National Competition Council
Section 1: Agency overview and resources
1.1 Strategic direction
The National Competition Council (NCC) is an independent statutory agency established under Part IIA of the Trade Practices Act 1974 (TPA). The NCC advises and makes recommendations under the National Access Regime in Part IIIA of the TPA1 and recommendations and decisions in relation to natural gas pipelines.
The National Access Regime promotes competition, efficiency and productivity in markets that depend on the use of services provided by monopoly infrastructure facilities. The regime provides for access to monopoly facilities on appropriate terms, while ensuring facility owners receive appropriate payment for the use of their facilities (including a commercial return on their investment) and avoids wasteful and inefficient duplication of costly facilities, while ensuring appropriate incentives for infrastructure investment are maintained.
The NCC's function within the National Access Regime is to recommend on applications for declaration made by parties seeking to open up access to services provided by monopoly facilities. The NCC may only recommend a service be declared where:
- access to a service would materially promote competition in a dependent market;
- the service is provided by a facility that is uneconomical to duplicate;
- the facility is of national significance;
- there is no undue risk to health and safety;
- there is no alternative effective access regime; and
- access is not contrary to the public interest.
All six of these conditions must be met before a service can be declared. The NCC is also required to have regard to the objects of Part IIIA of the TPA, which are to promote effective competition in upstream and downstream markets via the economically efficient operation of and investment in infrastructure, and to encourage a consistent approach to access regulation in each industry. Where a service is declared, the Australian Competition and Consumer Commission is empowered to arbitrate access disputes if parties seeking access and facility owners are unable to agree on access arrangements and prices.
As an alternative to the National Access Regime, States and Territories may develop and implement access schemes specific to a jurisdiction's circumstances or act cooperatively to implement parallel regulation across jurisdictions (such as occurs in relation to the gas and electricity industries). Governments may seek certification of an access scheme as a means of verifying that the scheme provides an effective means of regulating third party access that broadly adheres to the principles underlying the National Access Regime.2 Services that are subject to a certified State or Territory access regime are not subject to the national regime. The NCC is responsible for advising on whether such a scheme is effective and reflects the appropriate principles.
NCC recommendations in relation to declaration of services provided by monopoly facilities or certification of State or Territory access schemes are made to the responsible Australian Government Minister, except where declaration is sought for a service provided by a facility owned by a State or Territory government where the recommendation is to the responsible Minister of that State or Territory government.
The Ministerial Council of Energy's ongoing process of progressive reform of the energy sector will see a new National Gas Law. Under this law the NCC is to continue its role of recommending on whether particular natural gas pipeline systems should be covered and thus subject to regulation. This role is similar to that undertaken by the NCC under the Gas Code, which will continue to operate until the new law is implemented. In addition, under the new law, the NCC is responsible for determining whether covered (regulated) pipelines should be subject to full regulation or light regulation, classifying pipelines as transmission or distribution pipelines and advising the Minister for Resources and Energy in relation to price regulation and green field exemptions available under the law.
Activity in access regulation is expected to increase in 2008‑09 and beyond. The NCC expects to have three complex declaration applications on hand at the start of the year. The NCC is likely to receive additional applications during the year, although the number and timing of applications is unpredictable. The NCC is also closely involved in a number of court proceedings and applications before the Australian Competition Tribunal arising from current or earlier declaration applications. The NCC anticipates additional such proceedings and applications will arise in 2008‑09.
The Ministerial Council of Energy's energy reform process will see most State and Territory governments implementing revised gas and electricity regimes for which they will seek certification. State and Territory governments have also undertaken to seek the certification of all other access regimes by 2010. The NCC anticipates receiving between five and as many as 12 applications for certification during 2008‑09, although both the number and timing of these applications will depend on the implementation of relevant legislation at Australian and more particularly State and Territory level. The NCC expects applications for certification of some access regimes across jurisdictions to raise similar issues and to be amenable to being considered in parallel processes which will reduce the resources required in dealing with these.
In addition, the NCC may receive one or more applications relating to the regulation of natural gas pipeline systems.
The NCC is to make its best endeavours to recommend within four months on applications for declaration and within six months on applications for certification. The forthcoming National Gas Law will impose timeframes for the NCC's recommendations and decisions. Meeting these timeframes will require streamlining and greater efficiency in NCC processes and operations, and the reallocation of some additional human and financial resources. The number and complexity of proceedings in the Australian Competition Tribunal in relation to decisions resulting from NCC recommendations and court proceedings commenced in relation to applications for declaration coming to the NCC are also growing and absorbing significant resources.
The NCC works within a complex and evolving area of law where significant private and public interests are involved. In almost all matters that the NCC considers it is required to balance competing claims and interests with a view to ensuring an outcome that serves Australia's national interest. It is essential that the NCC continually develops its capabilities to ensure it provides appropriate advice and makes recommendations and decisions that reflect the relevant law and economic and policy developments as appropriate. The NCC must also ensure that its recommendations meet the requirements of decision making Ministers for objective advice that properly reflects relevant statutory provisions. The nature and potential impact of the NCC's areas of responsibility also demand that the NCC make available information and guidance to all interested parties.
The NCC considers that there are two particular potential challenges to delivering its output as projected.
The first is the capacity and willingness of some parties to raise legal challenges which seek to impair the NCC's ability to properly consider applications for declaration in commercially relevant timeframes or, more broadly, to delay processes under the National Access Regime such that declaration is rendered irrelevant. The second challenge is the scope for delay in intergovernmental regulatory reform processes or a lack of effective coordination in relation to the timing and conduct of applications for certification of new access arrangements in relation to electricity and gas markets. These factors have the potential to put back the likely timing of expected certification applications in these areas or significantly increase the resources and time needed to consider these applications.
The NCC is continually evaluating and seeking to manage these risks.
1.2 Agency resource statement
Table 1.1 shows the total resources from all origins. The table summarises how resources will be applied to the NCC.
Table 1.1: National Competition Council resource statement — Budget
estimates for 2008‑09 as at Budget May 2008
1. Appropriation Bill (No.1) 2008‑09.
2. Estimated adjusted balance carried forward from previous year for Annual Appropriations.
Third Party Drawdowns from and on behalf of other agencies
Note: The Australian Competition and Consumer Commission provides financial services to the NCC and has drawndown access to manage the NCC's finances.
1.3 Budget measures
Table 1.2: National Competition Council 2008‑09 Budget measures
Prepared on a Government Finance Statistics basis.
1 The NCC was established in 1995 to assist the Australian and State and Territory Governments to implement the National Competition Policy (NCP) and to make various recommendations relating to third party access to monopoly infrastructure. With the completion of the NCP program in 2006, the NCC re-focused on its roles relating to third party access and under the National Third Party Access Code for Natural Gas Pipeline Systems (the Gas Code). In April2007, the Council of Australian Governments (COAG) determined that the NCC should continue to undertake these functions on an ongoing basis.
2 These principles are set out in clause 6 of the Competition Principles Agreement.
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