Looking into the Future
Operating Environment
After two years since its commencement, the principal Act under which the Authority operates, the Economic Regulation Authority Act 2003, is currently scheduled for review by a joint standing committee of both houses of Parliament. The Authority would welcome the opportunity to have input to a review of the Act with a view to achieving various administrative improvements.
While the restructuring of the electricity industry in Western Australia is well progressed, which on 1 April 2006 culminated in the splitting of the then dominant Government owned electricity provider into Verve Energy (generation), Synergy (retail and trading), Western Power (networks) and Horizon Power (rural and remote), various elements of the new arrangements remain to be implemented. Of particular importance is the commencement of the new Wholesale Electricity Market, which is scheduled to start on the 21 September 2006. This will see the introduction of a range of new functions for the Authority and other bodies including the Independent Market Operator and the Energy Review Board.
In implementing the new regulatory arrangements, a number of desired changes to the Western Australian electricity networks access code have been identified, which the Government seeks to implement prior to the Authority approving Western Power's access arrangement. This is likely to see a delay in the Authority finalising the access arrangement for Western Power until midway through the next financial year.
At the national level, several lengthy reviews have been undertaken including that of the national access regime as set out under Part IIIA of the Trade Practices Act 1974, the gas access regime and the regulation of nationally significant infrastructure. As a result, the Council of Australian Governments is progressing implementation of various changes to national legislation and codes some of which will directly impact on the functions of the Authority. In particular, the Ministerial Council on Energy is nearing completion of amendments to the national gas law, which is expected to see various changes to the national gas code and associated legislation.
One anticipated outcome of the national reviews is that there will be some harmonisation in the regulation of access to gas and electricity infrastructure at the national level. While the Authority will continue to regulate both areas in Western Australia, the Australian Energy Regulator will progressively have responsibility for the regulation of access in the areas of gas and electricity in other jurisdictions. A new national body known as the Australian Energy Market Commission has been created with responsibility for rule making and market development at the national level. As the Authority regulates access to gas pipelines in Western Australia under the national regime, it will interact with the Australian Energy Market Commission in relation to the regulation of gas pipelines.
At the Council of Australian Governments meeting of February 2006, consideration was given to a proposal for the development of a national rail access regime. In the first instance, it is anticipated that the national regime would apply to all interstate rail lines followed by rail lines of national significance. In the case of Western Australia, the interstate rail line between Forrestfield and Kalgoorlie would be likely to come under the national regime and, given the importance of the line between Kwinana and Bunbury, this could also come under the national regime. It is likely that coverage of lines under the national regime will be assessed on a cost benefit basis. Under the proposal, State based rail access regimes that apply to rail lines not covered by the national regime would need to be certified by 2010.
The possible development of new iron ore mines in the midwest, east of Geraldton, in the next few years may impact on the rail access regime administered by the Authority. Such developments may require the construction of dedicated rail lines to transport large tonnages of iron ore.
In relation to the Pilbara, it is understood that the Western Australian rail access regime would apply to any new rail line built by the Fortescue Metals Group to transport iron ore from its mines in the Pilbara to Port Hedland. It is anticipated that such a rail line would offer open access to other mining companies for the transport of bulk commodities.
The two existing iron ore mining companies in the Pilbara, BHPBilliton and Rio Tinto, have rail lines which are not covered under the Western Australian rail access regime. The Western Australian Government is assessing the prospect of having the BHPBilliton and Rio Tinto rail lines covered under a third party haulage regime to enable other mining companies to utilise the existing rail facilities owned by these two companies.
A proposed merger between the Retail Energy Market Company and the Gas Market Company Limited (operator of the gas retail market in New South Wales and the Australian Capital Territory) has been considered. However, this proposal has been put on hold while the Commonwealth's Ministerial Council on Energy considers the Gas Market Leaders Group Gas Market Development Plan. This plan would involve the creation of a body to oversee gas retail market operations at a national level. If the gas market development plan proceeds, this is likely to have an impact on the Authority as it is the gas market rule administrator in Western Australia.
The Western Australia Government became a signatory to the National Water Agreement in April 2006. Clause 75 of the Agreement requires the signatories to report independently, publicly, and on an annual basis, benchmarking of pricing and service quality for metropolitan, nonmetropolitan and rural water service providers. The Authority is a member of the National Roundtable, which is establishing the industry performance indicators in association with the National Water Commission, and will be responsible for the collection and auditing of data from Western Australian licensees.
Clause 77 of the Agreement also requires the State and Territory Governments to use an independent body to publicly review or set water prices. The Western Australian Government may choose to use the Authority to undertake such reviews as they have in recent years for both metropolitan and country water and wastewater charges.