The regime, which enables third parties to seek access to infrastructure services of national significance, has in the past been subject to much criticism including excessive costs and delays involved in complying with the regime. As provided for in the Competition and Infrastructure Reform Agreement, Assistant Treasurer David Bradbury commissioned the PC to conduct an inquiry to assess the role and efficacy of the regime and propose ways of improving its operation.
Overall, the draft report recommends retaining the regime but does propose the inclusion of a number of fairly significant changes. Most relevantly, the draft report recommends:
- Amending declaration criterion (a), being the ‘competition test’, so that a comparison of competition with and without access through declaration would be undertaken.
- Amending declaration criterion (b) by replacing the ‘private profitability test’ that was adopted by the High Court in Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal  HCA 36, with a ‘natural monopoly test’. The new test would provide that a facility be declared in circumstances where total demand could be met, at least cost, by the facility in question.
- Amending declaration criterion (f), which is the public interest test, to make it an affirmative test and requiring certain factors to be taken into account when applying the public interest test. This would mean that the test would only be satisfied if declaration will benefit the public interest, as opposed to the current test, which is satisfied where declaration is ‘not contrary’ to the public interest.
- Clarifying that the Australia Competition and Consumer Commission has the power to order capacity expansions.
The PC also made a number of more specific recommendations in the report. Overall, whilst the draft report does not propose revolutionising the regime, it does include some important recommendations that the PC considers would have the effect of promoting the more efficient operation of the regime. Nevertheless, it is currently only a draft report and interested parties are invited to make submissions in response before 5 July 2013. Following the public consultation process, a final report is proposed to be provided to Government in October 2013. Even then, it is unclear if all or any of the recommendations will be enacted.
We will keep you updated on further developments in the reform process.