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The energy sector is subject to  a regulatory regime that has been designed according to the principles of a one-size-fits all regulation are:

A. EU Member states

I. State A

(written by...)

II. State B

(written by ...)

B. Non EU Member states

PDF
nameAustralian Energy Regulation Regime.pdf

Description and analysis of the Regulatory Regime in the Australian Energy Sector: 

In this paper, the regulatory regime in the Australian energy sector will be analyzed. This analysis will take place in four sections, a brief description of the Australian regulatory approach, what legal acts govern regulation, what are the names and functions of the regulatory bodies, and finally a short analysis of the advantages and disadvantages of the current regulatory regime

Regulatory Approach

the Australian energy sector regulation[1] - somewhat like the political nature of Australia – is extremely diverse and both state and sector specific. Indeed, there is no “one size fits all” policy of regulation in Australia, and the entirety of this paper could be spent just on explaining the complicated nature of the balancing act between the Australian National and State regulatory approach. A brief outline of the Regulatory approach can be found in the graph below.

Legal Acts Governing Regulation:

The legal framework of the Australian Regulatory Regime[2] is split into; the National Energy Law (NEL), the National Gas Law (NGL), the various legislation of each state and territory in Australia, the National Energy Retail Law (ERL), and finally; the Australian legislative instruments including National Electricity Rules (NER) and National Gas Rules (NGR). As can be seen, Gas and Energy Regulations are quite split and separate. However, the overarching legal act regulating both sectors, and within each state and Territory of Australia, stems from the Commonwealth Competition and Consumer Act 2010 (CCA 2010).  This Act established many of the laws and regulatory bodies that regulate both the energy and gas markets in Australia (with the exception of the state of Western Australia and the Northern Territory). Part IIIAA of the CCA 2010[3], should be particularly noted, as it establishes the Australian Energy Regulator (AER), ands sets up the legal framework for the Australian Energy Market Agreements between states and territories in Australia. In 2012, this led to much harmonization between state and national regulatory law. The state of South Australia – in particular- was heavily involved in this process, as example; the National Electricity Law[4], stemmed from the National Electricity (South Australia) Act 1996, The National Gas Law, stemmed from the National Gas (South Australia) Act 2008, and the National Energy Retail Law stemmed from the National Energy Retail Law (South Australia) Act 2011. As can be seen from the previous diagram1 the legal acts governing regulation in Australia are complicated despite the recent harmonization between state and national laws.

Regulatory Bodies:

The CCA 2010[5] establishes the functions of the governing bodies in the Australian Regulatory Regime. These are; the Standing Council on Energy and Resources, (SCER) responsible for pursuing a strategic national agenda across the energy and resources sectors, the Australian Energy Market Commission (AEMC) responsible for maintaining and developing the 
National Electricity Rules, the previously mentions Australian Energy Regulator (AER), responsible for economic regulation and enforcement, and finally, Australian Energy Market Operator (AEMO) responsible for the operation of the National Electricity Market (NEM) These regulators function on a national level in Australia, with the exception in Western Australia and the Northern Territory2, where, the Economic Regulation Authority (ERA), and the National Competition Council (NCC) also exist. Separate smaller and specifically designed regulators also exist in each state and territory and are too numerous to mention in such a short paper.

Advantages and Disadvantages: 

The Australian Energy Regime, reflecting the nature of Australian geographical and political realities – is extremely complex[6]. This complexity allows for many checks and balances to regulate the market efficiently, protecting consumers from abuse on both a state and national level6. Conversely, as can be seen, the complexity of the Australian Regulatory Regime leads to much inefficiency that is currently trying to be overcome for the benefit of both the market and consumer in Australia. This has however, only taken place in mainly Eastern and Southern Australian states, as they share the same gas and electricity networks. This is also why Western Australia and the Northern Territory still have much autonomy when it comes to regulation and legislation, as they have separate grids from the rest of the country1. It can be argued that in recent years, with the privatization of the energy and gas market in Australia, the average consumer has benefitted from an increase in competition in both the energy and gas sectors. The energy and gas sectors themselves, however, have suffered from the cumbersome nature in which the regulation and enforcement of this regulation differs from state to state in Australia, leading to many inefficiencies which cost the Australian tax payer.

