Economic Efficiency. Market Failure and Regulation 2008 /24175
Lyndon Rowe Chairman Economic Regulation Authority 28 April 2008 Economic Efficiency. Market Failure and Regulation – The Long Term Interests of Consumers
The Economic Regulation Authority Functions Administers Access to Monopoly Infrastructure Licenses Service Providers Monitors & Regulates Markets Inquiries (Referred by Government)
The Governing Body Full Time Chairman: Lyndon Rowe Part Time Members: Steve Edwell, Peter Panegyres Independent of Government, Industry & Consumers
Economic Regulation Authority Governing Body Lyndon Rowe – Chairman Steve Edwell – Member Peter Panegyres - Member General Manager Peter Kolf Planning & Executive Support Chris Brown Director References & Research Greg Watkinson Executive Director Licensing, Monitoring & Customer Protection Paul Kelly Director Gas & Rail Access Russell Dumas Manager Finance & Administration Pam Herbener Executive Director Competition Markets & Electricity Robert Pullella
Completed Inquiries - Mostly in the Water Industry 1.Annual Inquiry into the Bunbury and Busselton Water Boards’ Tariffs Feb Annual Inquiry on the Water Corporation’s Tariffs Jan School Bus Operators’ Charter Bus Operations Jul Annual Urban Water & Wastewater Pricing May Harvey Bulk Water Pricing May Country Water & Wastewater Pricing July Esperance – Kalgoorlie Bulk Water Supply Nov Urban Water & Wastewater Pricing Nov 2005
Current Inquiries Inquiry into Competition in the Water & Wastewater Services Sector Inquiry into Developer Contributions to the Water Corporation Review of the Grain Marketing Act 2002
Competition in the Water & Wastewater Services Sector Terms of Reference Issues Paper –Submissions closed 31 August 2007 Draft Report –Submissions closed 1 February 2008 Further Consultation Report –Submissions due 16 May 2008 Final Report –Presented to Government 30 June 2008
Developer Contributions to the Water Corporation Terms of Reference Issues Paper –Submissions closed 14 December 2007 Draft Report –Published 14 April 2008 –Submissions due 16 May 2008 Final Report –Presented to Government 30 June 2008
Review of the Grain Marketing Act 2002 Terms of Reference Issues Paper –Submissions closed 8 February 2008 Draft Report –Published 7 April 2008 –Submissions due 16 May 2008
Gas Pipeline Infrastructure: DBNGP GGP AGN Dist System Kambalda Lateral 7 Licences
Electricity Infrastructure: SWIN 30 Licences
Rail Infrastructure: Westnet Rail PTA
Water Services: 30 Licences
Economic Efficiency Technical Allocative Dynamic
Electricity All other commodities Interests of Consumers Optimum
Producer and Consumer Surplus MC AR Price Quantity p q Consumer Surplus p x q = Total Revenue Producer Surplus Total Cost
Supply of Goods & Services Private Goods Bread, Butter etc Mixed Goods Pipelines, Wires etc Public Goods Free to air, Defence etc Common Property Fisheries, Water resources etc
Market Failure Public Goods Externalities Market Power Imperfect Information
ERA Regulation Market Failure is Monopoly Power Access Monopoly Pricing
Monopoly Diagram P Q Ppm Ppo QpmQe Qpo MR MC AC D=AR
Natural Monopoly
Examples of the Challenge - Water Pricing Developer Charges Usage Charges Fixed Charges
Examples of Government Failure Environmental Sprinkler Restrictions in Bunbury Recycled Water in Bunbury
Quantity Restrictions P Q S D
Recycled Water in Bunbury
Concluding Comments
Economic Efficiency. Market Failure and Regulation.