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In This Edition Infrastructure Partnerships Australia - THE INFRASTRUCTURE REPORT - Infrastr... Page 1 of 12 Home About us Contact IN THIS EDITION 1. Request for Tender opens for Sydney’s Inner West bus operations 2. Shortlisted bidders announced for Southern Program Alliance 3. AEMC releases retail energy competition review; highlights increased level of competition under threat by higher wholesale costs 4. Infrastructure Australia determines Cross River Rail costs exceed benefits; adds Sydney Metro City & Southwest and Armadale Road upgrade to Infrastructure Priority List 5. Changes to Public Private Partnership guidelines set to lower bid costs and encourage innovative solutions for infrastructure projects 6. NSW maintains lead in CommSec’s State of the States, Victoria reclaims second place as the ACT falls to third 7. Industry News 8. Industry Appointments 9. IPA News 1. Request for Tender opens for Sydney’s Inner West bus operations This week, the NSW Government opened the competitive tender process for operations of the Inner West bus services in Sydney. The Request for Tender is due to close in the fourth quarter of 2017, with a new operator to be in place by July 2018. Bus Region Six services the inner western and south western suburbs from Sydney’s CBD west to Strathfield and Olympic Park, and is currently operated by the NSW State Transit Authority (STA). The NSW Government has previously cited the continued poor STA service and the higher performance of private operators of other public transport services as key reasons for the decision, which will see industry compete for the contract every five to 10 years. The move follows recent reports from the Audit Office of NSW, including the 2015 Sydney Metropolitan Bus contracts report, finding that the STA consistently underperformed compared to private operators in punctuality and overall customer satisfaction indicators. Currently, STA, operating as Sydney Buses, services four metropolitan contract regions (contracts six to nine) in the Sydney metropolitan area while private operators service the other 10 contract regions (see Figure 1). Figure 1: Bus Contract Regions mhtml:file://C:\Users\IPA0044\AppData\Local\Microsoft\Windows\INetCache\Conte... 28/07/2017 Infrastructure Partnerships Australia - THE INFRASTRUCTURE REPORT - Infrastr... Page 2 of 12 Source: Audit Office of NSW, 2015 STA bus operators are exempt from financial penalties imposed on private operators by the NSW Government for failing to meet punctuality targets, which removes the incentive to maintain service standards. Franchise agreements in public transport have been used successfully across several sectors in Australia, with Sydney Ferries and Victoria’s train and tram services improving their reliability and punctuality performance benchmarks since becoming privately operated. NSW Minister for Transport and Infrastructure, Andrew Constance has confirmed that the NSW Government will retain its role in regulating timetables, routes and bus stops, as well as safety and operational standards. Additionally, the NSW Government will continue to own all Region Six assets and be responsible for setting Opal fares. Read more about Inner West Bus Services on ANZIP HERE Read the NSW Government’s media release HERE back to top 2. Shortlisted bidders announced for Southern Program Alliance mhtml:file://C:\Users\IPA0044\AppData\Local\Microsoft\Windows\INetCache\Conte... 28/07/2017 Infrastructure Partnerships Australia - THE INFRASTRUCTURE REPORT - Infrastr... Page 3 of 12 The Victorian Government has announced the two shortlisted consortia for the first package of works of level crossing removals on the Frankston Line in Carrum and Seaford, part of the Southern Program Alliance. The contract is expected to be awarded by December 2017 with works due to start in 2018. The Southern Program Alliance involves the removal of eight level crossings along the Frankston Line in Melbourne’s southwest. The first package of works in Carrum and Seaford comprises four of the eight level crossing removals. The two consortia shortlisted are: CPB Contractors and Aurecon; and Lendlease, Acciona, Coleman Rail and WSP. The first package of works will include the removal of level crossings at Seaford Road, Seaford (shown in Figure 2) and Mascot Avenue, Station Street and Eel Race Road in Carrum. Other works will be completed in conjunction with the level crossing removals including: a new station at Carrum; relocating Carrum train storage facility to a purpose built facility near Kananook station; a new road-bridge over Patterson River connecting Station Street; and rail systems and power upgrades. Figure 2: Seaford Road, Seaford Source: Level Crossing Removal Authority The first package is expected to revitalise Carrum village