 

Christopher Harkin


[1] Byrnes, Liam; Brown, Colin; Foster, John  and Wagner, Liam “Australian Energy Policy: Barriers and Challenges” University of Queensland, Australian, Available from; http://www.uq.edu.au/eemg/docs/workingpapers/2013-02.pdf

[2] Schwartz, David, L. “Energy Regulation and Markets Revue: Law Business Research, 2012, Available from; http://www.minterellison.com/files/uploads/Documents%5CPublications%5CMediaManagerDocuments/The-Energy-Regulation-and-Markets-Review.pdf

[3] Australian Energy Regulator (AER), “industry Information, 2014 available from; http://www.aer.gov.au/industry-information

[4] National Electricity Rules, “Version 62 No. 4, National Electricity Amendment” 17th April, 2014 Available from; http://www.aemc.gov.au/getattachment/59559b99-e10c-4f4a-9c84-5f20df368c52/National-Electricity-Rules-Version-62.aspx

[5] Electranet “Regulatory and Market Framework” 2014, Available from; http://www.electranet.com.au/network/national-electricity-market/regulatory-and-market-framework/

[6] United Energy and Multinet Gas, “Australian Regulatory Framework”, 2014, Available from; http://www.unitedenergy.com.au/about-us/regulatory-framework.aspx

 

 

 

 

Written by Christopher Harkin

II. Japan

1. Regulatory authorities of energy sector

Agency for Natural Resource Energy which is the department of Ministry of Economy, Trade and Industry (hereinafter, METI) is responsible for regulation of the whole energy sector. ANRE’s goal is to ensure stable and enough supply of energy, such as oil, electricity and natural gas. It is responsible for the comprehensive issues regarding energy, such as rationalization of energy use, encouraging production of renewable energy, supervision on power plants management (water and fire power plants). Therefore, the “converged” approach is adopted for the energy sector in Japan.

METI is aimed at vitalizing the whole economy, encouraging trade and encouraging industries, especially machine production industry. Regarding other industries which are often controlled by the state, telecommunication, postal services and railway industries are regulated by other authorities in Japan. METI has ANRE as its department according to the METI establishing Act, because energy is essential for business of industrial customer and METI is related to METI the most strongly. This Act governs ANRE as well.

Under Japanese legal order, Cabinet Office submits a proposal of legislation in most cases. It is composed of Ministers who are politicians and appointed by Prime Minister and each Minister has Ministry to implement his decisions. ANRE is not entitled to decide independently from METI, namely from the head quarter of METI.

Industry whose market structure is natural monopoly including energy sector, had been mostly exempted from competition law traditionally. ANRE has amended Electricity Industry Act and Gas Industry Act step by step to open the markets since about 20 years ago. Regarding electricity market, non-discriminatory access to existing distribution grids is ensured and ANRE pursues the further objective to open the retail market completely where the Act allows de facto regional monopoly to supply small customers.

Footnote Macro

Reform for liberalisation of electricity market is summarized on the following page (ANRE HP, only Japanese version is available).

http://www.enecho.meti.go.jp/category/electricity_and_gas/electric/summary/

ANRE’s second function is to assist suppliers in research and development activities.

ANRE is the main regulatory authority of energy sector. Regarding nuclear power policy, however, Nuclear Regulatory Agency (hereinafter, NRA) established newly is entitled to regulate nuclear power plant to ensure safety. Until the disastrous earthquake in 2011 in Fukushima, METI had been responsible for the nuclear policy. The accident caused a big discussion on the structure of the regulatory regime, because METI had contradictory goals: encouraging nuclear power with regards to low marginal cost and stability and regulating it by means of safety standards. The head quarter of METI had decided nuclear policy under formerly and Cabinet Office had authorized his proposal. The new NRA is a professional and independent body whose decision making board is composed of specialists of nuclear power.

Footnote Macro

NRA's core values and principles

http://www.nsr.go.jp/english/e_nra/idea.html

It decides independently from politicians and market players though it is prima facie a part of Ministry of Environment.

 

2. Advantages and disadvantages of Japanese regulatory approach

In my opinion, a clear mandate is stipulated. ANRE can implement measures for liberalization of electricity and gas markets because of the similarities of them. METI is a traditional authority with minor reforms; therefore its implementation has been coherent. However, some doubt its risk of corruption because METI to which ANRE belongs has relationships with market players for a long time.

NRA is enough independent, professional and therefore neutral. Its problem is that it does not have enough human resource because it is a new institution.

 

Literature:

*English versions are not available, therefore the terms are translated into English by the author, where necessary. 

Agency for Natural Resource Energy HP

http://www.enecho.meti.go.jp/

Federation of Electric Power Companies of Japan HP

http://www.fepc.or.jp/enterprise/jiyuuka/outline/point/index.html

Nuclear Regulatory Agency HP

http://www.nsr.go.jp/english/

(written by Yuki Otsuka)