1 REGULATORY OBSERVER
1 REGULATORY OBSERVER
The UK’s Department for Business, Innovation and Skills (BIS) has released a consultationthat proposes to reform the process of appealing decisions made by UK economic regulators or competition authorities.
Problems with the current appeals process include that appeals may sometimes be treated by some businesses as a ‘one-way bet’, and a chance to re-open regulatory decisions. Also, the current process can encourage lengthy and expensive litigation and delay decisions by regulatory and competition authorities. The communications sector in particular is identified (p. 4). The concern is that the appeals process does not place enough emphasis on any material errors made by regulators as grounds for appeal, and allows businesses to submit a burdensome number of unnecessary documents to regulators.
The proposals are designed to streamline the current appeals framework so that: grounds of appeals may be limited to material errors made by regulators; appeal bodies’ expertise is applied in the most appropriate way; and appeal routes are more consistent across sectors. The intention is to provide greater certainty and facilitate a better use of resources. The proposals are also designed to ensure the appeals process is more accessible to all affected parties, not just to the largest regulated firms with the most resources and experience, and to ensure that the incentives in the system are aligned with the UK Government’s objectives for the appeals framework more generally. Finally, the proposals are designed to encourage better engagement between regulators and businesses before decisions are made.
Specifically, the proposals to amend the appeals framework include: changing the standard of review for appeals under the Communications Act 2003 (UK) from an appeal on the merits, to a flexible judicial review, or to specifying more focused grounds for these appeals; making similar changes to the standard of review for appeals under the Competition Act 1998 (UK) except decisions relating to the level of penalty; aligning the grounds of appeal for energy (in Great Britain), aviation and postal services decisions; and considering what the costs and benefits would be of moving to a similar appeal model for rail decisions.
The reforms are also designed to ensure that regulatory decisions are transparent and well-informed and that businesses do not have an incentive to make unmeritorious appeals. This includes encouraging regulators to claim their full legal costs and consulting on whether courts will only award costs against a regulator where they have acted unreasonably.
Over the last five years there have been more than 50 appeals of regulatory and competition agency decisions in the UK. It is estimated that the current appeals system costs around £22 million per year. This is comprised of estimated annual costs of£11.61 million for appellants, £3.43 million for regulators, £1.50 million for courts and tribunals, and £5.25 million for interveners.
Recent appeals have included challenges made against decisions made by the aviation, water, communications and energy regulators, together with decisions made by the competition bodies the Office of Fair Trading and the Competition Commission.
Examples of lengthy appeals include an appeal against the Ofcom’s proposal for the award of 2.6GHz spectrum in 2008. The appeal took 14 months to resolve and contributed to the delay of the auction of the 2.6GHz spectrum. The spectrum was finally awarded during the 4G spectrum auction in early 2013. In the Albion Water case, an appeal in relation to one of the Ofwat’s investigations led to a series of appeals and subsequent decisions by the Competition Appeal Tribunal and Court of Appeal over five years, from 2004 to 2009. An appeal in the British Sky Broadcasting Limited (Conditional Access Modules) Case lasted two years and involved over 35,000 pages of submissions and evidence, and 41 witnesses, including 14 experts.
The UK agencies affected by the proposals are: the Office of Fair Trading; the Competition Commission; the Ofwat; the Ofgem; the Ofcom; the Office of the Rail Regulator; the Civil Aviation Authority; and the Northern Ireland Utility Regulator.The consultation closes on 11 September 2013.
1 REGULATORY OBSERVER
International Regulatory Round-up
AIRPORTS
Oceania
NZ: New Zealand Commerce Commission Issues Final Report on Auckland International Airport
The New Zealand Commerce Commission (CCNZ) has released a report on the effectiveness of the information disclosure regulatory regime under Part 4 of the Commerce Act(NZ) in relation to Auckland International Airport.The CCNZis required to provide its report to the Ministers in respect of each of the regulated airports after anew price for a regulated service has been set. Auckland Airport set new prices on 7 June 2012. The CCNZfound that theinformation disclosure regulation had a positive influence on Auckland Airport’s behaviour.
COMMUNICATIONS
Americas
US: H Block Auction Announced
The Wireless Telecommunications Bureau has announced its intention to hold an auction of licences in the 1915-1920 MHz and 1995-2000 MHz band. It has sought comment on the procedures to be used for this auction. The auction may occur in January 2014.
US: FCC Streamlines Broadband and Voice Data Collection
The Federal Communications Commission (FCC) has sought to modernise and improve its collection of data about broadband and voice services, while at the same time taking measures to streamline and reduce the burden on providers. These changes seek to improve the data the FCC uses to implementpolicies and programs for expansion of access to broadband and voice service.
US: International Bureau Releases 2011 Circuit Status Report for US
The FCC’s International Bureau has released its annual circuit status reportfor US facilities-based international common carriers. The 2011 report shows the use of facilities from the US to international destinations for international telephone calls, private line services and other services, grew by 18 per cent from 2010 to 2011. The reported number of activated 64 Kbps equivalent circuits at the end of 2011 totalled 28.8 million circuits, as compared to 24.4 million circuits in 2010.
