OVERVIEW AGENCY PERFORMANCE SIGNIFICANT ISSUES DISCLOSURES AND LEGAL COMPLIANCE APPENDICES ANNUAL REPORT 2017/18 OVERVIEW AGENCY PERFORMANCE SIGNIFICANT ISSUES DISCLOSURES AND LEGAL COMPLIANCE APPENDICES Statement of compliance Hon. Ben Wyatt MLA Treasurer 11th Floor, Dumas House Havelock Street West Perth WA 6005 Dear Treasurer ECONOMIC REGULATION AUTHORITY 2017/18 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 2018. 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 2 / Economic Regulation Authority Annual Report 2017/18 OVERVIEW AGENCY PERFORMANCE SIGNIFICANT ISSUES DISCLOSURES AND LEGAL COMPLIANCE APPENDICES Contact details Accessing the annual report Office address The 2017/18 annual report and previous reports are Level 4, Albert Facey House available on the ERA’s website: www.erawa.com.au. 469 Wellington Street To make the annual report as accessible as possible, Perth WA 6000 we have provided it in the following formats: Office hours 9:00am to 5:00pm • An interactive PDF version, which has links to other Monday to Friday (except public holidays) sections of the annual report. Postal address • A version with separate chapters to reduce file size PO Box 8469 and download times. Perth WA 6849 • A text version, which is suitable for use with screen Telephone 08 6557 7900 reader software applications. Fax 08 6557 7999 Email [email protected] This report can also be made available in alternative formats upon request. Website www.erawa.com.au National Relay Service More information about the ERA is available TTY: 13 36 77 on our website, or search for “Economic Regulation Authority” on LinkedIn. Annual Report 2017/18 Economic Regulation Authority / 3 OVERVIEW AGENCY PERFORMANCE SIGNIFICANT ISSUES DISCLOSURES AND LEGAL COMPLIANCE APPENDICES Contents Statement of compliance 2 Agency performance 15 Significant issues affecting the Contact details 3 Energy Markets 16 agency 33 Accessing the annual report 3 Annual report to the Minister 16 Economic, policy and social trends 34 Contents 4 Monitoring and investigations 16 Changes in law 34 Compliance with the Market Rules 17 Likely developments 35 Overview 5 Annual Electricity Generation and Retail Executive summary 6 Disclosures and legal compliance 36 Corporation review 18 2017/18 highlights 8 Independent Auditor’s Report 37 Rule Change Panel support 19 About the ERA 9 Financial statements 39 Our governance framework 9 Regulation and Inquiries 20 Notes to the financial statements 44 Our values 9 Licensing 20 Certification of key performance Legislation 10 Water report 22 indicators 67 Responsible Minister 10 Energy retailers report 23 Key performance indicators 68 Our funding 10 Energy distributors report 24 Key effectiveness indicators 68 Organisational structure 10 Consumer protection 25 Key efficiency indicators 70 Organisational chart 11 Electricity access 26 Ministerial directives 71 Governing Body 12 Rail access 26 Other financial disclosures 71 Executive team 13 Gas access 27 Capital works 74 Performance management framework 14 Inquiries 29 Employment and industrial relations 74 Relationship to government goals 14 Corporate Services 30 Governance disclosures 76 Shared responsibilities with other Key performance indicators 31 Other legal requirements 77 agencies 14 Performance against key performance Government policy requirements 78 indicators 31 Appendices 80 Financial performance 32 Appendix 1 Other legislation 80 Appendix 2 Senior staff 81 4 / Economic Regulation Authority Annual Report 2017/18 OVERVIEW AGENCY PERFORMANCE SIGNIFICANT ISSUES DISCLOSURES AND LEGAL COMPLIANCE APPENDICES Overview Our mission: To ensure that the State of Western Australia has an efficient and customer-focused economy. Image credit: Transperth OVERVIEW AGENCY PERFORMANCE SIGNIFICANT ISSUES DISCLOSURES AND LEGAL COMPLIANCE APPENDICES Overview Executive summary This year saw significant changes in leadership at the ERA. Greg Watkinson and Ray Challen joined me as members of the Governing Body, which is the ERA’s decision-making authority. Greg has extensive knowledge of the ERA’s work and processes as its former chief executive officer, while Ray brings a deep understanding of the State’s electricity sector following many years leading the Public Utilities Office. This is the first time since August In late 2017, a new framework made by the ERA in its previous 2014 that the Governing Body has for information disclosure and reviews of the Railways (Access) operated at its full complement of a arbitration for non-scheme gas Code 2000. chair and two part-time members, pipelines came into effect in We