Some of the other media have now picked up on yesterday’s Fin Review’s
story that the federal government, in return for funding a new national
energy regulator, wants the states to give up some of their regulatory
powers over essential services, and in particular the system of caps on
retail prices.

This gave me a strong sense of déjà vu because 11
years ago I helped draft the legislation setting up Victoria’s first
independent regulator for the utilities, the Office of the
Regulator-General (now the Essential Services Commission). And guess
what? Our intention was just what Canberra is now proposing: that
retail price control would disappear when there was full competition,
and that once the national competition policy was in full swing,
responsibility would be handed over to a federal regulator.

On
the second point, the acting finance minister said this in the second
reading speech on the Office of the Regulator-General Bill on 5 May
1994 (available here):
“It is not the intention of this legislation in any way to detract from
the joint commonwealth-state process for reform of competition policy
begun by the Hilmer report. It is envisaged that economic regulation of
the reforming industries could be transferred to the relevant
commonwealth authorities when the Victorian reforms have been settled
down.” My draft had said “will be transferred” so the government was
still keeping its options open.

As to retail prices, we were
even more specific. In March 1995 the Regulator-General issued a
regulatory statement to participants in the about-to-be-privatised
electricity industry, which included the following: “If by the year
2000 customers have a choice and are able to shop around for the
price/service mix that best suits their individual needs, it would be
inappropriate to regulate retail prices.” But as the 2000 deadline
approached the government got cold feet, and then the Bracks government
nixed the whole idea.

Peter Fray

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