CCA, the Council finalised its consideration of the application by Port of Newcastle Operations Pty Ltd (PNO) for the shipping channel service at the Port of Newcastle to be revoked. While much of the work of the Council on this matter was undertaken during the previous financial year, the Council delivered its recommendation on the PNO’s application to the designated Minister (the Treasurer, the Hon. Josh Frydenberg MP) on 26 July 2019. In its recommendation, the Council observed that section 44J of the CCA provides that the Council may recommend to the designated Minister that a declaration be revoked. In doing so, however, the Council must have regard to the objects of Part IIIA of the CCA; and cannot recommend revocation of a declaration unless it is satisfied that subsection 44F(1) or 44H(4) of the CCA would prevent the declaration of a service from being considered, recommended or made (as applicable). Importantly, subsection 44(H)4 prevents the declaration of a service unless the Minister is satisfied of all of the declaration criteria set out in subsection 44CA(1) of the CCA.

The revocation consideration was significant for two reasons: one, it was the first time the Council had considered an application for revocation of an existing declaration under Part IIIA of the CCA; and two, it required the Council to consider the newly amended declaration criteria set out in section 44H(4) of the CCA for the first time.[1] Further, issues relating to whether a shipping channel service at the Port of Newcastle should be declared have been the subject of considerable disputation over a number of years.[2]

Ultimately, the Council considered that while some of the declaration criteria set out in subsection 44CA(1) of the CCA would be met by declaration of the shipping channel service at the Port of Newcastle, it was not satisfied that the declaration criterion described in subsection 44CA(1)(a) of the CCA would be. In particular, the Council reached the view that access to the shipping channel service at the Port of Newcastle on reasonable terms and conditions as a result of declaration is not likely to promote a material increase in competition in any market other than the market for the service. On this basis, the Council decided to recommend to the designated Minister that the declaration be revoked.

On receipt of the Council’s recommendation, the designated Minister was required to either revoke the declaration or decide not to revoke the declaration. However, under section 44J(7) of the CCA, if the designated Minister has not published a decision on the revocation recommendation with the period starting at the start of the day the recommendation is received and ending 60 days after that day, the Minister is taken immediately to have made a decision that the declaration be revoked. Given the designated Minister had not published a decision on the Council’s recommendation by 23 September 2019, it is taken that decision to revoke the declaration has been made.

Subsequently, however, in the post reporting period, the NSW Minerals Council has lodged a new application for declaration of certain services at the Port of Newcastle which is likely to represent a significant matter for the Council’s consideration during the 2020-21 financial year.

On the certification front, the Council considered and finalised a request to extend the certification of the NSW third-party access regime for water infrastructure services as set out in Part 3 of the Water Industry Competition Act 2006 (NSW) (WIC Access Regime).

This matter is significant for the Council as it is the first time the Council has received an application to extend the certification of an existing regime prior to its certification expiring (previous certification for other regimes had expired and were not extended). As is required with a new application for certification, the Council is required to make its recommendation to the Commonwealth Minister within 180 days of receipt of an application for extension. The Minister must then make and publish a decision within 60 days of receiving the Council’s recommendation, otherwise it is deemed that the Minister has made and published a decision in accordance with the Council’s recommendation.

In July 2019, the Premier of NSW submitted an application to the Council, seeking the Council’s recommendation to the designated Minister that an existing regime be certified for a further period of ten years (from 13 August 2019 to 12 August 2029). The Council considered the application and requested submissions from parties regarding the application. In December 2019, the Council issued its draft recommendation, recommending to the designated Minister that the NSW water infrastructure access regime be certified as effective for a period of ten years.

In February 2020, the Council provided its final recommendation to the designated Minister, confirming its recommendation to the Minister that the NSW water infrastructure access regime be certified as effective for a period of ten years. As the designated Minister did not publish a decision in response to the Council’s recommendation within 60 days of receipt, it is taken that the Minister made a decision in accordance with the Council’s recommendation to extend the certification for a period of ten years.

The Council has also been active on the policy review front during 2019-20 and continued to participate in policy reviews relating to the regulation of natural gas pipelines.

In November 2019, the COAG Energy Council published its Regulatory Impact Statement (RIS) to identify and evaluate options to deliver a more efficient, effective and well-integrated regulatory framework for gas pipelines. The RIS also included a review of the Part 23 Regime contained in of the National Gas Rule. In December 2019 and February 2020, the Council provided two submissions to COAG Energy Council, addressing governance arrangements under the NGL and addressing the broader design of the gas regulatory regime. The adoption of the Council’s recommendations would ensure consistency between the coverage criteria under the NGL and the declaration criteria applying to other monopoly infrastructure services under the 2017 amendments to Part IIIA of the CCA.

The Council also notes that the Productivity Commission published its Final Report on the economic regulation of airports in October 2019. The Council was heavily involved in the inquiry during 2018-19 where the Council emphasised its view that the statutory criteria that a designated Minister need be satisfied of when deciding whether to declare a service – and the Council inquiry process that elicits and analyses relevant material relating to whether these criteria are likely to be met – remains an important step in considerations of whether to regulate access to third-party infrastructure services. Importantly, it helps ensure access regulation is only applied in circumstances where it is necessary to both promote competition in dependent markets and help to achieve economically more efficient market outcomes. The Council also considered any proposed reforms to bypass the declaration criteria would undermine the current light-handed regulatory approach; and the incentives it provides for parties to negotiate outcomes commercially. The Council welcomes the Productivity Commission’s view that the current approach to airport regulation – which does not bypass the safeguards contained in the National Access Regime – benefits passengers and the community and remains fit for purpose.

The 2020-21 financial year appears likely again to be a significant period for Council. Already, in the post-reporting period, it has received a new application for declaration at the Port of Newcastle. Further, there a number of existing certifications of state-based access regimes that are due to expire in 2020-21; and policy debates with respect to the appropriate regulation of natural gas pipelines will continue.

The Council looks forward to the year ahead and the new challenges it will bring.

Julie-Anne Schafer

President

[1] Changes to the declaration criteria were enacted in 2017 following recommendations by the Productivity Commission’s 2013 Review of the National Access Regime.

[2] The Council first considered an application for declaration of this service in 2015. In that matter, the Council recommended (and the designated Minister accepted) that the service should not be declared. However, the Australian Competition Tribunal reached a different view on appeal, and the service was declared in July 2016.