"The Draft Regulatory Principles set out the framework that the ACCC will use when making its decisions on revenues allowed to electricity transmission businesses," ACCC Chairman, Professor Allan Fels, said today. "In a first for regulators in Australia, the ACCC's Regulatory Principles provide a guide for all governments, investors and end users as to how the ACCC will regulate the transmission of electricity.
"The Regulatory Principles set the standard for regulation of such infrastructure industries - protecting the interests of end users while providing network owners with a reasonable revenue from their investments".
The ACCC will assume responsibility for the regulation of transmission revenues in the National Electricity Market, on a progressive basis, with effect from 1 July 1999. The ACCC will be responsible for regulation of all transmission networks participating in the National Electricity Market from 1 January 2003.
In assuming its role as regulator of transmission revenues in the National Electricity Market, the ACCC's aim is to adopt a regulatory process which eliminates monopoly pricing, provides a fair return to network owners, and creates incentives for managers to pursue ongoing efficiency gains through cost reductions. In achieving these aims the ACCC is aware of the need to ensure compliance costs are minimised and that the regulatory process is objective, transparent and as light handed as possible.
"The Regulatory Principles provide for a transparent and consultative process to be used by the ACCC in making its regulatory decisions," Professor Fels said.
Key points in the proposed regulatory framework include:
- Use of a "building block" approach based on forecasts of the cost of service over the regulatory period. This forms the basis for an incentive orientated revenue cap or aggregate annual revenue requirement;
- A nominal post tax framework, where taxes are part of the cost of service;
- Inflation protection provided to the transmission network service provider via CPI-X adjustment of the revenue cap;
- A depreciated optimised replacement cost methodology to set a cap on the valuation of the asset base;
- Prudent capital expenditures to be added to the regulatory asset base;
- A depreciation profile designed to replicate the outcomes of a contestable market;
- An ability for on-going efficiency gains to be shared between network owners and users;
- Each transmission network service provider to propose a single set of service standards, and benchmarks for each standard;
- Information disclosure requirements based on the provisions of Corporations Law;
- A five yearly review period will apply;
- A competitive tender process to determine the aggregate annual revenue requirement for a new interconnector in the National Electricity Market will be allowed under certain conditions;
- and Ring fencing guidelines that are consistent with guidelines in the National Gas Access Code.
Consultation arrangements
One of the ACCC's objectives in publishing the Draft Regulatory Principles is to provide an opportunity for customers, transmission network service providers and other stakeholders to participate in the development of the regulatory framework.
The Draft Regulatory Principles set out the ACCC's current position on key regulatory issues and describe the processes by which the ACCC will undertake its regulatory task. Interested parties are invited to respond to the Draft Regulatory Principles before 30 July 1999.
The ACCC will hold information forums to assist interested parties in their understanding of the proposed regulatory framework. The forums will be held in:
Brisbane: Tuesday 15 June 1999
Melbourne:* Wednesday 16 June 1999
* includes a video facility to Adelaide
Sydney: Thursday 17 June 1999
Interested parties must register to attend an information forum by contacting Maxine Helmling on (02) 6243 1246, before Thursday 10 June 1999. Details regarding the times and venues will be available on the ACCC website.