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Victorian Government Library Service Library: Departments of Premier & Cabinet Treasury & Finance Level 5, 1 Macarthur Street East Melbourne Victoria 3002 . „ / DX 210759 MM0 ° Ph: 03 9651 5660 Fax: 03 9651 5659 Email: [email protected] • /v'iiMMMnii * * Office of the Regulator-General,* Vic. JOINT DEPT. INFO. CENTRE 2 7 NOV 1997 LEVEL 3 1 MACARTHUR STREET E. MFI BOURNE VIC. 3002 ANNUAL REPORT 1996-1997 * * ** Office of the Regulator-General,* Victoria ISSN: 1327-6964 © 1997 Office of Regulator-General, Victoria. 13 October 1997 The Hon Roger M Hallam, MLC Minister for Finance Parliament House MELBOURNE Vic 3002 Dear Minister Annual Report 1996-97 I have pleasure in presenting the Office of the Regulator-General's Annual Report for the year ended 30 June 1997. The year presented a number of challenges which the Office's executives and staff met in a most professional manner. I know the outgoing Regulator-General would wish me to acknowledge their contribution and to publicly thank them for it. The report has been prepared in accordance with the Government's guidelines and is an accurate account of the Office's third year of operation. Yours sincerely JOHN C. TAMBLYN Regulator- General CONTENTS Page 1. The Year Under Review by the Outgoing Regulator 8 New Regulator-General 8 New mandate 9 Other mandates 9 Anticipated mandate 9 Focus on electricity 9 Positive outcomes Need for regulatory vigilance Risk of regulatory dependency Water 14 Operational audits Licensing of non-metropolitan urban water authorities Grain handling and storage 17 Port services 18 Rail 18 APEC Regulators' Forum 20 Acknowledgments 20 Customer input Industry input Other agencies The Office's staff 2. Divisional Reports 22 Major challenges/realignment 22 Pricing and Performance Division 23 Responsibilities Achievements Electricity Industry Guideline No. 3 : Regulatory Information Requirements Electricity Industry Guideline No. 5: Connection and use of System Agreements Distribution loss factors System security VicPool monitoring AFL Park incident Page Camberwell surge incident Half hourly metering charges Metering solutions for 160MWh/yr customers Preparation for the post-2000 distribution network charges review Electricity customer service indicators and performance reports Water industry performance indicators Electricity Tariff Order and Port Pricing Order approvals Retailer of last resort Compliance audits December pool prices Customer Relations Division 38 Responsibilities Achievements Supply and Sale Code Electricity Industry Guideline No. 4 : Accounts Collection Cycle Electricity Industry Customer Charter Customer charters information campaign Trade Practices Act - implied conditions and warranties Tenants' obligations Water customer contract and customer charter reviews Customer Consultative Committee Memorandum of Understanding with the Electricity Industry Ombudsman A utilities ombudsman Customer information Prepayment schemes Competition & Market Conduct Division 46 Responsibilities Achievements Electricity Licensing Electricity access to distribution networks and customer initiated augmentation Amendment of Electricity Industry Guideline No. 2 : Distribution Systems Augmentation Own works augmentation review National electricity market Mutual recognition of electricity licences Land Access Code Page Policy and Planning Division 52 Responsibilities Achievements Strategic review of economic regulation Information technology strategic review Long term strategic planning Regulatory Plan Contract management Human resources and recruitment The Office's Structure 56 The Regulator-General 56 Appointment and qualification The individuals and their terms Associate Regulators-General 56 Staff 57 The Executive Team 57 Ian Wilson, Divisional Manager, Pricing and Performance Karen Chalmers, Divisional Manager, Customer Relations Velu Ramasamy, Divisional Manager, Competition and Market Conduct Fiona Delahunt, Project Director, Pricing and Performance Cameron Anderson, Acting Divisional Manager, Policy and Planning The Regulatory Framework 59 Establishment of the Office 59 Regulated industries and relevant legislation 59 Key legislation and other documents 60 Light handed 61 Objectives 61 General Industry specific Statements of government policy Objectives versus powers Page Statements of government policy 62 Independence of the Office 63 Functions 64 Powers 64 Price regulation Other regulatory powers Information gathering powers Inquiries and reports Enforcement powers 65 Appeals 65 Appeal panel Appeals to the courts Customer Consultative Committee 67 5. Financial Statements 69 Statement of Financial Position Operating Statement Statement and Cash Flows Notes to and forming part of the Financial Statement Certification of the Financial Statement Auditor-General's