The ERA is an independent statutory authority established by the Parliament of Western Australia. Our purpose is to benefit the WA community by promoting an efficient and customer focused economy. We aim to achieve this purpose through the range of regulatory functions that we perform and through the independent advice we provide to the government on important economic issues.
The Treasurer funds the ERA to maintain capacity to undertake independent investigations (called “references”) on economic matters of significance to the State. Our references function is similar to the role the Productivity Commission has in conducting economic inquiries for the Commonwealth Government.
It is up to the Treasurer to prioritise the investigations that we undertake and it is the Treasurer who formally issues the reference to the ERA. Ministers and other parties interested in having the ERA conduct a reference would typically write to the Treasurer with proposed terms of reference.
Unlike the Productivity Commission, we are not able to initiate our own investigations. The work we undertake can only be done in response to a notice of reference issued by the Treasurer. Under the Economic Regulation Authority Act 2003, the Treasurer is required to consult formally with us prior to issuing the terms of reference.
The matters that can be referred to us in relation to a particular industry include:
- prices and pricing policy in respect of goods and services provided in the industry concerned
- quality and reliability of goods and services provided in the industry concerned
- investment and business practices in the industry\ concerned and
- costs of compliance with written laws that apply to the industry concerned.
There are three types of references specified in the Act.
References on Regulated Industries: Inquiries
The first type deals with matters relating to the electricity, gas, rail and water industries. These are public inquiries where we publish the terms of reference upon receipt of the reference under the Act. The Act provides an indication of the types of matters that we can investigate, although it does not limit the potential references to these matters.
This type of reference is typically initiated with the release of an issues paper that invites submissions from interested parties.
This is usually followed by the release of a draft report, which provides the draft set of recommendations to the government and seeks further feedback from interested parties in relation to the draft recommendations. Depending on the issue, the consultation process might also include public forums or workshops.
The inquiry culminates in the preparation of a final report which is provided to the Treasurer by a date specified in the terms of reference. The Treasurer has 28 days to table the report before each house of Parliament (or provide it to the Clerk if Parliament is not sitting).
Inquiries within this category have included inquiries into Synergy’s electricity tariffs, Water Corporation’s tariffs, Horizon Power’s costs and how competition in the water sector could be enhanced.
References on Other Industries: Inquiries
The second type of reference is an inquiry into matters that do not relate to the electricity, gas, rail and water industries. These inquiries typically follow a similar process to the one described above. i.e. they are public processes with multiple opportunities for input from interested parties and culminate in a final report that must be tabled in Parliament.
Inquiries within this category have included inquiries into microeconomic reform in WA, the State’s home indemnity insurance arrangements, the provision of shared corporate services within the public sector, the State’s chicken meat and grain marketing legislation, and the charter operations of school bus contractors.
References on Other Industries: Reports
The third type of reference is a report into matters that do not relate to the electricity, gas, rail and water industries. There is no requirement under the Act for the terms of reference to be made public and there need not be any public consultation. However, we provide a report to the Treasurer, which must be tabled in Parliament. We have not yet been requested to undertake this type of reference.
Areas of Expertise
In considering potential references for the ERA, interested parties should be aware that we have specialist expertise in the following areas:
- Derivation of retail prices in markets that are not competitive (e.g. our work on electricity and water prices)
- Analysis of the efficiency of government businesses that are shielded from competition (e.g. our work on the efficiency of Synergy and Horizon Power)
- Cost benefit analysis of major project proposals (e.g. our investigation into a proposal to build a pipeline to transport water from Esperance to Kalgoorlie and displace the pipeline from Mundaring to Kalgoorlie)
- Analysis of legislative interventions in markets (e.g. our investigations into the Chicken Meat Industry Act 1977, Grain Marketing Act 2002 and Home Building Contracts Act 1991)
- Review of major government expenditure (e.g. our investigation into whether the project to share corporate services within the public sector should continue, the review of expenditure on dam safety, and the review of the State Underground Power Program)
- Analysis of new government initiatives (e.g. the proposal to recover the costs of the Department of Water’s water resource management and planning activities from industry)
- Identification of options to increase competition within an industry (e.g. our inquiry into competition in the water sector)
- Matters relating to the enhancement of economic efficiency and consumer welfare in Western Australia (e.g. our inquiry into microeconomic reform in WA).
The number of references that can be conducted simultaneously depends on the amount of work involved in each inquiry and on regulatory work underway at the ERA. Historically, the ERA has been asked to undertake two to three inquiries per year. References that involve public consultation would normally take at least nine months. A major pricing inquiry, such as an inquiry that results in recommendations on water prices, typically takes 12 months.