Chris Pearce (Aston, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

by leave—I present a supplementary explanatory memorandum to the bill. I move government amendments (1) to (4) together:

(1)    Schedule 1, item 67, page 31 (line 6), omit “determined under”, substitute “specified in”.

(2)    Schedule 1, item 92, page 39 (line 21), omit “determined under”, substitute “specified in”.

(3)    Schedule 1, item 100, page 40 (line 23), omit “determined under”, substitute “specified in”.

(4)    Schedule 1, item 110, page 48 (lines 20 to 23), omit section 44ZZCA, substitute:

44ZZCA  Pricing principles for access disputes and access undertakings or codes

                 The pricing principles relating to the price of access to a service are:

             (a)    that regulated access prices should:

                   (i)    be set so as to generate expected revenue for a regulated service or services that is at least sufficient to meet the efficient costs of providing access to the regulated service or services; and

                  (ii)    include a return on investment commensurate with the regulatory and commercial risks involved; and

             (b)    that the access price structures should:

                   (i)    allow multi-part pricing and price discrimination when it aids efficiency; and

                  (ii)    not allow a vertically integrated access provider to set terms and conditions that discriminate in favour of its downstream operations, except to the extent that the cost of providing access to other operators is higher; and

             (c)    that access pricing regimes should provide incentives to reduce costs or otherwise improve productivity.

As I mentioned earlier, the government has decided to accept a recommendation contained in the report of the Senate Economics Legislation Committee into the provisions of the Trade Practices Amendment (National Access Regime) Bill 2005 and to amend the bill to give effect to the committee’s recommendation.

The bill implements the government’s final response to the 2001 Productivity Commission’s Review of the National Access Regime. The Productivity Commission recommended that statutory pricing principles should be established to guide access pricing decisions by the ACCC when arbitrating access disputes and considering whether to accept an access undertaking or access code under the national access regime.

The government’s response to the Productivity Commission’s review accepted the recommendation that pricing principles should be included in part IIIA. However, as I mentioned in my summing up speech, in the course of developing the draft bill it was decided that implementing the pricing principles by way of what was originally proposed as a legislative instrument would be preferable, as this would afford greater flexibility should experience highlight a need for changes to those pricing principles. Consequently, the bill currently provides that the Commonwealth minister must, by a legislative instrument, determine the principles relating to the price of access to a service to which the ACCC must have regard.

The Senate Economics Legislation Committee conducted an inquiry into the bill and released its report in September last year. The committee’s report notes that submissions to the inquiry were very supportive of the bill and that the proposed pricing principles were not controversial and were broadly supported by all witnesses to the inquiry. However, as I mentioned, a majority of submissions did express some concern at the government’s proposed method of introducing the pricing principles under part IIIA by the use of a legislative instrument rather than enactment in the bill itself. These concerns largely centred around the idea that there would be a lack of certainty for infrastructure investors because there could be greater potential for changes to be made to those pricing principles, possibly without consultation, and that the use of a legislative instrument may have entailed less transparency and less parliamentary scrutiny.

So, on balance, the government considers that it should address these concerns by accepting the committee’s recommendations that the pricing principles be included in the bill itself. The apparent depth of concern revealed by the committee’s inquiry outweighs the greater flexibility that the use of a legislative instrument would provide.

I mentioned in my second reading speech—and I will cover it again briefly—that the introduction of these principles will achieve a number of important objectives. They will provide guidance on how the broad objectives of access regimes should be applied in setting terms and conditions. They will provide additional certainty to regulated firms and access seekers, in turn improving the operation of the whole negotiation and arbitration framework. The pricing principles will also provide some guidance for approaches adopted in industry regimes and help to address concerns that a regulator’s own values will unduly influence decisions relating to the terms and conditions of any access. The fact is that decision makers will be required to have regard to the pricing principles rather than requiring each and every principle to be satisfied. The pricing principles will assist in ensuring what will be a very consistent and transparent regulatory outcome. They will also enhance certainty for investors and access seekers and they will facilitate commercial negotiations between the parties.

