both by the Competition Policy Review and by other stakeholders, including the Total Environment Centre, Grid Australia and the ENA. Additional members would bring an expanded skills range to the AER in areas such as distributed energy and consumer market research. The size and composition of the AER Board are addressed in Chapter 6. The Panel does not, however, think that board expansion will be sufficient on its own to meet the challenges lying ahead. The success of regulatory organisations with the best of leaderships can be confounded by the existence of bureaucratic inertia in other parts of the organisation, combined with a variety of constraints on the capacity to address such inertia. It is therefore the Panel’s principal conclusion in relation to the AER that the Board should be afforded the resources and independence (from all other agendas, whether originating from within government or from without) to develop the kinds of organisational culture favourable to the effective discharge of its core functions. This conclusion motivates the Panel’s specific recommendations. In addition to these considerations, the Panel considers that the AER should be subject, from time to time, to an independent performance assessment. This matter is addressed below. Depending upon the future relationship of the AER and ACCC, there may also be advantage in a more immediate review of whether the AER is currently subject to influences that unduly bias it towards an overly and/or organisational culture. ‘rigid’ ‘defensive’ AER organisational cultures The question of organisational culture underlies staffing matters, including the skills, expertise, experience and incentives of employees of a larger government agency entrusted with the pursuit of other policy objectives and agendas. The ACCC is rightly proud of its and ‘pro-market’ ‘pro-consumer’ stance, but the fact remains that the core functions of a network regulator (even if it undertakes wider regulatory roles within an industry) involve the substitution of an administrative determination for a market outcome precisely because the market outcome is considered likely to be unsatisfactory, and this requires a particular approach. It also requires a culture that is favourable to coalescing perspectives from several disciplines, given the relatively wide range of skills and expertise that are relevant to decisions. In effect, regulatory price determination has to perform the same information discovery and aggregation functions as a competitive market—a distinct and difficult task.
both by the Competition Policy Review and by other stakeholders, including the Total Environment Centre, Grid Australia and the ENA. Additional members would bring an expanded skills range to the AER in areas such as distributed energy and consumer market research. The size and composition of the AER Board are addressed in Chapter 6. The Panel does not, however, think that board expansion will be sufficient on its own to meet the challenges lying ahead. The success of regulatory organisations with the best of leaderships can be confounded by the existence of bureaucratic inertia in other parts of the organisation, combined with a variety of constraints on the capacity to address such inertia. It is therefore the Panel’s principal conclusion in relation to the AER that the Board should be afforded the resources and independence (from all other agendas, whether originating from within government or from without) to develop the kinds of organisational culture favourable to the effective discharge of its core functions. This conclusion motivates the Panel’s specific recommendations. In addition to these considerations, the Panel considers that the AER should be subject, from time to time, to an independent performance assessment. This matter is addressed below. Depending upon the future relationship of the AER and ACCC, there may also be advantage in a more immediate review of whether the AER is currently subject to influences that unduly bias it towards an overly ‘rigid’ and/or ‘defensive’ organisational culture. AER organisational cultures The question of organisational culture underlies staffing matters, including the skills, expertise, experience and incentives of employees of a larger government agency entrusted with the pursuit of other policy objectives and agendas. The ACCC is rightly proud of its ‘pro-market’ and ‘pro-consumer’ stance, but the fact remains that the core functions of a network regulator (even if it undertakes wider regulatory roles within an industry) involve the substitution of an administrative determination for a market outcome precisely because the market outcome is considered likely to be unsatisfactory, and this requires a particular approach. It also requires a culture that is favourable to coalescing perspectives from several disciplines, given the relatively wide range of skills and expertise that are relevant to decisions. In effect, regulatory price determination has to perform the same information discovery and aggregation functions as a competitive market—a distinct and difficult task.
Review-of-Governance-Arrangements-for-Australian-Energy-Markets-Final-Report.docx