The Consumer Utilities Advocacy Centre (CUAC) has welcomed two major reviews into the energy sector and hopes that both reviews provide better outcomes for consumers.
Regulatory bodies are currently carrying out two major reviews, one on the National Electricity and Gas Laws, and the other into the Limited Merits Review regime, with both reviews aiming to report before the end of this year.
The review of the electricity and gas laws, which is being undertaken by the Australian Energy Market Commission (AEMC), was prompted by a rule change request submitted by the Australian Energy Regulator (AER).
The AER’s rule change submissions stated that in their review of the regulatory framework they found that ‘the current restrictions on an objective assessment of the efficiency or the necessity of expenditure proposed by electricity businesses is causing consumers to pay more than they should for a safe and reliable supply of electricity services’.
This position was supported by the rule change committee of the Energy Users Association which represents major companies including Amcor, Australia Paper, Rio Tinto, Simplot, Wesfarmers, Westfield and Woolworths, who also submitted a rule change proposal. They noted their concerns about increasing electricity prices, and argued that ‘failures in design and conduct of regulation have played a significant part in this outcome’.
The proposals of the AER would see a change in the way in which approval would be given to expenditure forecasts, and assessment made on the rate of return on network businesses’ assets; whilst the proposals of the seven major energy users also recommended a different method for the calculation of the rate of return on network businesses’ assets.
CUAC, in their first submission to the review, said that they ‘strongly support reform to the rules relating to the economic regulation of monopoly energy distribution network service providers’.
In their submission CUAC said that except for a revised approach to WACC setting they ‘support the implementation of all of the proposed amendments to the national electricity and gas rules proposed by the AER’.
CUAC is also hoping for a positive outcome from the Review of the Limited Merits Review Regime.
The Limited Merits Review (LMR) regime was introduced in 2008, after it was selected following the assessment of four differing review options by the Ministerial Council on Energy’s Standing Committee of Officials.
As part of its structure the regime was due to have a review completed within its first seven years. This review, however, was moved forward with the intention of completing it by 30 September 2012.
The current review’s purpose, as stated in its interim stage one report, is to firstly assess how the regime has operated, and secondly to provide advice as to whether changes to the review regime processes are required to ‘deliver an appropriate balance between the commercial needs of businesses and efficient outcomes for consumers’.
CUAC is concerned that the current regime, which they say is an almost automatic appeal process, does not allow for consumer involvement, and that outcomes always favour network businesses.
A 2006 report commissioned by CUAC argued for the use of a judicial review system over a merits based review regime such as the one currently used. The report found that judicial review was the most efficient and effective method of review as it ‘provides the greatest likelihood of participation by public interest organisations’. The report also found that this form of review would ‘limit the ability of the regulated businesses to game the process by picking and choosing elements of the decision’.
CUAC recommend that the regime be replaced with a judicial review system which provides a greater voice to consumers and minimises the monopolistic authority of network service providers in the review process.
CUAC says, with both of the reviews currently proceeding, that they ‘hope that change is on the way’.