ANNUAL REPORT 2019 l20 Statement of compliance Hon. Ben Wyatt MLA Treasurer 11th Floor, Dumas House Havelock Street West Perth WA 6005 Dear Treasurer Economic Regulation Authority 2019/20 Annual Report In accordance with section 61 of the Financial Management Act 2006, I hereby submit for your information and presentation to Parliament, the annual report of the Economic Regulation Authority for the financial year ended 30 June 2020. The annual report has been prepared in accordance with the provisions of the Financial Management Act 2006, the Public Sector Management Act 1994, and the Treasurer’s Instructions. Yours sincerely, Nicola Cusworth Chair 2019 l20 Contact details Address Level 4, Albert Facey House 469 Wellington Street, Perth WA 6000 Telephone 08 6557 7900 Email [email protected] Website www.erawa.com.au Accessing the annual report The 2019/20 annual report and previous reports are available on the ERA’s website: www.erawa.com.au. To make the annual report as accessible as possible, we have provided it in the following formats: • An interactive PDF version. • A text version that is suitable for use with screen reader software applications. This report can also be made available in alternative formats on request. National Relay Service TTY: 13 36 77 CONTENTS 02 Statement of compliance 26 Corporate Services 03 Contact details 26 Records management 03 Accessing the annual report 27 Key performance indicators 04 Contents 28 Financial performance 05 Overview 29 Significant issues affecting the agency 05 Our values 30 COVID-19 06 Executive summary 30 Energy transformation 08 About the ERA 30 Pilbara electricity regulation 08 Governance framework 30 Rail access reforms 08 Legislation 31 Synergy investigation 08 Responsible Minister 08 Funding 32 Disclosures and legal compliance 09 Organisation structure 33 Independent Auditor’s Report 10 Governing Body 37 Financial statements 11 Executive team 43 Notes to the financial statements 12 Performance management framework 60 Certification of key performance indicators 12 Relationship to government goals 61 Key performance indicators 12 Shared responsibilities with other agencies 61 Key effectiveness indicators 63 Key efficiency indicator 13 Agency performance 63 Ministerial directives 14 COVID-19 64 Other financial disclosures 16 Energy reform process 69 Governance disclosures 17 Energy Markets 70 Other legal requirements 17 Annual report to the Minister 72 Government policy requirements 17 Energy market reviews 18 Monitoring and investigations 73 Appendices 18 Compliance with the market rules 74 Appendix 1: Legislation 19 Rule Change Panel support 75 Appendix 2: Senior staff 20 Regulation and Inquiries 76 Appendix 3: Decisions and publications 20 Licensing 22 Consumer protection 23 Electricity access 23 Gas access 24 Rail access 25 Inquiries 4 l ECONOMIC REGULATION AUTHORITY Annual Report 2019/20 VALUES EXCELLENCE: We seek excellence in everything we do. RESPECT: We treat everyone fairly and show consideration and regard for others and their views. IMPARTIALITY: Our decisions, analysis and advice are independent and unbiased. INTEGRITY: We are honest and trustworthy. PURPOSE The purpose of the ERA is to promote the interests of Western Australian consumers through independent regulation, analysis and advice, now and into the future. OVERVIEW OVERVIEW EXECUTIVE SUMMARY It is impossible to begin a discussion of the challenges and achievements of 2019/20 without first discussing the COVID-19 pandemic. Although Western Australia Government. They have worked generation to Western Australia’s ended 2019/20 in a far better with their customers to mitigate energy network, and its position than most jurisdictions, the effects of the economic implementation will add to and the effects of the pandemic on downturn on those household alter the ERA’s functions. the State’s economy have been and business customers most Technological change, and significant. badly affected. particularly the transition to Before the pandemic hit, the Like many organisations, the renewable energy, is creating Economic Regulation Authority ERA had to quickly adapt to challenges across the energy had observed a steady and changes in the way we worked, sector as network operators concerning increase in the with almost all staff working from and traditional generators face number of electricity customers home for a period of around competition from new entrants experiencing difficulty paying three months. I commend the and sources of energy. their bills over the past few years, ERA Secretariat for its positive, This also poses a challenge with Western Australia having the practical and rapid response for regulators as the market highest reported disconnection to the challenges posed by outgrows the systems