with improved beach access and a village square to be built around a new Carrum Station. It also includes a $10 million package for new landscaping, walking and cycling paths with an upgrade to R.F. Miles Reserve in Seaford. The contract for the first package of works is expected to be awarded by December of this year, with works expected to start at the Seaford Road and the Station Street Bridge in 2018. Under the Program Alliance Model, if the successful tenderer satisfies the performance criteria on the first package of works they will retain the contract to deliver the remaining level crossing removals in the Southern Program Alliance at: Charman/Park Road, Cheltenham; Balcombe Road, Mentone; Edithvale Road, Edithvale; and Station Street/Bondi Road, Bonbeach. The Southern Program Alliance is one of the last remaining packages of the circa $6.9 billion Level Crossing Removal project, removing a total of 50 level crossings across Victoria. Read more about the Level Crossing Removal Project on ANZIP HERE mhtml:file://C:\Users\IPA0044\AppData\Local\Microsoft\Windows\INetCache\Conte... 28/07/2017 Infrastructure Partnerships Australia - THE INFRASTRUCTURE REPORT - Infrastr... Page 4 of 12 Read the Victorian Government’s media release HERE back to top 3. AEMC releases retail energy competition review; highlights increased level of competition under threat by higher wholesale costs This week the Australian Energy Market Commission (AEMC) released its fourth annual review of the state of competition in retail energy markets across the National Electricity Market (NEM). The review highlights the importance of information access for consumers to take advantage of increased competition in the market, but notes that continued policy uncertainty is driving up wholesale costs and dampening the benefits of retail competition. The 2017 Retail Energy Competition Review was undertaken at the request of the Council of Australian Governments (COAG) Energy Council. Consumer research assessed retail competition in electricity and gas markets for all NEM jurisdictions, drawing on FY 2016/17 data. Research involved a quantitative survey of 2,147 residential and 550 small business customers across the NEM. Currently, an influx of new smaller retailers are entering the market forcing existing retailers to become more competitive on price, and more innovative with new technologies. The review points out that consumers have increasingly more choices and are looking to take up new technology such as solar panels and battery storage. The review makes a number of recommendations to take advantage of competition and improve customer outcomes. The main emphasis is on increasing information access to improve customer awareness and confidence in the options that are available to manage energy bills. The AEMC states that “customers today have more options to manage their energy use, but for most people, understanding the details of energy plans and new energy products and services is low”. The fundamental argument behind what is driving energy prices is centred on issues affecting the generation and wholesale energy market. Significant failure around energy policy at both the state and federal level has resulted in a decline in investment – coupled with the closure of large coal-fired power stations – putting upward pressure on wholesale prices. Another contributing factor is the increased demand for gas exports. Wholesale prices have been driven up by rising gas prices and according to the AEMC, this is partly due to the fact that “largely isolated point-to-point pipelines have developed into an interconnected network and gas demand has increased to supply LNG exports”. The AEMC makes the strong link between price deregulation in the market and increased competition. However, the review notes that higher wholesale costs are driving up retail prices, which in turn are diminishing the benefits of competition. Rising wholesale costs are also due to the increasing cost of hedging contracts – as generators are reluctant to provide contracts given the current energy policy uncertainty. More specifically, the AEMC states that “a lack of liquidity in the contract market is creating a barrier to retailer entry and expansion”. This creates a significant risk to competition, potentially offsetting the current trend of decreasing market concentration through second tier retailers. The review also found that retailer gross margins are similar between the big three retailers (AGL, Origin Energy and Energy Australia) and smaller second tier retailers in both NSW and Victoria. The Australian Competition and Consumer Commission (ACCC) is undertaking further work to investigate the differences in retailer costs across different jurisdictions to better interpret
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