spent much of 2017/18 working and I have greatly appreciated these Western Australia, with the ERA on Western Power’s proposed new members’ contribution to our taking on responsibility for enforcing access arrangement for the next decision making. and monitoring compliance. five years. The ERA must decide In November, we also welcomed The ERA is affected by the abolition whether the proposal promotes Jenness Gardner as chief executive in October 2017 of Limited Merits economically efficient investment officer. Jenness has considerable Reviews, which had allowed in and operation of the network, experience in economic policy stakeholders to challenge the prices and competition in the market. development, commercial and revenues set by the regulator for We released a draft decision for negotiations and large-scale project access to monopoly gas pipelines. comment in May 2018, with the development. This reform is intended to lower final decision due in the first half of barriers to consumer participation, 2018/19. With this new leadership team, the and create more certainty for both Governing Body is looking at ways In 2017/18, we completed two major regulators and consumers. to improve our engagement with inquiries – one into the Emergency stakeholders and the general public, We are also awaiting the outcomes Services Levy, and the other into the and communicate more effectively of the review of Western Australia’s efficiency of water costs and tariffs the work the ERA does on behalf of rail access regime, conducted by in Western Australia. the Western Australian community. the Department of Treasury, which will address recommendations 6 / Economic Regulation Authority Annual Report 2017/18 OVERVIEW AGENCY PERFORMANCE SIGNIFICANT ISSUES DISCLOSURES AND LEGAL COMPLIANCE APPENDICES Overview The ERA released the final report In January 2018, our Utilities In 2017/18, the ERA was given a The ERA provides administrative for the Emergency Services Services Regulation team finalised a new legislative obligation to review support to the independent Rule Levy inquiry in October 2017. Its review of the Water Services Code some of the ways the Wholesale Change Panel overseeing the recommendations included using of Conduct (Customer Service Electricity Market operates. The Wholesale Electricity Market and the levy to fund a rural fire service if Standards) 2013. This was the first of these reviews will look Gas Services Information Rules. one was introduced, and improved first review of the Code since its at the method used to certify Our Corporate Services division has governance and transparency in the inception, and changes introduced capacity for intermittent generators, been focussed on bedding down way levy funding is allocated. Six new protections for consumers in also called the “relevant level structural changes made in 2016/17, months later, the State Government areas such as payment plans, life methodology”. If the ERA finds areas as well as working with the new announced it would create a Rural support, and reminder notices, and for improvement it may propose chief executive officer to improve Fire Division in the Department removed some regulatory burdens changes to the Market Rules. and streamline business processes. of Fire and Emergency Services, for licensees. The updated code The ERA monitors compliance with and improve oversight of levy came into effect on 1 July 2018. I conclude by thanking the staff of the Wholesale Electricity Market expenditure. the ERA for their professionalism This is an example of the ERA’s and Gas Services Information and their dedication to ensuring that In the water inquiry, the ERA found role of setting and monitoring the Rules. In 2017/18 we completed Western Australia has an efficient that the State’s three major water conditions under which suppliers of 108 investigations into alleged and customer-focused economy. corporations were recovering water, gas and electricity must deal non-compliant behaviour. We significantly more revenue than with their customers. also provided our first report to needed to cover the efficient cost of the Minister for Energy on our Our Energy Markets division supplying services. own compliance with the rules, promotes competition between Nicky Cusworth which included the findings of an Following the conclusion of these generators and retailers by Chair independent audit that the ERA had inquiries, the Treasurer, the Hon Ben monitoring rules requiring that the met its obligations. Wyatt MLA, directed the ERA to most efficient and lowest cost start a new inquiry into operational