Federal Budget 2021-22 – Changes to the National Access Regime

The Budget Papers are light on detail as to these reforms, despite the significance of these changes. Budget Paper No.2 does not provide any information about the scope and design of such changes whether they are forward looking or whether they will also apply retrospectively. These changes, in our opinion, go beyond their stated intention of improving the timeliness of regulatory decisions. In the absence of any detail, these changes, on face value, would appear to increase the risks for users seeking access to infrastructure services (e.g. ports and airports).

For both ports and airports, light regulation, or the threat of regulation, has generally worked well. However, there are instances where large, unexplained price rises have been introduced with little regard to regulatory risk. The Port of Newcastle provides an example; which has led to action against it under the National Access Regime. Yet the Budget announcement will lead to the National Access Regime becoming increasingly less relevant.

The National Access Regime

Australia’s National Access Regime is contained in Part IIIA of the Competition and Consumer Act 2010 (Cth). It is designed to facilitate third party access to significant infrastructure facilities.

Like most regulatory frameworks, Part IIIA is fraught with complexity. In recent years, the strength and suitability of the regime has been repeatedly tested with the declaration (and subsequent revocation) of shipping channel services at the Port of Newcastle. Amidst the legal wrangling, an access dispute between Glencore Coal Pty Ltd and Port of Newcastle Operations (PNO) Pty Ltd has been on foot for several years now and remains subject to legal appeal, with a final outcome still some time off.

The ACCC’s chairman, Rod Sims, has persistently called for reform to the National Access Regime in more recent times arguing that legal changes to Part IIIA are required because the regime is ill equipped to deal with market power of vertically separated monopolies, where any misuse of market power is unlikely to contravene the ‘competition test’ for declaration. The problem has become pronounced where governments have privatised assets with only the threat of regulation. When assets such as ports were government-owned, political pressure on Ministers created accountability on prices. Mr Sims has argued that a new ‘Part IIIB’ monopoly regime that would see owners of significant infrastructure with market power subject to some form of price regulation.

Federal Government’s 2021 review

The last review of the National Access Regime was conducted by the Productivity Commission (PC) in 2013. The PC conducted a public inquiry process which commenced in October 2012 and a final report was released in Feburary 2014. The Federal Government delivered its final response in November 2015 (alongside its response to the Competition Policy Review).

A far briefer and less visible review has just taken place. In February this year, the Treasurer announced, as part of his decision not to declare certain services at the Port of Newcastle (in response to the NSW Minerals Council’s application), that he had tasked the Department of the Treasury with examining the National Access Regime to ascertain whether the length of time that processes under the Regime can take is appropriate and consistent with the objectives of the Regime which are centred around promoting efficient operation and investment in infrastructure.

Part IIIA is becoming less relevant

Unlike previous reviews of the Regime, there is no public report into the outcomes of the review or the basis for its recommendations, nor have submissions to the review been published.

However, Tuesday night’s Budget papers announced a number of changes, aimed at improving the timeliness of decisions:

• removing merits review by the Australian Competition Tribunal of declaration decisions;
• limiting new applications for declaration, or revocation of a declaration, of infrastructure where the infrastructure has been the subject of previous declaration or revocation process; and
• terminating arbitration proceedings and determinations where the declaration of infrastructure is revoked in order to correct an existing anomaly in the process.

This announcement is light on detail, but these changes can only further ease the threat of regulation on monopoly infrastructure services such as ports and airports.  Users of these services are less likely to be willing to bear the time and expense required to run the gauntlet of Part IIIA, given the more limited recourse to appeal and the risk that arbitration proceedings and access determinations can be terminated in the event the declaration is subsequently revoked.

The implications of this announcement for Glencore’s long running dispute over the channel charges at the Port of Newcastle is particularly unclear. Glencore has long pursued a price determination through the National Access Regime after a newly privatised PNO sparked user anger in 2013 with large unexplained price hikes.  However, Glencore’s price arbitration remains unresolved and these proposals raise the spectre that any final access determination may be put aside, and have no substantive effect.

Final thoughts

Existing or threatened regulatory interventions in the transport sector have generally been effective, with prices stable or subject to only modest increases, except where significant investment occurs.

Seen in this light, the Port of Newcastle’s price rises are anomalous. The National Access Regime has been the only – albeit unsatisfactory – avenue available for users to respond.  However, the Government’s announced changes to the Regime further reduce the threat of regulation under Part IIIA, increasing the risks for users of these facilities.

Seeing more detail of the Government’s planned changes will be crucial to assessing the level of risk that is created by these changes. The changes announced in the Budget will require legislative reform and this should provide an opportunity for further detail to be made publicly available and further engagement.

However, the increasing ineffectiveness of the National Access Regime in dealing with legitimate pricing concerns may add further weight to calls for a new regulatory framework to apply to structurally separated monopolies.  There is a risk that, in doing so, all ports will be tarred with the same brush.  The regulatory net for a new framework may be cast too widely, capturing a broad swathe of services for whom the existing frameworks have been highly effective at constraining prices and promoting investment.