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Outcomes of Recent Inquiries

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.

We also provide advice to the Government on important economic issues.

The ERA provides independent economic advice to the State Government of Western Australia. We can be called on by the Government at any time to conduct independent inquiries on important economic issues.These inquiries can be on any economic issue and need not relate to the regulation of utilities. The inquiries result in recommendations to the Government and a report that must be tabled in Parliament.

Previous inquiries that have resulted in advice to the Government on the regulation of utilities 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.

Previous inquiries that have resulted in advice to the Government on non-utility matters have included inquiries into water resource management and planning charges, grain marketing, the chicken meat industry, school bus contracting, and the provision of shared corporate services within the public sector.

The number of inquiries we conduct varies as they are initiated at the request of the State Treasurer. Historically, we have been asked to undertake two to three inquiries per year. Examples of our recent inquiries include:

Inquiry into the efficiency and performance of Western Australian prisons

Scope: The Treasurer asked us to look for ways to improve the Western Australian prison system and to provide advice based on economic, market and regulatory principles. 
We were asked to design new regulatory arrangements for the prison system that incorporate appropriate performance standards, incentives and performance monitoring processes. 

Outcome: The final report outlines 44 specific recommendations aimed at improving a number of areas of the prison system. We provided advice based on economic, market and regulatory principles. We also provided advice on the design of appropriate performance standards, incentives and performance monitoring processes for the prison system. 
Our 44 specific recommendations were grouped into four categories: 

  1. Establishing consistent standards across the prison system.
  2. Setting clear and meaningful performance benchmarks. 
  3. Introducing better planning, processes, and use and disclosure of information. 
  4. Establishing a better framework for choosing prison operators that considers the merits of public, private, and not-for-profit providers.

We also recommended:

    The adoption of more sophisticated modelling of Western Australia’s future prison requirements.
  • Renewed planning for investment in major prison projects. 
  • That prisoner programs are targeted where and when they will yield the greatest benefits. 
  • Improved data collection and analysis, to determine what works best to rehabilitate prisoners. 
  • Improved management of financial and administrative data and records.
  • Increased collaboration with universities, other Government departments, and not-for-profit service providers.
  • Improved publication of transparent, reliable, and detailed information about the prison system, wherever this does not compromise security.

Inquiry into Microeconomic Reform in WA

Scope: Identify a package of reforms the State Government could implement to improve the efficiency and performance, and hence productivity, of the Western Australian economy.

We examined 17 specific areas of the Western Australian economy, broadly covering the topics of infrastructure, addressing disincentives for businesses, and removing barriers to competition in product markets. These specific areas included:
  • Government project evaluation procedures
  • Royalties for Regions
  • Electricity time-of-use charging
  • Public Private Partnerships
  • Unsolicited private sector proposals
  • Divestment of Government assets
  • Fit-for-purpose investment
  • Use of innovative funding sources
  • State infrastructure strategy
  • Congestion charging
  • Reduction of regulatory burden
  • Reform of State taxes
  • The domestic gas reservation policy
  • Deregulation of retail trading hours
  • Deregulation of taxi markets
  • Deregulation of potato markets
  • The Government’s involvement in housing policy

Outcome: We made 46 recommendations for reform designed to deliver better use of taxpayers’ money, reduce red tape, and provide better services and more choices for Western Australians.

We determined that the benefits from implementing the recommendations on State taxes, the taxi industry and potato marketing alone would be in the order of $622 million per annum, or $245 per year for every Western Australian resident. We did not quantify the benefits of the remaining recommendations but found that, if implemented, these would bring about better use and development of State infrastructure, a reduction of regulatory burden, a more efficient gas market, and greater choice in shopping hours.

The Treasurer has requested that we conduct a similar inquiry into microeconomic reform every four years, providing future State Governments with recommendations to encourage the growth of a more efficient and productive State economy.

Inquiry into Western Australia's Home Indemnity Insurance Arrangements

Scope: Assess the effectiveness of WA’s home indemnity insurance arrangements and consider whether it should continue to be mandatory for builders to hold home indemnity insurance.

Outcome: We recommended home indemnity insurance continue to be mandatory for builders to hold but that the period covered by the insurance need only be until the completion of construction.

Having mandatory insurance coverage in place during the construction period helps protect many consumers from the risk of very large financial losses incurred due to the death, disappearance or insolvency of their builder.

We found that it is during the construction period where potential losses are most significant and recommended that the mandatory construction period insurance continue to be provided by private sector insurers, with some financial support from the State Government.

We recommended that:

  • A warranty period insurance should still be available to provide consumers with financial protection in the event that defective work is encountered but due to the fact that these are generally smaller than those incurred during the construction period, we considered that this insurance need not be mandatory. Building industry associations could provide this form of insurance as they have a strong knowledge of the workings of the building industry.

Transitional arrangements with current providers of home indemnity insurance in Western Australia have been put in place while the Government considers and consults on our inquiry recommendations.

Inquiry into the Efficient Costs Tariffs of the Water Corporation, Aquest and the Busselton Water Board

Scope: Establish the efficient costs and tariffs of the Water Corporation (including its charges to Harvey Water), Aqwest and the Busselton Water Board for the three year period from 2013/14 to 2015/16.

Outcome: We made a set of specific recommendations on the structure and levels of tariffs for water and wastewater. We recommended that:

  • Tariffs be set for Water Corporation customers such that there would be a reduction in the aggregate water and wastewater service payment for most metropolitan residential customers and an increase for the average country residential customer. The aggregate decrease for metropolitan customers comprises an increase in water charges offset by a larger decrease in wastewater charges. The average commercial customer in metropolitan and country areas would benefit from a decrease in their combined water and wastewater bill.
  • Water service bills for residential and commercial customers in Bunbury and Busselton, serviced by Aqwest and Busselton Water, increase over each year of the price review period.
  • We also recommended that:

    • The Water Corporation’s current charging structure for residential wastewater services, which is based on the gross rental value (GRV) of a property, be replaced by a single and equal fixed charge payable by all customers.
    • The price review period for water and wastewater tariffs be extended from three years (as applies at present) to five years to reduce administration costs and provide for greater customer certainty about water prices.
    • Water service providers should bear demand forecast risk as is the case in normal business practice.
    • A charter be established between the Government, water service providers and the ERA as a means to clearly identify the roles and responsibilities of each party and to ensure that each party is accountable for its obligations.