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AustraliaCompetition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017

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About this Inquiry

The inquiry relates to the Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017 which was introduced into the House on 10 August 2017. It passed the House on 5 September and, on the same day, was introduced into the Senate. On 7 September the bill was referred to Environment and Communications Legislation Committee for report by 16 October 2017.

The bill was referred on the motion of Senator Gallagher (Manager Opposition Business in the Senate); the referral was opposed by Senator Fifield (Manager of Government Business in the Senate) who claimed that evidence was clear that 'the LMR regime has failed consumers ... [t]here has not been a single occasion when the LMR regime has reduced prices for consumers....' (Senate Hansard, 7 September 2017, p 24)

 

About the inquiry

There is no issues paper associated with the Inquiry: the Committee website notes:

'The Bill amends the Competition and Consumer Act 2010 to prevent the Australian Competition Tribunal from reviewing decisions made under the national energy laws (other than decisions relating to the disclosure of confidential or protected information) and to ensure that decisions of the Australian Energy Regulator (AER) are not subject to merits review by any other State or Territory body.'

Links to the Bill are provided on the webiste - see also my bill page for further details. The Minister (Josh Frydenberg MP's second reading speech is reproduced below (an almost identical speech was delivered by Senator Ruston when the bill was introduced into the Senate):

Image of Josh Frydenberg MPMr FRYDENBERG (Kooyong—Minister for the Environment and Energy) (09:32 on 10 August 2017): I move:

That this bill be now read a second time.

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 (the AER) and the Economic Regulation Authority 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 the 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.

Debate adjourned.

 

Final Report

The Final Report is due by 16 October 2017.

 

Submissions

Submissions are invited and due by 19 September 2017. They can be uploaded on the Committee website here.

 

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