National Competition Council

Compendium of National Competition Policy Agreements

Second Edition

June 1998

© Commonwealth of Australia 1998

ISBN 0 642 26145 8

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Contents
ABBREVIATIONS.....................................................................................1 INTRODUCTION.................................................................................... 3 PART 1: COMPETITION POLICY AGREEMENTS ............................ 9 National Agenda for Microeconomic Reform ................................... 11 Competition Principles Agreement ...................................................13 Conduct Code Agreement................................................................. 27 Agreement to Implement the National Competition Policy and Related Reforms ......................................................................... 35 PART 2: AGREEMENTS ON RELATED REFORMS ........................ 43 Electricity ........................................................................................... 45 Gas ...................................................................................................... 67 Water Resource Policy ....................................................................... 99 Road Transport ................................................................................. 115 APPENDIX A: NATIONAL COMPETITION POLICY CONTACTS ....................................................................................... 133

Abbreviations
ACCC ACT AGA ARMCANZ ANZECC ANZMEC APIA APPEA ATAC ATC BCA CAB CDM COAG CO 2 CPA DC EHV FAG GRIG GTE IPART IP&RC Australian Competition and Consumer Commission Australian Capital Territory Australian Gas Association Agriculture and Resource Management Council of Australia and New Zealand Australian and New Zealand Environment and Conservation Council Australian and New Zealand Minerals and Energy Council Australian Pipeline IndustryAssociation Australian Petroleum Production and ExplorationAssociation Australian TransportAdvisory Council Australian Transport Council Business Council of Australia Coverage Advisory Body Coverage Decision Maker Council ofAustralian Governments carbon dioxide Competition Principles Agreement direct current extra high voltage Financial Assistance Grants Gas Reform Implementation Group Government Trading Enterprise Independent Pricing and Regulatory Tribunal (NSW) Independent Pricing and Regulatory Commission (ACT)

kph kW MCRT MNC MW NCC NCP NECA NEM NEMMCO NEVDIS NGMC NGPAC NRTC NSW NT ORG PRRT QCA QLD SA SPPs TAS TER TPA VIC W A WACC

kilometres per hour kilowatt Ministerial Council for Road Transport Multiple Network Corporation megawatt National Competition Council National Competition Policy National Electricity Code Administrator National Electricity Market National Electricity Market Management Company National Exchange of Vehicle and Driver Information System National Grid Management Company National Gas PipelinesAdvisory Committee National Road Transport Commission New South Wales Northern Territory Office of the Regulator General (Vic) Petroleum Resource Rent Tax Queensland CompetitionAuthority Queensland SouthAustralia Special Purpose Payments Tasmania tax equivalent regime Trade Practices Act 1974 Victoria WesternAustralia weighted average cost of capital

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Introduction
In April 1995, all Australian governments reached agreement on a National Competition Policy (NCP) for Australia. Three intergovernmental agreements underpin the NCP: • • • the Competition PrinciplesAgreement (CPA); the Conduct Code Agreement; and the Agreement to Implement the National Competition Policy and Related Reforms (Implementation Agreement).

The three agreements outline the reforms which governments undertook to put in place under the NCP process. ‘Related’ reforms in the electricity, gas, water and road transport industries also form part of the NCP package. Reforms in these areas have been agreed at several recent meetings of the Council of Australian Governments (COAG) and of Heads of Governments and Premiers and Chief Ministers.1 For some reform areas, agreements reached by interjurisdictional bodies such as Ministerial Councils are also relevant. This document reproduces the three agreements and relevant extracts of agreements reached by COAG and other inter-jurisdictional bodies. Some background - a national approach to microeconomic reform Over the past decade, microeconomic reform issues have been at the forefront of the economic policy agendas of all spheres of government. Landmark decisions in the early 1980s to float the currency, deregulate financial markets and systematically reduce trade barriers helped to establish a more flexible and outward looking economy. These reforms in turn revealed other priorities, leading governments to focus on a range of matters including, for example, the performance of their business enterprises, the harmonisation of regulations among jurisdictions and the creation of competitive national energy markets.

1

Outcomes of meetings are reported in Communiques, which are the public account of key discussions and agreements released following each meeting.

Introduction

Increasingly, governments saw a benefit in adopting a nationally coordinated approach to reform, and the annual and biannual meetings of COAG became a key mechanism. The meetings of COAG and Heads of Governments since October 1990 are listed in the table below. Meetings of Heads of Australian Governments since October 1990 Meeting Special Premiers’ Conference Special Premiers’ Conference Premiers and Chief Ministers Heads of Government Council of Australian Governments Council of Australian Governments Council of Australian Governments Premiers and Chief Ministers Council of Australian Governments Premiers and Chief Ministers Leaders’ Forum Council of Australian Governments Leaders’ Forum Leaders’ Forum Council of Australian Governments Leaders’ Forum Council of Australian Governments Venue Brisbane Sydney Adelaide Canberra Perth Melbourne Hobart Sydney Darwin Melbourne Adelaide Canberra Brisbane Adelaide Canberra Melbourne Canberra Date 30-31 October 1990 30 July 1991 21-22 November 1991 11 May 1992 7 December 1992 8-9 June 1993 25 February 1994 29 July 1994 19 August 1994 25 November 1994 24 February 1995 11 April 1995 3 November 1995 12 April 1996 14 June 1996 27 September 1996 17 November 1997

