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30th April, 2019

Regulatory architecture and its evolution in the UK and Australia

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Event Details

30th April, 2019
11:00 - 14:00
Franklin Building
City, University of London
124 Goswell Road

There are similarities at a high level in the regulatory frameworks used in the UK and Australia, but there are significant differences in implementation and in the direction of evolution.  This round table will compare and contrast approaches, focusing on three main areas:

Should the regulatory rule setter be separate from rule implementer?

In the Australian energy sector, the functions of setting the regulatory rules is undertaken by a different organisation (the Australian Energy Markets Commission, AEMC) from that which implements those rules (the Australian Energy Regulator, AER).   This provides clarity of process for changing approaches to price control determinations and changes to other energy market rules.  It provides protection for investors but may reduce regulatory flexibility.

  • Does splitting of rule setting and rule implementation provide better protection for investors?
  • Does the split of roles reduce regulatory flexibility?
  • Are there lessons from the approach in Australia that can be used in the UK?

Are experimental approaches to getting challenge and customer engagement effective?

Regulators are increasingly seeking alternative ways to involve customers in decision making.   In both jurisdictions, customer representatives and customers are involved in price control processes, provide submissions to regulators through customer challenge groups and challenge panels (like Ofgem’s RIIO-2 challenge panel, and the AER’s Consumer Challenge Panel).  More recently, in a new initiative, the AER has established a process whereby a “Customer Forum” representing the consumer perspective is established which negotiates parts of the business plan with the network. This will be reflected in submissions to the AER which may then expedite the regulatory process.

  • In what ways have the formal challenge processes affected price determinations?
  • Do they bring a customer perspective, or can they be better characterised as a governance role?  Could the benefits be achieved more efficiently in other ways?
  • Does the Australian experience with New Reg indicate that direct involvement of alternative counterparties is a realistic way to enhance outcomes and reduce the role for regulators?

Are expert panel and “hot tub” processes useful?

The AER recently reviewed its approach to setting the Rate of Return in price determinations (the “Rate of Return Guideline”).  The process involved two innovations: the use of an Independent Panel to provide a critical review of draft proposal before the final decision; and “Concurrent Expert Evidence Sessions” which involved open panel sessions of experts with the AER board and preparation of a joint report.  In the UK, the UK Regulators Network commissioned a joint expert report on cost of capital.

  • How can regulators best make use of experts with a wide range of views to make better decisions?
  • Are open “hot tub” sessions valuable, rather than production of reports?
  • Do regulators welcome challenge, or see it as a necessary evil?

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