The Utilities Commission of the Northern Territory has found that Darwin Port should continue to be subject to regulatory oversight of its access and pricing of services, after an investigation into the port’s market power.
The commission is an independent statutory body that oversees various sectors, including ports, in the Northern Territory and it has now provided a report on its 2023 port review.
It was found by the commission that Darwin Port Operations, the private port operator, has substantial market power and the potential to exercise that power, but the commission noted there is no evidence that the port is improperly using that power.
“This is likely to reflect, at least in part, the constraints imposed on DPO under the port access and pricing regime and DPO’s compliance with those requirements,” the Commission noted.
The Commission said that there was no advocacy for removal of regulatory oversight, and that there are no developments that would substantially increase the level of competition or the availability of substitutes for services so as to negate the need for regulatory oversight.
Pricing recommendations
The commission also made a key set of recommendations in relation to pricing.
Not only did it recommend keeping the current rules on the regulatory oversight of pricing, it considered that the existing regime ought to be enhanced to provide more information on the cost and profits associated with providing prescribed services. That would enable the commission to more effectively monitor prices and to assess their reasonableness. The extra information would be treated as confidential, but the ‘high level’ information could be published by the commission. It also recommended extending the timeframe of a price determination from three to five years.
The commission noted that there are restrictions on how material instances of non-compliance are dealt with, on who deals with them, and even on the definition of material non-compliance. Penalties can in some cases lack transparency and independent and impartial adjudication. The commission therefore recommended that the port access and pricing regime be amended to provide guidance on the definition of ‘material instance of non-compliance’.
It was also noted that there are no requirements for a private port operator or private pilotage provider to report on measures of service or performance levels of prescribed services.
No competitive pressure to lift performance
The commission said that visibility and monitoring is important as a monopoly provider does not face competitive pressure to maintain or lift its service performance and it can reduce service quality (through cost reductions) while maintaining prices and thus, increase profits.
The commission recommended that a private port operator and a private pilotage provider should propose and report on measures of service and associated targets, approved by the commission. To minimise the additional cost and obligations, a private port operator and a private pilotage provider could leverage off existing performance indicators or other tools used internally to monitor and improve business performance.
Captain Melwyn Noronha, CEO of Shipping Australia, said that it is a remarkable report by the Utilities Commission, which should be commended for its sterling work.
“It is refreshing to see that, finally, somewhere in Australia, a government regulator is holding private port operators to account,” Ms Noronha said.
“Further, it is equally remarkable – and perhaps more so – that the words ‘Darwin’ and ‘Northern Territory’ could be crossed out in this report and replaced with the word ‘Australia’ and the findings of this report could equally well apply to the whole port sector right across the nation.
“Policy- and decision-makers should impose similar governance structures, controls, scrutiny, and oversight over monopoly-to-oligopoly service providers right across the Australian port sector as they are often monopoly, duopoly, or oligopoly providers and so they do not face much (if any) competitive pressure to lift their service performance.”
The commission also made a wide range of other recommendations related to access to port services, auditing, and also on a variety of procedural matters.
The Utilities Commission of the Northern Territory (Commission) is an independent statutory body established by the Utilities Commission Act 2000 (UC Act) with defined roles and functions for declared (regulated) industries in the Northern Territory including electricity, water supply and sewerage services industries, and ports. For the ports industry, the commission’s powers and functions are set out in section 6 of the UC Act and Part 11 of the Ports Management Act 2015.