Governments created the vision for a national approach to competition policy reform in October 1992 when they established an independent Committee of Inquiry into a National Competition Policy for Australia. The Committee, which became known as the Hilmer Committee after its chairperson, made recommendations in six policy areas: • • extension of the reach of the Trade Practices Act 1974 (TPA) to unincorporated businesses and State and Territory government businesses; extension of prices surveillance to State and Territory government businesses to deal with those circumstances where all other competition policy reforms had proven inadequate;

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National Competition Policy • application of competitive neutrality principles so that government businesses do not enjoy a competitive advantage simply as a result of public sector ownership; restructuring of public sector monopoly businesses; reviewing all legislation which restricts competition; and providing for third party access to nationally significant infrastructure.

• • •

The three April 1995 competition policy agreements committed governments to reforms broadly in line with the Hilmer recommendations, and to changes in the electricity, gas, water and road transport industries which had been previously agreed by governments. These agreements are reproduced in Part 1. Under the ImplementationAgreement, the Commonwealth Government undertook to make on-going National Competition Policy payments (NCP payments) to each State and Territory over the period 1997-98 to 2005-06, subject to that State or Territory making satisfactory progress against their NCPand related reform obligations. NCP payments are to be made in three tranches: prior to July 1997, July 1999 and July 2001, the NCC assesses whether each State or Territory has met the conditions for the payments to commence. There are two components to the NCP payments: a guarantee to maintain the real per capita value of the Financial Assistance Grants (FAG) pool available to each State andTerritory and an indexed competition payment. In several areas, the reforms compiled in theApril 1995 competition policy agreements have been augmented by subsequent COAG and Heads of Governments meetings. The Communiqués of these meetings provide the detail of the reform obligations against which the NCC assesses progress. Part 2 of this document reproduces extracts from Communiqués which are relevant to NCP and related reform matters. For completeness, Part 2 also provides details of decisions relevant to the overall NCP program taken by other inter-jurisdictional bodies such as Ministerial Councils. However, these do not form part of the formal assessment framework. State and Territory policy statements As a first step in the NCP reform process, all governments published two policy statements covering competitive neutrality reform and the application of the

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Introduction

competition principles to local government.2 Each government also developed a timetable for the review and, where appropriate, reform of legislation that restricts competition by the year 2000. All governments provided their policy statements and review timetables to the NCC in accordance with the competition policy agreements. All statements are publicly available documents and can be obtained from the relevant government. Contact details are provided at Appendix A. Progress with implementing National Competition Policy and Related Reforms The CPA requires each government to report annually to the NCC on progress with implementing their legislation review and competitive neutrality programs. State and Territory governments provided their first reports to the NCC in March 1997. These reports covered all aspects of their progress with NCP, including in relation to local government and the infrastructure reforms. The reports can be obtained from the relevant government. Based primarily on governments’ policy statements and annual reports, the NCC conducted an assessment of the progress achieved by each government, as required under the Implementation Agreement. On 30 June 1997, the NCC provided its assessment and the related recommendation on NCP payments to the Commonwealth Treasurer. The NCC recommended that each State and Territory receive all of the first (199798) component of their initial tranche of NCP payments, but that the second (199899) component be subject to assessment by the NCC, prior to July 1998, of first tranche matters for each jurisdiction which the NCC had identified as unresolved in its June 1997 assessment. The Treasurer agreed with the Council’s recommendation. Some $403 million in NCP payments was allocated to States and Territories in 199798, as shown in the table below.

2

Local government policy statements are not required from the Commonwealth and ACT Governments as these jurisdictions have no local government sphere.

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National Competition Policy Payments to States and Territories under the National Competition Policy, 1997- 98 ($million)
Real per capita growth in FAGs pool Competition payment Total

New South Wales Victoria Queensland Western Australia South Australia Tasmania ACT Northern Territory Total
Source:

56.4 41.4 36.4 18.4 18.0 7.5 2.8 9.4 190.3

72.3 53.0 39.4 20.8 17.0 5.4 3.6 2.2 213.6

128.7 94.3 75.8 39.2 35.0 12.9 6.4 11.6 403.0

Commonwealth Treasury

As a party to the NCP agreements, the Commonwealth Government must also provide annual reports on progress with legislation review and competitive neutrality, although there are no NCP payments linked to the Commonwealth’s performance. The NCC will make its second tranche assessment of progress with implementation and recommendations on NCP payments prior to July 1999, and the third tranche assessment prior to July 2001.

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