As I mentioned, the committee made a second recommendation in its report. That recommendation was that the Senate should pass the bill subject to the abovementioned change being made. Given this additional recommendation, and given that the government has responded in a positive way to the recommendation of the Senate Economics Legislation Committee and has presented the amendments to the bill—and that they are not substantial—we believe that this bill should receive the full support of this House.

Question agreed to.

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

I move:

(4)    Schedule 1, item 110, page 48 (lines 20-26), omit subsection 44ZZCA, substitute:

44ZZCA Pricing principles for access disputes and access undertakings or codes

The principles relating to the price of access to a service are:

             (a)    that regulated access prices should:

                        (i)    be set so as to generate expected revenue for a regulated service or services that is sufficient to meet the efficient costs of providing access to the regulated service or services; and

                       (ii)    include a return on investment commensurate with the commercial risks involved;

             (b)    that the access price structures should:

                        (i)    allow multi-part pricing and price discrimination when it aids efficiency; and

                       (ii)    not allow a vertically integrated access provider to set terms and conditions that discriminate in favour of its downstream operations, except to the extent that the cost of providing access to other operators is higher; and

             (c)    that access pricing regimes should provide incentives to reduce costs or otherwise improve productivity.

Note:   The Commission must have regard to the principles in making a final determination under Division 3 and in deciding whether or not to accept an access undertaking or access code under Division 6

This has been a disappointing bill—disappointing both for what is contained within it and for what is not contained within it. The obvious omission was the government’s original unpreparedness to include the pricing principles within the bill per se. We welcome the government’s backdown and the fact that the minister has just moved an amendment, supported by us, that finally supports the view, after a very effective Senate committee inquiry, of the Productivity Commission that those pricing principles should be contained within the bill.

I say the bill has been disappointing for its omissions, and I want to quickly make two key points here. The first omission is the failure of the bill, and the PC report for that matter, to address the definition of ‘infrastructure facility’, as opposed to definitions like ‘supply of goods’, which was the main point of contention in the very well-known case involving Robe River and Hamersley Iron. I know that the shadow minister for mining and energy addressed that during his contribution to the second reading debate. That is still an unsettled part of the law. This is causing great concern and uncertainty for potential access seekers, including Fortescue, which is currently looking for access in the Pilbara. This would have been an opportunity to address that definition in the bill.

The second omission is the failure to address clause 6 and the ability of a publicly owned facility to avoid part IIIA. That is leading some access seekers to go down the path of section 46 rather than worry about part IIIA, because they know that the problem remains in place—the ability of state owned facilities to effectively avoid part IIIA. Again, that is not addressed in the bill.

I have distributed some detailed amendments. On the face of it, they are very minor. They contain very subtle word changes to the government’s bill. But as subtle as they might seem in word, they can and will make significant changes to the operation of the act, if supported. The first amendment takes two words out of 44ZZCA (a)(ii) in the government’s bill, which reads:

... be set so as to generate expected revenue for a regulated service or services that is sufficient to meet at least the efficient costs of providing access to the regulated service or services ...

We are taking out the words ‘at least’, because we do not understand why it needs to be more than sufficient. It is a point that the minister addressed during his contribution and it is a point that I am happy to respond to. We do not understand why it needs to be more than sufficient. We are concerned that, again, this is a swinging of the pendulum back in favour of monopoly infrastructure owners, to the detriment of access seekers and, therefore, to the detriment of consumers who rely on competition in upstream and downstream markets.

The second amendment is to part (ii) of the provision where the government wants to require the ACCC to take into account the concept of regulatory risk. I know that this issue has been pursued quite enthusiastically by a number of owners of infrastructure facilities. I can understand their concern about regulatory risk. I acknowledge the concept of regulatory risk. I acknowledge that it exists. I acknowledge that it is very real. On that basis I think the ACCC should, if it sees fit, take into account the concept of regulatory risk. But I do not think it should be such a subjective test that the ACCC is forced to take into account regulatory risk. My amendment allows the commission to take into account regulatory risk as part of the assessment of commercial risk, if it sees fit in the circumstances. I think that is a reasonable and responsible proposition. What we are doing today is appealing to the government to accept the opposition’s amendments as a means of making part IIIA a generally more effective and proficient provision.

Question put:

That the amendment (Mr Fitzgibbon’s) be agreed to.