Tuesday, 5 September 2017
Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017; Second Reading
That this bill be now read a second time.
I seek leave to have the second reading speech incorporated in Hansard.
The speech read as follows—
This Bill will abolish access to the limited merits review (LMR) regime for reviewable regulatory decisions under the national energy laws.
Through limited merits reviews, monopoly network businesses in electricity and gas have been able to seek review from the Australian Competition Tribunal of decisions made by the Australian Energy Regulator (AER) and the Economic Regulation Authority of Western Australia. This includes decisions on regulated revenues that flow through to network prices paid by energy consumers for electricity and gas transmission and distribution. To date LMR has increased consumer bills by $6.5 billion.
The LMR regime was first reviewed in 2012 by an independent panel led by Professor George Yarrow. Amendments were made in 2013 with the goal of improving timeliness, reducing costs, increasing consumer participation and refocussing the process on the long term interests of consumers.
Despite these attempted reforms, energy networks were still routinely seeking reviews of the regulators' decisions, essentially using the Australian Competition Tribunal as a second regulator.
In response the Council of Australian Governments (COAG) Energy Council reviewed the LMR regime again in 2016. The review found that the 2013 amendments to the regime had largely failed, including that LMR: remained routine; had significant costs to all participants; presented barriers to meaningful consumer participation; led to significant regulatory and price uncertainty; and was failing to demonstrate outcomes that were in the long term interests of consumers.
The COAG Energy Council determined that the LMR regime was still failing to meet its policy intent with the consequence of higher prices for consumers.
In the face of escalating energy prices the Government is taking action to stop energy networks using LMR to extract monopoly rents from consumers.
That is why the Government announced on 20 June 2016 that it would divest the Australian Competition Tribunal of its LMR function—effectively abolishing the regime.
This bill will prevent the Australian Competition Tribunal from reviewing certain decisions made under the national energy laws, in particular, electricity network revenue determinations and gas access arrangements, with the exception of decisions relating to disclosure of confidential or protected information. Further, the bill will ensure that decisions made by the AER under those laws are not subject to merits review by any other State or Territory body.
Divesting the Tribunal of its function of reviewing decisions made under the national energy laws should reduce pressure on electricity prices.
It will put the power back to where it rightly should be, with the regulator. The AER is best placed to prevent inefficient costs being passed on to consumers.
A strong regulator is the best way to reduce pressure on network costs which make up around half of the average electricity bill in Australia.
Ordered that further consideration of the second reading of this bill be adjourned to 16 October 2017, in accordance with standing order 111.