rate in the country in 2018/19. COVID-19. established to regulate it. The With COVID-19 causing From the Governing Body’s Energy Transformation Strategy widespread job losses and perspective, the timeliness and will help by updating the economic contraction, it is highly quality of the ERA’s work was regulatory structures. likely that all of the hardship sustained in the weeks of Other notable achievements for indicators that the ERA monitors home-based work, which is the year include an extraordinary will have deteriorated further in a credit to our staff. amount of work for our gas 2019/20. One of the ERA’s main focuses access team, with two access However, we have observed this year was engaging with arrangement reviews for gas that Western Australia’s energy the Government’s Energy pipelines completed, and retailers have been pragmatic Transformation Strategy. The another commenced. Access and compassionate in their Strategy aims to manage arrangements set the terms and response to this crisis so far, with the increasing contribution conditions, including prices, strong direction from the State of intermittent renewable that third parties pay to access 6 l ECONOMIC REGULATION AUTHORITY Annual Report 2019/20 OVERVIEW a monopoly network. They are In January 2020, the ERA The ERA’s energy market an important part of ensuring released three reports on monitoring activities continued that essential infrastructure in the overall performance of in 2019/20, with 300 Western Australia is operated the electricity, gas and water investigations completed into fairly and efficiently. licensing schemes. The ERA alleged non-compliance with found that Western Australia’s the market rules. The ERA published its final licensing schemes were decision for ATCO’s Mid-West The ERA instructed the mostly operating as intended and South-West Gas Distribution Australian Energy Market and providing customers with Systems in November 2019, and Operator to recover necessary protections. for the Goldfields Gas Pipeline in approximately $141,000 of December 2019. A review for the The ERA recommended incorrect out-of-merit payments. Dampier to Bunbury Natural Gas some changes to the licensing I finish by congratulating Pipeline began in January 2020. schemes, including: the ERA’s passionate and In November 2019, the Electricity • For water, changes to the committed staff for their Review Board was convened to Water Services Act 2012 to achievements this year in difficult consider the ERA’s findings from ensure that rental tenants circumstances and extending an investigation of Synergy’s receive the same level of my thanks to the industry and pricing behaviour in the customer protection as government stakeholders with Wholesale Electricity Market. The owner-occupiers. whom we work regularly. ERA concluded that there was a • For electricity and gas, breach of the market rules. merging the three regulatory Two directions hearings have instruments that provide Nicky Cusworth since been held, resulting in customer protections into Chair orders for both the ERA and a single energy code. This Synergy to prepare and file would simplify the regulatory further papers. These hearings process and ensure will extend well into 2020/21, but consistent protections for it is pleasing to see progress on customers. this matter. Annual Report 2019/20 ECONOMIC REGULATION AUTHORITY l 7 OVERVIEW ABOUT THE ERA The ERA is Western Australia’s independent Legislation economic regulator. The ERA is established by the Economic Regulation Authority Act 2003. This Act gives us functions Our role is to regulate the gas, electricity and rail under the following Acts of Parliament: industries, and license providers of gas, electricity and water services. We also conduct inquiries into • Energy Coordination Act 1994 economic matters referred to us by the Treasurer, • National Gas Access (WA) Act 2009 provide support to the independent Rule Change • Railways (Access) Act 1998 Panel, and have regulatory and review roles in the • Water Services Act 2012. Wholesale Electricity Market and retail gas market. For a complete list of Acts under which we have We aim to ensure that the delivery of water, functions or that affect our operations, see electricity, gas and rail services in Western Australia Appendix 1. is in the long-term interest of consumers. Our functions are designed to maintain a competitive, Responsible Minister efficient and fair commercial environment. Although the ERA functions independently of government, it can receive written directions on We make our decisions independently of industry, financial administration matters from the Treasurer. government and other interests, and are not subject to government or ministerial directions when The ERA provides reports