Europe
EU: BEREC Publishes New Guidelines onRoaming Regulation
The Body of European Regulators for Electronic Communications (BEREC) has published its Guidelines on the application of the Roaming Regulation (EC) on the separate sale of roaming. The Guidelines are aimed to clarify aspects regarding the application of the separate sale of roaming services which will enter into force on 1 July 2014 and are designed to encourage competition at the retail level for international roaming services.
EU: BEREC Adopts Opinion onGerman Call Termination on Individual Public Telephone Networks
The European Commission has informed the German National Regulatory Authority BNetzA and BEREC about its serious doubts on a draft measure concerning call termination on individual public telephone networks provided at a fixed location in Germany. The BERECfound that the serious doubts by the European Commission are justified.
EU: BEREC AdoptsOpinion onEstonian Wholesale Physical Network Infrastructure Access
The European Commission has informed the Estonian National Regulatory Authority (ECA) and BEREC that it had serious doubts that a draft measure concerning wholesale physical network infrastructure access, and wholesale broadband access,may create a barrier to the internal market. The BEREC has issued a media release announcing that it found that that the serious doubts by the European Commission are justified.
Germany: Bundesnetzagentur Sets New Rates for Distribution Frames
The Bundesnetzagentur has approved new ratesthat Telekom Deutschland GmbH may charge for access to a subscriber line at a distribution frame. The monthly basic charge for the last mile from the distribution frame to the customer will decrease from €8.01 to €7.71. The decision is in line with proposals to lower the monthly rates for access to the feeder distribution interfacesubscriber line.
Germany: Consultation onSpectrum for Mobile Broadband
A consultation and Strategy Paper have been published by the Bundesnetzagentur to encourage debate on the provision of spectrum for broadband deploymentin Germany. The aim is for consumers to have minimum broadband speeds of 50 Mbit/s minimum by 2018 throughout the country.
Germany: Bundesnetzagentur Announces Final Mobile Termination Rates
The Bundesnetzagentur has issued a media release announcing final rates for the termination of calls to the mobile networks run by German mobile network operators. A uniform rate of 1.85 euro cents per minute is payable retroactively from 1 December 2012. On 1 December 2013, the rate will again decrease to 1.79 euro cents per minute.
UK: Fixed Access Market Reviews for Wholesale Local Access, Wholesale Fixed Analogue Exchange Lines, ISDN2 and ISDN30
The Ofcom has released a consultation documentthat sets out the preliminary conclusions of its review of fixed access markets. The Ofcom assessed the state of competition in these markets and, where these markets were found to be not ‘effectively competitive’, the Ofcom has proposed regulatory obligations.
UK: Review of the Wholesale Broadband Access Markets
The Ofcom has released a consultation in relation to a review of the state of competition in the wholesale broadband access (WBA) market. The market review process requires the Ofcom to identify any competition problems and impose appropriate remedies; in order to do so, the Ofcom has to identify and define relevant markets that are susceptible to ex ante regulation and assess whether any operator has significant market power.
UK: Ofcom Proposes New Prices for Landline and Broadband Services
The Ofcom has proposed new prices for landline and broadband services. The proposals relate to prices that Openreach, BT’s network access division, can charge other telecommunications providers for some of its main wholesale services. These prices have historically been regulated by Ofcom because BT has been found to have ‘significant market power’. The Ofcom is proposing revised ‘charge controls’ on some Openreach product.
UK: New Measures to Boost Superfast Broadband Competition
The Ofcom has proposed new measures designed to promote competitionamong superfast broadband providers. Under proposals for consultation, the wholesale cost of switching a customer from one superfast broadband supplier to another would fall by up to 80 per cent. In addition, the minimum length of the wholesale contract between BT and the switched customer’s new supplier would be reduced from a year to just one month.
UK: Mobile Phone Roaming Caps Come Into Force
The cost of UK consumers using a mobile phone in other EU countries will fall again after EU regulations recently came into force. The regulations limit the amount charged for accessing the internet and for making or receiving calls abroad.
Energy
Americas
US: JP Morgan Unit Agrees to $410 million in Penalties, Disgorgement to Ratepayers
The Federal Energy Regulatory Commission (FERC) has approved a stipulation and consent agreement under which JP Morgan Ventures Energy Corporation will pay US$410 million in penalties and disgorgement to ratepayers for allegations of market manipulation. The allegations stem from the business’s bidding activities in electricity markets in California and the Midwest from September 2010 to November 2012.
US: FERC Orders $453 million in Penalties for Western Power Market Manipulation
The FERC has announced in a media release that it has ordered Barclays Bank PLC and four of its traders to pay $453 million in civil penalties for manipulating electric energy prices in California and other western markets between November 2006 and December 2008. The FERC also ordered Barclays to pay$34.9 million, plus interest, in unjust profits to the Low-Income Home Energy Assistance Programs of Arizona, California, Oregon, and Washington.
US: FERC Proposes To Remove Communications Barriers between Gas Pipelines and Electricity Utilities
The FERC has proposed to remove potential barriers to communication between interstate natural gas pipelines and electricity transmission operators. This is designed to promote reliable service and operational planning. The FERC proposed for interstate natural gas pipelines and public utilities that own, operate or control interstate electricity transmission facilities to voluntarily share non-public, operational information that would help to promote reliable service on their systems. Comments on the proposed rule are due within 30 days of publication in the Federal Register.
