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Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017

Government bill

 

Introduction of the bill

Josh Frydenberg MP (Minister for the Environment and Energy) introduced a new bill - the Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017 into the House on 10 August 2017. Second reading debate took place on 4-5 September and the bill passed the House on 5 September 2017.

The bill is now before the Senate, but on 7 September was referred to Environment and Communications Legislation Committee for report by 16 October 2017. Submissions are due by 19 September 2017.

View my committee inquiry page for details

 

Content of bill

 

Explanatory memorandum

The Explanatory Memorandum states that the Bill amends the CCA to

'prevent the Australian Competition Tribunal ... from reviewing certain decisions made under the national energy laws and to ensure that decisions made by the Australian Energy Regulator (AER) under those laws are not subject to merits review by any other State or Territory body'

 

Second reading speech

House Second reading speeches are available here. The members who spoke on the Bill were:

  • Adam Bandt MP
  • Andrew Broad MP
  • Mark Butler MP
  • Pat Conroy MP
  • Chris Crewther MP
  • Josh Frydenberg MP
  • Craig Kelly MP
  • Keith Pitt MP
  • Tony Smith MP
  • Matt Thistlethwaite MP
  • Andrew Wallace MP
  • Tim Wilson MP

The Minister, Josh Frydenberg MP's, second reading speech is reproduced below (an almost identical speech was delivered by Senator Ruston when the bill was introduced into the Senate):

Image of Josh Frydenberg MPMr FRYDENBERG (Kooyong—Minister for the Environment and Energy) (09:32 on 10 August 2017): I move:

That this bill be now read a second time.

This bill will abolish access to the limited merits review (LMR) regime for reviewable regulatory decisions under the national energy laws.

Through limited merits reviews, monopoly network businesses in electricity and gas have been able to seek review from the Australian Competition Tribunal of decisions made by the Australian Energy Regulator (the AER) and the Economic Regulation Authority Western Australia. This includes decisions on regulated revenues that flow through to network prices paid by energy consumers for electricity and gas transmission and distribution. To date LMR has increased consumer bills by $6.5 billion.

The LMR regime was first reviewed in 2012 by an independent panel led by Professor George Yarrow. Amendments were made in 2013 with the goal of improving timeliness, reducing costs, increasing consumer participation and refocussing the process on the long-term interests of consumers.

Despite these attempted reforms, energy networks were still routinely seeking reviews of the regulators' decisions, essentially using the Australian Competition Tribunal as a second regulator.

In response the Council of Australian Governments (COAG) Energy Council reviewed the LMR regime again in 2016. The review found that the 2013 amendments to the regime had largely failed, including that LMR: remained routine; had significant costs to all participants; presented barriers to meaningful consumer participation; led to significant regulatory and price uncertainty; and was failing to demonstrate outcomes that were in the long-term interests of consumers.

The COAG Energy Council determined that the LMR regime was still failing to meet its policy intent with the consequence of higher prices for consumers.

In the face of escalating energy prices the government is taking action to stop energy networks using the LMR to extract monopoly rents from consumers.

That is why the government announced on 20 June 2016 that it would divest the Australian Competition Tribunal of its LMR function—effectively abolishing the regime.

This bill will prevent the Australian Competition Tribunal from reviewing certain decisions made under the national energy laws, in particular, electricity network revenue determinations and gas access arrangements, with the exception of decisions relating to disclosure of confidential or protected information. Further, the bill will ensure that decisions made by the AER under those laws are not subject to merits review by any other state or territory body.

Divesting the tribunal of its function of reviewing decisions made under the national energy laws should reduce pressure on electricity prices.

It will put the power back to where it rightly should be, with the regulator. The AER is best placed to prevent inefficient costs being passed on to consumers.

A strong regulator is the best way to reduce pressure on network costs which make up around half of the average electricity bill in Australia.

Debate adjourned.

 

Committee

On 7 September 2017 the Senate referred the bill to the Environment and Communications Legislation Committee for report by 16 October 2017.

 

Media release

Josh Frydenberg MP issued a press release to accompany the introduction of the bill. It stated:

The Turnbull Government has today introduced legislation to address escalating electricity prices by removing the ability of energy networks to appeal decisions of the Australian Energy Regulator (AER).

This will remove the ability of regulated energy network companies to game the system at the expense of consumers.

Network costs make up to 50 per cent of the household bill making this an important reform which can make a real difference to consumer bills.

Since it was introduced in 2008, the regime has seen consumers pay $6.5 billion more in energy bills than would have been the case if the Australian Energy Regulator’s decisions had been upheld.

Review decisions have only ever resulted in increased revenues for energy businesses and higher bills for consumers.

The Turnbull Government believes the independent regulator is best placed to protect consumers from unnecessarily high costs, while still ensuring energy networks receive a fair return.

To boost the work of the AER we are providing an additional $67.4 million to help ensure it is sufficiently resourced.

The Abolition of Limited Merits Review Bill 2017 will amend the Competition and Consumer Act 2010 to prohibit the Australian Competition Tribunal from conducting reviews of the regulator’s decisions on energy network businesses.

 

Media and commentary

Political

Media