Between the lines - Is the watchdog ready if all else fails?

By RICHARD BRADDELL

Of all those presenting to the Government's electricity inquiry, consumer and customer groups stand almost alone in favouring heavy-handed regulatory intervention in the form of price control.

It is not that everyone else is happy with the way things are. They are not. But for the most part, they believe that in this still new environment, the industry is close to sorting out many of its problems by itself.

Protocols are being drawn up that should keep errant retailers in line. And in what is a relatively young market, those same retailers can claim some forgiveness for occasionally erring while they tune their systems.

Even the monopoly parts of the industry are promising they will be better behaved in future. And as an article of their good faith, a price freeze adopted by the lines companies last year will end around the time the inquiry reports.

There are good arguments against regulation. It can be expensive to enforce, unexpected and perverse in its outcomes and it can stifle technological innovation in rapidly changing industries. Believe it or not, electricity is one of those.

Rather than going down this costly route, the electricity inquiry has frequently been told that the Commerce Act should be tightened up, probably to mirror the Australian Trade Practices Act, but that the industry in the end can work out its own solutions. When all else fails, the Commerce Commission should be the backstop regulator that will jump into the breach.

It is unlikely that the industry's problems can be solved that simply. While the industry deserves credit for the solutions it has devised already, there are still serious governance issues to be resolved, particularly in the wholesale market.

While the breakup of ECNZ may have brought lower wholesale prices, complaints linger that the wholesale market's functions are dominated by generators and rules are impeding the market's development.

Beyond doubt, the most attractive outcome is for industry and consumer groups to join together to create solutions that are fair to everyone. But if one dominant group captures the process, then intervention of an energetic regulator is vital.

But the electricity industry's faith in the Commerce Commission to do that is touching. Despite 10 months elapsing since Telecom said it would impose 0867 residential internet access, the commission has yet to produce a preliminary view, let alone the report that it first promised well before the election, despite the strong prima facie case that its purpose was anti-competitive.

Nonetheless, the Commerce Commission is the logical watchdog. One can only hope its new powers, unveiled yesterday, are the first step towards giving it clout.