Europe
EU: Croatia Joins Council of European Energy Regulators
The energy regulatory authority of Croatia has become a member of the Council of European Energy Regulators (CEER). Croatia became an EU Member State on 1 July 2013. TheCEER is an organisation of Europe’s national regulators for electricity and gas.
EU: European Electricity and Gas Sector Welcomes Adoption of Anti-VAT-Fraud Package
A group of ten European electricity and gas associations have welcomed the adoption of the anti-VAT-fraud package by the Economic and Financial Affairs Council (ECOFIN Council) at its June 2013 meeting. The associations comprise of regulators, exchanges, brokers, clearing houses, transmission system operators, energy trading firms, utilities and guarantee-of-origin issuing bodies. The package is said to constitute a major step towards the eradication of VAT fraud in the electricity and gas markets in Europe.
EU: CEER Holds Annual Customer Conference
The CEER has held its second annual customer conference in Brussels. The theme of the conference was‘On the path towards achieving the 2020 Vision’ for energy customers. The conference was aimed at providing opportunity to engage with Europe's energy organisations, highlight progress on implementing the ‘2020 Vision’, and to discuss EU energy and regulatory policy.
EU: ACER and ESMA Strengthen Cooperation
The Agency for the Cooperation of Energy Regulators (ACER) and the European Securities and Markets Authority (ESMA) have announced that they have put in place an agreement for cooperation and exchange of information. The agreement establishes a system for exchanging information when theregulatory responsibilities of both EU bodies coincide in relation to wholesale energy markets. This encompasses trading in commodity and derivatives contracts.
EU: ACER Opens Public Consultation onCost Allocation Methodologies andTariffs forIncremental Capacity
Until 17 September 2013, the ACER is running a Public Consultation on the Draft Framework Guidelines on rules regarding harmonised transmission tariff structures for gas. This Public Consultation is focusing on cost allocation and the determination of the reference price, as well as on the delineation of tariff rules applicable for incremental capacity.
EU: ACER Publishes Opinions on Projects of Common Interest for Trans-European Networks
The ACER has published its opinion on proposed projects of common interest (PCI) for trans-European networks for electricity and gas in 2013. The ACER has announced that itconsiders that the draft regional lists of gas, electricity transmission and electricity smart grids projects merit adoption as the first Union list of PCIs.
France: CRE Releases Report on Use and Management ofFrench Electricity Interconnection in 2012
The French Energy Regulatory Authority (CRE) has published its report on use and management of French electricity interconnection in 2012. Power supply costs are expected to decrease by €110 million per year because of the market coupling projects.
Northern Ireland: Consultation on Proposals for 2014 Power NI Supply Price Control
The Utility Regulator has published a consultation on proposals for the next Power NI supply price control. The price control is due to commence on 1 April 2014.
Northern Ireland: Regulator Publishes Gas Distribution Price Control Proposals
The Utility Regulator has published price control proposals for the gas distribution companies, Phoenix Natural Gas Ltd and Firmus energy. The publication sets out proposals for revenueand investment in the gas network during the price control period, 2014-16.
Netherlands: Security of Electricity Supply intheNetherlands at High Level
The Netherlands transmission grid manager, TenneT, has published its Security of Supply Monitoring Report 2012-2028. The report found that sufficient production capacity will be available in the Netherlands to meet domestic demand for electricity.Further, an additional 9.3 GW of new large-scale thermal production capacity is planned from 2013 to 2020.
Netherlands: Tennet andLTO Introduce Higher Payments for Land Owners
The TenneT hasannounced that electricity transmission company TenneT TSO B.V. and agricultural organisation LTO Nederland have signed an agreement covering TenneT’s fees when installing high-voltage lines in the Netherlands.Higher contractual fees will be paid to land owners.The contractual fee is payable in addition to the existing compensation receivable by land owners and users for damage that they incur.
UK: The State ofthe Market for Customers with Dynamically Teleswitched Meters
The Ofgem has released a report into the state of the market for customers with dynamically teleswitched meters.Around 550,000 customers in Great Britain have dynamic teleswitched (DTS) meters. The customers are almost entirely located in the East Midlands, Northern Scotland and Southern Scotland. They have been able to receive lower electricity rates for their heating but have historically had fewer supply choices than other customers.
UK: The Ofgem releases Decision In Relation To RIIO-T1
The Ofgem has released a Decision in relation to the Regulatory Instructions and Guidance (RIGs). The RIGs is the principal means by which the Ofgem collects data from network owners in order to monitor performance against price control objectives. In May 2013, the Ofgem consulted on a draft set of RIGs1 for gas transmission and electricity transmission licences. They would apply for the period 2013-2021.
UK: Ofgem Recommends Change toTransmission Charging Methodology
The Ofgem has announced proposals to approve a change to the methodology for calculating what generators pay to use the electricity transmission network across Great Britain. It is proposed that the new charges would come into effect on 1 April 2014.