The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Chris Pearce

Chris Pearce

Parliamentary Secretary to the Treasurer

26 October 2004 - 3 December 2007

Speech of 09/02/2006

TRADE PRACTICES AMENDMENT
(NATIONAL ACCESS REGIME) BILL 2005

9 FEBRUARY 2006

The Government has decided to accept a recommendation contained in the Senate Economics Legislation Committee's report into the provisions of the Trade Practices Amendment (National Access Regime) Bill 2005, and to amend the Bill to give effect to the Committee's recommendation.

Pricing Principles

The Bill implements the Australian Government's final response to the 2001 Productivity Commission's Review of the National Access Regime.

The Productivity Commission recommended that statutory pricing principles should be established to guide access pricing decisions by the Australian Competition and Consumer Commission (ACCC) when arbitrating access disputes and when considering whether to accept an access undertaking or access code under the National Access Regime.

The Australian Government's response to the Productivity Commission review accepted the recommendation that pricing principles be included in Part IIIA.

However, in the course of developing the draft Bill, it was decided that implementing the pricing principles by way of a legislative instrument would be preferable as this would afford greater flexibility should experience highlight a need for changes to them.

Consequently, the Bill currently provides that the Commonwealth Minister must, by legislative instrument, determine the principles relating to the price of access to a service to which the ACCC must have regard.

The Senate Economics Legislation Committee subsequently conducted an inquiry into the Bill and released its report on 8 September 2005.

The Committee's report notes that submissions to the inquiry were supportive of the Bill and that the proposed pricing principles were not controversial. The Committee further noted that the pricing principles were broadly supported by all witnesses to its inquiry.

However, the Committee also reported that many submissions expressed concern at the Government's proposed method of introducing pricing principles under Part IIIA by the use of a legislative instrument, rather than by enactment in the Bill itself.

The main concerns expressed in submissions were that there would be a lack of certainty for infrastructure investors because of the greater potential for changes to be made to the pricing principles, possibly without consultation, and that use of a legislative instrument entailed less transparency and Parliamentary scrutiny.

The Government determined that it would accept the Committee's recommendation that the pricing principles be included in the Bill. An announcement to this effect was made by the Government on 14 September 2005.

The introduction of pricing principles should achieve a number of important objectives. The pricing principles will:

  • provide guidance on how the broad objectives of access regimes should be applied in setting terms and conditions;
  • provide additional certainty to regulated firms and access seekers, in turn improving the operation of the negotiation-arbitration framework. Further, pricing principles will provide some guidance for approaches adopted in particular industry access regimes; and
  • the pricing principles will help to address concerns that a regulator's own values will unduly influence decisions relating to the terms and conditions of access.

Decision makers will be required to have regard to the pricing principles, rather than requiring each and every principle to be satisfied.

The pricing principles will assist in ensuring consistent and transparent regulatory outcomes. They will also enhance certainty for investors and access seekers and facilitate commercial negotiations between parties.

I was pleased to hear the Opposition supports the majority of the measures contained in the Bill.

However, there are two significant differences between the Opposition's proposed amendments on pricing principles and those of the Government.

First, the Government amendments provide that regulated access prices should be set so as to generate expected revenue for a regulated service or services that is at least sufficient to meet the efficient costs of providing access to a regulated service or services.

The Opposition's amendments mirror the Government amendments, but omit the words at least'.

Omitting the words at least', as proposed by the Opposition, would reduce the scope for regulatory decisions on access prices that provide appropriate encouragement for new investment in infrastructure, and would thereby undermine one of the key aims of this Bill.

Retaining the words at least', as per the Government's amendments, ensures the pricing principles facilitate incentives for service providers to continue to invest in infrastructure.

Second, the Opposition amendments seek to ensure that the regulator is not required to consider regulatory risk in any return on investment.

On the other hand, the Government amendments provide that access prices should include a return commensurate with the regulatory and commercial risks involved.

To remove scope for the regulator to factor into investment returns an amount to compensate for regulatory risk would be to ignore concerns put forward by service providers in the Productivity Commission's review, that regulated investment returns do not accurately account for the uncertainty that may arise from regulatory decision-making processes.

I note also that the Productivity Commission consulted extensively on these amendments, while the wording of the Opposition's amendments has not been subject to the same level of scrutiny.

In summary, the Government does not accept the Opposition's amendments, because they would appear to contradict one of the key aims of the Bill, supported strongly by industry, which is to facilitate efficient use of and investment in infrastructure.

Conclusion

The Senate Economics Legislation Committee made a second recommendation in its report on the Bill, namely that the Senate pass the Bill subject to the abovementioned change being made to the implementation of pricing principles.

With the Government having responded fully to the sole concern identified in the Committee's recommendations, and given strong industry support for these measures, the Government considers the Bill deserves the full support of this chamber.