Sandy Macdonald (NSW, National Party, Parliamentary Secretary to the Minister for Defence) Share this | Hansard source

I move:

That this bill be now read a second time.

I table a revised explanatory memorandum relating to the bill and I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

Infrastructure facilities play an important role in Australia’s economic and social development. The efficient use of, and continued investment in, facilities such as natural gas pipelines and rail tracks are of strategic importance to the nation.

Accordingly, the Government’s policy is to assist realising the potential contribution of such services to economic growth and the improved well-being of all Australians.

The Exports and Infrastructure Taskforce report, provided to the Prime Minister in May 2005, highlighted the need for improvements to the regulation of access to services provided through export-related infrastructure facilities.

Much of the work to be done in addressing the recommendations of the report will require the cooperation and action of state and territory governments.

Most recently, the importance of jurisdictional cooperation in the area of infrastructure regulation has been recognised in the new National Reform Agenda, agreed by the Council of Australian Governments on 10 February 2006. As part of a new broad-ranging reform initiative, COAG has agreed to a simpler and consistent national system of economic regulation for nationally-significant infrastructure, including for ports, railways and other export-related infrastructure.

The initiatives contained in this bill reflect recommendations by the Productivity Commission. Importantly, they are consistent not only with the recommendations of the Export and Infrastructure Taskforce report, but also with the underlying principles governing infrastructure regulation that have been agreed to by COAG.

This bill will make an important contribution to promoting timely and efficient infrastructure investment decisions and outcomes, through an improved National Access Regime for infrastructure facilities of national significance.

By way of background, following recommendations of the Report on National Competition Policy by the Hilmer Committee —in 1995 —the Commonwealth and state and territory governments agreed to implement a National Competition Policy package.

The package contained a range of measures to increase competition across the economy and thereby enhance economic performance. The National Access Regime is part of the NCP package.

The National Access Regime comprises two key components: a legislative framework contained in Part IIIA of the Trade Practices Act 1974, and Clause 6 of the 1995 Competition Principles Agreement, negotiated between the Commonwealth, state and territory governments.

Under Part IIIA, businesses can seek access to strategically important infrastructure services on reasonable terms and conditions.

This access can be sought in cases where replicating the infrastructure concerned would not be economically feasible, and where commercial negotiation with the infrastructure owner or operator has failed. This ensures that facilities with natural monopoly characteristics do not create barriers to competition.

Access provided under Part IIIA promotes competition in upstream and downstream markets, which is essential for sustaining strong economic growth and job creation, and contributes significantly to efficiencies and innovation.

Clause 6 of the Competition Principles Agreement sets out principles for assessing the effectiveness of a state and territory access regime, for the purposes of determining whether the National Access Regime should apply to services provided by means of a facility covered by that regime.

The National Access Regime establishes three pathways available for an access seeker to gain access to a strategically important infrastructure service:

(1)

by having a service declared so that the access seeker has the right to initiate negotiations with the service provider;

(2)

by seeking access through an effective industry-specific regime, or

(3)

by seeking access under the terms and conditions specified in a registered undertaking from the service provider.

In October 2000, the Commonwealth Government requested that the Productivity Commission inquire into the operation of the National Access Regime —specifically, clause 6 of the Competition Principles Agreement, and the legislation contained in Part IIIA of the Trade Practices Act 1974.

In its report, the Commission made 33 recommendations for improvements to the National Access Regime.

The Government’s response to the Commission’s report accepted almost all of the Commission’s recommendations, and the Trade Practices Amendment (National Access Regime) Bill 2006 implements that response.

The key changes contained in the bill aim to clarify the Regime’s objectives and scope, encourage efficient investment in new infrastructure, strengthen incentives for commercial negotiation and improve the certainty, transparency and accountability of regulatory processes.

These changes provide a balance between ensuring a means for business to gain access to nationally significant infrastructure, while providing incentives for new investment.

The changes are also designed to provide access seekers and investors with greater confidence and certainty about the regulatory framework to enable them to make well-informed decisions.

The major initiatives contained in the bill are as follows.

Clarifying the objectives of the regime

The bill will insert a new objects clause in Part IIIA in order to provide greater certainty for infrastructure owners, access seekers, investors and other interested parties.

The objects clause emphasises the need for Part IIIA decisions to promote competition by promoting the economically efficient operation and use of investment in infrastructure.

It also highlights the important role played by Part IIIA in terms of providing a framework for access regulation applying to specific industries.

Decision-makers under Part IIIA will be required to have regard to the objects clause when making their respective decisions.

The implementation of an objects clause will promote consistency and provide guidance in the decision-making process and in the application of Part IIIA, which in turn will enhance regulatory accountability.

Encouraging efficient investment

The bill specifies pricing principles that are relevant to the price of access to a service; and that are designed to guide regulatory decision makers.

In its review of the National Access Regime, the Productivity Commission recommended that statutory pricing principles should be established and applicable to all three access pathways under the National Access Regime.

The introduction of pricing principles should 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.

The pricing principles will provide additional certainty to regulated firms and access seekers, in turn improving the operation of the negotiation-arbitration framework.

Further, pricing principles will provide some guidance for approaches adopted in industry regimes.

Finally, the pricing principles will help to address concerns that a regulator’s own values will unduly influence decisions relating to the terms and conditions of access.

The Government has accepted the recommendation of the Senate Economics Legislation Committee, which reported on 8 September 2005 that pricing principles should be included in the bill specifically, rather than in a legislative instrument.

The Committee concluded that the pricing principles were not controversial —with strong support by industry —and having them introduced in the bill would enhance certainty and transparency for investors and access seekers alike.

Minor amendments to the original Bill were moved in the House of Representatives giving full effect to the Committee’s recommendation.

