The Year in Review

The Chairman's Overview

Looking back at the past year, it is satisfying to report that the organisational initiatives that were introduced in the previous year have proved to be successful. Considerable efficiency gains have been achieved by locating all staff at the one address and by taking a common approach to regulation across the different industry sectors.

Particular efforts were made to assist stakeholders by issuing guidelines particularly in areas such as licensing. Feedback suggests this has been especially helpful in electricity where new and existing industry participants needed to be licensed for the first time by 30 June 2006. The approach adopted resulted in all licences being issued within the required timeframe. The Authority has also achieved a great deal in other areas of regulatory responsibility, undertaken major inquiries into aspects of the State's water sector; and contributed to the national debate on economic regulation. We hope that these achievements have contributed to the Authority's vision of leadership in best practice economic regulation for the benefit of all Western Australians. The Authority can take some comfort from the results of our first Customer Satisfaction Survey which showed that, while we can continue to improve, only 1.3 per cent of stakeholders surveyed were dissatisfied with the overall performance of the Authority – an encouraging result for any regulator.

Major regulatory activities in 2005-06 included finalising arrangements for third party access to gas infrastructure such as the Dampier to Bunbury Natural Gas Pipeline (DBNGP), AlintaGas' Mid-West and South-West Gas Distribution Systems and the Goldfields Gas Pipeline.

Substantial progress was also made in assessing the arrangements for third party access to Western Power's electricity network in the South West Interconnected System and in finalising draft Technical Rules for this network.

The Authority's regulatory activities in rail include a review of the Railways (Access) Code 2000 to assess its suitability to give effect to the Competition Principles Agreement and a review of WestNet Rail's Part 5 Instruments under the Rail Code.

In 2005-06, the Authority undertook three inquiries into aspects of the delivery of water services in Western Australia. These were: the Inquiry on Urban Water and Wastewater Pricing; the Inquiry on the Cost of Supplying Bulk Potable Water to Kalgoorlie-Boulder; and the Inquiry on Country Water and Wastewater Pricing. The Government's acceptance of recommendations, particularly in relation to cost-reflective pricing of urban water, as reflected, in the 2006-07 budget, was most welcome.

From 1 July 2006, the Authority will assume responsibility for a number of functions relating to the Western Australian Wholesale Electricity Market scheduled to be introduced later this year. The Authority's new responsibilities will include monitoring the effectiveness of the market, determination of the allowable revenue for both the Independent Market Operator and Western Power's System Management and approval of price limits for reserve capacity and energy annually.

While I completely support the independence of the regulator and the separation of the administration of the regulatory regime from the policy role of Government, I am of the view that regulators can make a valuable contribution to the regulatory debate on appropriate models based on the practical experience of administering regulatory regimes. To this end I welcome the opportunity to contribute to and advance the debate in economic regulation.

The Authority endorses the Ministerial Council on Energy's (MCE) goal to achieve a consistent national approach to regulation in electricity and gas transmission and distribution. During 2005-06, the Authority responded to the Expert Panel established by the MCE to formulate the Australian Government's response to the Productivity Commission's reviews of the National Access Regime and the National Gas Access Regime. In this regard, the Authority made four submissions to national bodies drawing on first-hand experience in the application of the national gas code and State-based rail and electricity access regimes.

In considering future changes to regulatory regimes, it will be important to retain those aspects of existing regimes that have worked well. In this regard, the Authority notes comments by gas network owners and operators to the Federal Energy Minister in support of the "current successful gas decision-making model" and expressing concern that this "model is not replaced by an approach which may prove to be more time-consuming, costly and complex".

The Authority is also of the view that sufficient discretion with clearly enunciated objectives be available to the regulator to adequately address the specific circumstances of individual cases. While prescriptive rules may provide greater certainty and improve timeliness, such benefits could be lost where there is not enough flexibility to accommodate individual circumstances.

Further, proposed changes to regulatory regimes should be based on both factual evidence of regulatory failure and analysis indicating that proposed changes will result in a net benefit to the regulatory regime as a whole. Otherwise changes will just add to regulatory uncertainty, at least in the short-term, for no benefit. A particular concern is that some seriously proposed recommendations for change at the national level have not been so factually based.

The year saw changes in the composition of the Authority with Dr Ken Michael AC taking up his appointment as Governor in January 2006 and the appointment of Mr Steve Edwell as a part-time member of the Governing Body.

On behalf of the members of the Authority, I sincerely thank Dr Michael for his significant contribution to economic regulation in this State. Dr Michael was the State's first rail and gas access regulator and a foundation member of the Authority.

I also welcome Mr Steve Edwell as a part-time member of the Governing Body. Mr Edwell brings with him a wealth of experience in both the energy industry and the regulation of access to monopoly infrastructure.

I would also wish to express my personal appreciation to the current part-time members Mr Chris Field and Mr Edwell and of course to Dr Michael all of whom have brought professionalism, experience and knowledge to the Authority and have greatly facilitated my role as Chairman.

Finally, I would like to acknowledge the valuable contribution made by the General Manager, Peter Kolf, and staff of the Authority and, on behalf of the members, thank them for their professional expertise, support and enthusiasm in this challenging and interesting work. I look forward to working with them in the following year as we continue to address the ongoing and emerging economic regulatory issues in Western Australia.

  1. Mr Lyndon Rowe

    Chairman