The Australian Competition and Consumer Commission notes the release of the draft report of the CoAG Review of Energy Markets.
"The ACCC agrees with the broad aim of the review, that is, to reduce the number of regulators in this important sector of the economy", ACCC Chairman, Professor Allan Fels, said today. "The ACCC also agrees that the National Electricity Code change process is time consuming and lacks industry input.
"The ACCC recognises that simplified governance arrangements of Australia's energy sector is an important part of the completion of energy market reforms.
"The report is wide-ranging but recognises that governance is both an area of concern to industry participants and a key to the industry's success.
"The ACCC does not believe the solution would be an industry-specific regulator. Furthermore, a single agency approach is also contrary to current Commonwealth practice.
"The Hilmer Report into National Competition Policy and the resulting Competition Agreements stressed the necessity of universal application of competition law and the benefits arising from consistent approaches to regulation. Such consistency is difficult with competing agencies regulating different sections of a similar market.
"Further, the Federal Government's response to the recent Productivity Commission Report on Part IIIA of the Trade Practices Act 1974 affirmed the multi-sector access regime.
"Several studies, including one by the OECD, have stressed the risk of 'regulatory capture' of industry-specific bodies. 'Regulatory capture' describes the tendency for sector-specific agencies to be biased in favour of industry, over consumers and other interested parties, in decision making. A single, economy-wide regulator may be less prone to regulatory capture than sector-specific regulators.
"International experience refutes the sector-specific regulatory approach.
"Where industry-specific models have been tried internationally outcomes have been disappointing. For example, in the United Kingdom differences in approach between the regulators led to differing outcomes for different UK industries. This leads to the potential to distort private investment decisions. The more recent trend in the UK has been a re-aggregation of regulators.
"The ACCC will submit a response to the Draft Report outlining its suggestions for improving the institutional framework for the gas and electricity industries. It will be particularly focussed on realising the benefits of change of the current institutional arrangements without losing the existing strengths.
â??Whatever the future institutional framework, it is important that energy market regulation continue to benefit from a strong competition focus and that there is consistency in regulatory decisions across regulated sectors", Professor Fels said.
"The outcomes of this Review will be important not only for industry participants but for the wider community. Putting the right institutional arrangements in place will encourage private investment, and ensure that competition continues to deliver lower prices to consumers.
"The ACCC will also examine the many areas raised by the report including those covering transmission in the National Electricity Market, the operation of the pool system, and the ACCC's approach to electricity acquisitions, among others".