Importantly, the Senate Economics Legislation Committee recommended that the Senate pass the bill once this change was made.

The Australian Competition and Consumer Commission —the ACCC —will be required to have regard to the pricing principles in making a final arbitration determination, and in deciding whether or not to accept an access undertaking or access code.

On review, the Australian Competition Tribunal will also be required to take the pricing principles into account where the Tribunal is required to reconsider a decision of the ACCC.

Furthermore, in using the principles, decision makers will be required to have regard to the pricing principles ‘as a whole’, rather than requiring each and every principle to be satisfied.

As part of the new Competition and Infrastructure Reform Agreement signed by COAG on 10 February 2006, the States and Territories have committed to including the same pricing principles in all access regimes for significant infrastructure facilities. This will promote consistency and greater certainty in access regulation for industry.

The bill also establishes a framework for the granting of immunity from declaration for new infrastructure projects that are to be developed subject to a competitive tendering process.

A competitive tendering process is likely to see any monopoly rents expected to attach to the facilities concerned dissipated in more favourable terms and conditions for service users, rather than accruing to the service provider.

This obviates the need for declaration.

The bill will include a new Division 2B which sets out the process by which the ACCC will assess whether a tender should confer immunity from declaration.

By establishing statutory criteria for the tendering process, the bill provides additional regulatory certainty for government-sponsored investment in infrastructure that is likely to benefit the economy and enhance community well-being overall.

The ACCC will have the power to revoke its approval if it transpires that the assessment of tenders was not in accordance with the tender process, or the service provider concerned is not complying with the terms and conditions of access to the service.

The threat of revocation acts to safeguard the interests of access seekers if the terms and conditions are not reasonable in practice.

Enhancing the access regime

The Government is introducing a number of refinements to enhance the effectiveness of the National Access Regime.

The declaration criteria under the current regime preclude declaration of a service where the relevant infrastructure and subsequent potential public benefits are not significant.

However, as identified by the Productivity Commission, the current declaration criteria do not sufficiently address the situation where, irrespective of the significance of the infrastructure, a declaration would result in only marginal increases in competition.

The bill amends Part IIIA so that declaration of a service cannot be recommended unless access to the particular service would promote a material increase in at least one market other than the market for the service.

The bill also enables an access provider to lodge an undertaking after a service has been declared.

This will provide a means of achieving certainty on access terms and conditions, thereby facilitating negotiations between access providers and access seekers.

The bill also makes explicit certain arrangements regarding the powers of the ACCC.

For example, the ACCC will be prevented from accepting an access undertaking if the service concerned is already subject to a state or territory access regime that has been certified as an effective regime under Part IIIA.

The bill also makes explicit that when arbitrating a dispute for a declared service, the ACCC can require a service provider to permit interconnection to its facility by an access seeker.

The bill also clarifies and enhances the ACCC’s existing powers when arbitrating access disputes.

For example, when arbitrating a dispute over access terms and conditions, the ACCC will be required to limit its involvement to matters in dispute between the parties.

It will be empowered to conduct multilateral arbitrations following consultations with relevant parties.

The ACCC will also be required to publish reports addressing specific matters following completion of an arbitration, provided that the published material will not disclose commercially confidential information.

Improving the transparency, accountability and timeliness of the regime

The bill implements a number of measures designed to enhance the transparency, accountability and timeliness of the decision-making processes in Part IIIA.

The bill requires Part IIIA decision makers —such as Ministers, the National Competition Council and the ACCC —to publish reasons for their decisions or recommendations. These would relate to all access routes provided for under the regime: declarations; certifications; and proposed undertakings.

These amendments will enhance procedural transparency and regulatory accountability. They will also help facilitate informed consideration of whether grounds exist to challenge a decision, by way of merit review before the Tribunal or judicial review by the courts.

The bill seeks to improve the accountability of decision makers under the regime by introducing non-binding target time limits to various decision-making processes under Part IIIA.

If the National Competition Council, the ACCC or the Australian Competition Tribunal cannot meet a specified target time limit, the provisions require the party concerned to extend the period and publish notification to that effect in a national newspaper.

In this way, the target time limits should increase incentives for timely decision making, without compromising the rigour of the decision-making process.

The bill also provides discretion to the ACCC to grant interim arbitration determinations, which will not be subject to merit review by the Tribunal, and to backdate final determinations to the date negotiations commenced between the access provider and access seeker. Such changes will also assist in encouraging timely decision making.

This bill provides for public input on specific regulatory decision processes under Part IIIA, where it is reasonable and practicable to seek such input. This would cover, for instance, declaration and certification applications, proposed access undertakings, and access codes.

Public input into the regime’s decision-making processes will enhance informed decision making, particularly when assessing the public interest in each case.

The bill also establishes mechanisms to streamline the extension of a certification or undertaking, prior to its expiry, which should benefit a wide range of stakeholders.

For example, infrastructure service providers will be given the opportunity to avoid potential regulatory uncertainty and delay. Access seekers will also benefit, as the process will expedite regulatory certainty in relation to the terms and conditions governing access to the service.

Finally, the bill contains an important new reporting requirement, as the National Competition Council will be required to report annually on the operation and effects of the regime.

This will provide an opportunity to reflect on the developments that have occurred in the preceding 12 month period, and to consider changes which may further improve the effectiveness of the regime.

Conclusion

In conclusion, the changes to the National Access Regime in this bill will provide access seekers and infrastructure investors with greater confidence and certainty about the regulatory framework.

This will allow informed decisions to be made, and ensure that the National Access Regime will continue to play an important role in Australia’s economic and social development.

I note that, following minor amendments to the bill made by the Government in the House, the bill has the full endorsement of the Senate Economics Legislation Committee.

I commend the bill to the Senate.

Debate (on motion by Senator Sandy Macdonald) adjourned.