Report 6. Appendices 86 A. The Office's publications B. Legislation and amendments C. Office of the Regulator-General Act 1994 Part 3A Report D. External consultancies E. Human resources F. Freedom of Information G. Pecuniary interest declarations CHAPTER I THEYEAR UNDER REVIEW BY THE OUTGOING REGULATOR THIS IS THE OFFICE'S THIRD ANNUAL REPORT It reports the Office's activities in the period 1 July 1996 to 30 June 1997. Separate publications, detailed in Appendix A, report on particular aspects of the regulated industries for which the Office has responsibility. New Regulator-General On 18 June 1997, the Treasurer and Acting Minister for Finance, the Hon Alan Stockdale, MP, announced the appointment of Dr John Tamblyn, a senior adviser to the Australian Competition and Consumer Commission (the ACCC), as the new Regulator-General. In announcing the appointment, Mr Stockdale said - "... Dr Tamblyn would bring to the position wide ranging experience and expertise in public utility regulatory practice and in competition policy and law. As a senior officer with the v4CCC and with a strong background in regulation of utilities, Dr Tamblyn is an excellent candidate to fill this position. In particular, his experience in structural reform, pricing and regulation of the electricity and gas industries will be invaluable in light of Victoria's continuing Government business enterprise reform program." There is no doubt that Dr Tamblyn brings a wealth of knowledge and experience to the position and is well placed to lead the Office in the challenges facing it over the next five years. The outgoing Regulator-General, Robin Davey, resigned with effect from 30 June 1997. His appointment as Regulator-General would have otherwise expired on 30 June 1999. In the year 2000, the Regulator-General is scheduled to set electricity distribution network charges to apply from 1 January 2001. The Office is also scheduled to make major decisions in relation to other regulated industries in the year 2000. He did not consider it appropriate that he be re-appointed to set the post- 2000 distribution network charges or to make the other major decisions required to be made in the year 2000. Preparations to set the post-2000 charges and to make the other decisions has commenced. He took the view that his replacement needs to satisfy himself as to the adequacy of the preparations and that he should have the opportunity to influence them. He informed the Government accordingly in October 1996 while at the same time indicating that he would remain until a replacement was found. The outgoing Regulator-General is confident that the Office will, under the leadership of Dr Tamblyn, go on to bigger and better things. New mandate During the year, provision was made in the Rail Corporations Act 1996 for that Act to be relevant legislation for the purposes of the Office of the Regulator-General Act 1994 and for the railways and rail infrastructure managed by Rail Track to be a regulated industry. Rail Track manages the non-suburban rail infrastructure in Victoria, including access and signalling issues. The Office's objective under the Rail Corporations Act 1996 is to ensure that users have fair and reasonable access to declared railway infrastructure (ie-declared by the Governor in Council on the recommendation of the Minister for Transport). Other mandates The relevant provisions in the Rail Corporations Act 1996 bring to five the number of regulated industries within the ambit of the Office. Other industries within the ambit of the Office are - • the electricity industry (the Electricity Industry Act 1993); • the Melbourne water and sewerage industries (the Water Industry Act 1994); • the industry of facilitating export shipping of grain (the Grain Handling and Storage Act 1995); and • certain services in the ports of Melbourne, Geelong, Portland and Hastings (the Port Services Act 1995). Anticipated mandate The Office is also preparing itself for a role in relation to the gas industry similar to its role in relation to the electricity industry. It anticipates receiving a mandate in relation to the gas industry in the first half of the 1997-98 financial year. Focus on electricity As in previous years, the Office's main focus has been on the electricity industry. Positive outcomes Outcomes to date of the Government's restructuring and re-regulation of the Victorian electricity industry auger well for the future - • available capacity factors of three of the brown coal generators (Hazelwood,Yallourn and LoyYang A) have improved significantly (from under 70% to over 90%); THE YEAR UNDER REVIEW BY THE OUTGOING REGULATOR • as a result, spot prices in the wholesale market have been significantly lower than anticipated - on a twelve monthly average of $20-25, compared to
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